TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 501
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.... shortage of funds, the huge amount of self-assessment tax could not be deposited in time and therefore, it was not possible to furnish the return of income on or before the due date. However, the A.O. did not agree with the assessee's contention and disallowed assessee's claim of deduction U/s 80IA of the Act merely on the ground that the return so filed was delayed by 31 days. The A.O. also levied penalty with respect to disallowance of deduction U/s 80IA of the Act which was confirmed by the ld. CIT(A), against which the assessee is in further appeal before us. 3. The ld AR appearing on behalf of the assessee has contended that the tax audit report was originally filed well in time, on 30/09/2013 itself, alongwith the audited financial statements. The deduction of Rs. 88,51,859/- admissible to the assessee company under Section 80IA was duly mentioned in the Tax Audit Report under Section 44AB, in Clause 26 of Form No. 3CD. Thus, the company has made substantial compliance of the provisions of Section 80IA, r.w.s 80AC by filing the tax audit report and audited financial statements in time. Thus, the assessee company did not intend to contravene the legal provisions. As per the....
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....on of total income were duly furnished by assessee and no deficiencies in furnishing of such facts were pointed out by the department, deeming fiction of Explanation 1 to section 271(1)(c) was not applicable to the assessee's case. Merely on account of disallowance of certain claim, penalty cannot be imposed u/s 271(1)(c). For this purpose, reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC), wherein the Hon'ble Supreme Court explained the meaning of the term 'furnishing of inaccurate particulars'. It was observed that 'inaccurate particulars' means the details supplied in the return which are not accurate, not exact or correct, not according to truth, or erroneous. It was held that making a claim which is not sustainable in law, cannot, by itself, amount to furnishing of inaccurate particulars. It was further held that by no stretch of imagination can it be held that making an incorrect claim in law would tantamount to furnishing of inaccurate particulars. 5. In support of the above contention, reliance was also placed on the decision of the Chandigarh bench of the T....
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....he claim of deduction could not be said to be malafide. 6. Our attention was invited to the penalty order passed by the A.O. wherein the AO has observed that the reply of the assessee is not acceptable as the same was submitted during the course of assessment proceedings and was duly considered by the A.O. The AO is under an erroneous impression that levy of penalty u/s 271(1)(c) is an automatic action of the AO in every case of difference in returned and assessed income and that levy of penalty in such cases is mandatory. It is a trite law that the levy of penalty is not a consequential action by the AO in every case of difference in returned and assessed income and that levy of penalty in such cases is discretionary, which has to be exercised judiciously. Vide Para 3.3 of the reply, dated 19.02.2018 (supra), it was submitted as under : "It is an established law that penalty proceedings are distinct from assessment proceedings, Levy of penalty is not a necessary concomitant of assessment proceedings. Mere fact that disallowance has been made and upheld in appeal, does not justify the imposition of penalty under section 271(1)(c). The findings recorded in the assessment order on....
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....ccurate particulars of income. 10. We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders while levying the penalty as well as cited by the ld. AR during the course of hearing before us in support of its contention that it was not a fit case for levy of penalty. From the record we found that the assessee company derives income from trading of tea blended in its own factory and form windmill. During the year under consideration, the assessee claimed deduction U/s 80IA of the Act. The assessee's claim for deduction was declined only on the plea that there was delay of 31 days in filing return of income. By referring the provisions of Section 80AC, the A.O. declined claim of deduction as there was delay in filing return. We found that not only tax audit report but also audited financial statements were filed well within the time and only due to the shortage of fund, the assessee could not pay self-assessment tax, therefore, return could not be filed before due date. While declining claim of deduction U/s 80IA of the Act,....
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....because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. [Para 8] The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assesses in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assesses had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount....
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....d. Raising a bona fide legal claim in the return of income, even if it is ultimately found to be legally not acceptable, could not amount to concealing particulars of income or furnishing of inaccurate particulars of income. The assessee could not be saddled with penal consequences merely because a bona fide legal claim was made in the return of income and the same has not been accepted by the tax authorities or appellate authorities so far. Thus, the case of assessee could not be said to be a case of 'concealing particulars of income' or 'furnishing of inaccurate particulars of income' as contemplated under section 271(1)(c) of the Act. 12. In the case of Pr. CIT v. Sundaram Fasteners Ltd. [2018] 92 taxmann.com 356 (Madras) the Hon'ble Madras High Court has held as under: Section 271(1)(c), read with section 80-IB, of the Income-tax Act, 1961 - Penalty - For concealment of income (Disallowance of claim, effect of) - Assessment year 2004-05 - Assessee was a manufacturer of automobiles components like fastners, radiator caps, gear shifters etc. - For relevant year, assessee filed its return claiming deduction under section 80-IB - Assessing Officer rejected assess....
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....and machinery - Assessee was under impression that it was entitled to benefit under section 80-IA and, thus, claimed said deduction - Said claim was held as not allowable - Whether since assessee was under a bona fide belief, penalty under section 271(1)(c) was not sustainable - Held, yes [Para 7]." 14. In the case of CIT v. Dharampal Premchand Ltd. [2011] 11 taxmann.com 437 (Delhi), the Hon'ble Delhi High Court has held as under: "Section 271(1)(c), read with sections 80-IA and 80-IB of the Income-tax Act, 1961 - Penalty - For Concealment of Income - Assessment year 2001-02 - Assessee was engaged in manufacture of flavoured chewing tobacco and kimam - For relevant assessment year, assessee filed its return wherein deductions under sections 80-IA and 80-IB were claimed - Assessing Officer rejected assessee's claim for deduction - He also levied penalty under section 271(1)(c) on ground that assessee had wrongly claimed deduction in its return of income - On appeal, assessee contended that it had disclosed all material facts pertaining to computation of deduction admissible under sections 80-IA and 80-IB - Assessee further contended that it was of opinion that interest earned....