2013 (6) TMI 553 - AT - Income Tax

Penalty u/s 271(1)(c) - furnishing of inaccurate particulars of income - Held that - Why the assessee paid to the Swiss Consultancy and M/s. Premium Investments and what are the business or professional or research services rendered by them to become entitled for the impugned payments. The assessee is under the obligation to explain. For the said failure only, the Tribunal confirmed the additions in quantum proceedings. It is the finding of fact that the transaction in question constitutes sham transaction . In effect, the above details supports the allegation of the AO that the assessee has deflated the income by debiting the impugned claims. Further, the discrepancies between the sundry debtors account of the assessee qua the Swiss Consultancy are beyond the reconciliation. Assessee s request for one more opportunity at this point of time cannot be seen as a genuine attempt for reconciliation in view of the principle of limitations. Thus considering the overall factual matrix of the case ie discrepancies in the books of account, absence of reliable research reports, lack of original bills, the facts brought in by the Tribunal it is a case of issue of accommodation bills etc, penalty confirmed by the CIT (A) does not call for any interference. Against assessee.

Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.
2. Disallowance of Research & Development (R&D) expenditure claimed by the assessee.
3. Genuineness of transactions with Swiss Consultancy and Premium Investment.
4. Evaluation of evidence and discrepancies in the assessee's books of account.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The primary issue in this appeal is the confirmation of the penalty levied under Section 271(1)(c) of the Income Tax Act, which pertains to the concealment of income and furnishing inaccurate particulars. The assessee argued that the penalty proceedings should be independent of the assessment proceedings. However, the Tribunal found that the assessee failed to provide sufficient evidence to support the R&D expenditure claims, leading to the conclusion that the transactions were sham. The Tribunal upheld the penalty, citing the Supreme Court's judgment in Union of India vs. Dharmendra Textile Processors, which emphasizes strict liability and mens rea.

2. Disallowance of R&D Expenditure:
The assessee claimed R&D expenses amounting to Rs. 47,55,000/- paid to Swiss Consultancy and Premium Investment. The Assessing Officer (AO) disallowed these expenses, stating that the assessee failed to furnish credible evidence, such as original bills and detailed research reports. The AO observed that the reports provided were routine information available in newspapers, not genuine research reports. The Tribunal agreed with the AO's findings, noting that the assessee could not establish that the expenses were incurred for business purposes.

3. Genuineness of Transactions with Swiss Consultancy and Premium Investment:
The AO and the Tribunal scrutinized the transactions with Swiss Consultancy and Premium Investment, concluding that they were accommodation bills rather than genuine business expenses. The Tribunal highlighted discrepancies in the accounts, such as differences in the amounts recorded by the assessee and Swiss Consultancy, and the nature of the reports provided. The Tribunal found that the transactions were not substantiated with reliable evidence, leading to the disallowance of the claimed expenses.

4. Evaluation of Evidence and Discrepancies:
The Tribunal noted several discrepancies in the assessee's books of account. For instance, the amount shown by Swiss Consultancy against the assessee was significantly different from the amount recorded by the assessee. Additionally, no payments were made in the relevant year, and the reports provided were routine data, not specialized research. The Tribunal emphasized that the assessee failed to reconcile these discrepancies or provide corroborative evidence to support the claimed expenses. Consequently, the Tribunal upheld the AO's decision to disallow the expenses and levy the penalty.

Conclusion:
The Tribunal dismissed the appeal, confirming the penalty levied under Section 271(1)(c) and the disallowance of the R&D expenses. The Tribunal found that the assessee failed to provide credible evidence to support the claimed expenses and that the transactions with Swiss Consultancy and Premium Investment were sham. The decision was based on the discrepancies in the assessee's books of account and the lack of genuine research reports. The order was pronounced in the open court on 15/5/2013.

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