2015 (5) TMI 891 - AT - Income Tax

Penalty u/s. 271(1)(c) - claim of deduction u/s. 10A - Held that - It can be safely concluded that when the assessee has filed the return for the year under consideration, it was well aware of the view taken by the department in earlier assessment years, in so far as the allocation of expenses is concerned, yet the assessee did not allocate the expenses in the manner in which they were allocated in the earlier assessment years by the AO. The claim of the assessee that it received the appellate order for A.Y. 2006-07 after filing the return is not acceptable for the simple reason that the assessee was well aware of the contentious issue of earlier assessment year just because the AO did not levy penalty in earlier assessment year does not exonerate the assessee from the levy of penalty for the year under consideration. This is the third year of allocation of expenses therefore it cannot be said that the assessee was not aware of the allocation of expenses, the basis of which was taken as turnover of the respective unit. Taking the liberty for the third time on the same set of facts is nothing but filing of inaccurate particulars by concealment of income by increasing the expenses of non STP unit vis- -vis STP units. The assessee has deliberately inflated the expenses of taxable units keeping in mind that this issue was not accepted in earlier assessment years yet the assessee took a chance because it was well aware that hardly 2-3% of the returns are selected for scrutiny assessment, which means that such persons can make irregular and excessive claim of the nature of the case in hand and would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny, thereby discriminating with the good taxpayers and law abiding tax payers. Such inequity takes away deterrent effect from the penal provisions which have been enacted in the Act. As decided in Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT ) has held that everything would depend upon the return filed because that is the only document, where the appellant can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability of penalty u/s. 271(1)(c) would arise. In the instant case, the assessee has repeatedly claimed the skewed allocation of common expenses between the STP unit and the non STP unit so as to artificially inflate the claim of deduction u/s. 10A of the Act. - penalty confirmed - Decided against assesse.

Summary

Issues:
Challenge to penalty u/s. 271(1)(c) for assessment year 2008-09 due to incorrect claim of deduction u/s. 10A.

Analysis:
1. The roots for the penalty u/s. 271(1)(c) were in the assessment order of 21.12.2011, where the AO observed the assessee rendering software services from three units, one eligible for deduction u/s. 10A. The AO requested details of units, manpower, activities, and profit & loss accounts. The assessee claimed deduction based on a perceived profit from the eligible unit, despite past disputes on allocation of expenses.

2. The AO disputed the allocation of software purchase and interest expenses, leading to penalty proceedings. The assessee's justification was deemed unsatisfactory, as the issue was recurrent from previous years, and the AO relied on legal precedents to impose the penalty.

3. The Ld. CIT(A) upheld the penalty, noting the assessee's deliberate submission of inaccurate particulars by claiming excessive deduction u/s. 10A, despite prior rejections. The Ld. CIT(A) emphasized the importance of accurate claims, especially when scrutinized, leading to the penalty confirmation.

4. The assessee contended that expense allocation is debatable, not constituting concealment. Citing various legal cases, the assessee argued against penalty imposition. The departmental representative supported the lower authorities' findings.

5. The Tribunal observed the assessee's awareness of past disputes on expense allocation, yet failing to comply. The Tribunal rejected the claim of receiving appellate orders post-return filing, emphasizing the deliberate inflation of taxable unit expenses, justifying penalty imposition.

6. Referring to the Supreme Court's decision, the Tribunal concluded the assessee's conduct warranted penalty, dismissing the appeal based on the deliberate submission of inaccurate particulars for deduction u/s. 10A.

7. The Tribunal declined interference with the Ld. CIT(A)'s findings, considering the assessee's conduct and upheld the penalty under section 271(1)(c) for the assessment year 2008-09.