Appeal granted on penalty for CSR expenditure claim error.

The Appellate Tribunal allowed the appeal, setting aside the penalty imposed under section 271(1)(c) for inadvertent claim of expenditure under Corporate Social Responsibility. The Tribunal found the mistake to be a genuine oversight, rectified promptly by the assessee during assessment proceedings. Emphasizing the bona fide nature of the error and citing legal precedents, the Tribunal concluded that no penalty should be imposed in this case. The assessing officer was directed to delete the penalty, and the appeal of the assessee was upheld.

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Issues:
1. Condonation of delay in filing appeal.
2. Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 for inadvertent claim of expenditure under Corporate Social Responsibility (CSR).

Issue 1: Condonation of Delay in Filing Appeal

The appeal was filed 86 days beyond the due date, citing closure due to the Covid-19 pandemic. The Appellate Tribunal noted that the delay was beyond the assessee's control and was filed within the extended period granted by the Taxation & Other Laws Ordinance, 2020. Consequently, the appeal was deemed to be within the extended limitation period, and no delay was found in filing the appeal.

Issue 2: Levy of Penalty under Section 271(1)(c) for CSR Expenditure

The assessing officer had imposed a penalty under section 271(1)(c) for the inadvertent claim of expenditure under CSR. The assessee voluntarily revised the computation of income during assessment proceedings, disallowing the CSR expenditure. It was argued that the mistake was bona fide, as it was the first year for disallowing CSR expenditure, and the error was rectified promptly. The assessing officer did not inquire about CSR expenditure, and the mistake was corrected by the assessee without carrying forward losses.

The Appellate Tribunal analyzed the case laws cited by both parties and observed that the mistake in claiming CSR expenditure appeared to be a genuine oversight, considering the introduction of Explanation 2 to section 37 in the Finance Act, 2014. The Tribunal noted that the assessee disclosed the error and rectified it promptly during assessment proceedings. Referring to the Supreme Court's decision in CIT vs Reliance Petroproducts Pvt. Ltd., it was emphasized that a mere unsustainable claim does not attract penalty under section 271(1)(c) if details provided in the return are not found to be inaccurate or false.

Based on the facts and legal precedents, the Tribunal concluded that this was not a suitable case for imposing a penalty under section 271(1)(c). Therefore, the assessing officer was directed to delete the penalty, and the appeal of the assessee was allowed.

In conclusion, the Appellate Tribunal upheld the appeal, setting aside the penalty imposed under section 271(1)(c) for the inadvertent claim of expenditure under Corporate Social Responsibility, emphasizing the bona fide nature of the mistake and the timely rectification by the assessee during assessment proceedings.

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