S. 271(1)(c): Professional’s opinion in support of claim does not per se make it bona fide. Third Member cannot sit in judgment over dissenting Members’ views

Darwabshaw B Cursetjee Sons Ltd vs. ITO (ITAT KolKata Third Member)

The assessee filed a ROI claiming deduction for the entire VRS liability despite s. 35DDA providing that VRS payments would be allowed in 5 installments. The AO allowed the claim in s. 143(1) and then issued a s. 148 notice (on some other issue; the s. 148 notice did not refer to the VRS claim). In the ROI filed pursuant to the s. 148 notice, the assessee itself disallowed the VRS payment and claimed only 1/5th thereof as was allowable u/s 35DDA. The AO accepted the ROI but imposed s. 271(1)(c) penalty on the ground that there was suppression of income in the original ROI and the s. 148 ROI was not “voluntary”. The CIT (A) confirmed the penalty. Before the Tribunal, the assessee argued that s. 271(1)(c) penalty was not leviable because (a) under Explanation 3 to s. 271(1)(c), income declared in a s. 148 ROI cannot be subjected to penalty if a s. 139(1) ROI had been filed, (b) at the stage of filing the original ROI, the assessee was advised by his CA that in view of Bhor Industries 264 ITR 180 (Bom), VRS was revenue expenditure & allowable in the year it was incurred, (c) after receipt of the s. 148 notice, the assessee was advised by its CA that in view of s. 35DDA, VRS was allowable only in installments and it surrendered the claim and (d) the s. 148 notice did not refer to the VRS claim and the assessee had voluntarily disallowed it. The JM accepted the assessee’s plea that it had acted in a “bona fide manner” based on a mistaken belief of the law and penalty was not leviable. However, the AM took a converse view. On reference to the Third Member, HELD: