2024 (4) TMI 592 - AT - Income Tax

Penalty proceedings u/s 271(1)(c) - deduction u/s 35(2)(AB) was reduced by the Competent Authority - HELD THAT - As time of filing of the return of income, the claim of deduction u/s 35(2)(AB) of the Act, was not reduced by the Competent Authority. The Competent Authority had subsequently approved the expenditure to an extent , therefore, the assessee during the course of assessment proceedings, reduced its claim as approved. CIT(A), therefore, considering the facts and circumstances of the case, applied the ratio laid down in the case of Price Water House Coopers Pvt. Ltd 2012 (9) TMI 775 - SUPREME COURT It is not the case of the Revenue that expenditure claimed by the assessee, was not genuine. The accounts are audited and reported in Form No.3CLA was filed. Thus, the assessee had disclosed all material particulars before the Assessing Authority. Merely because the DSIR reduced and approved lower expenditure should not be the only reason for imposition of penalty. The AO ought to have brought adverse material in respect of the expenditure so claimed by the assessee more particularly, when the assessee himself has reduced its claim as recorded by the AO in the assessment order itself. Thus in the light of decision of M/s. Napord Life Sicences P.Ltd. 2019 (2) TMI 980 - ITAT MUMBAI no infirmity in the finding of Ld.CIT(A), the same is hereby affirmed. Grounds raised by the Revenue are accordingly, dismissed.

Summary

Issues Involved:
1. Deletion of penalty levied u/s 271(1)(c) of the I.T. Act.
2. Allegation of furnishing inaccurate particulars of income by the assessee.

Summary:

Issue 1: Deletion of Penalty Levied u/s 271(1)(c) of the I.T. Act

The Revenue challenged the deletion of the penalty of Rs. 60,11,830 levied u/s 271(1)(c) of the I.T. Act by the Ld.CIT(A). The penalty was imposed by the AO on the grounds that the assessee furnished inaccurate particulars of income by claiming a deduction u/s 35(2)(AB) of the Act, which was subsequently restricted by the Department of Scientific and Industrial Research (DSIR). The Ld.CIT(A) deleted the penalty, noting that the assessee had made a bona fide claim based on the available information and had not concealed any particulars of income.

Issue 2: Allegation of Furnishing Inaccurate Particulars of Income

The Revenue contended that the assessee's claim for deduction u/s 35(2)(AB) was inaccurate and deliberate. However, the assessee argued that the expenditure of Rs. 4.41 crores on R&D was genuine and the DSIR's restriction to Rs. 2.85 crores was not available at the time of filing the return. The Ld.CIT(A) observed that the genuineness of the expenditure was not questioned and the assessee had disclosed all material particulars. The Tribunal upheld the Ld.CIT(A)'s decision, citing the Supreme Court's rulings in Price Water House Coopers Pvt. Ltd. vs. CIT and CIT vs. Reliance Petroproducts (P) Ltd., which state that a mere incorrect claim does not amount to furnishing inaccurate particulars.

Conclusion:

The Tribunal affirmed the Ld.CIT(A)'s order, concluding that the penalty u/s 271(1)(c) was not justified as the assessee had not furnished inaccurate particulars or concealed income. The appeal by the Revenue was dismissed.