The Falcon Finstock Ltd., Ahmedabad V. The Income tax Officer, Ward-4(3), Ahmedabad

CO 77/AHD/2007

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4387 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 16-04-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V C MODI
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Wrong claim
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER CO NO.77/AHD/2007 (ARISING OUT ITA NO.796/AHD/2007 ASSESSMENT YEAR: 2001-02 DATE OF HEARING:3.3.10 DRAFTED:4.3.10 FALCON FINSTOCK, 152, NEW CLOTH MARKET, AHMEDABAD PAN NO.AAACP3436C V/S . INCOME TAX OFFICER, WARD-4(3), AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SUNIL H TALATI, AR RESPONDENT BY:- SHRI V.C. MODI, ADDL. CIT-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS CROSS OBJECTION (CO) BY THE ASSESSEE IS ARISI NG OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, AHMEDABA D IN APPEAL NO. CIT(A)- VIII/ITO/4(3)/29/04-05 DATED 24-12-2004. THE ASSESS MENT WAS FRAMED BY THE INCOME-TAX OFFICER, WARD-4(3), AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 19-03-2004 FOR THE ASSESSMENT YEAR 2001-02. 2. THE REVENUES APPEAL HAS ALREADY BEEN DECIDED BY THIS TRIBUNAL IN ITA NO.796/AHD/2007 DATED 17-04-2007, AND ONLY ISSUE IN THIS CO OF THE ASSESSEE IS CO NO.77/AHD/2007 A.Y. 2001-02 FALCON FINSTOCK V. ITO WD-4(3) ABD PAGE 2 AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE LEVY OF PENALTY BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE ACT IN RESPECT OF THE CLAIM OF DEDUCTION DISALLOWED BY THE ASSESSING OFFICER U/S.80IA OF THE ACT. FOR THIS, AS SESSEE RAISED THE FOLLOWING ARGUMENTATIVE GROUNDS:- 1. THE LEARNED C.I.T. (APPEALS) ERRED IN LAW AND O N FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER LEVYING PENALTY U/S .271(1) OF THE I.T. ACT IN RESPECT OF DEDUCTION U/S.80IA DISALLOWED. THE LEARN ED C.I.T. (APPEALS) OUGHT TO HAVE HELD AS HE HELD WITH RESPECT TO BONA FIDE C LAIM OF DEDUCTION U/S.80HHC THAT THERE WERE NO MALA FIDES IN CLAIMING THE DEDUCTION U/S.80IA TOO AND HENCE PENALTY WAS NOT AT ALL LEVIABLE IN RE SPECT OF PART DISALLOWANCE MAINTAINED U/S.80IA. IT BE SO HELD NOW. THE PENALTY DIRECTED TO BE RETAINED IN RESPECT OF DISALLOWANCE U/S.80IA BE DELETED. 2. THE LEARNED C.I.T.(APPEALS) FURTHER ERRED BOTH I N LAW AND ON FACTS IN NOT ACCEPTING THE PLEA OF THE APPELLANT THAT PENALTY WA S NOT TO BE IMPOSED UNLESS THERE WAS CONSCIOUS BREACH OF LAW AND THAT DEBATABL E ISSUES CANNOT RESULT IN TO CONCEALING THE PARTICULARS OF INCOME. IT BE SO H ELD NOW AND THE PENALTY ORDER TO THE EXTENT IT RETAINS PENALTY ON PART DISA LLOWANCE BE QUASHED AND THE PENALTY BE DELETED IN TOTO. 3. THE LEARNED C.I.T. (APPEALS) FURTHER ERRED BOTH IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT CONSIDERING THE TOTAL CL AIMS OF DEDUCTIONS BONAFIDELY MADE IN THE ORIGINAL RETURN OF INCOME, THERE WAS NI L INCOME AND NO TAX WAS ACTUALLY PAYABLE AND IF THE BONA FIDE DEDUCTION U/S .80HHC IS ACCEPTED THEN THERE WOULD BE NIL INCOME AND AS SUCH THERE WAS NO TAX PAYABLE AND THERE WAS NO QUESTION OF ANY PENALTY. IT BE SO HELD NOW. THE PENALTY BE DELETED IN TOTO. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GOING T HROUGH THE FACTS OF THE CASE. WE FIND THAT FOR ASSESSMENT YEAR 2001-02 THE ASSESS EE FILED ITS RETURN OF INCOME DECLARING NIL INCOME AND AS PER THE SAID STATEMENT OF TOTAL INCOME, THE ASSESSEE HAD GROSS TOTAL INCOME OF RS.42,61,594/- AND TOTAL DEDUCTION U/S.80HHC AND U/S.80IA OF THE ACT, FOR WHICH A BONA FIDE CLAIM AN D CALCULATION WAS MADE AT RS.1,28,01,576/-. WE FURTHER FIND THAT THE ASSESSEE HAD ADMISSIBLE CLAIM OF DEDUCTION U/S.80HHC OF THE ACT, AMOUNTING TO RS.12, 78,478/- WHICH WAS MORE THAN THE GROSS TOTAL INCOME OF RS.42,61,594/- AS PER ITS RETURN OF INCOME. HOWEVER, THE CLAIM U/S.80HHC WAS REDUCED BY AN AMOUNT OF RS.12,7 8,478/- AGAIN ON ACCOUNT OF A BONA FIDE CLAIM OF 80IA OF THE ACT AND BALANCE CLAI M U/S.80IAOF THE ACT WAS MADE AT RS.1,15,23,098/-. UNDER THE CIRCUMSTANCES THE AGGRE GATE CLAIM U/S.80HHC AS WELL AS 80IA OF THE ACT WAS SUBSTANTIALLY MORE, I.E. RS. 1,28,01,576/- THAN THE GROSS CO NO.77/AHD/2007 A.Y. 2001-02 FALCON FINSTOCK V. ITO WD-4(3) ABD PAGE 3 INCOME OF RS.42,61,594/-. IN QUANTUM PROCEEDINGS TH E ABOVE BONA FIDE CLAIMS OF DEDUCTION U/S.80HHC AND 80IA OF THE ACT WERE NOT AC CEPTED AND THE ASSESSMENT WAS ACCORDINGLY MADE BY DISALLOWING THE ABOVE DEDUC TIONS. HOWEVER, THE ASSESSING OFFICER LEVIED THE PENALTY U/S.271(1) OF THE ACT A T RS.17,00,490/- ON BOTH THE CLAIMS, SINCE BOTH THE ABOVE CLAIMS WERE NOT ACCEPT ED IN THE ASSESSMENT PROCEEDINGS. THE CIT(A) CANCELLED THE PENALTY IN SO FAR AS IT RELATED TO THE CLAIM OF SEC. 80HHC OF THE ACT. SINCE THE SAME WAS SUPPORTED BY REPORT OF THE AUDITOR AND THE CLAIM WAS HELD TO BE MADE UNDER BONA FIDE BELIE F, HOWEVER, THE CIT(A) ERRED IN CONFIRMING THE PENALTY IN PART SO FAR AS IT RELATED TO THE CLAIM OF DEDUCTION U/S.80IA OF THE ACT. BEFORE US, IT IS SUBMITTED THAT THE CIT(A ) OUGHT TO HAVE CANCELLED THE PENALTY IN ITS ENTIRETY FOR THE FOLLOWING REASONS:- THERE IS NO CONCEALMENT OF ANY INCOME OR FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME. THE ORDER OF THE AO IS SILEN T ON THE BONA FIDE CLAIM OF DEDUCTION U/S.80IA AMOUNTING TO RS.12,78,478/-. AS HELD BY THE CIT(A) AND CONFIRMED BY THIS TRIBUNAL IN ITA NO.796/AHD/2007 DATED 17-04-2007, WHEREIN THE TRIBUNAL HAS APPROVED THE CONDUCT OF AS SESSEE, I.E. THE BONA FIDE BELIEF ABOUT THE CLAIM U/S.80HHC. THE TRIBUNAL HAS THEREFORE, APPROVED THE ACTION OF CIT(A) CANCELING THE PENALTY QUA CLAIM OF DEDUCTION U/S.80HHC BY DISMISSING THE DEPARTMENTAL APPEAL. UNDER THE ABOV E CIRCUMSTANCES EVEN IF ONE IS TO BE PRESUME THAT THE ASSESSEE WAS NOT JUST IFIED IN MAKING CLAIM U/S.80IA THE TOTAL DEDUCTION OTHERWISE BONA FIDELY CLAIMED U/S.80HHC WAS MORE THAN THE GROSS TOTAL INCOME AND HENCE THERE CO ULD BE NO INTENTION TO MAKE A FALSE CLAIM SINCE EVEN OTHERWISE WITHOUT A C LAIM U/S.80IA OF THE ACT THE TOTAL INCOME BY CONSIDERING THE CLAIM OF DEDUCT ION U/S.80HHC WOULD WORK OUT TO NIL. EVEN OTHERWISE, THE ASSESSEE HAD FULLY DISCLOSED PARTICULARS OF INCOME AND CLAIMS OF DEDUCTION. BASED ON THE ABOVE FACTS AND CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES AND THE ORDER OF THE TRIBUNAL IN THE CASE OF DEPARTMENTAL APPEAL WHEREBY THE CANCELLATION OF PEN ALTY WAS UPHELD IN SO FAR AS THE CLAIM OF DEDUCTION U/S.80HHC WAS CONCERNED, THERE BEING NIL INCOME AS PER RETURN FILED BY THE ASSESSEE AFTER CONSIDERI NG THE CLAIM OF DEDUCTION U/S.80HHC ALONE AND THE PENALTY LEVIED BY THE ASSES SING OFFICER AS WELL AS CONFIRMED BY THE CIT(A) DESERVES TO BE CANCELLED. 4. WE FIND FROM THE COMPLETE FACTS WERE BEFORE THE ASSESSING OFFICER IN RESPECT TO THE CLAIM OF DEDUCTION U/S.80HHC AS WELL AS U/S. 80-IA OF THE ACT. THE ONLY FACT IS THAT THE ASSESSEES CLAIM WAS NOT JUSTIFIED U/S.80- IA OF THE ACT BUT THE SAME WAS MADE BONA FIDELY AS ACCEPTED BY THE TRIBUNAL, WHILE DEALING WITH PENALTY ON THE CLAIM MADE U/S.80HHC OF THE ACT. THE ONLY PREMISE OF THE LOWER AUTHORITIES FOR LEVYING PENALTY WAS THAT THE ASSESSEE-COMPANY HAS N OT FILED THE AUDIT REPORT FOR CO NO.77/AHD/2007 A.Y. 2001-02 FALCON FINSTOCK V. ITO WD-4(3) ABD PAGE 4 CLAIMING DEDUCTION U/S.80-IA OF THE ACT, WE WANT TO CLARIFY THAT UP TO ASSESSMENT YEAR 2002-03, THE ASSESSEE BEING A COMPANY, NOT REQUIRED TO FILE ANY SUCH REPORT, AS REQUIREMENT OF FILING OF SUCH REPORT WAS INSERTED I N SECTION 80-IA(7) OF THE ACT ONLY FROM ASSESSMENT YEAR 2003-04. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CLAIM MADE BY THE ASSESSEE U/S./80-IA OF THE ACT WAS A BONA FI DE CLAIM BUT NOT ALLOWABLE. ACCORDINGLY, WE FIND THAT THIS IS NOT A CASE OF CON CEALMENT AND ACCORDINGLY WE DELETE THE PENALTY LEVIED U/S.271(1) OF THE ACT. 4. IN THE RESULT, ASSESSEES CO IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 05/03/2010 SD/- SD/- (D.C.AGRAWAL) (MAHAVI R SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED :05/03/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- VIII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD