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TMI Blog2021 (8) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961 (for short 'the Act') qua the assessment year 2014-15 on the grounds inter alia that :- "On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting penalty of Rs. 1,65,52,880/- imposed by the AO u/s 271(1)(c) of the Income-tax Act, 1961." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : On the basis of assessment framed under section 143(3) of Act, penalty proceedings have been initiated for furnishing of inaccurate particulars of income to the tune of Rs. 4,86,99,262/- while claiming Research & Development (R&D) expenditure, which the Assessing Officer (AO) has treated to be capital in nature by disallowing the same. Declining the contentions raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86,99,262/-. 6. Taking into account the aforesaid undisputed facts and circumstances of the case, ld. CIT (A) deleted the penalty by returning following findings :- "5.3 It is also observed from the available records that the initiation of the penalty u/s 271 (1)(c) was made in the order u/s 143(3) under the limb 'furnishing inaccurate particulars of income'. In fact, it is gathered from the appellant's submissions filed during the course of the present appeal that penalty u/s 271 (1)(c) was imposed by the impugned order although the appellant had submitted all details regarding its claim of deduction of expenses. It is also observed from the plethora of judicial precedents relied upon by the appellant that complete details f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.4 It is also observed from the available records that the initiation of the penalty u/s 271(1)(c) was made in the order u/s 143(3) under the limb 'furnishing inaccurate particulars of income' while in the notice u/s 274 there is no tick mark on the appropriate limb (or striking off of the inappropriate limb) as required u/s 271 (1 )(c) and finally, the penalty is imposed for 'furnishing inaccurate particulars of income' (as understood from the impugned order). 5.5 Thus, from the above paras it can be inferred that the disallowances of the appellant's claims of expenditure were on not satisfying the stipulated conditions for their allowability under the Act, i.e. u/s 37 of the Act. Such disallowances, in my opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the assessee for incurring expenditure on account of R&D does not come under the purview of section 271(1)(c) of the Act and relied upon the decisions rendered by Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) and CIT vs. SSA's Emerald Meadows (2016) 73 taxmann.com 248. 8. Ld. DR for the Revenue except for relying upon the order passed by the AO has failed to bring on record if valid notice u/s 271(1)(c) read with section 274 of the Act was issued to the assessee and that mere claim of expenditure by the assessee if disallowed does not amount to furnishing of inaccurate particulars of income or concealing particulars of income during assessment proceedings. 9. Hon'ble Apex Court in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA's Emerald Meadows (2016) 73 Taxman.com 241 (Kar) , the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of2016 by order dated 5th August, 2016." 11. Following the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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