DCIT, NEW DELHI vs. M/S. SUNBEAM AUTO (P) LTD., NEW DELHI

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ITA 6141/DEL/2013Status: DisposedITAT Delhi31 July 2017AY 2005-065 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's claim for weighted deduction was bonafide, considering the High Court decisions which stated that the DSIR's cut-off date is irrelevant. Therefore, the admittance of the addition did not warrant a penalty under Section 271(1)(c).

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 1,58,32,991/- to the assessee's income related to weighted deduction under Section 35(2AB). The AO also imposed a penalty of Rs. 56,82,854/- under Section 271(1)(c) for furnishing inaccurate particulars. The CIT(A) deleted the penalty.

What were the issues?

Whether the assessee furnished inaccurate particulars of income warranting a penalty under Section 271(1)(c) when the addition was accepted under a bonafide belief of law, later clarified by High Court judgments.

Which sections of the Income-tax Act were involved?

Section 35(2AB),Section 35,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(5)Show list

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Before: Shri Bhavnesh Saini & Shri L.P. Sahu

Hearing: 05.07.2017Pronounced: 31.07.2017

ORDER Per L.P. Sahu, A.M.: This is appeal filed by the Revenue against the order of ld. CIT(A)-XII, New Delhi for the assessment year 2005-06 challenging the deletion of penalty imposed u/s. 271(1)(c) of the IT Act, on the following ground: “1. The Ld. CIT(A) has erred in law and on facts in deleting the penalty u/s. 271(1)(c) of the Income Tax Act, 1961 imposed by the AO amounting to Rs.56,82,854/-“

2. The brief facts of the case are that original assessment of the assessee was completed u/s. 143(3) of the Act on 31.10.2012 at an income of ITA No. 6141/Del./2013 2 Rs.10,05,52,749/- after making additions of Rs.1,58,32,991/-. Subsequently, the case of the assessee was reopened on the premise that the assessee had claimed deduction of Rs.5,85,90,963/- u/s. 35(2AB) of the Act, but as per approval of DISR, the Research and Development activities of the assessee were approved from 21.09.2004 to 31.03.2006 and this certificate mentions that R&D expenditure would be eligible for weighted deduction from 21.09.2004 to 31.03.2005 for the year under consideration. The AO was of the view that, therefore, the expenses of Rs.3,16,65,983/- incurred on capital equipments upto 20.09.2004 were not eligible for weighted deduction @ 150% u/s. 35(2AB), but were eligible for normal deduction @ 100% u/s. 35 of the Act. Accordingly, addition of Rs.1,58,32,991/- was made by the AO, as the assessee did not object to the reopening of assessment and also imposed a penalty of Rs.56,82,854/- u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income. The assessee carried the penalty matter in appeal before the ld. CIT(A), who after considering the submissions of the assessee deleted the penalty vide impugned order. Aggrieved by the impugned order, the Revenue is in appeal before the Tribunal.

3.

The ld. DR relied on the order of the Assessing Officer and submitted that the ld. CIT(A) was not justified in deleting the penalty, as the assessee did

ITA No. 6141/Del./2013 3 not challenge the addition in appeal, but accepted the same in the reopening proceedings. Since there was no basis or explanation for making such claim in the return of income, the provisions of section 271(1)(c) would attract against the assessee. Reliance is placed on the decisions in the case of CIT vs. Zoom Communication (P) Ltd., 191 Taxman 179 (Del.), CIT vs. Moser Bear India Ltd., 315 ITR 460 (SC), Union of India vs. Dharamendra Textile Processors, 295 ITR 244 and several other decisions cited in its written synopsis. He, therefore, urged for sustenance of impugned penalty.

4.

On the other hand, the ld. AR of the assessee, reiterating the submissions made before the ld. CIT(A) submitted that the assessee has not furnished inaccurate particulars of income, as observed by the Assessing Officer and all the material facts necessary for assessment were unfolded before the AO. It was, however, under the wrong notion of law, the assessee company agreed to surrender the weighted deduction claimed for the period upto the date of approval, as the assessee was not aware of the direct decision of Hon’ble jurisdictional High Court in the case of CIT vs. Sandan Vikas (India) Ltd., 335 ITR 117 wherein the Hon’ble jurisdictional High Court after following the decision of Hon’ble Gujrat High Court in the case of CIT vs. Claris Life Sciences Ltd., 326 ITR 251, has held that the total amount incurred during

ITA No. 6141/Del./2013 4 the year should be considered for weighted deduction irrespective of the date mentioned by DSIR for that year. Therefore, simply because the assessee did not challenge the addition in appeal, would not empower the AO to impose penalty for furnishing inaccurate particulars of income.

5.

We have considered the rival submissions and have gone through the entire material available on record and we find no justification to interfere with the decision reached by the ld. CIT(A). Having gone through the decision of Hon’ble Gujrat High Court in the case of CIT vs. Claris Lifesciences Ltd. (supra), we find that the Hon’ble Court has categorically observed that the cut-off date mentioned in the certificate issued by DSIR would be of no relevance and what was to be seen was that the assessee was indulging in research and development activity and had incurred the expenditure thereon. This decision has been followed by Hon’ble jurisdictional High Court in the case of CIT vs. Sandan Vikas (India) Ltd. (supra). In view of these decisions, it can be hardly said that the assessee had furnished inaccurate particulars of income and the admittance of addition under these peculiar circumstances, in our opinion, would not warrant penalty u/s. 271(1)(c) of the Act against the assessee. The decisions relied by the ld. DR, in the present facts and circumstances, would not render any help to the Revenue, being based on ITA No. 6141/Del./2013 5 different footings. We, accordingly, find that the claim made by the assessee was bonafide and thus, there is no justification to interfere with the impugned order. As a result, the appeal of the Revenue is found to have no merits and is liable to fail.

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