No penalty for disallowance U/s. 40(a)(i) if TDS deducted next year

Merely because a claim (per the return of income) is a legal claim, or has a legal aspect to it – which would be in each case – the same by itself cannot be a cause for non levy of penalty in every case, as where there is no valid basis for the same (i.e., the legal claim). That is, the claim must rest on some reasonable premises or basis, i.e., have some basis to it. In CIT vs. Escorts Finance Ltd. [2010] 328 ITR 44 (Del), the hon’ble court found the assessee’s claim u/s.35D, said to be based on the opinion of its Chartered Accountant, a tax expert, as without basis in view of the clear language of the provision, extending the benefit of the said deduction to an industrial company, while the assessee-respondent was admittedly a finance company. In CIT vs. Zoom Communication (P.) Ltd. [2010] 327 ITR 510 (Del.), the claim was qua income-tax, barred by section 40(a)(ii), so that the plea of ‘omission’ was considered as not acceptable. In CIT vs. Usha International Limited [2013] 214 Taxmann.com 519 (Del), again, the claim was u/s.35CCA, which was found as de hors any basis. Penalty u/s.271(1)(c) of the Act was accordingly confirmed in all these cases by the hon’ble court, confirming thus that furnishing of a plausible explanation for default continues to be the building block or an essential ingredient for saving levy penalty u/s.271(1)(c) of the Act, and would apply even in respect of legal claims and, further, even after the decision in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), which decision was considered in these cases.