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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the revenue. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-21 [in short ‘CIT(A)’], Mumbai and arises out of the penalty levied u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
filed by the revenue read as under: 1 Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty on addition of Rs.1,39,87,496/- being weighted deduction of expenses on R&D. 2 Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty without appreciating the fact that the said penalty was levied in respect of the disallowance of claim of deduction u/s 35(2AB) after giving sufficient opportunity to the assessee to prove genuineness of its claim. 3 The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the Assessing Officer be restored.
3. In a nutshell, the facts of the case are that the assessee had claimed deduction of Rs.1,39,87,406/- u/s 35(2AB) in respect of expenditure incurred on scientific research. The Assessing Officer (AO) observed that the assessee had claimed net business loss and there was no business income. Therefore, he was of the view that no further deduction would be allowable as the same would result in carry forward of the deduction by way of increased loss, which is not allowable under any provisions of the Act. Therefore, the AO disallowed the claim of deduction of Rs.1,39,87,406/- u/s 35(2AB) of the Act. Subsequently, the AO levied a penalty u/s 271(1)(c) on the above disallowance of Rs.1,39,87,406/-.
4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A) and submitted that the claim of deduction u/s 35(2B) was a bonafide mistake. The Ld. CIT(A), relying on the decision of the Hon’ble Supreme Court in Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) and Price Waterhouse Coopers (P) Ltd. v. CIT (2012) 25 taxmann.com 400 (SC), deleted the penalty levied by the AO u/s 271(1)(c) on the above disallowance of Rs.1,39,87,406/-.
5. Before us, the Ld. DR submits that in quantum addition, the disallowance of Rs.1,39,87,406/- made by the AO has reached finality and therefore, the AO has rightly levied penalty u/s 271(1)(c) on the above disallowance. On the other hand, the Ld. Counsel of the assessee submits that it was a bonafide mistake and therefore, penalty is not leviable in view of the decisions relied on by the Ld. CIT(A). Thus he supports the order of the Ld. CIT(A).
We have heard the rival submissions and perused the relevant materials on record. As recorded by the AO at para 7 of his assessment order dated 31.01.2014, the assessee had claimed deduction of Rs.1,39,87,406/- u/s 35(2AB) in respect of expenditure incurred on scientific research. The AO disallowed the above claim in the assessment finalized by him on 31.01.2014. In Reliance Petroproducts Pvt. Ltd. (supra), the Hon’ble Supreme Court has held that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee and such a claim made in the return cannot amount to furnishing inaccurate particulars. Facts being identical, we follow the ratio laid down in the above decision and uphold the order of the Ld. CIT(A).