Placing reliance on the opinion of a chartered accountant will not absolve the taxpayer from penal consequence for apparent incorrect claim. Thus decided the Delhi Bench of appellate tribunal in the Chadha sugars (P) Ltd case on December 23, 2011.
The concealment penalty was with regard to Rs 7.81 lakh claimed as expenditure for fee paid to the Registrar of companies for enhancing the authorised capital of the company. The tax officer held that in spite of direct apex court decisions, the taxpayer had persisted with the claim, taking shelter under the opinion of a chartered accountant. It had been opined by the CA that the issue is debatable and that the claim could be made in the financial statements. No direct reference was made with regard to claim for income-tax purposes. And, the tax auditor too did not make any reference to the correctness of the claim in his report.
As the tax payer had not given any explanation for claiming a prima facie inadmissible deduction and had persisted with the claim, the tribunal upheld the levy of penalty. Commenting on the case, Mr V. K. Subramani, an Erode-based chartered accountant, says it is unfortunate that the tax auditor had not reported the applicability of deduction under Section 35D in his tax audit report. "That would have cautioned the taxpayer against preferring the claim of deduction. Considering the apex court decision in the Brooke Bond Ltd case (225 ITR 758), the taxpayer must have desisted from making a claim prima facie not permitted."
The concealment penalty was with regard to Rs 7.81 lakh claimed as expenditure for fee paid to the Registrar of companies for enhancing the authorised capital of the company. The tax officer held that in spite of direct apex court decisions, the taxpayer had persisted with the claim, taking shelter under the opinion of a chartered accountant. It had been opined by the CA that the issue is debatable and that the claim could be made in the financial statements. No direct reference was made with regard to claim for income-tax purposes. And, the tax auditor too did not make any reference to the correctness of the claim in his report.
As the tax payer had not given any explanation for claiming a prima facie inadmissible deduction and had persisted with the claim, the tribunal upheld the levy of penalty. Commenting on the case, Mr V. K. Subramani, an Erode-based chartered accountant, says it is unfortunate that the tax auditor had not reported the applicability of deduction under Section 35D in his tax audit report. "That would have cautioned the taxpayer against preferring the claim of deduction. Considering the apex court decision in the Brooke Bond Ltd case (225 ITR 758), the taxpayer must have desisted from making a claim prima facie not permitted."
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