Brief of the case:
ITAT Delhi held in case of ACIT Vs. PTC Industries Ltd. ITAT held that when expenditure claimed is genuine then penalty u/s 271 (1) (c) cannot be levied. ITAT relied upon the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Product Pvt. Ltd. (2010) 36 DTR 449 (SC) wherein it was held that merely because of the assessee’s claim, deduction of the interest of expenses which has not been accepted by revenue, penalty u/s 271(1)(c) not attracted, for merely making of the claim, which is not sustainable in law by itself will not amount furnishing inaccurate particulars of income.
Facts of the case:
- AO has made the addition of disallowances of Revenue Expenditure claimed by appellant u/s 35(2AB) of I.T. Act of Rs.32,42,889/- (150% deduction claimed at Rs.21,61,926/-).
- The appellant has disclosed in its return of income in respect of the expenses claimed and shown in its return of income but the A.O. has found the same as disallowable expenses in the absence of approval/ sanction of Secretary, DSIR, New Delhi.
- The said approval was received by appellant from Secretary, DSIR, New Delhi vide letter dated 06.02.2013. In said approval letter the Secretary, DSIR has granted the approval of revenue expenditure allowable u/s 35(2AB) of IT Act of Rs. 37.38 lacs against claimed by appellant at Rs. 49,05,284/-.
- The AO has allowed the said expenses as revenue expenditure only Rs.27,43,358/- against the approval of DSIR u/s 35(2AB) Rs. 37.38 lacs and accordingly the AO has levied penalty u/s 271(1)(c) on the expenses claimed by appellant u/s 35(2AB) at Rs.32,42,889/-.
Contention of the revenue:
- Necessary approval from DSIR was not received till completion of scrutiny assessment order.
Contention of the assessee:
- The assessee has furnished each detail/ information in respect of claim of Revenue Expenditure u/s 35(2AB) before AO either at the time of filing of return of income or assessment/penalty proceedings.
- The appellant has bonafide belief that its claim of Revenue expenditure u/s 35(2AB) was genuine as per provisions of IT Act, though the approval of DSIR was pending till completion of scrutiny assessment order.
- The appellant has filed proper application for approval of DSIR in the form of 3CL for approval of Revenue Expenditure which were incurved and recorded in its books of accounts.
- The AO has never doubted the genuineness and correctness of the Revenue expenditure claimed and shown by appellant on which penalty was levied.
Held by CIT (A):
- The action of AO cannot be said justified because the AO has even not considered the quantum of revenue expenses allowed by Secretary, DSIR of Rs. 37.38 lacs vide letter dated 06.02.2013.
- The letter from DSIR was received well before the passing the present penalty order u/s 271(1)(c) of IT Act and the letter was submitted before AO by appellant during penalty proceedings but the AO has over-looked the quantum of revenue expenditure approval i.e. 37.38 lacs.
Held by ITAT:
The claim of the assessee was not accepted by the Assessing Officer for the sole reason that the assessee could not get the approval from DSIR till completion of scrutiny assessment proceedings and therefore, in the facts of the present case, the judgment of Hon’ble Apex Court (Supra) is squarely applicable and therefore, respectfully following this judgment of Hon’ble Supreme Court, we decline to interfere in the order of learned CIT(A).
Comments by the Author:
Besides the above observation tribunal have also dismissed the appeal filed by revenue against the order of CIT (A) in which he allowed the deduction of Rs.37.38 lacs on the basis of application filed before him by the assessee, as against Rs.27.43 lacs allowed by the AO u/s 35(2AB) of the Income-tax Act, 1961 against the claim of Rs. 49.05 lacs. According to AO, during the course of assessment proceedings, assessee did not file any such Form- 3CL received from Ministry of Science & Technology, Department of Scientific and Industrial Research, New Delhi. Tribunal dismissed the said appeal on the basis of low tax effect as prescribed by CBDT.