2013 (8) TMI 245 - HC - Income Tax

Penalty u/s 271(1)(c) - Deduction u/s 80IA - Tribunal deleted penalty - Held that - For claiming deduction under Section 80IA of the Act, filing of certificate and forms signed by the Chartered Accountant is mandatory and a requirement of law. All returns, where deduction under Section 80IA is claimed, must have such certificates and forms. Mere filing of the said forms/certificate cannot absolve and protect an assessee who furnishes in-accurate particulars. If the explanation and the reasoning of the Tribunal is accepted, then in all cases where a form/certificate is furnished by the Chartered Accountant but a wrong claim of deduction is made, no penalty under Section 271(1)(c) can be imposed. Merely because the assessee complies with the statutory procedural requirement of filing the prescribed form and certificate of the Chartered Accountant, cannot absolve the assessee of its liability if the act or attempt in claiming the deduction was not bonafide - Penalty of concealment cannot be imposed because the assessee has taken a particular stand or had preferred an interpretation which was plausible and reasonable, but has not been accepted, unless the assessee had not disclosed facts before the authorities. Such cases have to be distinguished from cases where the claim of the assessee is farcical or farfetched. Dubious and fanciful claims under the garb of interpretation, are a mere pretence and not bonafide - assessees had not carried out the work but had sub-contracted the same to a third party/parties - Tribunal has not referred to the Explanation to Section 80IA as to why and on what basis divergent interpretations were possible. Absurd or illogical interpretations cannot be pleaded and become pretence and excuses to escape penalty. Bonafides have to be shown and cannot be assumed. In the present case, the respondents have not been able to discharge the said onus and establish that they had acted bonafidely - Decided in favour of Revenue.

Summary

Issues:
Appeals by Revenue against ITAT order for Assessment Year 2007-2008 - Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
1. The respondent assessees claimed deduction under Section 80IA of the Act supported by Form No.3CB, 3CD, and Form No.10CCB. The Assessing Officer found that the assessees had not executed the work but subcontracted it, denying the deduction. The assessees accepted the quantum order, and additions made were finalized.

2. Penalty proceedings under Section 271(1)(c) were initiated, upholding penalties imposed by CIT (Appeals). The Tribunal, in its order, emphasized the bonafide nature of the claim for deduction under Section 80IA supported by the Chartered Accountant's certificate, citing relevant legal precedents.

3. The Tribunal clarified that penalty provisions do not require criminal intent, focusing on whether the assessee fulfilled conditions under Explanation 1 to Section 271(1)(c) by offering a bonafide explanation and disclosing all material facts.

4. The Tribunal analyzed the applicability of sub-clauses (A) and (B) of the explanation, concluding that the assessees' claim for deduction was not factually false but inaccurately made. It emphasized the onus on the assessee to prove the bonafide nature of the claim.

5. The Tribunal highlighted the mandatory requirement of filing Chartered Accountant's certificates for claiming deductions under Section 80IA. Mere compliance with procedural requirements does not absolve an assessee if the claim was not bonafide.

6. The Assessing Officer rejected the deduction claim based on the Explanation to Section 80IA, which excludes works contracts. The Tribunal noted that the assessees failed to provide tangible material justifying the ignorance of clear statutory provisions.

7. The Tribunal distinguished between justifiable interpretations of tax laws and farcical claims, emphasizing that penalty for concealment cannot be imposed solely based on rejected interpretations. The onus lies on the assessee to demonstrate bonafide actions.

8. The Tribunal upheld the penalty, stating that the assessees failed to establish bonafide actions and did not address the Assessing Officer's second reason for disallowing the deduction claim.

9. Ultimately, the Tribunal ruled in favor of the Revenue, holding that the deletion of the penalty by the Tribunal was contrary to law, and the penalties imposed were upheld. The appeals were disposed of without costs.