CREDIT LYONNAISA, MUMBAI V. A.C.I.T. (IT) 1(2, MUMBAI

CO 180/MUM/2011

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1499 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 26-08-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 25-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARI GOVIND
• Keywords: Transfer pricing; Double taxation relief; International transaction; Permanent establishment; Difference of opinion
• Section: 143(3); 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 2714/MUM/2011 (ASSESSMENT YEAR : 2003-04) ASST.DIRECTOR OF INCOME TAX- (INTERNATIONAL TAXATION)-(2), 119, SCINDIA HOUSE, BALLARD PIER, MUMBAI 400 038 ... APPELLANT VS. CREDIT LYONNAIS, (THROUGH THEIR SUCESSORS CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, (FORMERLY CALYON BANK) 11 TH , 12 TH , 14 TH FLOOR, HOECHAST HOUSE, NARIMAN POINT, MUMBAI 400 038 PAN : AAACC144J ...... RESPONDENT C.O.NO.180/MUM/2011(ARISING OUT OF ITA NO. 2714/M UM/2011, ASSESSMENT YEAR : 2003-04) CREDIT LYONNAIS, MUMBAI. ...CROSS OBJECTOR VS. ASST.DIRECTOR OF INCOME TAX- (INTERNATIONAL TAXATION)-(2), MUMBAI. ... APPELLANT IN APPEAL REVENUE BY : SHRI HARI GOVIND ASSESSEE BY : SHRI MADHUR AGARWAL, DATE OF HEARING : 20/08/2015 DATE OF PRONOUNCEMENT : ..../10/2015 2 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL FILED BY THE REVENUE AND C ROSS OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF TH E CIT(A)-15, MUMBAI DATED 04/01/2011, PERTAINING TO THE ASSESSMENT YEA R 2003-04, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASS ESSING OFFICER DATED 31/3/2010 UNDER SECTION 271(1)(C) OF THE INCOME T AX ACT 1961 ( IN SHORT THE ACT). 2. IN THIS CASE, ASSESSEE IS FOREIGN BANK HEADQUART ERED IN FRANCE AND FOR ASSESSMENT YEAR 2003-04 IT FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.19,26,37,440/-, WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT. THE TOTAL INCOME IN THE ENSUING ASSES SMENT FINALIZED UNDER SECTION 143(3) OF THE ACT DATED 28/03/2006 W AS DETERMINED AT RS.28,08,60,5601/-. ON AN APPEAL BEFORE THE CIT(A ) IN THE QUANTUM ASSESSMENT, ASSESSEE WAS ALLOWED CERTAIN RELIEFS, WHICH REDUCED THE DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME . SUBSEQUENTLY, THE ASSESSING OFFICER HELD THE ASSESSEE GUILTY OF F URNISHING INACCURATE PARTICULARS OF INCOME LEADING TO CONCEALMENT OF INC OME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. ACCORDING LY, VIDE ORDER DATED 31/3/2010, THE ASSESSING OFFICER LEVIED PENALTY UND ER SECTION 271(1)(C) OF THE ACT, BEING 100% OF THE TAX SOUGHT TO BE EVAD ED ON THE DIFFERENCE BETWEEN THE ASSESSED AND REPORTED INCOME, WHICH C AME TO RS.79,05,213/-. THE LEVY OF SUCH PENALTY IS THE SU BJECT MATTER OF THE PRESENT APPEAL. 3 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) 3. THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS ON ACCOUNT OF THREE ITEMS, NAMELY, (I) ADDITION ON ACCOUNT OF INT EREST PAID/RECEIVED FROM HEAD OFFICE OF RS.1,46,69,611/-; (II) TRANSFER PRICING ADJUSTMENT OF RS.40,74,327/-; AND (III) DENIAL OF DEDUCTION UNDER SECTION 80G AT RS.78,000/-. THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A) WHO HAS DELETED THE PENALTY WITH REGARD T O THE ADDITIONS ON ACCOUNT OF INTEREST PAID/RECEIVED FROM HEAD OFFICE AND THE TRANSFER PRICING ADJUSTMENT, WHEREAS WITH RESPECT TO THE DI SALLOWANCE OF DEDUCTION UNDER SECTION 80G OF THE ACT, THE PENALTY HAS BEEN AFFIRMED. AS A CONSEQUENCE, THE REVENUE IS IN APPEAL, CHALLEN GING THE ORDER OF THE CIT(A) DELETING THE PENALTY WITH RESPECT TO THE ADDITIONS ON ACCOUNT OF INTEREST PAID/RECEIVED FROM HEAD OFFICE AND THE TRANSFER PRICING ADJUSTMENT, WHEREAS THE ASSESSEE IN ITS CROSS OBJEC TION IS AGITATING THE SUSTENANCE OF PENALTY ON NON-ALLOWANCE OF DEDUCTIO N UNDER SECTION 80G OF THE ACT. 4. IN THIS BACKGROUND, THE RIVAL COUNSELS HAVE BEEN HEARD. 5. IN SO FAR AS THE FIRST ISSUE REGARDING THE ADDIT ION OF RS.1,46,69,611/- ON ACCOUNT OF INTEREST PAID/RECEIV ED FROM HEAD OFFICE IS CONCERNED, BRIEF FACTS ARE THAT IN THE RETURN OF INCOME, THE ASSESSEE ADDED BACK THE INTEREST PAID ON NOSTRO ACCOUNT/OVE RSEAS BORROWINGS OF RS.3,47,821/- BEING INTEREST PAID TO SELF AND AL SO EXCLUDED INTEREST RECEIVED ON NOSTRO ACCOUNTS/OVERSEAS BRANCHES OF RS .1,46,69,611/- BEING INTEREST RECEIVED FROM SELF. IN THE ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER HELD THAT THE INTEREST EARNED BY THE ASSESSEE BRANCH FROM HEAD OFFICE/OVERSEAS BRANCHES COULD NOT BE EXC LUDED FROM THE TOTAL INCOME BECAUSE THE INDIAN BRANCH AND HEAD OFF ICE/ OVERSEAS 4 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) BRANCHES WERE SEPARATE TAX ENTITIES. IN SO FAR AS THE NON-CLAIMING OF THE INTEREST PAID ON BORROWING FROM HEAD OFFICE WAS CON CERNED, THE SAME WAS AFFIRMED BY THE ASSESSING OFFICER. IN THE APPE AL PROCEEDINGS, WHEN THE MATTER CAME UP BEFORE THE TRIBUNAL, IN ITA NO.2 401 & 2384/MUM/2009 FOR ASSESSMENT YEAR UNDER CONSIDERATI ON DATED 30/9/2013, THE TRIBUNAL NOTED THAT IN SO FAR AS THE CLAIM FOR EXCLUSION OF INTEREST RECEIVED FROM HEAD OFFICE/OVERSEAS BRANCHE S OF RS.1,46,69,611/- WAS CONCERNED, THE ASSESSEE DID NO T PRESS THE ISSUE. HOWEVER, THE TRIBUNAL ACCEPTED THE PLEA OF THE ASSE SSEE THAT INTEREST PAID TO THE HEAD OFFICE/OVERSEAS BRANCHES WAS LIABL E TO BE CONSIDERED AS ALLOWABLE DEDUCTION SINCE ASSESSEE HAD ACCEPTED THE TAXABILITY OF INTEREST RECEIVED FROM HEAD OFFICE/OVERSEAS BRANCHE S. THE AFORESAID POSITION IN THE QUANTUM ASSESSMENT PROCEEDINGS, HAS BEEN REFERRED TO BY THE LD. REPRESENTATIVE FOR THE ASSESSEE BEFORE US TO POINT OUT THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS WITHIN THE MEANING OF SECTION 271(1)(C ) OF THE ACT. IN FACT, A REFERENCE HAS BEEN MADE TO THE DISCUSSION IN PARA-4 OF THE ORDER OF THE CIT(A), WHEREIN THE CIT(A) HAS REFERRED TO DIVERGEN T DECISIONS OF THE TRIBUNAL ON THE SUBJECT. THE CIT(A) HAS REFERRED T O THE DECISION OF THE CALCUTTA SPECIAL BENCH IN THE CASE OF ABN AMRO BANK NV VS. DDI, 97 ITD 89 (SB)(CAL), IN WHICH IT WAS HELD THAT DEDUCTION OF THE PAYMENT OF EXPENDITURE TO SELF AND INTEREST RECEIVED FROM SELF THROUGH A BRANCH OR PERMANENT ESTABLISHMENT (PE) IS NOT PERMISSIBLE UND ER THE ACT. THE CIT(A) HAS NOTICED THAT SUBSEQUENTLY, THE MUMBAI BE NCH OF THE TRIBUNAL IN THE CASE OF DRESDNER BANK AG VS. ADDL. CIT, 108 ITD 375 (MUM) HELD THAT INTEREST RECEIVED FROM HEAD OFFICE OF NON-RESI DENT BANK BY INDIAN BRANCH IS TAXABLE IN INDIA. THE SAID DECISION DIST INGUISHED THE DECISION 5 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) OF SPECIAL BENCH IN THE CASE ABN AMRO BANK (SUPRA). FURTHER, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF AMERICA N EXPRESS BANK LTD., VIDE ORDER DATED 28/2/2007 FOR ASSESSMENT YEA R 1991-92, AFTER NOTICING THE CONTRARY VIEWS TAKEN BY THE SPECIAL B ENCH IN THE CASE OF ABN AMRO BANK (SUPRA) AND BY THE DIVISION BENCH IN THE CASE OF DRESDNER BANK AG.(SUPRA) HELD THAT INTEREST RECEIVE D FROM HEAD OFFICE/ OVERSEAS BRANCHES WAS NOT CHARGEABLE TO TAX. ON TH E BASIS OF SUCH CONFLICT OF OPINION, THE CASE MADE OUT BY THE ASSES SEE IS THAT THE ISSUE IS DEBATABLE AND SINCE THE ASSESSEE HAD MADE A BONAFI DE CLAIM, THE PENALTY UNDER SECTION 271(1)(C) HAS BEEN RIGHTLY DE LETED BY THE CIT(A). 6. LD. DEPARTMENTAL REPRESENTATIVE APPEARING FOR TH E REVENUE, HOWEVER, REFERRED TO THE DISCUSSION MADE BY THE ASS ESSING OFFICER IN THE PENALTY ORDER BY POINTING OUT THAT THE CLAIM MA DE BY THE ASSESSEE IN THE RETURN OF INCOME IN RESPECT OF THE ADDITION OF RS.1,46,69,611/- AS INTEREST RECEIVED ON NOSTRO ACCOUNTS WAS WRONG AND, THEREFORE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS JUST IFIABLY LEVIED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THIS ASPECT, AND FIND NO REASON TO DISTRACT FROM THE CONCLUSION ARRIVED A T BY THE CIT(A). OSTENSIBLY, WITH REGARD TO THE ASSESSABILITY OF INT EREST EARNED BY THE ASSESSEE BRANCH FROM ITS HEAD OFFICE/OVERSEAS BRANC HES IS CONCERNED, THE STAND OF THE ASSESSEE HAS NOT BEEN FOUND TENA BLE BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS, BUT THAT BY ITSELF, CANNOT BE A GROUND TO JUSTIFY THE LEVY OF PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT. IN FACT, THE CLEAVAGE OF JUDICIAL OPINION BROUGHT OUT BY THE CIT(A) ON THE SUBJECT CLEARLY SUGGESTS THAT THE ISSUE IS NOT FREE FROM DEBATE. A CLAIM MADE BY THE ASSESSEE IN THE RETURN OF INCOME, WHICH IS NOT 6 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) ACCEPTED IN THE ASSESSMENT PROCEEDINGS, CANNOT IPSO -FACTO LEAD TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AS LA ID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIA NCE PETRO-PRODUCTS PVT. LTD., 322 ITR 158 (SC) . NOTABLY, IN SO FAR A S THE PARTICULARS AND DETAILS OF SUCH INCOME IS CONCERNED, THERE IS NO CH ARGE AGAINST THE ASSESSEE THAT THE SAME WERE FOUND TO BE INCORRECT O R FALSE. THEREFORE, IN OUR CONSIDERED OPINION THE CIT(A) HAS RIGHTLY DE LETED THE PENALTY ON THIS ASPECT. 8. THE SECOND ISSUE ON WHICH PENALTY HAS BEEN LEVIE D IS TRANSFER PRICING ADJUSTMENT OF RS.40,74,327/- SUSTAINED BY THE CIT(A) ON ACCOUNT OF DETERMINATION OF ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. IN ORDER TO UNDERSTAND THE BACKGROUND OF THE SAID DISPUTE, IT WOULD SUFFICE TO NOTE THAT THE INCOME TAX AUTHOR ITIES NOTED THAT THE ASSESSEE BEING INDIAN BRANCH OF A FOREIGN THE BAN K, HELP SYNDICATION OF FOREIGN CURRENCY LOANS TO TWO INDIAN ENTITIES NAMEL Y RELIANCE PETROLEUM LTD. AND RELIANCE INDUSTRIES LTD., FOR SUCH LOAN OF SYNDICATION THE OVERSEAS ASSOCIATED ENTERPRISE OF THE ASSESSEE NAME LY, CREDIT AGRICOLE INDOSUEZ (ASIA), SINGAPORE WORKED AS LEAD ARRANGE RS/CO-ARRANGERS. THE ANZ INVESTMENT BANK, BA ASIA LTD. AS WELL AS ABN AM RO BANK ALSO WORKED AS CO-ARRANGERS. THE ROLE OF THE ASSESSEE I N THESE TRANSACTIONS OF FOREIGN CURRENCY LOAN UNDER ECB ROUTO WAS TO P ROVIDE FINANCIAL ANAYLSIS OF THE BORROWERS. THE INCOME TAX AUTHORIT IES FORMULATED THAT ASSESSEE OUGHT TO HAVE RECEIVED CERTAIN PORTION OF FEE OR COMMISSION FOR SUCH SERVICES PERFORMED. THE ASSESSEE HAS NOT ACCOUNTED FOR ANY INCOME ON THIS ASPECT IN THE RETURN OF INCOME. HOW EVER, IN THE COURSE OF TRANSFER PRICING PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER AN 7 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) ADDITION OF RS.49,63,456/- WAS QUANTIFIED, WHICH HA S LATER BEEN SCALED DOWN TO RS.40,74,327/- BY THE CIT(A). BE THAT AS IT MAY, IN ORDER TO UNDERSTAND THE BONAFIDES OF THE ASSESSEES CLAIM MA DE IN THE RETURN OF INCOME, IT WOULD BE APPROPRIATE TO UNDERSTAND THE S TAND OF THE ASSESSEE IN THE QUANTUM PROCEEDINGS. THE ASSESSEE CONTENDED THAT ON THE BASIS OF THE INDO-FRANCE DTAA, PARTICULARLY PARA-4 OF THE PROTOCOL BETWEEN INDIA AND FRANCE, NO OF PROFITS WERE LIABL E TO BE ATTRIBUTED TO THE INDIAN BRANCH BY REASON OF FACILITATION OF T HE CONCLUSION OF ANY LOAN OR TRADE AGREEMENT. ON THE STRENGTH OF PARA-4 OF THE PROTOCOL BETWEEN INDIA AND FRANCE, THE ASSESSEE CONTENDED T HAT IT WAS ONLY FACILITATING SYNDICATION OF THE FOREIGN CURRENCY LO ANS AND, THEREFORE, NO PROFITS COULD BE ATTRIBUTED TO SUCH ACTIVITY. THE AFORESAID ASSERTION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE INCOME TA X AUTHORITIES, AND SUCH STAND HAS ALSO AFFIRMED BY THE TRIBUNAL IN ITS ORDER DATED 30/09/2013(SUPRA). ON THIS ASPECT, THE INCOME TAX AUTHORITIES INFERRED THAT THE ROLE OF ASSESSEE BRANCH, INTER-ALIA, INCLU DED PROVIDING A CORE BASIS FOR TAKING THE DECISION OF GRANTING LOANS AN D, THEREFORE, SUCH NATURE OF SERVICES DID NOT FALL WITHIN THE EXPRESS ION FACILITATION OF LOAN AGREEMENT AS UNDERSTOOD FOR THE PURPOSE OF PAR A-4 OF THE PROTOCOL BETWEEN INDIA AND FRANCE. IN THIS MANNER, THE STAN D OF THE ASSESSEE WAS NOT FOUND TENABLE AND INSTEAD ADDITION WAS MAD E DETERMINING THE ARM'S LENGTH PRICE OF SUCH ACTIVITIES. 8.1 BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE CONTENDED THAT THE STAND OF THE ASSESSE E THAT NO INCOME WAS ASSESSABLE ON ACCOUNT OF SUCH SERVICES PROVIDIN G TO ITS OVERSEAS ENTITIES HAS NOT BEEN ACCEPTED, WHICH REFLECTS THAT THERE WAS FURNISHING OF INACCURATE PARTICULARS OF INCOME IN THE RETURN O F INCOME. THEREFORE, 8 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) LD. DEPARTMENTAL REPRESENTATIVE HAS JUSTIFIED THE L EVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 9. ON THIS ASPECT, WE HAVE PERUSED THE RELEVANT MAT ERIAL AND FIND THAT IT IS A CASE WERE ARGUMENTS OF THE ASSESSEE H AVE NOT BEEN ACCEPTED AND IT IS NOT A CASE WHERE ASSESSEE CAN BE SAID TO HAVE CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTIC ULARS OF SUCH INCOME. THE ASSESSEE HAD SET UP ITS CASE BASED ON PARA-4 OF THE PROTOCOL BETWEEN INDIA AND FRANCE, WHICH HAS NOT FO UND TO BE ACCEPTABLE UNDER AND FACTS AND CIRCUMSTANCES OF THE CASE. ON THIS ASPECT ALSO, WE FIND THAT THE RATIO OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO-CHEMICALS (SUPR A) SUPPORTS THE CONCLUSION OF THE CIT(A) THAT NO PENALTY UNDER SECT ION 271(1)(C) IS LEVIABLE. NOTABLY, THE CIT(A) FOUND THAT THE CLAIM MADE IN THE RETURN OF INCOME WAS BONAFIDE IN AS MUCH AS THE TRANSFER PRIC ING STUDY WAS CARRIED OUT BY A REPUTED FIRM OF CHARTERED ACCOUNT ANTS, WHICH DID NOT ENVISAGE ANY TRANSFER PRICING ADJUSTMENT WITH REGAR D TO THE ACTIVITIES IN QUESTION. LD. REPRESENTATIVE FOR THE ASSESSEE ALSO MADE A STATEMENT AT BAR THAT IN THE EARLIER ASSESSMENT YEAR OF 2002-03 ALSO SUCH ADJUSTMENT WAS MADE TO THE RETURNED INCOME, BUT THE ASSESSING OFFICER DID NOT LEVY ANY PENALTY UNDER SECTION 271(1)(C) OF THE ACT . IT WAS, THEREFORE, CANVASSED BEFORE US THAT UNDER THE CIRCUMSTANCES TH E PENALTY HAS BEEN RIGHTLY SET-ASIDE BY THE CIT(A). WE ARE IN AGREEME NT WITH THE CONCLUSION OF THE CIT(A) THAT THE IMPUGNED ADDITION IS A RESULT OF A MERE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND RE VENUE AND IS NOT A CASE WHERE THE CLAIM MADE BY THE ASSESSEE IN THE RE TURN OF INCOME WAS FOUND TO BE NON-BONAFIDE OR FALSE. IN THE RESULT, WE HEREBY AFFIRM THE STAND OF THE CIT(A) ON THIS ASPECT ALSO. 9 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) 10. IN THE RESULT, SO FAR AS THE APPEAL OF THE REVE NUE IS CONCERNED THE SAME IS DISMISSED. 11. IN THE CROSS OBJECTION PREFERRED BY THE ASSESSE E, IT IS CONTENDED THAT THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTI ON 80G OF THE ACT ON THE BASIS OF DONATION PAID TO ELIGIBLE ENTITIES WAS DISALLOWED ON THE GROUND THAT THE RELEVANT EVIDENCE WAS NOT ON RECORD . THE ASSESSEE HAD CLAIMED THAT THE DONATIONS PAID OF RS.1,56,000/- W ERE ELIGIBLE FOR DEDUCTION UNDER SECTION 80G OF THE ACT TO THE EXTEN T OF RS.78,000/-. IN THE ABSENCE OF RELEVANT EVIDENCE, NAMELY, RECOGNITI ON OF THE RECIPIENTS UNDER SECTION 80G OF THE ACT, THE CLAIM OF THE ASSE SSEE WAS DISALLOWED. 12. ON THIS ASPECT, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN THE COURSE OF THE QUANTUM ASSESSMENT PROCEE DINGS, THE ASSESSEE COULD NOT PRODUCE THE RELEVANT RECEIPTS IN AS MUCH AS DONATION OF RS.1,56,000/- WAS PAID TO THE FOLLOWING THREE PARTIES:- 1. MISSIONARIES OF CHARITY(BROTHERS), CALCUTTA - RS. 75,000/- 2. MA-NIKETAN SOCIETY, THANE - RS.75,000/- 3. S. VABODHINI CHARITABLE E TRUST, CHENNAI - RS.6,000/- BY REFERRING TO THE ACKNOWLEDGEMENT RECEIPTS PLACED IN THE PAPER BOOK AT PAGES 51 TO 52, IT WAS SOUGHT TO BE POINTED OUT THAT ALL THE THREE RECIPIENTS ARE RECOGNIZED UNDER SECTION 80G OF TH E ACT AND, THEREFORE, THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTI ON 80G OF THE ACT WAS RIGHTLY MADE. THE AFORESAID EVIDENCE COULD NOT BE PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND, THEREFORE, FO R SUCH REASON THE DEDUCTION WAS DENIED, OTHERWISE THE DISALLOWANCE IT SELF WAS NOT MERITED. 10 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) 13. LD. DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE HAS CONTENDED THAT THE ASSESSEE IS RELYING ON MATERIAL WHICH WAS NOT AVAILABLE IN THE COURSE OF THE ASSESSMENT PROCEEDIN GS AND, THEREFORE, THE SAME CANNOT BE CONSIDERED AT THE STAGE OF CONS IDERING EFFICACY OF THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND FIND THAT THE PAYMENTS FOR DONATIONS HAVE BEEN MADE THROUGH A CCOUNT PAYEE CHEQUES AND GENUINENESS OF THE SAME HAVE NOT BEEN D OUBTED DURING THE ASSESSMENT PROCEEDINGS, THOUGH THE DEDUCTION U/S.80G WAS NOT ALLOWED FOR WANT OF THE EVIDENCE OF THE RECOGNITION UNDER SECTION 80G OF THE ACT. BE THAT AS IT MAY, IT IS QUITE CLEAR THAT THE DISALLOWANCE WAS ON ACCOUNT OF FAILURE TO SUBSTANTIATE A CLAIM OF DE DUCTION AND NOT FOR THE REASON THAT THE CLAIM WAS CLINCHINGLY FOUND TO BE UNTRUE OR FALSE, SO AS TO WARRANT LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. THEREFORE, WE SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ASPECT AN D DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED IN RELATION TO THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80G OF THE ACT OF RS.78,000 /-. 15. AS A CONSEQUENCE, THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. 16. RESULTANTLY, WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED, THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/ 10/2015. SD/- SD/- (SANDEEP GOSAIN) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 30/10/2015 11 ITA NO. 2714/MUM/2011& CO 180/M/2011 (ASSESSMENT YEAR : 2003-04) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS