DCIT, Circle - 1, Kolkata, Kolkata V. M/s. The Champdany Industries Ltd., Kolkata

ITA 132/KOL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3173 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 09-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2010
• Court: TRIBUNAL
• Department Lawyers: APURBA DAS SRDR
• Keywords: Bonafide belief; Retrospective amendment; Question of law; Wrong claim; Bonafide mistake
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI, PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO. 132 / KOL / 2010 ASSESSMENT YEAR :2004-05 D.C.I.T.,CIRCLE-1, 7 TH FLOOR,AAYAKAR BHAWAN, KOLKATA 700 069 V/S . M/S. THE CHAMPDANY INDUSTRIES LTD., 25, PRINCEP ST. KOLKATA 700 072 [ PAN NO.AABCT 1661 N ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI APURBA DAS, SR-DR /BY RESPONDENT SHRI SUBASH AGARWAL, AR /DATE OF HEARING 25-06-2013 /DATE OF PRONOUNCEMENT 25-06-2013 / // / O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL FILED BY REVENUE IS ARISING OUT ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-CENTRAL-II, KOLKATA IN APPEAL NO.22/CC-XXI/CIT(A)- C-II/KOL/09-10 DATED 09-09-2009. ASSESSMENT WAS FRA MED BY ACIT, C.C- XXI, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 13-12-2006 FO R ASSESSMENT YEAR (AY) 2004-05. THE PENALTY UNDER DISPUTE WAS LEVIED BY AO U/S. 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 31-03-2009. 2. AT THE OUTSET, IT IS SEEN THAT THIS APPEAL OF RE VENUE IS BARRED BY LIMITATION FOR FIVE DAYS AND REVENUE HAS FILED COND ONATION PETITION STATING ITA NO.132/KOL/2010 A.Y. 2004-05 DCIT CIR-1 KOL V. M/S. THE CHAMPDANY INDS. LTD. PAGE 2 REASONS. WHEN THESE WERE PUT TO LD. COUNSEL FOR THE ASSESSEE, HE FAIRLY CONCEDED THAT THE DELAY CAN BE CONDONED. IN SUCH CI RCUMSTANCES, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) CANCELLING THE PENALTY LEVIED BY ASSESSING O FFICER U/S. 271(1)(C) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING GR OUNDS:- (I)THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CANCELING THE PENALTY UNDER SECTION 271(1)(C) IMPOSED BY THE AO ON WRONG CLAIM OF DEDUCTION/S. 80HHC(3) WHIC H WAS AMENDED WITH RETROSPECTIVE EFFECT FROM 1992. (II) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CANCELLING THE PENALTY UNDER SECTIO N 271(1)(C) IMPOSED BY THE AO ON WRONG AND INADMISSIBLE CLAIM OF DEDUCTION U/S. 80HHC WITHOUT THE ASSESSEE HAVING ESTABLISHED THAT ITS INTERPRETA TION OF LAW WAS DUE TO BONAFIDE INADVERTENCE OR BONAFIDE MISTAKE ON PART O F THE ASSESSEE. (III) THAT, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE CIT(A) ERRED IN CANCELLING THE PENALTY ORDER U/S. 2 71(1)C) IMPOSED BY AO WHEREAS ITS SETTLED IN LAW THAT WRONG CLAIM OF DED UCTION WHICH IS NOT BONAFIDE , IS FURNISHING OF INACCURATE PARTICULARS OF INCOME TO EVADE TAX. 4. BRIEFLY STATED FACTS ARE THAT ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT AY 2004-05 ON 31-10-2004 AND ASSESSMENT WA S COMPLETED U/S. 143(3) OF THE ACT ON 13-12-2006 DISALLOWING DEDUCTI ON U/S.80HHC OF THE ACT. THE DISALLOWANCE OF DEDUCTION U/S. 80HHC OF TH E ACT WAS WORKED OUT DUE TO NEGATIVE FIGURE CONSIDERING THE LOSSES THAT SUM OF THE PROFIT FROM EXPORT OF MANUFACTURED GOODS AND THAT FROM TRADING GOODS. THE ASSESSING OFFICER, AS APPELLATE AUTHORITIES FOLLOWING THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES V. DCIT (2004) 266 ITR 521 (SC) AND IN THE CASE OF P.R.PRABHAKAR V.CIT (2006) 284 ITR 548 (SC) CONFIRMED THIS ADDITION AND INITIATED PENALTY PROCE EDINGS AND ALSO LEVIED THE PENALTY/S. 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME WITH AN INTENTION OF CLAIMING EXCESSIVE DEDU CTION U/S. 80HHC OF THE ACT. AGGRIEVED AGAINST THE LEVY OF PENALTY, ASS ESSEE PREFERRED APPEAL ITA NO.132/KOL/2010 A.Y. 2004-05 DCIT CIR-1 KOL V. M/S. THE CHAMPDANY INDS. LTD. PAGE 3 BEFORE CIT(A), WHO DELETED THE PENALTY VIDE PARA-4 OF HIS ORDER BY OBSERVING AS UNDER:- 4 I HAVE GONE THROUGH THE PENALTY ORDER AND SUBMIS SIONS OF APPELLANT. THE PROVISIONS OF SECTION 80HHC WERE HIGHLY DEBATAB LE AND THIS FACT HAS BEEN WELL ESTABLISHED BY THE APPELLANT IN ITS SUBMI SSION. MORE IMPORTANTLY, JUST BEFORE FILING OF THE RETURN OF INCOME OF INSTA NT ASSESSMENT YEAR, APPELLANT HAD RECEIVED THE ORDER OF HBLE ITAT KOLK ATA IN ITS OWN CASE FOR AN EARLIER ASSESSMENT YEAR THAT THE DECISION OF IPCA LABORATORY OF HBLE BOMBAY HIGH COURT IN THE CONTEXT OF SECTION 80HHC W AS NOT APPLICABLE IN CASE OF APPELLANT. THEREFORE EVEN THOUGH THIS JUDGM ENT OF HBLE BOMBAY HIGH COURT WAS CONFIRMED BY HBLE SUPREME COURT, AP PELLANT WAS UNDER BONAFIDE BELIEF THAT THE FACTS OF THE CASE OF APPEL LANT ARE DIFFERENT FROM THE FACTS IN THE CASE OF IPCA LABORATORY AS HELD BY HBLE ITAT-KOLKATA VIDE ITS ORDER DATED 12.06.03 IN ITA NO. 330/CAL/2000 IN APPELLANTS OWN CASE FOR AY 1996-1997. THE INTERPRETATION OF THE PROVISI ONS OF SECTION 80HHC FOR THE APPELLANT WAS GOVERNED BY THE ORDER OF HBL E IAT-KOLKATA IN ITS OWN CASE AS MENTIONED ABOVE, WHEN IT WAS FILLING THE RE TURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR. THEREFORE AS PER THIS BONA FIDE BELIEF AND THE LAW WHICH EXISTED FOR APPELLANT AT THE TIME OF FILI NG OF RETURN OF INCOME, APPELLANT DID NOT CONCEAL ANY INCOME OR FILED ANY I NACCURATE PARTICULAR OF INCOME. THE LAW CHANGED SUBSEQUENTLY ON 23.006.2005 ON INTERPRETATION OF THE PROVISIONS OF SECTION 80HHC BY ITAT; SPECIAL BENCH IN THE CASE OF B. SORABJIS, REPORTED IN 95 ITD 540 (MUM)(SB) AND FURTHER WHEN THE PROVISIONS WERE AMENDED BY TAXATION LAWS (AMENDMENT ) ACT, 2005 WITH RETROSPECTIVE EFFECT WHEN ASSESSMENT ORDER WAS PASS ED BY THE ASSESSING OFFICER. HERE IS NO DOUBT THAT WHEREVER THERE IS A DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME, THERE IS AN INFERENCE OF CONCEALMENT UNDER EXPLANATION 1 TO SECTION 271(1) OF THE ACT. HOWEVER, THE EXPLANATION 1 TO SECTION 271(1) RAISES ONLY A RESUMPTION THAT C AN BE REBUTTED BY THE APPELLANT WITH REFERENCE TO THE FAC TS OF THE CASE. THE RESPONSIBILITY FOR REBUTTING SUCH INFERENCE OF CONC EALMENT UNDER EXPLANATION 1 TO SECTION 271(1) IS ON THE APPELLANT AND THE EXP LANATION OF THE APPELLANT SHOULD NOT BE FALSE. IN PRESENT CA SE, APPELLANT HAS SUFFICIENTLY PROVED ITS BONAFIDE BELIEF IN RESPECT OF INTERPRETATION OF PROVISIONS OF SECTION 80HHC AT THE TIME OF FILING O F RETURN OF INCOME AND ALL THE FACTS RELATING AND MATERIAL TO THE COMPUTATION OF TOTAL INCOME WERE DISCLOSED BY THE APPELLANT. THIS ACT OF APPELLANT C AN NEITHER BE CONSTRUED AS CONCEALMENT OF INCOME NOR FILING OF INACCURATE P ARTICULARS WHICH ARE THE PRIMARY REQUIREMENTS FOR THE LEVY OF PENALTY U/S.27 1(1) OF THE I.T. ACT. IN VIEW OF THESE FACTS, I DELETE THE PENALTY OF RS.99, 50,186/- LEVIED BY THE ASSESSING OFFICER. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E IGNORED THE LOSSES ITA NO.132/KOL/2010 A.Y. 2004-05 DCIT CIR-1 KOL V. M/S. THE CHAMPDANY INDS. LTD. PAGE 4 ARISING OUT OF PROFIT FROM EXPORT OF TRADING GOODS AND FROM EXPORT OF MANUFACTURED GOODS AND CLAIMED THE BENEFIT OF SECTI ON 80HHC DEDUCTION ON THE INCENTIVE AMOUNT RECEIVED AS PER THE ENTITLE MENT UNDER THE PROVISO TO SECTION 80HHC(3) OF THE ACT BUT ASSESSING OFFICE R DENIED THE DEDUCTION IN ITS ENTIRETY HOLDING THE VIEW THAT NET AMOUNT WA S A NEGATIVE FIGURE AFTER THE ADJUSTMENT OF EXPORT OF TRADING AND MANUFACTURI NG GOODS. LD. COUNSEL FOR THE ASSESSEE STATED THAT ASSESSEE HAS BEEN CLAI MING THE BENEFIT OF DEDUCTION U/S. 8HHC OF THE ACT WHICH IS CLAIMED ON THE AFORESAID BASIS OF IGNORING THE LOSSES ARISING OUT OF EXPORT OF TRADIN G AND SELF-MANUFACTURED GOODS AND SOLELY BASED ON THE COMPUTATION PRESCRIBE D BY THE STATUTE ON THE EXPORT INCENTIVES AS PER THE PROVISO TO SECTION 80HHC(3) OF THE ACT ON THE EXPORT INCENTIVES. THE CLAIM OF ASSESSEE IS BAS ED ON THE CERTIFICATE ISSUED BY A QUALIFIED CHARTERED ACCOUNTANT IN FORM NO. 10CCAC WHICH IS STATUTORILY REQUIRED TO BE FILED WITH THE RETURN OF INCOME AND THE SAME WAS ACCORDINGLY FILED IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE-COMPANY HAD WAY BACK IN THE YEAR 1999 SOUGHT A LEGAL OPINIO N FROM A RENOWNED FIRM OF CHARTERED ACCOUNTANTS, M/S BANSI S MEHTA & CO. ON THE ISSUE IN QUESTION. THE SAID FIRM OF CHARTERED ACCOUNTANTS, V IDE THEIR LETTER DATED 06-12-1999, OPINED THAT THE METHOD OF COMPUTATION O F DEDUCTION FOLLOWED BY THE ASSESSEE-COMPANY IS THE CORRECT METHOD. THE AFORESAID VIEW WAS EXPRESSED BY THEM AFTER A THOROUGH ANALYSIS OF THE CASE LAW ON THE ISSUE. FURTHERMORE, THE SAME ISSUE HAD CROPPED UP BEFORE T HE HONBLE ITAT A BENCH KOLKATA IN ASSESSEES OWN CASE FOR AY 1996-97 IN ITA NO. 330/KOL/2000 DATED12-06-2003 WHEREIN IT HAD AFFIRME D THE METHOD OF COMPUTATION FOLLOWED BY THE ASSESSEE IN COMPUTING D EDUCTION U/S. 80HHC OF THE ACT. THE HONBLE ITAT MUMBAI BENCH EVEN CONS IDERED THE HONBLE BOMBAY HIGH COURTS VIEW IN THE CASE OF IPCA LABORATORIES (SUPRA) WHICH WAS IN DEPARTMENTS FAVOUR AND FOUND THE SAME TO BE DISTINGUISHABLE ON FACTS. THE AFORESAID JUDGMENT OF HONBLE BOMBAY HIG H COURT WAS AFFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES (SUPRA). STILL DOUBTS PERSISTED WHETHER THE HONBLE SUPREME COURTS JUDGDMENT IN ITA NO.132/KOL/2010 A.Y. 2004-05 DCIT CIR-1 KOL V. M/S. THE CHAMPDANY INDS. LTD. PAGE 5 THE CASE OF IPCA LABORATORIES (SUPRA) IS AN AUTHORITY FOR THE PROPOSITION THAT LOSSES IN EXPORT OF TRADING / MANUFACTURING GO ODS TAKEN TOGETHER ARE NOT TO BE IGNORED FOR COMPUTING DEDUCTION U/S. 80HH C OF THE ACT. THE ISSUE WAS FINALLY DEALT WITH AND SET AT REST BY THE HONBLE CO-ORDINATE SPECIAL BENCH IN B SORABJITS CASE, ORDER DATED 23- 06-2005 IN 95 ITD 540 (MUM) (SB). IT IS SUBMITTED THAT THE ISSSUE WAS HIG HLY DEBATABLE WHEN THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 31-1 0-2004.THE ISSUE WAS FINALLY CLINCHED WHEN B. SORABJITS CASE WAS DECIDE D ON 23-06-2005 AFTER THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME. IT WAS SUBMITTED THAT THE ASSESSEE-COMPANY HAD CLAIMED DEDUCTION BASED ON LEG AL ADVICE AND STATUTORILY PRESCRIBED CERTIFICATE ISSUED BY THE CH ARTERED ACCOUNTANT AND FORM NO. 10CCAC. THE ASSESSEE-COMPANY HAD BONA FIDE BELIEF THAT THE METHOD ADOPTED IS THE CORRECT METHOD AND THE INTENT ION OF THE ASSESSEE WAS NEVER TO DEFRAUD THE REVENUE. 6. WE FIND THAT THE ASSESSEE HAS FILED COMPLETE DET AILS FOR CLAIM OF DEDUCTION U/S. 80HHC OF THE ACT AND WHEN COMPLETE P ARTICULARS ARE AVAILABLE IN THE RETURN OF INCOME, THE CONCEALMENT OF INCOME CANNOT BE ATTRIBUTED TO THE ASSESSEE. THIS VIEW OF OURS IS S UPPORTED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NALIN P. SHAH (HUF), ITA(LOD) NO. 49 OF 2013 DATED 04.03.2013 AND THE DE CISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (2010) 322 ITR 158 (SC). HONBLE BOMBAY HIGH COURT IN THE CASE OF NALIN P. SHAH, CIT ED SUPRA HAS HELD AS UNDER: 6. ON FURTHER APPEAL, THE TRIBUNAL IN THE IMPUGNED ORDER HELD THAT THE RESPONDENT-ASSESSEE HAD IN ITS RETURN OF INCOME FILED A NOTE WITH ITS COMPUTATION OF INCOME DISCLOSING ALL DETAILS AB OUT THE SALE OF US 64 UNITS, THE LOSS AND RESULTANT CARRY FORWARD. FUR THER, ALL DETAILS WERE DISCLOSED IN ITS RETURN OF INCOME AS IS EVIDEN T FROM THE FACT THAT THE ASSESSING OFFICER GATHERED INFORMATION ABOUT TH E CARRY FORWARD LOSS AND SALE OF UNITS FROM RETURN FILED BY THE RES PONDENT-ASSESSEE. THE TRIBUNAL HELD THAT THE FROM THE AFORESAID FACTS AT THE HIGHEST IT CAN BE SAID THAT THE CLAIM OF THE ASSESSEE WAS NOT SUSTAINABLE IN ITA NO.132/KOL/2010 A.Y. 2004-05 DCIT CIR-1 KOL V. M/S. THE CHAMPDANY INDS. LTD. PAGE 6 LAW BUT THERE WAS NO FURNISHING OF INACCURATE PARTI CULARS OR CONCEALMENT OF INCOME ON THE PART OF THE RESPONDENT -ASSESSEE. THUS, THE PENALTY WAS SET ASIDE. WE FIND THAT THE S AME VIEW IS TAKEN BY THE APEX COURT IN THE MATTER OF CIT V/S. R ELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN [2010] 322 ITR 158 (SC). AS THE DECISION OF THE TRIBUNAL IS ESSENTIALLY BASED ON FI NDING OF FACT, WE SEE NO REASON TO ENTERTAIN THE PROPOSED QUESTION OF LAW. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRAMOD.KUMAR) (MAHAVIR SI NGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP !' #- 25/06/2013 ++, ++, ++, ++, -, -, -, -, / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '/'+0 1 / CONCERNED CIT 4. 1- / CIT (A) 5. ,34 +++0, +0 , / DR, ITAT, KOLKATA 6. 467 89 / GUARD FILE. BY ORDER/ , :/; '< +0 , =