2020 (7) TMI 244 - AT - Income Tax

Penalty u/s 271(1)(c) - furnishing of inaccurate particulars of income as regards his claim of deduction under Sec. 35(1)(ii) - claim made in Original return of income - HELD THAT - Assessee on learning about the fact that School of Human Genetics Population Health was found to have indulged in ingenuine activities, had thus, in the return of income filed by him in compliance to Notice u/s 148, had in all fairness withdrawn the claim of deduction u/s 35(1)(ii) that was earlier raised by him in the Original return of income. At this stage, we may herein observe that though serious irregularities were found in the activities of the aforesaid institute viz. School of Human Genetics Population Health, but then, we cannot also remain oblivious of the fact that no clinching evidence had emerged which would prove beyond doubt that the assessee had not made any genuine contribution to the said institute. In the case of the present assessee before us, we hold a conviction that he had after learning about the serious irregularities in the activities of the aforesaid institute, acted in a bonafide manner, and in his return filed in compliance to notice issued u/s 148 of the Act, had withdrawn the claim of deduction u/s 35(1)(ii) that was earlier raised by him in the Original return of income nothing has been brought to our notice from where it could be gathered that the aforesaid institute had categorically claimed to have provided a bogus/accommodation entry to the assessee before us. Be that as it may, as observed by us hereinabove, there is nothing discernible from record which would conclusively prove to the hilt that the assessee had raised a false claim of deduction. In fact, the conduct of the assessee who had in all fairness withdrawn the claim of deduction that was earlier raised by him u/s 35(1)(ii) in his Original return of income inspires substantial confidence as regards the genuineness and veracity of the said claim. As observed in CIT Vs. Upendra V. Mithani 2009 (8) TMI 1159 - BOMBAY HIGH COURT wherein the High Court had concurred with the view taken by the Tribunal, that if the assessee gives an explanation which is unproved but not disproved, i.e it is not accepted but circumstances do not lead to the reasonable and positive inference that the assesse s case is false, then no penalty u/s 271(1)(c) could be imposed. - Decided in favour of assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Summary

Issues Involved:
1. Legitimacy of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Determination of whether the assessee concealed income or furnished inaccurate particulars of income.
3. Procedural compliance with the pronouncement of orders within the stipulated time frame.

Detailed Analysis:

1. Legitimacy of the Penalty Imposed under Section 271(1)(c):
The assessee, a life insurance agent, filed his return for A.Y 2013-14, declaring an income of ?33,38,580/-. The income was later revised to ?43,88,580/- after withdrawing a deduction claim of ?10,50,000/- under Section 35(1)(ii) related to a contribution to the School of Human Genetics & Population Health. The Assessing Officer (A.O) initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) upheld the penalty, observing that the assessee had intentionally raised a false claim of deduction.

2. Determination of Whether the Assessee Concealed Income or Furnished Inaccurate Particulars of Income:
Upon receiving information from the Directorate of Investigation, Kolkata, that the School of Human Genetics & Population Health was not conducting genuine activities, the A.O reopened the case under Section 147. The assessee, in response to the notice under Section 148, filed a revised return, withdrawing the earlier deduction claim. The Tribunal observed that although irregularities were found in the institute’s activities, no conclusive evidence proved that the assessee did not make a genuine contribution. The Tribunal referenced several judicial pronouncements where similar claims were accepted despite the institute's irregularities. The Tribunal concluded that the assessee acted in a bona fide manner by withdrawing the deduction claim upon learning about the institute's irregularities. The Tribunal held that the assessee’s explanation, though unproved, was not disproved, and thus, no penalty under Section 271(1)(c) could be imposed.

3. Procedural Compliance with the Pronouncement of Orders within the Stipulated Time Frame:
The Tribunal addressed the delay in pronouncing the order beyond the 90-day period due to the nationwide lockdown imposed to prevent the spread of COVID-19. The Tribunal cited the Hon’ble Supreme Court and Bombay High Court's orders extending limitations due to the pandemic. The Tribunal concluded that the lockdown period should be excluded from the 90-day time limit for pronouncement of orders, following the pragmatic approach in light of the unprecedented situation.

Conclusion:
The Tribunal set aside the CIT(A)’s order and quashed the penalty of ?3,24,450/- imposed under Section 271(1)(c), concluding that the assessee’s conduct did not warrant the penalty. The Tribunal also justified the delay in pronouncing the order due to the extraordinary circumstances of the COVID-19 lockdown.