2015 (12) TMI 963 - AT - Income Tax

Penalty u/s 271(1)(c) - claim of revenue expenditure u/s 35(2AB) disallowed - Held that - The claim of the assessee was not accepted by the Assessing Officer for the sole reason that the assessee could not get the approval from DSIR till completion of scrutiny assessment proceedings and therefore, in the facts of the present case, this judgment of Hon ble Apex Court in CIT vs. Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT wherein it was held that merely because of the assessee s claim, deduction of the interest of expenses which has not been accepted by revenue, penalty u/s 271(1)(c) not attracted, for merely making of the claim, which is not sustainable in law by itself will not amount furnishing inaccurate particulars of income. - Decided in favour of assessee

Summary

Issues:
1. Quantum proceedings appeal - Deduction allowed by CIT(A) exceeding that by Assessing Officer.
2. Penalty proceedings appeal - Deletion of penalty imposed u/s 271(1)(c) by CIT(A).

Quantum Proceedings Appeal:
In the quantum proceedings appeal, the Revenue challenged the CIT(A)'s decision to allow a deduction higher than that allowed by the Assessing Officer, raising concerns about the lack of certain documentation during assessment. The Revenue argued that the extra deduction allowed by the CIT(A) was not justifiable due to the absence of a Form-3CL from the Ministry of Science & Technology. However, the tribunal noted that the tax effect of the additional relief granted by the CIT(A) was below the threshold set by the Board's instructions, rendering the appeal not maintainable. Consequently, the tribunal dismissed the Revenue's appeal in the quantum proceedings.

Penalty Proceedings Appeal:
Regarding the penalty proceedings appeal under section 271(1)(c) of the Act, the Revenue contested the deletion of the penalty imposed by the CIT(A). The CIT(A) had canceled the penalty after considering the appellant's belief in the genuineness of the claimed revenue expenditure under section 35(2AB), despite pending approval from DSIR during assessment. The CIT(A) found that the Assessing Officer did not doubt the correctness of the expenditure claimed. Citing the judgment in CIT Vs. Reliance Petro Product Pvt. Ltd., the CIT(A) held that a mere claim, even if not accepted by the revenue, does not attract penalty if not sustainable in law. The tribunal upheld the CIT(A)'s order, emphasizing the bonafide belief of the appellant and the lack of deliberate concealment. Consequently, the tribunal dismissed the Revenue's appeal in the penalty proceedings.

In conclusion, the Appellate Tribunal ITAT Lucknow dismissed both appeals filed by the Revenue, upholding the decisions of the CIT(A) in both the quantum proceedings and penalty proceedings. The judgments focused on the justification of deductions allowed and the absence of deliberate concealment in the claimed expenses, leading to the cancellation of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.