Tribunal remands revenue's appeal for penalty deletion on research & R&D claims.

The Tribunal remanded the issues back to the CIT(A) for necessary steps, allowing the appeal filed by the revenue for statistical purposes. The CIT(A) deleted the penalty under section 271(1)(c) imposed by the AO, as the disallowance of the claim towards research did not constitute furnishing inaccurate particulars. The CIT(A) also deleted the penalty levied by the AO regarding the disallowance of R&D expenditure under section 35(1)(iv) after considering fresh facts and a recognition received from the R&D Unit, Government of India.

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Issues:
1. Disallowance of R&D expenditure under section 35(1)(iv) of the Income Tax Act for assessment year 2002-03.
2. Imposition of penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:

Issue 1: Disallowance of R&D expenditure under section 35(1)(iv)
The appellant, a revenue authority, challenged the order of the CIT(A) allowing the appeal of the assessee regarding the disallowance of R&D expenditure. The appellant contended that the facts of the case were different from the relied-upon case and that the addition was made due to a false claim in the written income, deemed as "inaccurate particulars of Furnishing of income" by the Assessing Officer (AO). The AO rejected the deduction claimed by the assessee under section 35(1)(iv) as it was related to research and development capital expenditure, stating that the technology used was provided by ISRO and did not fulfill the conditions under the Act. The penalty proceedings were initiated by the AO. The CIT(A) dismissed the appeal against the disallowance, leading to the appellant filing an appeal before the Tribunal. The Tribunal remanded the issue to the CIT(A) for deciding on merits. The CIT(A) considered fresh facts and a recognition received from the R&D Unit, Government of India. The CIT(A) observed that the AO should have referred the matter to the board to determine if the activity involved scientific research and development. Consequently, the penalty levied by the AO was deleted by the CIT(A).

Issue 2: Imposition of penalty under section 271(1)(c)
The AO imposed a penalty under section 271(1)(c) for furnishing inaccurate particulars of income, as the assessee did not respond to the intimations issued. The CIT(A) deleted the penalty based on the grounds that a mere disallowance of the claim towards research does not constitute furnishing inaccurate particulars or concealment by the assessee. The senior DR submitted that necessary actions regarding verification with the board were not taken by the CIT(A). The Tribunal noted that the AO passed the penalty order without considering the submissions of the assessee and decided to remand the issue back to the CIT(A) to ascertain if the assessee was carrying out research and development activities during the relevant period based on the recognition received from the Government of India.

In conclusion, the Tribunal remanded the issues back to the CIT(A) for necessary steps, allowing the appeal filed by the revenue for statistical purposes.

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