2024 (3) TMI 880 - AT - Income Tax

Penalty u/s. 271(1)(c) - deduction u/s. 80GGC denied - second round of appeal - first round the disallowance made by the AO has been deleted by the ld. CIT (A) - quantum proceedings matter has been decided against assessee - assessee submitted invoices Rashtravadi which showed that money was paid for giving some advertisement in the news letter and cheque was drawn in the name of the editor - AO held that same is not allowable for deduction u/s. 80GGC which clearly states that deduction should be made to a political party registered u/s. 29A of The Representation of Peoples Act, 1951 or an electoral trust and newsletter Rashtravadi is neither a trust. HELD THAT - Though the deduction is not allowable for the reasons given by the ld. AO however, for the purpose of charging assessee for furnishing of inaccurate particulars of income, what has to be seen is, whether at the time of making the claim for deduction, there was any bonafide belief and explanation for making such a claim in the return of income. From the records, it appears that the claim was made on the basis of auditor s note who had given the detailed reasoning for making such a claim that it is allowable u/s. 80GGC. CIT (A) in the first round too has held to be a bonafide claim of deduction. Though in the quantum proceedings finally the matter has been decided against assessee, but that alone is not sufficient for the penalty proceedings u/s 271(1)(c). For the purpose of penalty proceedings one has to see, whether assessee has furnished any inaccurate particulars by making a false claim or it is a claim which has not been found to be admissible by the ld. AO. Here the claim was made on the basis of an opinion of the auditor who has given his opinion which too has been found to be acceptable by the ld. CIT (A). Though such an order has been set aside subsequently and AO has made the disallowance after verification, but it cannot be held that the claim at the time of filing of return of income based on opinion of an auditor was not bonafide. Accordingly, following principles laid down in the case of Reliance Petro Products Ltd. 2010 (3) TMI 80 - SUPREME COURT it cannot be held that the claim of deduction by the assessee tantamount to furnishing of inaccurate particulars of income. Accordingly, the penalty levied by the ld. AO and confirmed by the ld. CIT (A) is deleted.Appeal of the assessee is allowed.

Summary

Issues:
The appeal concerns the penalty proceedings under section 271(1)(c) for the Assessment Year 2011-12, specifically addressing the disallowance of deduction claimed under section 80GGC.

Summary:
The appellant claimed a deduction under section 80GGC for payments made towards publishing advertisements in the newsletter "Rashtravadi." The Assessing Officer disallowed the deduction, stating that the newsletter was not a political party as required by section 80GGC. However, the CIT (A) allowed the deduction, emphasizing that the newsletter was associated with a registered political party under the Representation of the People Act, 1951. The Tribunal set aside the issue for further verification by the AO.

In the subsequent proceedings, the AO found that the payment was made to the newsletter, not the political party, leading to the disallowance of the claim under section 80GGC. The AO also held that the expenditure fell within the definition of section 37(2B) due to its association with a political party. Subsequently, a penalty was imposed for furnishing inaccurate particulars, which was confirmed by the CIT (A).

Upon review, the Tribunal noted that the claim was based on the auditor's opinion, which was considered bonafide. Despite the final disallowance, the claim made in the return was not deemed to be inaccurate. Citing the principles from the case of Reliance Petro Products Ltd., the penalty was deleted, and the appeal of the assessee was allowed.

The judgment highlights the importance of verifying deductions under relevant sections and the distinction between bonafide claims and inaccurate particulars in penalty proceedings.