| Question And Answer | |
|---|---|
| Subject: | Show cause notice for claim of Education Cess as expenditure for A.Y. 2020-21 |
| Category: | Income-Tax |
| Querist: | Prakash Kulkarni |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Education Cess, penalty |
| Date: | August 10, 2022 |
Assessee is private limited co filed the Return of Income filed the Return of Income For 20-21 where in Education cess has been claimed as expenditure on the basis of decision of hon’ble BHC. Assessee co has received SCN as to why proposed variation should not be made on 8.08.2022. on following grounds
1.Education Cess is not an allowable expenditure/deduction u/s 40(a)(ii) of the Income Tax Act, 1961.
2) It has retrospective effect from 01.04.2005 i.e. A.Y. 2005-06.
3) Penalty u/s 270A is imposable on such claim for under reporting of income.
4.Hence, you are requested to show sufficient cause as why the amount of Rs.4,26,095/- would not be disallowed in your case as per provision of section 40(a)(ii) of Income Tax Act, 1961.
5. Further, you are also requested to show sufficient cause as to why penalty proceedings u/s 270A would not be initiated for under reporting of income for the reasons discussed above.
is the action of AO is correct, if yes, how the compliance be made ?
whether penalty U/Sec. 270A is applicable?
pl guide .
The disallowance made by the Ld. AO is correct as the law has been amended with retrospective effect. However, the provision for imposing penalty being substantive law cannot have retrospective effect, unless expressly stated by the Legislature to be so applicable.
Reliance is placed on the decision of the Hon’ble Income-tax Appellate Tribunal – Jaipur Bench in the case of Chambal Fertilisers & Chemicals Ltd. v. ACIT [2015] 55 taxmann.com533 (Jaipur – Trib.) wherein it was held that Assessee could not be penalized for claims which were not disallowable by any express provision at relevant time, but were disallowed in view of retrospective amendment.