Will penalty be levied under section 271(1)(c) for disallowance made under section 14A and addition made on account of section 50C?

Section 14A mandates that no deduction shall be allowed in respect of expenditure incurred in relation to income which does not form part of the total income under the Act. Method for allocating expenditure has been prescribed. First duty is of the assessee to compute his income and in the light of section 14A. On failure without reasonable explanation, penalty would be attracted as it would amount to furnishing of in accurate particulars of income u/s. 271(1)(c) Explanation 1. 

In Mak Data P Ltd. v. CIT (2013) 358 ITR 593 (Supreme Court), it is stated “Explanation 1 to Section 271(1)(c) of the IT Act, 1961, raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence’. It applied Union of India v. Dharmendra Textile Processors (2008) 306 ITR 277 (Supreme Court) and CIT v. Atul Mohan Bindal (2009) 317 ITR 1 (Supreme Court).

Section 50C is special provision for full value of consideration in specified cases. It is a deeming provision whereby the stamp duty valuation is deemed as full consideration against real consideration received by the owner. Hence, no penalty would be exigible u/s. 271(1)(c), CIT v. Madan Theatres Ltd. (2013) 260 CTR 75 (Kolkata).