S. 271(1)(c) penalty is valid even if claim is disclosed and as per CA certificate

CIT vs. HCIL Kalindee ARSSPL (Delhi High Court)

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.