DCIT, Parwanoo V. M/s Hycron Electronics, Solan

ITA 1194/CHANDI/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5171 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 18-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR GULSHAN RAJ
• Keywords: Business income; Rule of consistency; Earning of tax free income; Proportionate interest; Wrong claim; Difference of opinion
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NOS.1194 & 1195/CHD/2016 ASSESSMENT YEARS: 2010-11 & 2011-12 THE DCIT VS. M/S HYCRON ELECTRONICS CIRCLE, PARWANOO VILL: BATED, BAROTIWALA SOLAN PAN NO. AADFH1249K ITA NOS.1217 & 1218/CHD/2016 ASSESSMENT YEARS: 2010-11 & 2011-12 M/S HYCRON ELECTRONICS VS. DY. CIT PLOT NO. 35, EPIP-II CIRCLE, PARWANOO VILL THANA, BADDI, SOLAN HIMACHAL PRADESH HIMACHAL PRADESH (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : DR. GULSHAN RAJ DATE OF HEARING : 14/12/2017 DATE OF PRONOUNCEMENT : 06/03/2018 ORDER PER BENCH: THE ABOVE APPEALS EMANATES FROM THE ORDER U/S 271(1 )(C) OF THE INCOME- TAX ACT, 1961 HAVE BEEN FILED BY THE REVENUE AND CR OSS APPEALS FILED BY THE ASSESSEE AGAINST THE SIMILAR ORDER OF LD. CIT(A), S HIMLA DT. 16/09/2016. THE APPEAL IN ITA NO. 1195/CHD/2016 FOR THE A.Y. 2011-1 2 IS TAKEN AS THE LEAD CASE AS IT COMPRISES OF ALL THE GROUNDS TAKEN IN VARIOUS YEARS. 2. REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND S OF APPEAL IN ITA NO. 1195/CHD/2016 : 1. ON THE FACTS AND INTEREST THE CIRCUMSTANCES, THE LD . CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C ) IGNORING THE FACTS THAT THE 2 ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION @ 100% AND ESCAPED HIS INCOME FROM TAX WILLFULLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT( A)WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C ) IGNORING THE FACTS THAT THE ASSESSEE WAS NOT ELIGIBLE FOR INCOME FROM CURRENCY FLUCTUATION AND ESCAPED HIS INCOME FROM TAX WILLFULLY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT( A) WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C ) IGNORING THE FACTS THAT THE ASSESSEE SHOULD ITSELF DISALLOWED THE PROPORTIONATE INTEREST AFTER APPLYING SECTION 14A OF THE INCOME TAX ACT, 1961 AND ESCAPED HIS INC OME FROM TAX WILLFULLY. 3. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS IN HIS CROSS APPEAL IN ITA NO. 1218/CHD/2016: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER DT. 16/09/2016 PASSED BY THE LD. CIT(A), SHIMLA UNDER S ECTION 250(6) OF THE INCOME TAX ACT, 1961 IS BAD IN LAW, ILLEGAL, WITHOUT JURIS DICTION AND VOID. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A), SHIMLA HAS ERRED IN AFFIRMING THE ORDER OF THE LD. DY. CIT, CIRCLE PARWANOO, HP IN IMPOSING THE PENALTY UNDER SECTION 271(1)(C) OF THE IT ACT 1961 ON CLAIM OF DEDUCTION UNDER SECTION 80IC ON THE INTEREST RECEIV ED ON MARGIN MONEY OF RS. 220282/- MISC. RECEIPT OF RS. 1,14,089/- AND SUNDRY BALANCES WRITTEN BACK RS. 99/- WHICH IS UNJUSTIFIED, UNWARRANTED AND BAD IN LAW. 4. BRIEF FACTS OF THE CASE: THE ASSESSEE STARTED ITS BUSINESS OPERATION/ACTIVI TIES ON 17.01.2004 AND INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S 80IC OF THE ACT WAS A.Y. 2004- 05. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARI NG NIL INCOME ON 29.09.2011 AFTER CLAIMING DEDUCTION UNDER SECTION 80-IC OF THE IT. ACT, 1961 AMOUNTING TO RS.10,03,39,227/-. THE ASSESSMENT WAS COMPLETED ON 11.02.2014 AT RS.7,63,55,788/- BY RESTRICTING THE CLAIM U/S 80IC MADE BY THE APPELLANT. THE ASSESSEE HAD ALREADY CLAIMED DEDUCTION U/S 80IC TO THE EXTENT OF 100% OF THE ELIGIBLE PROFIT FOR FIVE YEARS PERIOD STARTING FROM A.Y. 2004-05 TO 2008-09. IT WAS NOTICED THAT THE ASSESSEE FIRM HAD AGAIN CLAIMED 10 0% DEDUCTION AGAINST ELIGIBLE PROFITS IN THE RELEVANT A.Y. 2011-12 WHICH IS 8 TH YEAR OF PRODUCTION FOR THE ASSESSEE BY CLAIMING TO HAVE UNDERTAKEN SUBSTANTIAL EXPANSION IN A.Y.2009-10. THE ASSESSING OFFICER, FOR THE DETAILED REASONS MEN TIONED IN THE ASSESSMENT ORDER HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/ S 80IC ONLY @ 25% AS AGAINST THE CLAIM OF 100% MADE BY THE ASSESSEE. THE ASSESSI NG OFFICER FURTHER MADE THE FOLLOWING ADDITIONS TO THE RETURNED INCOME BY TREAT ING THE INCOME UNDER THESE HEADS AS NOT ELIGIBLE FOR DEDUCTION U/S 80IC. 3 PARTICULARS AMOUNT INTEREST RECEIVED ON MARGIN MONEY 2,20,282 DIVIDEND RECEIVED 10,50,047 FOREIGN EXCHANGE FLUCTUATION 7,99,987 MISCELLANEOUS RECEIPT 1,14,089 SUNDRY CREDIT BALANCES WRITTEN BACK 99 A FURTHER ADDITION OF RS.5,55,241/- WAS MADE BY DIS ALLOWING THE EXPENSE CLAIMED AGAINST EXEMPT INCOME U/S 14A. PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED W.R.T. ALL THE ABOVE REFERRED RESTRICTION IN DEDUCTION CLAIMED AND DISALLOWANCES MADE. THE ISSUES ON WHICH PENALTY LEV IED IS AS UNDER:- ISSUES WHERE PENALTY PROCEEDINGS INITIATED AMOUNT OF ADDITION ON WHICH PEN ALTY PROCEEDINGS INITIATED 8 M A.Y. CLAIM OF DEDUCTION U/S 80IC RS.7,36,16,042/- OTHER INCOME RS.21,84,505/- U/S 14A RS.5,55,241/- TOTAL RS.7,63,55,788/- 5. BEFORE US THE ASSESSEE HAS SUBMITTED THAT THE DE TAILS OF EXPANSION WERE SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THE GENUINENESS OF THE CLAIM HAS NOT DRAWN ANY ADVERSE INFERENCE. IT WAS A RGUED BEFORE THE LD. CIT(A) THAT HE IS NOT HIT BY THE PROVISIONS OF SECTION 271 (1)(C) AS IT HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED A NY INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS RELIED ON VARIOUS CASE LAW S TO SUPPORT HIS CASE AS PER THE RECORD. THE RELEVANT EXTRACTS OF THE SAME ARE R EPRODUCED AS UNDER:- 10. IN SUPPORT OF THE APPELLANT'S CONTENTION THAT PENAL TY U/S 271(1) (C) OF THE IT ACT IS NOT LEVIABLE UNDER THE FACT AND CIRCUMSTANCE S IS DULY SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (I) CIT VS. RELIANCE PETROPRODUCTS (P)LTD. (2010) 2 30 CTR (SC) 320, WHEREIN THE HON'BLE COURT HELD AS UNDER: PENALTY UNDER S, 271(1)(C)CONCEALMENTDISALLOWANCE OF CLAIM FOR DEDUCTION IN ORDER TO ATTRACT THE PROVISIONS OF S, 271(1)(C ), THERE HAS TO BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF H IS INCOME BY THE ASSESSEE IN THE INSTANT CASE, ASSESSEE CLAIMED DEDUCTION OF INT EREST ON LOANS TAKEN BY IT FOR PURCHASE OF SHARESAO DISALLOWED SUCH INTEREST ADM ITTEDLY, NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR IN ACCURATEHENCE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARSMAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INA CCURATE PARTICULARSMERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION WHICH HAS NO T BEEN ACCEPTED BY THE R EVENUE, PENALTY UNDER S. 271(1)(C) IS NOT ATTRACTED IF THE CONTENTION OF THE REVENUE IS ACCEPTED, THE ASSESSEE WOULD BE LIABLE F OR PENALTY UNDER S. 271(1)(C) IN EVERY CASE WHERE THE CLAIM MADE BY THE ASSESSEE IS NOT ACCEPTED BY THE AO FOR ANY REASONTHAT IS CLEARLY NOT THE INTENDMENT O F THE LEGISLATURE. PLEASE REFER ANNEX 1. 4 (II) CIT V CHITTORGARH KENDRIYA SAHAKARI BANK LTD ( SLP - CC NO(S). 8127/2014 DATED 02.07.2014) SUPREME COURT DISMISSED THE SLP FILED BY TAX AUTHOR ITIES AGAINST THE RAJASTHAN HIGH COURT RULING IN THE CASE OF CHITTORGARH KENDRI YA SAHAKARI BANK LTD [2014] 41 TAXMANN.COM 11 WHEREIN IT WAS HELD PENALTY UNDER SECTION 271(1 )(C) LEVIED UPON THE ASSESSEE ON INCORRECT CLAIM FOR DEDUCTION WAS N OT JUSTIFIABLE AS THE SAME WAS ON ACCOUNT OF CHANGE OF LAW AND THEREFORE, A MATTER OF BONA FIDE MISTAKE..,.. (III) SHREE KRISHNA ELECTRICALS 2009-23 VST249 (SC) PENALTY CANNOT BE LEVIED MERELY BECAUSE EXEMPTION CLAIMED BY 'A'WAS DISALLOW ED. (IV) THE HON'BLE SUPREME COURT IN THE MATTER OF DIL IP N, SHROFF V. JOINT COMMISSIONER OF INCOME-TAX, MUMHAI REPORTED IN (200 7) 6 SCC 329 OBSERVED THAT: 'THE EXPRESSION 'CONCEALS'' IS OF GREAT IMPORTANCE. ACCORDING TO LAW LEXICON, THE WORD 'CONCEAL' MEANS: TO HIDE OR KEEP SECRET. THE W ORD 'CONCEAL' IS CON PLUS CLEAR WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WI THDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCO ME TAX AUTHORITIES. IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFI NED AS: NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT. IT SIGNIFIES A DELIBERATE ACT OF OMISSION ON THE PA RT OF THE ASSESSEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CO NCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE TERM 'INACCURATE PARTICULARS' IS NOT DEFINED. F URNISHING OF AN ASSESSMENT OF VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHI NG OF INACCURATE PARTICULARS. EVEN IF THE EXPLANATIONS ARE TAKEN RECOURSE TO, A F INDING HAS TO BE ARRIVED AT HAVING REGARD CLAUSE (A) OF EXPLANATION 1 THAT THE ASSESSING OFFICER IS REQUIRED TO ARRIVE AT A FINDING THAT THE EXPLANATION OFFERED BY AN ASSESSEE, IN THE EVENT, HE OFFERS ONE WAS FALSE. HE MUST BE FOUND TO HAVE FAIL ED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE F ACTS RELATING TO THE SAME AND MATERIAL TO THE INCOME WERE NOT DISCLOSED BY HIM. T HUS, APART FROM HIS EXPLANATION BEING NOT BONA FIDE, IT SHOULD BE FOUND AS A FACT THAT HE HAS NOT DISCLOSED ALL THE FACTS WHICH WERE MATERIAL TO THE COMPUTATION OF HIS INCOME. THE EXPLANATION HAVING REGARD TO THE DECISION OF TH IS COURT MUST BE PRECEDED BY A FINDING AS TO HOW AND AS TO IN WHAT MANNER HE FUR NISHED THE PARTICULARS OF HIS INCOME, IT IS BEYOND ANY DOUBT OR DISPUTE THAT FOR THE SAID PURPOSE THE INCOME TAX OFFICER MUST ARRIVE AT ITS SATISFACTION IN THIS BEHALF. [SEE COMMISSIONER OF INCOME TAX V. RAM COMMERCIAL ENTERPRISES LTD. REPOR TED IN [2000] 246 ITR 568 (DELHI) AND DIWAN ENTERPRISES VS. COMMISSIONER OF I NCOME TAX REPORTED IN [2000] 246 ITR 571 (DELHI).] (V) THE HON'BLE HIGH COURT OF MADHYA PRADESH IN THE MATTER OF NARENDRA KUMAR RAJENDRA KUMAR JAIN VS. COMMISSIONER OF INCOM E TAX REPORTED IN (1988) 174 FTR 479 (MP) WHILE DECIDING ON THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT HELD THAT THE PENALTY HAS BEEN LEVIED U/S 271(1)(C) AFTER DISALLOWING CLAIM FOR CERTAIN DEDUCTION. HOWEVER, T HE TRIBUNAL DID NOT FIND THAT EXPENDITURE WAS NOT INCURRED AT ALL, OR THAT IT WAS CLAIMED IN EARLIER YEARS AND THAT THE ASSESSEE MADE A FALSE CLAIM FOR DEDUCTION IN TH E ASSESSMENT YEAR IN QUESTION. THEREFORE, IN THE ABSENCE OF ANY FINDING THAT ASSES SEE HAD DELIBERATELY MADE A FALSE CLAIM FOR DEDUCTION, LEVY OF PENALTY UNDER S. 271(1)(C) WAS NOT JUSTIFIED. ,Y (VI) IT IS FURTHER RESPECTFULLY SUBMITTED THAT THE HON'BLE ITAT, CHANDIGARH THE JURISDICTIONAL ITAT HAVE OBSERVED IN THE ASSESSE OW N CASE RELATING TO AY 2009-10 WHILE DECIDING IN APPEAL NO 326/CHD/2015 ON 8.10.20 15, THAT PENALTY U/S 271(1)(C), ON THE ISSUE IS NOT LEVIABLE. 6. WITH REGARDS TO THE PENALTY COMPUTED AND LEVIED ON THE ISSUES OTHER THAN SUBSTANTIAL EXPANSION REFERRED SUPRA, THE RELEVANT EXTRACTS OF THE ASSESSEES SUBMISSION IS REPRODUCED AS UNDER:- 1. THE OTHER INCOME, AS ABOVE OF RS. 21,84,505/-, IS D ULY DISCLOSED IN THE AUDITED ACCOUNT OF THE YEAR AND DULY DEALT WITH BY THE LD AO IN THE ASSESSMENT ORDER U/S 143(3) DATED 11.2.2014. 5 2 SINCE THE OTHER INCOME AS ABOVE WAS DULY DISCLOSED IN THE ANNUAL AUDITED ACCOUNTS, WHICH IS ALSO DULY CONSIDERED BY THE LD AO IN THE ORIGINAL ASSESSMENT ORDER, THERE HAS BEEN NO CONCEALMENT WHA TSOEVER ON THE PART OF THE APPELLANT. 3. ON THE AFORESAID 'OTHER INCOME' OF RS. 21,84,505/- (EXCLUDING DIVIDEND INCOME OF RS 10,50,047), THE APPELLANT CLAIMED DEDU CTION U/S 80IC, AS ALL THE INCOME, AS ABOVE, HAD DIRECT NEXUS TO THE MANUFACTU RING ACTIVITIES OF THE UNIT ELIGIBLE FOR DEDUCTION U/S 80IC, BEING THE 8* YEAR IN SUCCESSION AFTER HAVING UNDERTAKEN SUBSTANTIAL EXPANSION IN FY 2008-09. 4. THE LD. AO WHILE FRAMING THE ASSESSMENT ORDER CONSI DERED THE 'OTHER INCOME' NOT ELIGIBLE FOR DEDUCTION U/S 80IC AND WHI LE DISALLOWING ALSO PROPOSED PENALTY U/S 271(1)(C) OF THE IT ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 5. THE LD AO ALSO PROCEEDED WITH LEVY OF PENALTY U/S 2 71(1)(C) ON THE DISALLOWANCE OFRS 5,55,241/- U/S 14A R.W.R8D. 6. THE LD. AO WHILE FRAMING THE ORDER U/S 271(1)(C) OF THE IT ACT ON 23.02.2016 PROCEEDED WITH LEVY OF PENALTY OF RS. 2,35,93,940/- ON RS. 7,63,55,788/- THE BREAKUP OF WHICH IS AS UNDER: THE ASSESSEE HAS FURTHER RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE MATTER OF DILIP N. SHROFF V. JOINT COMMISSIONER OF INCOME-TAX, MUMBAI REPORTED IN (2007) 6 SCC 329 BEFORE THE LD. CIT(A). 7. WITH REGARDS TO LEVY OF PENALTY ON DISALLOWANCE MADE U/S 14A, THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE IT A T, CHANDIGARH BENCH IN THE CASE OF AARGE DRUGS P LTD VS DCIT IN ITA NO 781/ CH D/2014 ASSTT YEAR 2010-11 WHICH HELD AS UNDER: AS TO THE PENALTY LEVIED ON DISALLOWANCE OF RS. 56. S5&- BEING EXPENSES INCURRED ON EARNING EXEMPT INCO ME , THE ASSESSEE HAS DISCLOSED BOTH THE FIGURES OF EXPE NSES AS WELL AS INCOME IN ITS P&L ACCOUNT FILED ALO NGWITH RETURN OF INCOME AND PRODUCED BEFORE US AT PAPER BO OK 21 & 22 OF PAPER BOOK II. THERE IS NO QUESTION O F CONCEALING OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO ON PART OF DEDUCTION U/S 80IC ON SAM E FACTS HAS ALREADY DROPPED THE PENALTY PROCEEDINGS. THE CA SE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECIS ION OF THE APEX COURT IN RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). THE PENALTY IMPOSED OF RS. 19,224/- IS THEREFORE HEREBY DELETED. THE RELEVANT EXTRACTS OF THE SUBMISSION IS REPRODUC ED AS UNDER:- 8. THE AO ALSO LEVIED PENALTY U/S 271(1)(C) OF THE IT ACT ON DISALLOWANCE OF RS 5,55,241/- BEING DISAL LOWANCE U/S 14A R.W.R. 8D ON THE DIVIDEND INCOME OF RS 10,5 0,047/-. IT MAY KINDLY BE OBSERVED THAT THE APPELLA NT SUBMITTED ALL PARTICULARS SHOWING THE MANNER IN WHI CH CLAIM OF VARIOUS EXPENSES WAS ADMISSIBLE. THEREA FTER, THE QUESTION AS TO WHETHER ANY AMOUNT WAS DISALLOWA BLE U/S 14A WAS TO BE DECIDED BY THE LD AO AND THER EFORE THERE WAS NO CONCEALMENT ON THE PART OF APPELLANT. IT IS RESPECTFULLY SUBMITTED THAT QUESTION OF LEVY OF PENALLY ON DISALLOWANCE U/S 14A R.W.R 8D IS DEALT WITH BY VARI OUS JUDICIAL AUTHORITIES AS UNDER: I.LN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'F' DELHI ITA NO. 3805(DEL)/2010 ASSESSMENT YEAR. 2005- 06 DEPUTY COMMISSIONER OF INCOME-TAX VS. NALWA INVESTM ENTS LTD. IT WAS HELD AS UNDER: NO COMPUTATION OF DISALLOWANCE WAS MADE U/S 14A AS NO DISALLOWANCE/%' WAS MADE IN THE RETURN OF INCOME . HOWEVER, THE ACCOUNTS HAVE BEEN AUDITED AND THE RETURN WAS ACCOMPANIED BY THE TAX A UDIT REPORT. THE LATTER DID NOT SUGGEST ANY DISALLOWANCE U/S 14A. THEREFORE , IT CAN BE INFERRED THAT ALL EXPENSES WERE CLAIMED IN FULL AS THE AUDITORS DID NOT SUGGEST DISALLOWANCE OF ANY PA RT OF THE EXPENDITURE RELATING IT TO THE DIVIDEND I NCOME. THUS, IT CAN BE CONCLUDED THAT THE CLAIM WAS MADE ON THE BASIS OF TAX AUDIT REPORT. THERE IS NO ALLEGATION B Y THE AO THAT THERE WAS ANY COLLUSION BETWEEN THE AUDITOR AN D THE ASSESSEE TO ENHANCE THE LOSS IN THE RETURN OF INCOME BY IGNORING THE PROVISION CONTAINED IN SECTION 14A. THEREFORE, IT CAN BE SAID THAT THE ASSESSEE HAS FU RNISHED AN EXPLANATION WHICH IS BONA FIDE. (PAGE 60 TO 64 OF P APER BOOK) II.SUNASH INVESTMENT CO. LTD. V. ACIT[2007] 14 SOT 80 (MUM.) (TRIB.) -WHEN ASSESSEE CLAIMED DEDUCTION OF INTEREST ON BORROWED FUNDS WHICH WERE INVESTED IN T HE FINANCING BUSINESS AS WELL AS PURCHASE OF SHARES OF GROUP COMPANIES UNDER BONA FIDE BELIEF THAT SUCH IN TEREST WAS DEDUCTIBLE IN ENTIRETY IN VIEW OF SOME J UDICIAL 6 PRONOUNCEMENTS, IT CANNOT BE SAID THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. HELD, PENALTY UNDER S. 271(1 )(C) WAS NOT LEVIABLE [AY 1998-99]. (PAGE 65 TO 79 OF PAPER BOOK) III. CIT VS LIQUID INVESTMENT AND TRADING CO. [ITA 240/2009 DATED 5/10/2010 - DELHI HC] - DISALLOWANCE U/S 14A OF THE ACT WAS A DEBATABLE ISSUE. ALSO, HIGH COURT HAD ADMITTED THE APPEAL OF THE ASSESSEE ON QUANTUM. HENCE, PENALTY WAS NOT LEVIABLE. IV. SKILL INFRASTRUCTURE LTD. V .ACIT [2013] 157 TTJ 565 (MUM.)(TRIB.) - DISALLOWAN CE U/S 14A DOES NOT CALL FOR PENALTY. IT IS RESPECTFULLY SUBMITTED THAT APPELLANT APPEAL ON DISALLOWANCE U/S 14A R.W.R 8D, BEING A DEBATABLE ISSUE, IS ALSO ADMITTED BY HON'BLE HIGH COURT OF HIMACHAL PRA DESH AND IS PENDING FOR A DECISION. THE ASSESSEE FURTHER DREW ATTENTION OF THE LD. CIT( A) TO THE FACT THAT OTHER INCOME OF RS. 21,84,505/- ALSO INCLUDED DIVIDEND IN COME OF RS 10,50,047/- WHICH HAS ALSO BEEN CONSIDERED AS PART OF OTHER INCOME FO R THE PURPOSE OF LEVY OF PENALTY. IT WAS SUBMITTED THAT DIVIDEND INCOME IS S EPARATELY SHOWN IN THE COMPUTATION OF INCOME AND RETURN OF INCOME FOR THE YEAR UNDER APPEAL. THE SAID DIVIDEND INCOME, WHICH IS EXEMPT U/S 2(22) AND WHICH IS SEPARATELY SHOWN IN THE RETURN OF INCOME IS NOT LIABLE FOR PENALTY U /S 271(1)(C) OF THE IT ACT, 1961, 8. WITH REGARDS TO LEVY OF PENALTY ON THE ISSUE OF FOREIGN EXCHANGE FLUCTUATION THE IT WAS SUBMITTED THAT LD AO WHILE L EVYING THE PENALTY U/S 271(1)(C) IN ASSESSMENT 2010-11, EXCLUDED FOREIGN E XCHANGE FLUCTUATION FROM THE LEVY OF PENALTY. THE LD AO OUGHT TO HAVE FOLLOW ED THE SAME PRINCIPLE DURING THE YEAR UNDER APPEAL AND SHOULD HAVE EXCLUDED FORE IGN EXCHANGE FLUCTUATION OF RS 7,99,987/- FROM OTHER INCOME, BEFORE PROCEEDI NG TO LEVY THE PENALTY. THE PRINCIPLE OF CONSISTENCY OUGHT TO HAVE BEEN FOLLOWE D BY THE LD AO, WHICH IN THE INSTANT CASE HE HAS FAILED. A) THE LEVY OF PENALTY WITH REGARD TO DISALLOWANCE OF DEDUCTION U/S 80IC : 9. THE FACTS OF THE CASE, THE ORDER OF THE LD. CIT( A) UNDER APPEAL AND THE ARGUMENTS OF THE ASSESSEE ON RECORD AND THAT OF LD. DR HAVE BEEN PERUSED. THE ISSUE OF LEVY OF PENALTY U/S 271(1)(C) ON THE E NHANCED CLAIM OF DEDUCTION U/S 80IC ON CARRYING OUT SUBSTANTIAL EXPANSION HAS BEEN CONSIDERED AND DECIDED BY THE COORDINATE BENCH OF ITAT, CHANDIGARH IN ITA.NO. 326/CHD/2015 IN THE ASSESSEE'S OWN CASE OF M/S. HYCRON ELECTRONI CS VS. ITO FOR A.Y. 2009-10. WHILE ALLOWING THE APPEAL OF THE ASSESSEE ON THE IS SUE OF LEVY OF PENALTY, IT WAS HELD AS UNDER- 6 , WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MATERI AL AVAILABLE ON RECORD. THE FACTS AS NOTED ABOVE IN THE IMPUGNED ORDERS ARE NOT IN DISPUTE. IT IS NOT IN DISPUTE THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECT ION 80IC OF THE ACT AND HAS BEEN CLAIMING THE SAME DEDUCTION FROM ASSESSMENT YE AR 2004-05 TILL 2008-09, THE 7 ASSESSEE IN ASSESSMENT YEAR UNDER APPEAL I.E. 2009- 10 CONTENDED THAT SINCE IT HAS UNDERTOOK SUBSTANTIAL EXPANSION, THEREFORE, ASS ESSMENT YEAR UNDER APPEAL I.E. 2009-10 BEING INITIAL YEAR, ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 80IC OF THE ACT @ 100%. HOWEVER, THE AUTHOR ITIES BELOW CONSIDERED THAT THE ASSESSMENT YEAR UNDER APPEAL I.E. 2009-10 IS TH E 6TH YEAR OF THE MANUFACTURING ACTIVITY OF THE INDUSTRIAL UNDERTAKIN G, THEREFORE, INSTEAD OF CLAIM OF 100% DEDUCTION UNDER SECTION 80IC, ASSESSEE WOULD B E ENTITLED FOR DEDUCTION UNDER SECTION 80IC @ 25% ONLY. THE CLAIM OF ASSESSE E WAS SUPPORTED BY AUDIT REPORT AND THE PAST HISTORY SUBMITTED BY ASSESSEE A ND CONSIDERED BY THE AUTHORITIES BELOW. THUS, THE CLAIM OF ASSESSEE WAS RAISED FOR THE FIRST TIME IN THE 6TH YEAR ON UNDERTAKING SUBSTANTIAL EXPANSION AND IT WA S CLAIMED TO BE FIRST YEAR/INITIAL YEAR FOR CLAIMING 1 00% DEDUCTION UNDE R SECTION 801C OF THE ACT. THUS, THE CLAIM OF THE ASSESSEE WAS NOT FALSE AND WAS ALS O NOT WRONG. THE ASSESSEE MADE CLAIM OF 1 00% DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE BASIS OF SUBSTANTIAL EXPANSION CARRIED OUT IN FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE, THEREFORE, FURNISHED AI L PARTICULARS OF INCOME IN THE RETURN OF INCOME AS WELL AS BEFORE ASSESSING OFFICE R AT THE ASSESSMENT STAGE. NOTHING WAS CONCEALED TO THE REVENUE DEPARTMENT. WH OLE ISSUE WAS THUS, BASED UPON INTERPRETATION OF PROVISIONS OF SECTION 80IC OF THE ACT FOR CLAIM OF DEDUCTION UNDER SECTION 80IC @ 100% ON UNDERTAKING SUBSTANTIAL EXPANSION IN THE ASSESSMENT YEAR UNDER APPEAL BY CLAIMING IT TO BE I NITIAL YEAR. PRIOR TO THAT, THERE MAY BE NO HISTORY AGAINST THE ASSESSEE FOR MAKING S UCH A CLAIM. THE ISSUE IS WHOLLY DEBATABLE AND THE APPEAL OF THE ASSESSEE IS PENDING BEFORE HON'BLE HIGH COURT FOR CONSIDERATION OF THE SIMILAR ISSUE. THOUGH, THI S BENCH HAS NOT FOLLOWED THE DECISION OF DELHI BENCH IN THE CASE OF TIRUPATI LPG LTD.(SUPRA) ON QUANTUM AN