Case Law Details
DCIT Vs Polyplex Corporation Limited (ITAT Delhi)
Polyplex Corporation Limited, the assessee, filed its income tax return for the assessment year 2016-17 declaring a total income of INR 14,22,64,180/-. The return was selected for scrutiny assessment, and during the assessment, certain deductions claimed under section 35(2)(AB) of the Income Tax Act were disallowed by the Assessing Officer (AO) to the tune of INR 1,76,87,054/-. This disallowance led to the initiation of penalty proceedings under section 271(1)(c) by the AO, resulting in the imposition of a penalty of INR 60,11,830/-.
Contentions: The Revenue contended that the disallowance under section 35(2)(AB) indicated inaccurate particulars of income furnished by the assessee, justifying the imposition of the penalty. It argued that had the case not been scrutinized, the incorrect deduction claimed would have gone unnoticed. Therefore, the AO’s decision to levy the penalty was justified.
However, the assessee argued that there was no concealment or furnishing of inaccurate particulars of income. It explained that while it had claimed a deduction of INR 4.41 crores for Research & Development (R&D) expenditure, the Department of Scientific and Industrial Research (DSIR) later restricted this deduction to INR 2.85 crores. The assessee contended that the expenditure remained genuine business expenditure and was allowable under section 37(1) of the Act. Therefore, the penalty imposition was unwarranted.
Decision: The Commissioner of Income Tax (Appeals) [CIT(A)] considered the submissions and deleted the penalty imposed by the AO. The CIT(A) found that the assessee had not furnished inaccurate particulars of income in its return. It noted that the assessee had disclosed all relevant facts, and any discrepancy arose due to subsequent approval by the DSIR, which was received after the filing of the return. The CIT(A) relied on judicial precedents, including the Supreme Court’s decision in Price Water House Coopers Pvt. Ltd. vs. CIT, to support its decision.
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