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TMI Blog2020 (2) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 80 - SUPREME COURT] because in this case claiming of inadmissible deductions u/s 80IB and 80G is not a wrong claim rather a deliberate and conscious scheme to evade the tax by furnishing inaccurate particulars of income, if not caught in scrutiny.- thus penalty is not sustainable in the eyes of law Assessee in this case has never revised its return during the period prescribed u/s 139(1) rather withdrew the claim during assessment proceedings when confronted by the AO. So, by no stretch of imagination, the claim made by the assessee for deduction u/s 80IB and 80G can be considered as inadvertent claim rather it is deliberate and conscious claim made to evade the taxes. Moreover, it is nowhere the case of the assessee company that the claim of deduction has been made on the basis of wrong audited reports or its audited report has been subsequently corrected by its auditors. Had there been any inadvertent mistake on the part of the assessee company to claim such deductions, assessee company would have filed revised return within the prescribed period, but no such revised return has been filed which leads to the conclusion that it was a deliberate and conscious attempt to evade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f penalty of ₹ 7,91,852/-u/s 271 (1)(c) of I.T. Act made by the Ld. Assessing Officer and sustained by the Ld. CIT(Appeals) being illegal and untenable on facts and in law deserves to be quashed and cancelled." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee company being incorporated on 02.12.1988 is into the business of manufacturing and sale of engineered metal products for auto and allied engineering industries such as Aluminum Die Cast, Sheet Metal, etc.. On the basis of assessment framed under section1 143 (3) of the Act at total income of ₹ 1,85,64,980/- by making various disallowances inter alia addition of ₹ 22,77,910/-, ₹ 44,592/- & ₹ 30,000/- on account of withdrawal of claim of deduction u/s 80IB, wrongly claimed deduction u/s 80G from 50% to 100% & on account of TDS not deducted by the assessee on legal and professional expenses respectively, the penalty proceedings were initiated u/s 271(1)(c) of the Act. Declining the contentions raised by the assessee that it was inadvertent claim of the assessee, Assessing Officer (AO) levied penalty of ₹ 7,91,852/- @ 100% of the tax sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght on record as to what was the material with assessee company which is manned by expert hands put under the impression that they are eligible for deduction u/s 80IB of the Act. 8. For facility of reference, extract of the letter dated 09.07.2008 written by the assessee company to the AO is extracted as under :- "In our Income Tax Return filed for the captioned assessment year declaring Taxable Income at ₹ 1,59,42,885/- wherein the assessee company has claimed the deduction u/s 80-IB of the Income Tax Act, 1961. In this connection, it is respectfully submitted that while going through our records we have noticed as under: 1. That the deduction u/s 80 IB has been inadvertently claimed at by the Assessee Company, 2. That a loss of ₹ 154143/- on sale of derivative was inadvertently not reduced from the income. Therefore, we are revising our Computation of Income at the total taxable income of ₹ 1,80,66,649/- i.e. without the deduction of ₹ 22,77,910/- u/s 80IB of the Act. You are required to please treat this revised statement of assessable income showing taxable income for the aforesaid assessment year at ₹ 1,80,66,649/- as forming part an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, "assessee company has furnished inaccurate particulars with a view to evade the tax and the reason described above may be treated as satisfaction note for initiating the penalty proceedings u/s 271(1)(c) of the Act for the above two additions made". Then, on the basis of aforesaid satisfaction recorded by the AO, notice was issued to the assessee company u/s 274 r/w section 271(1)(c) of the Act which has never been challenged by the assessee company. All these facts go to prove that penalty proceedings in this case are initiated on the basis of valid satisfaction and the decisions relied upon by the assessee are not applicable to the facts and circumstances of the case. 13. Ld. AR for the assessee further contended that penalty cannot be levied u/s 271(1)(c) on the basis of wrong claim of deduction u/s 80IB of the Act amounting to ₹ 22,77,910/-, for claim u/s 80G @ 100% instead of 50% and for non-deduction of TDS on professional fee and relied upon the decision of Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC). 14. No doubt, merely making claim which is not sustainable ipso facto not sufficient to term it "furnishing of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 36(1)(iii) of the Act was deleted by the Commissioner of Income Tax(Appeals) though it was later restored, by the Tribunal, to the Assessing Officer. The appeal filed by the assessee against the order of the Tribunal was admitted by the High Court. It was, in these circumstances, that the Tribunal came to the conclusion that the assessee had neither concealed the income nor filed inaccurate particulars thereof. In recording this finding, the Tribunal felt that if two views of the claim of the assessee were possible, the explanation offered by it could not be said to be false. This, however, is not the factual position in the case before us. The facts of the present case thus are clearly distinguishable. 19. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide. If the claim besides being incorrect in law is malafide, Explanation 1 to Section 271(1) would come into play and work to the disadvantage of the assessee. 20. The Court cannot overlook the fact that only a small percentage of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contention made by the ld. AR for the assessee in this regard is sustainable because qua addition of ₹ 30,000/- assessee company has made full disclosure of all the facts as to making payment on which TDS was not deducted. So, the assessee had no occasion to furnish inaccurate particulars to conceal its income as the only dispute was qua deduction or non-deduction of tax for the payment made on account of legal and professional expenses. 21. Coordinate Bench of the Tribunal in case of Syndicate Labels vs. ACIT (supra) deleted the penalty levied for nondeduction of tax u/s 40A(ia) by returning following findings. "3. After considering rival submissions and perusing relevant material on record, it is observed that the instant penalty has been imposed only in respect of disallowance u/s 40(a)(i) of the Act. The assessee entertained a bona fide belief about the nondeduction of tax at source from the amount paid to M/s Maersk India Pvt. Ltd. on the basis of a Circular, as per which, the foreign shipping companies and their agents were governed by the provisions of Section 172 and not by Section 194C of the Act. Though it is an admitted fact that the assessee made the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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