2020 (1) TMI 126 - AT - Income Tax

Penalty u/s 271(1)(c) - Deduction u/s 80IC for some higher amount than the entitlement of the assessee - HELD THAT - Fact remains that the assessee had furnished all the details of income and expenditure in its return, which details in themselves were not found to be inaccurate by the learned Assessing Officer and therefore the Ld. CIT(A) held that the same cannot be viewed as concealment on the part of the assessee nor is a case of filing of inaccurate particulars. Insofar as this factual observation of the Ld. CIT(A) is concerned, the Revenue cannot dispute the same. Alongwith the original return of income the assessee had furnished all the details of income which includes the audited P L Account, balance sheet of but the unit as well as the company as a whole, certificate in form No. 10 CCB issued by a Chartered Accountant which includes the particulars of income from sublicensing. There is no dispute that the assessee furnished all these material particulars along with the original return of income. When the facts remain like this, the question is whether it is permissible for the assessing officer to draw an inference that the assessee tried to conceal the income by showing higher amount of deduction under section 80 IC of the Act. As decided in RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars and that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. The Hon ble Apex Court further observed that there can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. - Decided in favour of assessee

Summary

Issues Involved:
1. Deduction under Section 80 IC of the Income Tax Act.
2. Penalty proceedings under Section 271(1)(c) of the Income Tax Act.
3. Validity of the original return versus the revised return filed under Section 153A.
4. Condonation of delay in filing cross objections.

Issue-wise Detailed Analysis:

1. Deduction under Section 80 IC of the Income Tax Act:
The assessee, a company engaged in manufacturing plastic film and printed articles, claimed a deduction under Section 80 IC of the Income Tax Act for the assessment year 2004-05. Initially, the assessee filed a return declaring nil income after claiming a deduction of ?9,13,69,859/-. Following a search and seizure operation, the assessee filed a revised return excluding the income received from the license fee and declaring a lower income. The Assessing Officer (AO) allowed the deduction to the extent of ?1,06,31,753/- and disallowed the excessive claim, suspecting manipulation in the accounts.

2. Penalty Proceedings under Section 271(1)(c) of the Income Tax Act:
The AO initiated penalty proceedings under Section 271(1)(c), alleging that the assessee furnished inaccurate particulars by claiming an excessive deduction under Section 80 IC. The assessee argued that the claim was based on an audit report and that there was no concealment or furnishing of inaccurate particulars. The AO, however, imposed a penalty of ?2.90 crores, stating that the excessive claim was made without a sound legal basis.

3. Validity of the Original Return versus the Revised Return Filed under Section 153A:
The assessee contended that the return filed in response to Section 153A should be considered for penalty purposes, as it did not furnish inaccurate particulars in such return. The CIT(A) observed that the doctrine of eclipse applies, meaning the original return is eclipsed but not annulled. CIT(A) found that the assessee disclosed all particulars in the original return, including the audited profit and loss account, balance sheet, and certificate from a Chartered Accountant. The issue of whether income from sublicensing could be claimed under Section 80 IC was debatable and was settled by the Supreme Court in Liberty India Private Limited.

4. Condonation of Delay in Filing Cross Objections:
The assessee filed cross objections with a delay, citing realization of legal rights after a jurisdictional High Court judgment. The Tribunal allowed the condonation of delay, noting no prejudice to the Revenue and emphasizing the importance of rendering substantial justice over technicalities.

Conclusion:
The Tribunal upheld the CIT(A)'s order, finding no concealment or furnishing of inaccurate particulars by the assessee. The Tribunal agreed that the assessee had disclosed all material particulars in the original return and that merely making an incorrect claim does not amount to furnishing inaccurate particulars. The Tribunal dismissed the Revenue's appeals and the cross objections filed by the assessee as infructuous. The decision was pronounced in open court on 31st November 2019.