An income-tax tribunal has held that a company cannot avoid paying penalty for claiming false deduction on grounds that its claim was supported by advice from a chartered accountant. 

A division bench of the Income-tax Appellate Tribunal (ITAT), Kolkata, made this point in an appeal filed by Darwabshaw B Cursetjee Sons, a company based in the city. 

The appeal was filed against the levy of a penalty by the tax officer for falsely claiming deduction for an expenditure incurred on voluntary retirement scheme (VRS). 

The law stipulates deduction on account of VRS expenditure should be spread over five years, but the taxpayer, on the basis of an opinion given by a CA, claimed deduction in a single year for the entire expenditure. 

The I-T department, which reopened the case after detecting the deduction claim, levied a penalty for concealment of income. The taxpayer appealed against the penalty, claiming the error was bonafide since it had acted on the opinion of a chartered accountant. What went against the taxpayer company was the fact that it had claimed only one-fifths of the VRS expenditure as deduction during the preceding year, as was permissible under Section 35 DDA of the Income-tax Act. 

"In any case, expert advice obtained by the assessee from Vakharia & Associates lacks credibility, and just because the assessee's claim is supported by a chartered accountant's opinion, this fact per se cannot absolve the assessee from penalty under section 271(1)( c)," the ITAT said. 

The tribunal also pointed out that the taxpayer company had followed the relevant law while filing its previous tax return and deducted only one-fifths of the VRS expenditure. 

"The expert advice did not deal with this aspect at all. One can perhaps even understand the ignorance about a legal provision, such as of Section 35 DDA, but once the assessee is on record as not only being aware about this provision but also preparing the income-tax return in the light of the said provision, there cannot be justification about the assessee ignoring the mandate of the same provision in the subsequent assessment years," the ITAT held. "It is not correct on the part of the taxpayer to file a return on the basis of a chartered accountant's opinion that is prima facie wrong," TP Ostwal, a senior chartered accountant, told ET. 

"The tribunal, on the basis of the facts of the case, held that a claim cannot be said to be disputable if the language of statute is clear and unambiguous and, in such circumstances, the expert's opinion may not be used as a shelter to avoid penalty, as the explanation of the assessee is not bonafide. But, the decision cannot be said to hold the field in all disputable cases where two opinions are valid and, hence, penalty would not be leviable," Vispi T Patel of Vispi T Patel & Associates told ET. (Economic Times)