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Facts
The assessee claimed a deduction under Section 35(2AB) of Rs. 78,32,617. The Assessing Officer (AO) restricted this deduction to Rs. 76,50,000 and initiated penalty proceedings for furnishing inaccurate particulars. The penalty was sustained by the CIT(A).
Held
The Tribunal held that the assessee had provided complete details and had the necessary approval for claiming the deduction. The restriction by the AO did not automatically mean the assessee furnished inaccurate particulars. Therefore, the penalty was not sustainable.
Key Issues
Whether penalty under Section 271(1)(c) can be levied when the assessee claimed a deduction based on an auditor's certificate, and the AO merely restricted the quantum of deduction during assessment?
Sections Cited
35(2AB), 143(3), 271(1)(c)
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िनधा"रती क" ओर से/Assessee by : Shri Vineet Krishan, Advocate राज"व क" ओर से/ Revenue by : Dr. Ranjeet Kaur, Sr. DR सुनवाई क" तारीख/Date of Hearing : 07/01/2025 उदघोषणा क" तारीख/Date of Pronouncement : 09/01/2025 आदेश/Order
PER VIKRAM SINGH YADAV, AM
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 11/06/2024 pertaining to Assessment Year 2015-16 wherein the sole ground of appeal relates to sustenance of levy of penalty amounting to Rs. 59,249/-under section 271(1)(c) of the Act.
2. Briefly the facts of the case are that the assessee filed its return of income claiming deduction under section 35(2AB) amounting to Rs. 78,32,617/- and thereafter, in terms of order passed under section 143(3) dt. 29/09/2017, the deduction so claimed was restricted to Rs. 76,50,000/- by the Assessing officer. Separately, penalty proceeding were initiated for furnishing inaccurate particulars of income and after calling for the explanation from the assessee but not finding the same acceptable, order dt. 24/03/2022 was passed under section 271(1)(c) levying penalty amounting to Rs. 59,249/- for furnishing inaccurate particulars of income which on appeal has been sustained by the Ld. CIT(A) and against the said findings, the assessee is in appeal before us.
During the course of hearing, the Ld. AR submitted that during the course of assessment proceedings, complete details of both revenue and capital expenditure incurred on scientific research has been submitted by the assessee and the assessee has the requisite approval granted by the competent authority i.e; Department of Scientific and Industrial Research (DSIR) dt. 29/03/2016 and basis the said approval and the auditor certificate, the deduction has been claimed under section 35(2AB) of the Act. It was submitted that the AO has relied on the subsequent certificate in Form 3CL submitted by the DSIR to DGIT for restricting the claim of deduction under section 35(2AB) of the Act. It was submitted that the said certification talks about the expenditure both revenue and capital held eligible for deduction under section 35(2AB) of the Act. However, the deduction on capital expenditure of Rs. 1,82,617/- was to be allowed @ 200% as per the provisions of Section 35(2AB) of the Act. It was submitted that there is no dispute that the assessee has incurred expenditure of Rs. 76.50 Lacs on scientific research, however the claim of deduction under section 35(2AB) has to be determined at 200% of capital expenditure which comes to Rs. 78,32,617/- which has been rightly claimed by the assessee. It was accordingly submitted that there is no basis for levy of penalty by the AO holding that the assessee has furnished inaccurate particulars of income by claiming excess deduction. It was further submitted that given the quantum involved, the assessee has not preferred any further appeal against the assessment order, however the same cannot be taken as admittance on the part of the assessee in terms of furnishing of inaccurate particulars of income and more so, for levy of penalty as so held by the AO. Further, reliance was placed on the decision of the Hon’ble Supreme Court in case of Reliance Petro products. It was accordingly submitted that penalty so levied may be directed to be deleted.
Per contra, the ld DR has relied on the order of the lower authorities.
I have heard the rival contentions and purused the material available on record. There is no dispute that the assessee is eligible for claim of deduction u/s 35(2AB) of the Act and fulfills all the requisite conditions for claiming such deduction. There is also no dispute that the assessee has incurred an expenditure of Rs 76.50 lacs during the year on scientific research. The auditors have verified the books of accounts and issued a certificate in this regard and has determined an amount of Rs 78.32 lacs as eligible deduction u/s 35(2AB) of the Act and basis the same, the assessee has made the claim of Rs 78.32 lacs while filing its return of income. The AO, basis certificate submitted by DSIR with DGIT, subsequent to the filing of the return of income has restricted the claim of deduction to Rs 76.50 lacs. Therefore, as far as the return of income is concerned, it cannot be held that the assessee has furnished any inaccurate particulars of income by claiming weighed deduction u/s 35(2AB) as so certified by its auditors. During the course of assessment proceedings, mere restricting the qunatum of the deduction from Rs 78.32 lacs to Rs 76.50 lacs by the AO cannot lead to a situation where the assessee is held guilty of furnishing inaccurate particulars of the income. The assessee has explained that the claim has been made basis the auditors certificate where on the capital expenditure, the weighted deduction has been determined at the rate of 200% as so provided in Section 35(2AB) of the Act and the said explanation has not been rebutted by the AO. In light of the same and given that the quantum and penalty proceedings are separate proceedings, merely the fact that the assessee has not challenged the findings of the AO in the quantum proceedings, the same cannot form the basis to fasten the charge against the assessee and held it liable for penalty and the assessee has all the rights under the law to put forward its case against levy of penalty and which as I have noted above, the assessee has duly explained and demonstrated. In the result, the penalty so levied and sustained u/s 271(1)(c) is hereby directed to be deleted.
In the result, the appeal of the assessee is allowed.