Tribunal upholds deletion of penalty for claiming expenditure in good faith

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) for the disallowance of expenditure claimed under section 35D. The Tribunal found the mistake in claiming the expenditure bonafide and inadvertent, considering the circumstances of the case, where the resulting company was eligible for deduction but did not claim it. Referring to relevant Supreme Court decisions, the Tribunal concluded that the assessee did not have an advantage to make a false claim, as both companies belonged to the same group.

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Issues:
Penalty imposed under section 271(1)(c) of the Income Tax Act for disallowance of expenditure claimed under section 35D.

Analysis:

Issue 1: Disallowance of Expenditure under Section 35D
- The appeal was against the order of CIT(A) setting aside the penalty imposed under section 271(1)(c) for disallowance of expenditure claimed under section 35D.
- The assessee, an investment company, filed its return showing taxable income, which was later assessed by the AO with disallowances, including the one under section 35D.
- The AO imposed the penalty after the assessee did not challenge the disallowance before CIT(A).
- The revenue challenged the deletion of penalty only in relation to the expenditure claimed under section 35D.
- The revenue argued that the assessee furnished inaccurate particulars leading to the penalty imposition.
- The assessee contended that the mistake was inadvertent and bonafide, as the unamortized expense was not described with assets during demerger.
- CIT(A) found the mistake bonafide and inadvertent, directing the AO to delete the penalty.
- The Tribunal noted that the resulting company was eligible for deduction under section 35D but did not claim it, supporting the bonafide nature of the assessee's claim.
- Referring to relevant Supreme Court decisions, the Tribunal upheld CIT(A)'s decision, dismissing the revenue's appeal.
- The Tribunal concluded that the assessee was not in an advantageous position to make a false claim, as both companies belonged to the same group.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) for the disallowance of expenditure claimed under section 35D.

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