2020 (2) TMI 935 - AT - Income Tax

Penalty u/s 271(1)(c) - inadmissible claim of deductions u/s 80IB and 80G - HELD THAT - It is a valid satisfaction because it is categorically mentioned in the satisfaction note that, assessee company has furnished inaccurate particulars with a view to evade the tax and the reason described above may be treated as satisfaction note for initiating the penalty proceedings u/s 271(1)(c) for the above two additions made . Then, on the basis of aforesaid satisfaction recorded by the AO, notice was issued to the assessee company u/s 274 r/w section 271(1)(c) of the Act which has never been challenged by the assessee company. All these facts go to prove that penalty proceedings in this case are initiated on the basis of valid satisfaction and the decisions relied upon by the assessee are not applicable to the facts and circumstances of the case. This is a case clearly distinguishable from the case of Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT because in this case claiming of inadmissible deductions u/s 80IB and 80G is not a wrong claim rather a deliberate and conscious scheme to evade the tax by furnishing inaccurate particulars of income, if not caught in scrutiny.- thus penalty is not sustainable in the eyes of law Assessee in this case has never revised its return during the period prescribed u/s 139(1) rather withdrew the claim during assessment proceedings when confronted by the AO. So, by no stretch of imagination, the claim made by the assessee for deduction u/s 80IB and 80G can be considered as inadvertent claim rather it is deliberate and conscious claim made to evade the taxes. Moreover, it is nowhere the case of the assessee company that the claim of deduction has been made on the basis of wrong audited reports or its audited report has been subsequently corrected by its auditors. Had there been any inadvertent mistake on the part of the assessee company to claim such deductions, assessee company would have filed revised return within the prescribed period, but no such revised return has been filed which leads to the conclusion that it was a deliberate and conscious attempt to evade tax. At no point of time, either before assessment proceedings or during appellate proceedings assessee has come forward with claim that it has acted bonafide while making the inadmissible claim u/s 80IB and 80G. When it is proved on record that the claim of deductions made by the assessee company u/s 80IB an d80G is not only incorrect but a malafide under Explanation 1 to section 271(1)(c) is attracted to confirm the penalty levied on the assessee company. - Decided against assessee. Penalty initiated on the basis of addition u/s 40A(ia) for non-deduction of TDS - Contention of the assessee in this regard is sustainable because qua addition assessee company has made full disclosure of all the facts as to making payment on which TDS was not deducted. So, the assessee had no occasion to furnish inaccurate particulars to conceal its income as the only dispute was qua deduction or non-deduction of tax for the payment made on account of legal and professional expenses. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the assessee deliberately and consciously furnished inaccurate particulars of income by claiming inadmissible deductions under section 80IB and 80G.
2. Validity of the satisfaction recorded by the Assessing Officer (AO) for initiating penalty proceedings under section 271(1)(c).
3. Applicability of penalty under section 271(1)(c) for non-deduction of TDS on professional fees.

Detailed Analysis:

1. Deliberate and Conscious Furnishing of Inaccurate Particulars of Income:
The primary issue was whether the assessee, a company incorporated in 1988 and audited under section 44AB, deliberately and consciously furnished inaccurate particulars of income by claiming inadmissible deductions under sections 80IB and 80G. The assessee had withdrawn its claim for deduction of ?22,77,910 under section 80IB and claimed a 100% deduction under section 80G instead of the permissible 50%. During the assessment, the assessee admitted the disallowances, stating the claims were made inadvertently. However, the tribunal found that the assessee, being a long-established and audited company, could not have inadvertently made such claims. The tribunal concluded that the claims were deliberate and conscious attempts to evade tax, as the assessee failed to provide any cogent reason or evidence to support the inadvertent claim.

2. Validity of the Satisfaction Recorded by the AO:
The assessee challenged the validity of the AO's satisfaction for initiating penalty proceedings under section 271(1)(c), arguing that there was no valid satisfaction. The tribunal examined the satisfaction note recorded by the AO, which stated that the assessee furnished inaccurate particulars with a view to evade tax. The tribunal found this to be a valid satisfaction, as it was clearly mentioned in the satisfaction note that the assessee's actions were intended to evade tax. The tribunal dismissed the assessee's reliance on various case laws, stating that the facts of this case were distinguishable.

3. Applicability of Penalty for Non-Deduction of TDS:
The assessee contended that the penalty for non-deduction of TDS on professional fees amounting to ?30,000 was not warranted, as proper disclosure was made. The tribunal agreed with the assessee, noting that the assessee had made full disclosure of the facts regarding the payment on which TDS was not deducted. The tribunal referred to a coordinate bench decision in Syndicate Labels vs. ACIT, which held that penalty under section 271(1)(c) could not be imposed for non-deduction of TDS when the assessee had made a bona fide belief and proper disclosure. Hence, the tribunal ordered the deletion of the penalty related to the non-deduction of TDS.

Conclusion:
The tribunal upheld the penalty imposed by the AO for the inadmissible claims under sections 80IB and 80G, confirming that these were deliberate and conscious attempts to evade tax. However, the tribunal deleted the penalty related to the non-deduction of TDS on professional fees, finding that the assessee had made proper disclosure and acted in a bona fide manner. The appeal was thus partly allowed, confirming the penalty for inadmissible deductions and deleting the penalty for non-deduction of TDS.