JT.CIT (OSD)-6(2)(1), MUMBAI vs. CROMPTON GREAVES LTD., MUMBAI

ORDER

PER N.K. PRADHAN, AM

i. On the facts and circumstances of the case and the law, the Ld. CIT(A) erred in deleting the penalty levied u/s 271(1)(c) of Rs. 13,20,920/- on the excess amount of deduction claimed u/s 35(2AB) and ignoring the fact that during the appellate proceeding in appeal against the quantum addition before the Ld. CIT(A), the assessee did not press this ground of appeal against the quantum addition and the same was dismissed accordingly. ii. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty by relying on judgements of Hon'ble Supreme Courts where the facts were totally different and as penalty is liveable in the given set of facts ignored the facts recorded by the A.O. in para 5 of the penalty order.

3. Briefly stated that facts are that the assessee filed its return of income for the A.Y 2008-09 on 30.06.2009 showing total income at Rs.453,61,63,050/-. The Assessing Officer (A.O.) completed the inter-alia assessment u/s 143(3) making disallowances Rs.38,86,202/- u/s 35(2AB) of the Act. During the course of assessment proceedings, the assessee filed before the A.O. a copy of Form 3CM and Form 3CL in relation to section 35 (2AB). As per the report of DSIR in Form No. 3CL, there was a difference in the eligible amount as compared to the amount claimed in the computation. The details are as under: Eligible as per Form 3CL Claimed in computation Revenue Expenditure. Rs.944.20 lacs Rs.9,51,45,795 Capital Expenditure. Rs.612.13 lacs Rs.6,30,77,938 The assessee ,during the course of assessment proceedings, vide note-sheet entry dated 22.12.2011, agreed before the A.O. of the above amounts as per the report of DSIR. The excess deduction claimed worked out to Rs.38,86,202/- (Rs.23,73,35,702/- minus Rs.23,34,49,500/-)The A.O. made in addition of Rs.38,86,202/- and then imposed a penalty of Rs.13,20,920/- u/s 271(1)(c) of the Act.

4. Aggrieved by the order of the A.O., the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) has held that (i) the assessee has claimed deduction u/s 35(2AB) at the time of filing of the return as per the provisions of law and there is neither concealment of income nor furnishing of inaccurate particulars of such income and (ii) mere disallowance of the part of the expenses will not alter the bona fide claim of the assessee. The Ld. CIT(A) relied on the decision in Reliance Petro Products (P.) Ltd. 322 ITR 158 (S.C.), P V Rammanna Reddy vs. ITO (ITAT Hyderabad), CIT vs. Siddharth Enterprises (184 Taxmann 460) (P&H). Thus the Ld. CIT(A) deleted with penalty of Rs.13,20,920/- imposed by the A.O. u/s 271(1)(c) of the Act.

5. Before us, the Ld. DR submits that only after being confronted by the A.O., the assessee vide note-sheet entry dated 22.12.2011 agreed to incorporating the amounts as per the report of DSIR. Therefore, he submits that the A.O. has rightly imposed the penalty u/s 271(1)(c) of the Act. Thus the Ld. DR entirely supports the order of penalty passed by the A.O.

6.1. The main argument of the Ld. Counsel of the assessee is that in the return income the amount claimed as revenue expenditure was Rs.1427.2 lacs and capital expenditure Rs.946.17 lacs totalling to Rs.2373.37 lacs based on tax audit report and certificate issued by the statutory auditor. In 3CL, the eligible amount mentioned on account of revenue expenditure was Rs.1416.3 lacs and capital expenditure Rs.918.19 lacs, totalling to Rs.2334.49 lacs. So there was a difference of Rs.38.86 lacs and the A.O. added the same to the income of the assessee. The Ld. Counsel further submits that at the time of filing of the return of income, Form 3CL was not issued to the assessee- company, therefore, the claimed amount was relied based on the tax audit report and the certificate. It is thus submitted that the weighted deduction was claimed as per the provisions of the Act. Further it is stated that the assessee has withdrawn the deduction in assessment proceedings and hence penalty is not leviable.

In Reliance Petroproducts (P) Ltd. (supra), the Hon'ble Supreme 7.1. Court has held that merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not attract penalty u/s 271(1)(c) of the Act.

In the case of Banyan Tours & Travels (P) Ltd. (supra), the 7.2. assessee-company was engaged in business as a tour operator. As per provisions of section 80HHD, an Indian company engaged in business of tour operator, approved by prescribed authority, namely, Directorate General of Tourism, would be entitled to certain percentage of deduction of profits derived by him from services provided to foreign tourists. The assessee in accordance with condition laid down u/s 80HHD applied to prescribed authority for approval of its business. The prescribed authority initially granted approval only w.e.f. 20.05.1998 and thereafter, approval was granted w.e.f. 02.07.1997. In the course of assessment proceedings, the assessee wrote a letter to the A.O. stating that since prescribed authority initially granted only w.e.f. 20.05.1998, and thereafter, approval was granted w.e.f. 02.07.1997, for the year under consideration, he did not have approval of the prescribed authority so as to enable it to claim deduction u/s 80HHD. Therefore, its claim for deduction u/s 80HHD might be taken as withdrawn. The A.O., however, imposed penalty u/s 271(1)(c) for furnishing inaccurate particulars of income. The Tribunal held that since the assessee prior to completion of assessment had withdrawn the claim, there was no concealment of income or furnishing of inaccurate particulars of income.

7.3. The facts in instant appeal being similar, we respectfully followed the aforesaid decisions and uphold the order of the Ld. CIT(A).