2023 (8) TMI 441 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - disallowance on account of order u/s 92CA(3) by TPO for undercharging interest on foreign currency loan to AE by assessee company - HELD THAT - Since the quantum addition/ disallowance has been deleted the penalty to this extent does not survive and, therefore, the findings of the CIT(A) cannot be faulted with. Disallowance being excess claim u/s. 35 (2AB) - We find that during the course of the assessment proceedings itself the assessee has intimated the claim of expenditure approved by DSIR - On identical set of facts this Tribunal in 2016 (3) TMI 921 - ITAT DELHI has deleted the levy of penalty levied on similar excess claim u/s. 35 (2AB) of the Act. Claim of the assessee at the time of filing of the return was a bonafide claim supported by the relevant provisions of the law. As soon as a lesser claim was approved by the DSIR the assessee intimated the AO and because the return could not be revised accepted the disallowance made by the AO by not contesting the same in the appeal. Ratio laid down by the Hon ble Supreme Court in the case of Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT squarely apply. Decided against revenue.

Summary

Issues involved:
The issues involved in this case are the deletion of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for undercharging interest on foreign currency loan to an associated enterprise and the deletion of penalty on excess claim made under section 35(2AB) of the Act.

Deletion of penalty for undercharging interest:
The revenue appealed against the deletion of penalty imposed for undercharging interest on a foreign currency loan to an associated enterprise. The Tribunal considered the appeal and held that since the quantum addition had been deleted, the penalty did not survive. The Tribunal noted that the revenue failed to demonstrate any distinguishing feature in the case and did not provide any material to show that the order in the assessee's own case for other years had been overruled. Therefore, the penalty was directed to be deleted, and the CIT(A)'s findings were upheld.

Deletion of penalty for excess claim under section 35(2AB):
The second issue pertained to the disallowance of an excess claim made under section 35(2AB) of the Act. The assessee had claimed a deduction for Research and Development (R&D) expenditure, which was approved at a lower amount by the Department of Scientific and Industrial Research (DSIR). The Assessing Officer disallowed the excess claim and initiated penalty proceedings under section 271(1)(c) of the Act. However, the Tribunal observed that the assessee had intimated the approved expenditure to the AO during assessment proceedings and had explained the bifurcation of the claim. The Tribunal also noted a previous decision where a penalty on a similar excess claim was deleted. The Tribunal found the assessee's claim to be bona fide and in compliance with relevant provisions of the law. As the claim was revised by DSIR after the filing of the return, the assessee accepted the disallowance without contesting it further. Citing the precedent set by the Supreme Court, the Tribunal dismissed the revenue's appeal, upholding the findings of the CIT(A) and dismissing the penalty.

Separate Judgement:
No separate judgment was delivered by the judges in this case.