2015 (7) TMI 322 - AT - Income Tax

Penalty u/s 271(1)(c) - expenditure claimed by the assessee u/s 35D - CIT(A) deleted addition - Held that - In accordance with the provisions of section (5A) of section 35D the resulting company was eligible for deduction but no deduction was claimed by the resulting company i.e. Consolidated Photo Products Ltd. as per computation of income for the year under consideration. In view of above noted facts, we are inclined to agree with the conclusion of the CIT(A) that the impugned claim of deduction u/s 35D of the Act in the hands of Consolidated Photo Products Ltd. would have reduced the aforesaid income and consequential payment of taxes and hence, the assessee company was not at all in any advantageous position to make a false claim of deduction u/s 35D of the Act as the assessee company and the transferee company belong to the same group of companies. At this juncture, we respectfully take note of decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT) and Pricewaterhouse Coopers Pvt. Ltd. vs CIT (2012 (9) TMI 775 - SUPREME COURT ) wherein it was held that penalty is not imposable merely on the ground that the assessee submitted the claim under a bonafide belief and due to inadvertent mistake which was not found to be acceptable or was not accepted by the revenue. Respectfully following the ratio of these judgements of Hon ble Apex Court, we finally hold that the view taken by the CIT(A) is justified and reasonable and we are unable to see any valid reason to interfere with the same. - Decided in favour of assessee.

Summary

Issues:
Penalty imposed under section 271(1)(c) of the Income Tax Act for disallowance of expenditure claimed under section 35D.

Analysis:

Issue 1: Disallowance of Expenditure under Section 35D
- The appeal was against the order of CIT(A) setting aside the penalty imposed under section 271(1)(c) for disallowance of expenditure claimed under section 35D.
- The assessee, an investment company, filed its return showing taxable income, which was later assessed by the AO with disallowances, including the one under section 35D.
- The AO imposed the penalty after the assessee did not challenge the disallowance before CIT(A).
- The revenue challenged the deletion of penalty only in relation to the expenditure claimed under section 35D.
- The revenue argued that the assessee furnished inaccurate particulars leading to the penalty imposition.
- The assessee contended that the mistake was inadvertent and bonafide, as the unamortized expense was not described with assets during demerger.
- CIT(A) found the mistake bonafide and inadvertent, directing the AO to delete the penalty.
- The Tribunal noted that the resulting company was eligible for deduction under section 35D but did not claim it, supporting the bonafide nature of the assessee's claim.
- Referring to relevant Supreme Court decisions, the Tribunal upheld CIT(A)'s decision, dismissing the revenue's appeal.
- The Tribunal concluded that the assessee was not in an advantageous position to make a false claim, as both companies belonged to the same group.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) for the disallowance of expenditure claimed under section 35D.