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2019 (8) TMI 501

..... age of fund, the assessee could not pay self-assessment tax, therefore, return could not be filed before due date. While declining claim of deduction u/s 80IA no defect was pointed out by the A.O. with regard to assessee’s eligibility save and except there was delay in filing return of income. Eligible amount of deduction U/s 80IA was mentioned in the tax audit report and clause (26) of Form 3CD. Thus, there was a substantial compliance of the provisions of Section 80IA read with Section 80AC of the Act by filing tax audit report with audited financial statement well in time. Under these facts and circumstances when there was full disclosure by the assessee and there was no failure on the part of the assessee to fully disclosed all the material facts with regard to claim of deduction U/s 80IA Penalty is not an automatic consequence for every addition to returned income. Merely because an addition is made to the income declared by the assessee, penalty u/s.271(1)(c) could not be imposed. Raising a bona fide legal claim in the return of income, even if it is ultimately found to be legally not acceptable, could not amount to concealing particulars of income or furnishing of inac .....

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..... against which the assessee is in further appeal before us. 3. The ld AR appearing on behalf of the assessee has contended that the tax audit report was originally filed well in time, on 30/09/2013 itself, alongwith the audited financial statements. The deduction of ₹ 88,51,859/- admissible to the assessee company under Section 80IA was duly mentioned in the Tax Audit Report under Section 44AB, in Clause 26 of Form No. 3CD. Thus, the company has made substantial compliance of the provisions of Section 80IA, r.w.s 80AC by filing the tax audit report and audited financial statements in time. Thus, the assessee company did not intend to contravene the legal provisions. As per the ld AR the provisions of Section 80AC are directory in nature and not mandatory. Therefore, a substantial claim or benefit to the company should not be denied on the ground that the provisions of Section 80AC, 80IA(7) or other similar sections which are procedural and directory in nature, are not met with due to genuine reasons beyond the control of the company. For this purpose, reliance was placed on the decision in the case of CIT Vs M/s Unitech Ltd. in ITA No. 239 of 2015 (Delhi HC). As per the ld AR .....

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..... 'ble Supreme Court explained the meaning of the term 'furnishing of inaccurate particulars'. It was observed that 'inaccurate particulars' means the details supplied in the return which are not accurate, not exact or correct, not according to truth, or erroneous. It was held that making a claim which is not sustainable in law, cannot, by itself, amount to furnishing of inaccurate particulars. It was further held that by no stretch of imagination can it be held that making an incorrect claim in law would tantamount to furnishing of inaccurate particulars. 5. In support of the above contention, reliance was also placed on the decision of the Chandigarh bench of the Tribunal in the case of ACIT Vs Perfect Forgings (2011) 11 ITR (Trib) 166 (Chd) wherein it was held that there is no merit in imposition of penalty with respect to disallowance of deduction U/s 80-IB and 80HHC of the Act in so far as the assessee had disclosed material facts for its computation of income in its return. In respect of such claims, there was no justification for levy of penalty. Reliance was also placed on the decision of Coordinate Bench of Chandigarh Bench of Tribunal in the case of DCIT .....

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..... s is mandatory. It is a trite law that the levy of penalty is not a consequential action by the AO in every case of difference in returned and assessed income and that levy of penalty in such cases is discretionary, which has to be exercised judiciously. Vide Para 3.3 of the reply, dated 19.02.2018 (supra), it was submitted as under : "It is an established law that penalty proceedings are distinct from assessment proceedings, Levy of penalty is not a necessary concomitant of assessment proceedings. Mere fact that disallowance has been made and upheld in appeal, does not justify the imposition of penalty under section 271(1)(c). The findings recorded in the assessment order only lays down the foundation for levy of penalty. It was pointed out in ACIT v. Rawalpindi Flour Mills (P) Ltd.. (1980) 125 ITR 243 (All), that material collected during assessment proceedings and finding arrived at therein can be relied upon in penalty proceedings but on this basis alone the imposition of penalty cannot be sustained. 7. Ld. AR also placed reliance on the decision of Chandigarh Bench of the Tribunal in the case of Symbiosis Pharmaceuticals (P) Ltd. Vs. DCIT (2017) 190 TTJ 518 (Chd-Trib) whe .....

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..... in its own factory and form windmill. During the year under consideration, the assessee claimed deduction U/s 80IA of the Act. The assessee s claim for deduction was declined only on the plea that there was delay of 31 days in filing return of income. By referring the provisions of Section 80AC, the A.O. declined claim of deduction as there was delay in filing return. We found that not only tax audit report but also audited financial statements were filed well within the time and only due to the shortage of fund, the assessee could not pay self-assessment tax, therefore, return could not be filed before due date. While declining claim of deduction U/s 80IA of the Act, no defect was pointed out by the A.O. with regard to assessee s eligibility save and except there was delay in filing return of income. We also found that eligible amount of deduction U/s 80IA of the Act amounting to ₹ 88,51,859/- was mentioned in the tax audit report and clause (26) of Form 3CD. Thus, there was a substantial compliance of the provisions of Section 80IA read with Section 80AC of the Act by filing tax audit report with audited financial statement well in time. Under these facts and circumstances .....

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..... would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assesses had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the ret .....

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..... articulars of income' or 'furnishing of inaccurate particulars of income' as contemplated under section 271(1)(c) of the Act. 12. In the case of Pr. CIT v. Sundaram Fasteners Ltd. [2018] 92 taxmann.com 356 (Madras) the Hon ble Madras High Court has held as under: Section 271(1)(c), read with section 80-IB, of the Income-tax Act, 1961 - Penalty - For concealment of income (Disallowance of claim, effect of) - Assessment year 2004-05 - Assessee was a manufacturer of automobiles components like fastners, radiator caps, gear shifters etc. - For relevant year, assessee filed its return claiming deduction under section 80-IB - Assessing Officer rejected assessee's claim on ground that out of four units belonging to assessee, only two units had made profits but other two units had incurred losses and putting all four units together there was loss - Tribunal confirmed order passed by Assessing Officer denying deduction claimed under section 80-IB - Thereupon, the Assessing officer passed a penalty order under section 271(1)(c) - Tribunal found that assessee had a reasonable basis to stake a claim for deduction under section 80-IB, which had been disallowed upon interpretatio .....

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..... cealment of Income - Assessment year 2001-02 - Assessee was engaged in manufacture of flavoured chewing tobacco and kimam - For relevant assessment year, assessee filed its return wherein deductions under sections 80-IA and 80-IB were claimed - Assessing Officer rejected assessee's claim for deduction - He also levied penalty under section 271(1)(c) on ground that assessee had wrongly claimed deduction in its return of income - On appeal, assessee contended that it had disclosed all material facts pertaining to computation of deduction admissible under sections 80-IA and 80-IB - Assessee further contended that it was of opinion that interest earned on banks and interest paid to others had a direct nexus to business activities and, therefore, deduction of said amount would be admissible - It was also put forth that there was no deliberate attempt on part of assessee to conceal particulars of income - Commissioner (Appeals) accepted assessee's explanation and set aside penalty order - Tribunal upheld order passed by Commissioner (Appeals) - Whether on facts, no substantial question of law arose from Tribunal's order - Held, yes. 15. In the case of Sharda Construction and .....

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