2004 (8) TMI 57 - HC - Income Tax

Assessing Officer disallowed the claim for deduction under section 80-I and also initiated proceedings penalty u/s 271(1)(c) - deduction was supported by the requisite certificate of the chartered accountants - conduct of the chartered accountant who in first issuing a certificate and then denying it altogether - It is an admitted position that the claim of deduction was duly supported by the certificate of the chartered accountant on the prescribed format. In this view of the matter no fault can be found with the claim of the assessee that it had claimed the deduction in a bona fide manner - No substantial question of law arises out of the order of the Tribunal for consideration by this court penalty not leviable

Issues:
1. Appeal against the order of the Income-tax Appellate Tribunal regarding penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Claim for deduction under section 80-I for the assessment year 1992-93.
3. Validity of the certificate issued by the chartered accountant.
4. Imposition of penalty and subsequent appeals.

Analysis:

1. The appeal was filed by the Revenue against the Tribunal's order canceling the penalty levied under section 271(1)(c) of the Income-tax Act, 1961. The Tribunal accepted the assessee's contention that the deduction was claimed in good faith based on the certificate issued by the chartered accountant. The High Court found that the claim was supported by the chartered accountant's certificate on the prescribed format, and no fault could be attributed to the assessee for claiming the deduction in a bona fide manner. The Revenue's argument regarding the denial by the chartered accountant was deemed irrelevant as the assessee was not confronted with this denial, and it was contrary to the factual position on record. Consequently, the High Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's order.

2. The assessee had claimed a deduction under section 80-I for the assessment year 1992-93, amounting to Rs. 33,965. However, the Assessing Officer disallowed the claim as the sheller was installed in a previous accounting year, making the assessee ineligible for the deduction. The Assessing Officer initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The penalty was imposed, and subsequent appeals were filed. The Tribunal ultimately accepted the assessee's argument that the deduction was claimed in good faith based on the chartered accountant's certificate, leading to the cancellation of the penalty.

3. The validity of the certificate issued by the chartered accountant played a crucial role in the case. The chartered accountant initially issued a certificate supporting the deduction claim but later denied the eligibility of the unit for deduction under section 80-I. The High Court expressed dissatisfaction with the chartered accountant's conduct, stating that it was inappropriate to first issue a certificate and then deny it. The Court decided to issue a notice to the chartered accountant's firm to explain their conduct, indicating a potential inquiry into the matter.

4. The imposition of the penalty and subsequent appeals formed a significant part of the case. The penalty was imposed by the Assessing Officer under section 271(1)(c), and appeals were filed before the Commissioner of Income-tax (Appeals) and the Tribunal. The Tribunal's decision to cancel the penalty was based on the acceptance of the assessee's claim that the deduction was made in good faith. The High Court upheld the Tribunal's decision, emphasizing the lack of any substantial legal question for consideration. Additionally, the High Court expressed intent to investigate the conduct of the chartered accountant further, highlighting the need for accountability in professional certifications.

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