2024 (5) TMI 153 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - disallowance made u/s. 35(2AB) - assessee argued that claim was made by the assessee as per DSIR guidelines and duly certified by a Chartered Accountant and DSIR does not communicate the grounds or items on which, it has restricted the claim of weighted deduction towards capital expenditure and revenue expenditure - Whether the DSIR approval or certificate restricting the claim of deduction u/s. 35(2AB) and particularly, when certificate comes after filing of return of income, restricting the deduction by the AO based on DSIR approval can amount to concealment of particulars of income or not ? HELD THAT - The issue answered in the case of CIT vs. Balaji Distilleries Ltd. 2012 (10) TMI 514 - MADRAS HIGH COURT , wherein it is held that in the absence of due care, it did not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income and hence, the imposition of penalty for furnishing of inaccurate particulars of income on assessee s held not justified. The Hon ble Madras High Court applied the decision of Price Waterhouse Coopers Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT Also decided in Reliance Petroproducts Ltd. 2010 (3) TMI 80 - SUPREME COURT wherein as propounded the meaning of the term particulars used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars . In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars Thus at the time of filing of return of income, the DSIR approval was not available with the assessee restricting the claim of deduction will not tantamount to furnishing of inaccurate particulars of income in the return of income filed by the assessee. Hence, we delete the penalty and allow the appeal of assessee.

Summary

Issues involved:
The judgment involves the confirmation of penalty u/s. 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income on account of disallowance made u/s. 35(2AB) by DSIR and adopted by AO.

Confirmation of Penalty by CIT(A):
The CIT(A) upheld the penalty by stating that the appellant had inflated its claim of weighted deduction u/s 35(2AB) and that the appellant had suppressed its taxable income by filing inaccurate particulars of income. The CIT(A) held that the plea of the appellant did not have much strength and that the penalty order deserved to be sustained and upheld based on the facts of the case.

Arguments Before the Tribunal:
The appellant argued that there was no furnishing of inaccurate particulars of income as the returned income was filed prior to the receipt of the certificate from DSIR. The appellant contended that the DSIR approval was not available at the time of filing the return, and therefore, the disallowance based on DSIR approval after filing the return should not lead to penalty imposition. The appellant relied on relevant case law to support the argument.

Tribunal's Decision:
The Tribunal noted that the DSIR approval was received after the filing of the return, and the appellant was not aware of the disallowance details at the time of filing. Citing a relevant decision by the Hon'ble Madras High Court, the Tribunal held that in the absence of due care, the imposition of penalty for furnishing inaccurate particulars of income was not justified. The Tribunal also referred to the decision of the Hon'ble Supreme Court to emphasize that making an incorrect claim does not necessarily amount to furnishing inaccurate particulars. Consequently, the Tribunal deleted the penalty and allowed the appeal of the assessee.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, ruling in favor of the appellant and deleting the penalty imposed u/s. 271(1)(c) of the Income Tax Act.