Indo-Russian Helicopters Limited Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, allowed the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals)/NFAC upholding a penalty under Section 270A of the Income-tax Act, 1961 for Assessment Year 2018-19. The Tribunal first condoned a delay of 642 days in filing the appeal after finding that the assessee had shown sufficient cause.
The assessee, a joint venture company incorporated on 2 May 2017 for manufacturing Russian design Kamov 226T helicopters, filed its return declaring a loss of Rs. 45,33,901. During scrutiny, the Assessing Officer noticed that the assessee had claimed the entire pre-incorporation expenditure of Rs. 26,83,290 as a deduction, whereas under Section 35D only one-fifth of such expenditure was allowable in a year. The Assessing Officer allowed Rs. 5,36,658 and disallowed Rs. 21,46,632, completing the assessment under Section 143(3) by reducing the returned loss to Rs. 23,87,269. Simultaneously, penalty proceedings under Section 270A were initiated for under-reporting of income.
During both the assessment and penalty proceedings, the assessee accepted that the entire claim had been made inadvertently instead of claiming the expenditure over five years in accordance with Section 35D. The assessee maintained that the incorrect claim was unintentional and requested that no penalty be levied. The Assessing Officer rejected the explanation and imposed a penalty of Rs. 3,31,655, being 50% of the tax payable on the under-reported income. The CIT(A)/NFAC upheld the penalty, observing that the assessee had not furnished any concrete explanation showing why the Assessing Officer’s action was unwarranted.
