| COURT: | |
| CORAM: | |
| SECTION(S): | |
| GENRE: | |
| CATCH WORDS: | |
| COUNSEL: | |
| DATE: | (Date of pronouncement) |
| DATE: | August 10, 2013 (Date of publication) |
| AY: | |
| FILE: | |
| CITATION: | |
| Click here to download the judgement (HCIL_271_1_c_Penalty.pdf) |
S. 271(1)(c) penalty is valid even if claim is disclosed and as per CA certificate
The assessees claimed deduction u/s 80IA on the ground that it has executed an eligible infrastructure project. A copy of Form No.3CB, 3CD and Form No.10CCB was filed with the return in support of the claim. In the assessment order, the AO denied 80-IA deduction on the ground that the assessee had not executed the work but had given a sub-contract to another party and that it was not eligible u/s 80-IA(13). The assessee accepted the denial of the claim. The AO levied penalty u/s 271(1)(c) for filing inaccurate particulars of income which was upheld by the CIT(A). The Tribunal relied on Reliance Petroproducts 322 ITR 158 (SC) and deleted the penalty on the ground that the claim for deduction u/s 801A was on the basis of a certificate of the CA, was bona fide and all the material facts relevant thereto had been furnished. On appeal by the department to the High Court, HELD reversing the Tribunal:
While it is true that the Income-tax Act, 1961 is one of most vexed and complicated legislation and requires highest degree of interpretative skills and there are divergent views on interpretation of its provisions and while it is also true that penalty for concealment cannot be imposed merely because assessee’s interpretation or claim is rejected, such cases have to be distinguished from cases where the claim of the assessee is farcical or farfetched. Dubious and fanciful claims under the garb of interpretation, are a mere pretense and not bona fide. Absurd or illogical interpretations cannot be pleaded and become pretense and excuses to escape penalty. “Bona fides” have to be shown and cannot be assumed. The fact that the claim for deduction u/s 80IA was duly supported by the Chartered Accountant’s Certificate and prescribed forms signed by the CA cannot absolve and protect an assessee who furnishes in-accurate particulars because then in all cases where a form/certificate is furnished by the CA but a wrong claim of deduction is made, no penalty u/s 271(1)(c) can be imposed. Merely because the assessee complies with the statutory procedural requirement of filing the prescribed form and certificate of the Chartered Accountant cannot absolve the assessee of its liability if the act or attempt in claiming the deduction was not bona fide. On facts, the assessee’s claim was not tenable due to the Explanation to s. 80IA (13) which stipulates that benefit is not available to a contractor carrying on a works contract. The assessee has not shown any “tangible material” or basis as to why a clear statutory provision which excludes works contracts was ignored.
Some may prefer to call it pragmatism of High Court, sorry but in my view and with due respect to the Hon’ble High Court, it is a blatant attempt to dilute the supremacy of the Apex Court by distinguishing its decisions through twists and turns.
In one’s underestandng, based on an independent reading, of the referred Explanation (immediately below sub-section (13)), first inserted by the FA 2007 but later amended by the FA 2009,albeit both wref 1-4-2000, a given case will squarely come within the mischief thereof, provided aseessee’s claim for tax exemption is in respect of its business “which is in the nature of a works contract awarded by any person….”. Now, the facts and circumstances as narrated in the subject judgment and understood by one, seem to be quite different. Open to correction. if such an undertstanding is incorrect or misconceived.
Rider:
With a view to saving self the cost of repetotion, for more points of reraction, though in brief, attention s invited to the comments posted on the very case recently reported @ Mere CA certificate do not establish the bonafide of Assessees claim on TaxGuru.
Recommend to to go through the line of court cases cited in leading text books (with comprehensive commentary- e.g. in the popular book of Kanga and Palkhivala), wprt to the group of sections providig for such or similar tax exemptions (for instance, under the erstwhile section 80 J). For instance, the case law cited in support of the commentary on top of pg. 1437, footnotes 13,14, 15 (vol I, Ninth Edition). The true scope of the Explanation under section 80IA would be better understood in proper light, with no confusion whatsoever, should the setlled propositions dealt with therein, seemingly on same lines, be noted and borne in mind.
The feedback is intended
< The feedback is intended for those concerned or interested in making a fresh study of the issues that have surfaced, not only on the aspect of 'penalty', but on the merits or otherwise of the very tax exemption claimed, though not pursued but given up, as well.