2017 (5) TMI 1681 - AT - Income Tax

Penalty u/s 271(1)(c) - excess amount of deduction claimed u/s 35(2AB) - HELD THAT - We find that in the certificate dated 26.09.2008 the auditor has certified that (i) the assessee-company has maintained separate accounts for the R D Centre approved by DSIR u/s 35 (2AB) and (ii) the accounts have been satisfactorily maintained and the expenditure certified are also in consonance with DSIR guidelines. The assessee-company s claim for weighted deduction is supported by the auditor s certificate as per the Form prescribed by the DSIR. In the present case, the auditor s certificate for the approved R D unit has certified the total eligible expenditure for weighted deduction u/s 35(2AB) at ₹ 15.84 crores. From the above, it is clear that the assessee-company has claimed weighted deduction on the basis of tax audit report and the auditor s certificate. In Reliance Petroproducts (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT held that merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not attract penalty u/s 271(1)(c) - Decided in favour of assessee

Summary

Issues:
- Appeal against order u/s 271(1)(c) of the Income Tax Act, 1961
- Disallowance of excess deduction claimed u/s 35(2AB)
- Deletion of penalty by Ld. CIT(A)
- Validity of penalty imposed by A.O.
- Claim of weighted deduction based on tax audit report and auditor's certificate

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai involved a dispute regarding the imposition of a penalty u/s 271(1)(c) of the Income Tax Act, 1961 concerning the assessment year 2008-09. The Revenue challenged the order of the Commissioner (Appeals) regarding the deletion of the penalty amounting to ?13,20,920/- on the excess deduction claimed u/s 35(2AB). The Revenue contended that the assessee did not press the ground of appeal against the quantum addition during the appellate proceedings, which led to the penalty imposition by the Assessing Officer (A.O.).

During the assessment proceedings, the A.O. disallowed an amount of ?38,86,202/- claimed u/s 35(2AB) by the assessee, based on variations between the eligible amounts as per Form 3CL and the claimed amounts in the computation. The A.O. subsequently imposed a penalty of ?13,20,920/- u/s 271(1)(c) of the Act. The assessee appealed to the Ld. CIT(A), who held that the claim made by the assessee was bona fide and there was no concealment of income. The Ld. CIT(A) relied on various judicial decisions to support the deletion of the penalty.

The Revenue argued that the penalty was rightly imposed as the assessee agreed to the discrepancies only after being confronted by the A.O. However, the assessee's counsel presented arguments supported by documentary evidence, including a Paper Book containing relevant certifications and reports. The counsel emphasized that the claim for weighted deduction was based on the tax audit report and auditor's certificate, maintaining the genuineness of the claim.

The Tribunal noted that the auditor's certification supported the assessee's claim for weighted deduction u/s 35(2AB) and that the claim was made in accordance with the prescribed guidelines. Relying on the decision in Reliance Petroproducts (P) Ltd., the Tribunal upheld the Ld. CIT(A)'s order, emphasizing that the mere rejection of a claim does not automatically attract a penalty under section 271(1)(c) of the Act. Drawing parallels with similar cases, the Tribunal dismissed the appeal, affirming the deletion of the penalty by the Ld. CIT(A).

In conclusion, the Appellate Tribunal upheld the decision of the Ld. CIT(A) to delete the penalty imposed by the A.O., based on the genuineness of the claim for weighted deduction supported by documentary evidence and relevant certifications, in line with established legal principles and precedents.