Incorrect claim based on CA report won’t attract penalty

Brief of the case:

The ITAT New Delhi in the above cited case held that making of an incorrect claim by assessee which is supported by a report of Chartered Accountant cannot be hold as furnishing inaccurate particulars of income. Therefore, penalty u/s 271(1)(c) is not warranted as the claim made under bonafide belief.

Facts of the case:

• The assessee is a company and is engaged in providing certain services including air conditioning, generator backup, interiors, electric, wooden fixtures and fittings etc. to its clients. The assessee claimed deduction u/s 80 IA of the Act to the extent of 100% of its gross total income i.e. Rs.36,80,723/-. The report of Chartered Accountant in Form 10CCB read with Rule 18BBB was filed with the return of income. The assessee has claimed that it is engaged in (i) developing, (ii) operating and maintaining (iii) developing, operating and maintaining, infrastructure facility.
• The AO observed that the assessee is merely providing certain interiors, furniture, fixtures and generator back up power services etc. for BPO/Software companies which are lessees of the building owned by its Director and has received services and hire charges for the same. The assessee is not engaged in the business of developing, operating and maintaining, the infrastructure facilities as specified in Sec.80 IA of the Act. Thus, the deduction was denied to assessee.
• Aggrieved assessee carried the matter in appeal. However, later on assessee withdrawn the appeal. The A.O. thereafter levied penalty u/s 271(1)(c ) of the Acton the ground that the assessee has furnished inaccurate particulars of income. CIT(A) also confirmed the same.
• Aggrieved assessee now in appeal before tribunal.
  

Contention of the Assessee:

• The learned counsel for the assessee contended that the assessee was guided solely by legal advise in making this claim u/s 80 IA. He argued that these are complicated provisions of law and the claim was made on a bonafide belief that the assessee is entitled for the same. The report of Chartered Accountant in Form CCB certifying the claim of assessee was good reason to believe that it is entitled to deduction u/s 80IA.
• The assessee has made deliberate attempt to reduce its taxable income and hence it is not a bonafide mistake.
  

Contention of the Revenue:

The learned counsel for the revenue contended that an apparently wrong claim has been made by the assessee and hence it is a case offurnishing of inaccurate particulars of income. The Software Park Development authorities have registered the assessee for computer softwareexports and not for supply or maintenance of air conditioners/facilities.

Held by ITAT New Delhi:

• The ITAT observed that the return of income in which assessee made a claim u/s 80IA was supported by report of Chartered Accountant in Form 10 CCB. A perusal of this audit report demonstrates that the auditors of the assessee also believed that the assessee was eligible for deduction u/s 80 IA of the Act. All details of the claim made u/s 80 IA are filed by the assessee, along with the return of income. The assessee acted under the guidance and advice of a Chartered Accountant.
• The provisions under the Income Tax Act are highly complicated and its really difficult for a layman to understand the same. Even seasoned tax professionals have difficulty in understanding these provisions. Making a claim for deduction under the provisions of S.80 IA of the Act which has numerous conditions attached, is a complicated affair.
• Under these circumstances it cannot be hold that the assessee attempted furnishing of inaccurate particulars of income rather acted under bonafide belief.
• Therefore, levy of penalty u/s not warranted (1)(c) not warranted and ordered to be deleted.