DCIT, Chandigarh V. M/s Parabolic Drugs Ltd., Chandigarh

ITA 1091/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81031 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Wrong claim
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 1091/CHD/2013 ASSESSMENT YEAR: 2005-06 THE D.C.I.T., V M/S PARABOLIC DRUGS LTD., CENTRAL CIRCLE 1, SCO 99-100, CHANDIGARH. SECTOR 17B, CHANDIGARH. PAN: AACCP1419K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJEEV KUMAR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 11.11.2014 DATE OF PRONOUNCEMENT : 18.11.2014 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS) CENTRAL, GURGAON DATED 25.09.2013 FOR ASSESSMENT YEAR 2005-06 CHALLENGING THE CANCELLATION OF PENALT Y UNDER SECTION 271(1)(C) OF THE ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSMENT WAS COMPLETED ON 21.12.2009 UNDER SECTION 47/143(3) OF THE ACT AT RS. 98,74,970/-. AGAINST THE ADDITION OF RS. 29,62 ,491/-, PENALTY PROCEEDINGS WERE INITIATED. THE ASSESSING O FFICER HAS OBSERVED THAT THE ASSESSEE DID NOT QUALIFY AS SMALL SCALE INDUSTRY AS THE INVESTMENT IN THE PLANT & MACHINERY IN THIS UNDERTAKING WAS OF RS. 351.59 LACS. CONSEQUENTLY, THE CLAIM OF 2 DEDUCTION UNDER SECTION 80IB OF THE ACT OF RS. 29,6 2,491/- WAS DISALLOWED. THIS DISALLOWANCE WAS CONFIRMED IN APP EAL. IT WAS A CASE OF THE ASSESSING OFFICER THAT ASSESSEE DID NOT QUALIFY AS SMALL SCALE INDUSTRY AS THE INVESTMENT IN THE PLANT & MACHINERY WAS MORE THAN THE MONETARY LIMIT PRESCRIBED, HENCE, THE ASSESSEE MADE WRONG CLAIM OF DEDUCTION UNDER SECTIO N 80IB(3), THEREFORE, VIDE SEPARATE ORDER, PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT WAS LEVIED. THE ASSESSEE CHALLENGED THE LE VY OF PENALTY BEFORE LD. CIT(APPEALS) AND THE WRITTEN SUBMISSION OF THE ASSESSEE IS INCORPORATED IN THE APPELLATE ORDER IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT ALL PARTICULARS WER E DISCLOSED IN THE RETURN OF INCOME AS WELL AS AT THE ASSESSMENT S TAGE FOR CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THEREF ORE, IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURING OF BULK DRUGS AND FINE CHEMICALS. TH E DEDUCTION UNDER SECTION 80IB WAS DISALLOWED FOR THE REASON TH AT ASSESSEE HAD MADE INVESTMENT IN PLANT & MACHINERY MORE THAN THE LIMIT PRESCRIBED BY THE MINISTRY OF INDUSTRIES, IN RESPEC T OF SMALL SCALE INDUSTRIES. IT WAS SUBMITTED THAT ASSESSEE COMPANY WAS UNDER A BONAFIDE BELIEF THAT IT WAS A SMALL SCALE UNDERTAKI NG IN VIEW OF VARIOUS CONFUSING NOTIFICATIONS WHICH KEPT ON CHANG ING TIME AND AGAIN. THE AUDITOR HAS ALSO QUALIFIED FOR DEDUCTIO N IN THE AUDIT REPORT. THE LEVY OF PENALTY IS NOT AUTOMATIC AND I S DISCRETIONARY IN NATURE, THEREFORE PENALTY MAY BE CANCELLED. 3. THE LD. CIT(APPEALS), CONSIDERING EXPLANATION OF ASSESSEE IN THE LIGHT OF VARIOUS JUDGEMENTS, CANCELLED THE PENA LTY AND 3 ALLOWED THE APPEAL OF THE ASSESSEE. HIS FINDING IN APPELLATE ORDER IN PARA 4.3 AND 5 ARE REPRODUCED AS UNDER : 4.3. I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSE E AS WELL AS THE IMPUGNED ORDER. I HAVE ALSO GONE THROUGH THE PLETHORA OF CASES RELIED UPON BY THE ASSESSEE. THE LD. AO HAD INI TIATED THE PENALTY PROCEEDINGS U/S 271(1) (C ) AS IT HAS BEEN HELD THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS AND SO CON CEALED HIS INCOME TO THE EXTENT OF RS. 29,62,491/-IN AS MUCH AS THE CLAIM FOR DEDUCTION U/S 80IB(3) ON GROUND OF IT BEING A SMALL SC ALE UNDERTAKING WAS FALSE. AS PER SEC 271(L)(C), PENALT Y IS TO LEVIED IF THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. ASSESSEE HAS CONTENDED THAT THE PENALTY WAS NOT SUSTAINABLE AS THE CHARGE CONTEMPLATED U/S 271(1)(C) IS NOT CLEAR. BE THAT AS IT IS, IT IS A FACT THAT DEDUCTION HAS BEEN CLAIMED U/S 80IB(3) IN THE STATUS OF A SMALL SCALE INDUSTRY. THIS W AS FOUND TO BE INCORRECT AS PER THE NOTIFICATION OF THE MINISTRY OF INDUSTRY FOR SMALL SCALE UNITS. THE INVESTMENT IN PLANT AND MACHINERY WA S FOUND TO BE EXCEEDING THE PRESCRIBED LIMIT. IT IS THE ASSESSEE 'S CONTENTION THAT IT WAS UNDER BONA-FIDE BELIEF THAT IT WAS A SMA LL SCALE INDUSTRY IN VIEW OF THE VARIOUS CONFUSING NOTIFICATIONS OF T HE MINISTRY WHICH CHANGED FROM TIME AND AGAIN. IT WAS ALSO EMPHASIZED THAT THE BOOKS WERE DULY AUDITED AND THAT FORM 10CCB WAS QUANTIFIE D AFTER LOOKING INTO THE CONDITIONS FOR CLAIMING THE DEDUCTION. FURTHER MORE, ASSESSEE STATED THAT AS ALL PARTICULARS OF ITS PLANT A ND MACHINERY AS WELL AS THE CALCULATION OF DEDUCTION U/S SECTION 80IB W AS FURNISHED IN THE RETURN OF INCOME, SO IT COULD NOT BE SAID THAT PARTICULARS OF INCOME WERE CONCEALED OR FILED INACCURATELY. HERE A CLAIM HAS BEEN MADE WHICH WAS FOUND TO BE INCO RRECT. THIS CLAIM WAS ON THE BASIS OF CERTIFICATE ISSUED BY THE AUDITOR IN THE REQUISITE FORM 10CCB. THE VIOLATION IS THE INVESTMENT IN PLANT AND MACHINERY EXCEEDED THE LIMIT PRESCRIBED BY THE MINISTR Y OF INDUSTRIES. NOTIFICATION AS TO THE LIMIT OF INVESTMENT HAS BEEN MODIFIED IN 1997 AND 2009 AS EVIDENT FROM THE IMPUGN ED ORDER. ALL MATERIAL FACTS AS REGARDS ITS INVESTMENT CANNOT BE SAI D TO HAVE BEEN WITHHELD BY THE ASSESSEE AS THE RETURN FILED W AS ACCOMPANIED BY AUDITED ACCOUNTS AND FORM 10CCB. CON SEQUENTLY CONSIDERING THE FACTS OF THE CASE, I AM INCLINED TO HOLD THAT THE ASSESSEE HAD FULLY DISCLOSED ALL MATERIAL FACTS AND SO IT IS APPARENT THAT THERE IS NEITHER ANY CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME. THE PENALTY LEVIED IS THEREFORE DIRECTED TO BE DELETED. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. 4. THE LD. DR RELIED UPON ORDER OF THE ASSESSING OF FICER AND SUBMITTED THAT ASSESSEE MADE WRONG CLAIM OF DEDUCTI ON UNDER 4 SECTION 80IB OF THE ACT. THEREFORE, PENALTY WAS LE VIABLE UNDER SECTION 271(1)(C) OF THE ACT. HE HAS SUBMITTED THA T SINCE CLAIM OF DEDUCTION WAS NOT BONAFIDE, THEREFORE, IT AMOUNT S TO CONCEALMENT OF INCOME AND RELIED UPON DECISION OF T HE DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION P. L TD. 327 ITR 510. THE LD. DR ALSO RELIED UPON DECISION IN THE CA SE OF CIT VS ESCORTS FINANCE LTD. 328 ITR 44, DECISION IN THE CA SE OF KRISHNA KUMAR CHAMANLAL & ANOTHER V CIT & ANOTHER 217 ITR 645, DECISION IN THE CASE OF RAJARAM AND CO. V CIT 193 I TR 614 AND DECISION IN THE CASE OF BEENA METALS V CIT 240 ITR 222. 5. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND R EFERRED TO PB-2 AND PB-3 WHICH IS COMPUTATION OF INCOME FOR YE AR UNDER CONSIDERATION IN WHICH THE ASSESSEE HAS CLAIMED DED UCTION UNDER SECTION 80IB AND ALSO DECLARED IN THE NOTICE THAT ITS UNIT WAS GRANTED PERMANENT REGISTRATION BY THE DISTRICT INDUSTRIES CENTRE, PATIALA AS SMALL SCALE UNIT AND COMMERCIAL PRODUCTION WAS STARTED ON 18.02.1998 AND BEING A COMPANY ELIGI BLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. IT WAS SU PPORTED BY AUDITORS REPORT UNDER SECTION 80IB OF THE ACT. HE HAS SUBMITTED THAT REGISTRATION OF SSI UNIT AS GRANTED BY THE GOVERNMENT WAS NEVER CANCELLED OR REVOKED BY DISTRI CT INDUSTRY CENTRE, PATIALA. THE LIMIT IN FIXED ASSETS IN PLAN T & MACHINERY FOR THE UNIT TO BE REGISTERED AS SSI UNIT WAS FIXED AT RS. 3 CRORES VIDE NOTIFICATION DATED 10.12.1997 WHICH WAS AMENDE D LATER ON AND MONETARY LIMIT WAS REVISED TO RS. 1 CRORE. SUB SEQUENTLY, CLARIFICATION ISSUED ON 14.03.2000 WAS ISSUED STATI NG THAT UNITS THAT HAVE OBTAINED PERMANENT REGISTRATION IN TERMS OF EARLIER 5 NOTIFICATION SHALL CONTINUE TO REMAIN AS A UNIT OF SSI INSPITE OF REDUCING THE INVESTMENT LIMIT TO RS. 1 CRORE. SUBS EQUENTLY, FURTHER NOTIFICATION WAS ISSUED BY VIRTUE OF WHICH, CERTAIN ITEMS UNDER DRUGS AND PHARMACEUTICAL CATEGORY WERE INCLUD ED AND UNDER WHICH THE INVESTMENT LIMIT WAS INCREASED UPTO RS. 5 CRORES. HOWEVER, IN NOTIFICATION DATED 21.02.2006, THE SAID LIMIT OF RS. 5 CRORES WAS MADE APPLICABLE TO ALL THE ITE MS OF DRUGS AND PHARMACEUTICALS. THE ASSESSEE HAS INVESTMENT L ESSER THAN RS. 5 CRORES AND MADE A BONAFIDE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ASSESSEE HAS NOT FILED ANY INACCURATE PARTICULARS OF INCOME AND HAS NOT CONCEA LED THE PARTICULARS OF INCOME. THE CLAIM OF ASSESSEE WAS B ONAFIDE AS PER INTERPRETATION OF VARIOUS NOTIFICATIONS ISSUED TIME TO TIME. HE HAS RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS P. LTD. V CIT 348 ITR 306 (S.C) IN WHICH IT WAS HELD; IMPOSITION OF PENALTY WOULD BE UNWARRANTED IN A CA SE WHERE THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONAFIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS. 6. DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V HIMACHAL AGRO FOODS LTD. 9 DTR 46 (P& H) IN WHICH IT WAS HELD ; ASSESSEE HAVING CLAIMED DEDUCTION UNDER S. 80-IB B Y MAKING A MISTAKE IN CALCULATION OF NUMBER OF YEARS, IT CANNOT BE SAID THAT THE ASSESSEE HAS DELIBERATELY CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF AND THEREFORE, PENAL TY UNDER S. 271(L)(C) CANNOT BE IMPOSED UPON THE ASSESSEE. 6 7. DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V DEEPAK KUMAR 38 DTR 118 (P&H), IN WHI CH IT WAS HELD AS UNDER : ASSESSEE HAVING FILED THE RETURN OF INCOME CLAIMIN G EXEMPTION UNDER S. 10(36) IN RESPECT OF PROFIT ON S ALE OF SHARES ON THE BONA FIDE BELIEF BASED ON THE ADVISE OF HIS COUNSEL AND AFFIDAVIT OF THE COUNSEL ADMITTING HIS MISTAKE BEING ACCEPTED BY THE APPELLATE AUTHORITY W HILE DELETING THE PENALTY, NO SUBSTANTIAL QUESTION OF LA W ARISES. 8. ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF AC IT V PERFECT FORGINGS 143 TTJ 117 IN WHICH IT WAS HELD A S UNDER : ASSESSEE HAVING DISCLOSED COMPLETE PARTICULARS VIS -A- VIS ITS CLAIM OF DEDUCTION UNDER S. 80-IB IN ITS RE TURN WHICH WAS ACCOMPANIED BY AUDIT REPORT, PENALTY UNDE R S. 271(L)(C) IS NOT LEVIABLE SIMPLY BECAUSE THE CLA IM OF DEDUCTION HAS BEEN REJECTED ON CERTAIN DEBATABLE ISSUES. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD AND DO NOT FIND ANY JUSTIFICATI ON TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE WH ILE MAKING CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN COMPUTATION OF INCOME DISCLOSED COMPLETE FACTS AND CLAIMED TO H AVE PERMANENT REGISTRATION AS SMALL SCALE UNIT ISSUED B Y DISTRICT INDUSTRIES CENTRE, PATIALA. THE CLAIM OF ASSESSEE WAS QUALIFIED BY THE AUDITOR AS WELL. THE ASSESSEE REFERRED TO VA RIOUS NOTIFICATIONS ISSUED BY THE CONCERNED DEPARTMENT TH ROUGH WHICH TIME TO TIME, THE MONETARY LIMITS WERE VARYING AND ULTIMATELY THE LAST NOTIFICATION WAS ALSO FAVOURABLE TO THE ASSESS EE. IN THE CASE OF THE ASSESSEE, THE VALUE OF EXCLUSIVE PLANT & MAC HINERY AS ON 01.04.2004 WAS RS.2.93 CRORES AND BECAUSE OF THE AD DITION MADE IN THE ASSESSMENT YEAR UNDER APPEAL OF RS. 58.33 LA CS, THE TOTAL 7 INVESTMENT COMES TO RS.3.51 CR. IT IS, THEREFORE, C LEAR THAT THE ASSESSEE WAS SMALL SCALE INDUSTRIAL UNIT AND WAS EN TITLED FOR DEDUCTION UNDER SECTION 80IB EARLIER AND IT IS ONLY BECAUSE OF SOME ADDITIONS MADE IN YEAR UNDER CONSIDERATION, TH E ASSESSEE WOULD NOT HAVE QUALIFIED FOR DEDUCTION UNDER SECTIO N 80IB OF THE ACT. THE ASSESSEE, THEREFORE, MADE A BONAFIDE CLAI M OF DEDUCTION UNDER SECTION 80IB AS PER THE NOTIFICATION ISSUED L ASTLY WHICH COVERED SUCH UNIT UPTO RS. 5 CRORES THOUGH THERE MA Y BE SOME RESTRICTION THEREON. IT IS, THEREFORE, NOT A CASE OF FILING OF INACCURATE PARTICULARS OF INCOME OR CONCEALING THE PARTICULARS OF INCOME. THE DECISION CITED CLEARLY SUPPORT THE FIN DING OF THE LD. CIT(APPEALS) FOR CANCELING THE PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT. 10. IN VIEW OF THE ABOVE DISCUSSION, THE DECISION C ITED BY LD. DR WOULD NOT SUPPORT THE CASE OF THE REVENUE. WE, THE REFORE, DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY. 11. IN THE RESULT, DEPARTMENTAL APPEAL FAILS AND IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER,2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH NOVEMBER,2014. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH