DCIT, Ludhiana V. M/s Karna International, Ludhiana

ITA 1347/CHANDI/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1374 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Wrong claim
• Section: 80IB; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1347/CHD/2010 ASSESSMENT YEAR: 2005-06 THE DCIT, VS. M/S KARNA INTERNATIONAL CIRCLE VII, VILLAGE BALLOKE, LUDHIANA LUDHIANA PAN NO. AABFK2120Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI RESPONDENT BY: SHRI ASHWANI KUMAR ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A)-II, LUDHIANA DATED 24.9.2010 RELATING TO ASSESSMENT YEA R 2005-06 AGAINST THE PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE I. T. ACT, 1961. 2. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE DELETION OF PENALTY LEVIED U/S 271 (1)(C) OF THE ACT. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT A S AGAINST RETURNED INCOME OF RS. 74,31,802/-, THE ASSESSMENT WAS COMPL ETED ON A TOTAL INCOME OF RS. 99,10,802/-. WHILE COMPUTING THE INC OME, THE DEDUCTION U/S 80IB OF THE ACT WAS RECOMPUTED BY EXCLUDING THE VALUE OF EXPORT INCENTIVE ON ACCOUNT OF DEPB AND MISC. INCOME OF RS . 38,50,000/- REPRESENTING THE AMOUNT SURRENDERED DURING THE COUR SE OF SURVEY. THE ASSESSING OFFICER EXCLUDED THE SAID AMOUNTS BEING N OT DERIVED FROM 2 INDUSTRIAL UNDERTAKING, AND CONSEQUENTLY THE DEDUCT ION U/S 80IB OF THE ACT WAS NOT ALLOWED ON THE SAID AMOUNTS. PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE ACT WERE INITIATED ON THE SAID DISALL OWANCE OF CLAIM OF DEDUCTION U/S 80IB OF THE ACT. THE ASSESSING OFFIC ER HELD THE ASSESSEE TO HAVE FILED INACCURATE PARTICULARS OF INCOME IN RE SPECT OF THE FALSE CLAIM OF DEDUCTION U/S 80IB OF THE ACT AND LEVIED PENALTY U/S 271 (1)(C) OF THE ACT @ 150% OF THE TAX SOUGHT TO BE EVADED I.E. AT R S. 13,61,240/-. THE CIT(A) FOLLOWING THE APPELLATE ORDER IN THE CASE OF THE ASSESSEE ITSELF RELATING TO ASSESSMENT YEAR 2004-05, WHICH IN TURN WAS CONFIRMED BY THE TRIBUNAL IN ITA NO. 1033/CHD/2009, ORDER DATED 24.5 .2010 DELETED THE PENALTY LEVIED U/S 271 (1)(C) OF THE ACT. FURTHER RELIANCE WAS PLACED BY THE CIT(A) ON THE RATIO LAID DOWN BY THE HON'BLE SU PREME COURT IN CIT V RELIANCE PETRO PRODUCTS LTD [322 ITR 158 (SC)]. REV ENUE IS IN APPEAL AGAINST THE AFORESAID ORDER. 4. THE LD. AR OF THE ASSESSEE FURNISHED THE COPY OF THE ORDER OF THE TRIBUNAL RELATING TO ASSESSMENT YEAR 2004-05. LD. DR PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. FROM THE PERUSAL OF THE ORDER OF THE TRIBUNAL RELATING T O ASSESSMENT YEAR 2004- 05 IN ASSESSEES OWN CASE IN ITA NO.. 1033/CHD/2009 (ORDER DATED 24.5.2010), WE FIND THAT PENALTY U/S 271 (1)(C) OF THE ACT WAS LEVIED BY THE ASSESSING OFFICER ON THE RE-COMPUTATION OF DED UCTION CLAIMED U/S 80IB OF THE ACT. THE TRIBUNAL VIDE PARAS 5 TO 7 H ELD AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE PROVISIONS OF SECTION 271 (1)(C) OF THE ACT ENVISAGE IMPOSITION OF PENALTY IN CASES WHERE THE A SSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PA RTICULARS 3 OF INCOME. THE TWO INGREDIENTS OF SECTION 271 (1)( C) OF THE ACT NAMELY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, ARE REQUIRED TO B E FULFILLED IN ORDER TO JUSTIFY THE LEVY OF PENALTY U/S 271(1)( C) OF THE ACT. THERE IS NO JUSTIFICATION FOR LEVY OF PENALT Y U/S 271 (1)(C) OF THE ACT IN EACH CASE WHERE CERTAIN ADDIT IONS HAVE BEEN MADE TO THE RETURNED INCOME OF THE ASSESSEE, W HILE COMPLETING THE ASSESSMENT. 6. IN THE FACTS OF THE PRESENT CASE, PENALTY U/S 27 1 (1)(C) OF THE ACT HAS BEEN LEVIED ON THE GROUND THAT THE A SSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME BY C LAIMING EXCESS DEDUCTION U/S 80 IB OF THE ACT. THE SAID D EDUCTION WAS DENIED TO THE ASSESSEE ON THE BASIS OF THE JUDG MENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LIBERTY INDIA LTD DATED 22.9.2006, WHICH WAS SUBSEQUENTLY A PPROVED BY THE HON'BLE SUPREME COURT IN ITS DECISION DATED 31.8.2010. SIMILAR ISSUE REGARDING IMPOSITION OF P ENALTY U/S 271 (1)(C) OF THE ACT ON DENIAL OF DEDUCTION U/S 8 0 IB OF THE ACT ON EXPORT INCENTIVES, AROSE BEFORE THE CHANDIG ARH BENCH OF TRIBUNAL IN M/S CHIRAG INTERNATIONAL IN ITA NO. 401/CHAND/2008 DATED 15.10.2008 WHEREIN IT HAS BEEN HELD AS UNDER:- THE ASSESSEE HAD CLAIMED THAT PROFIT OF THE INDUSTRIAL UNDERTAKING TO THE EXTENT OF RS.11,90,348/- WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. HENCE THE CLAIM OF DEDUCTION UNDER SECTION 80IB AT RS.2,97,587/-. WHILE COMPUTING THE ELIGIBLE PROFITS THE ASSESSEE ALSO INCLUDED INCOME BY WAY OF EXPORT INCENTIVES I.E. DUTY DRAWBACK. THIS CLAIM WAS NEGATIVED BY THE ASSESSING OFFICER ON THE GROUND THAT INCOME BY WAY OF EXPORT INCENTIVES WAS NOT ELIGIBLE FOR IT COULD NOT BE CONSTRUED AS AN INCOME DERIVED FROM THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. THE SAID DENIAL HAS ALSO BEEN AFFIRMED BY THE CIT(A) AS WELL AS BY THE TRIBUNAL. THE PRESENT DISPUTE IS AS TO WHETHER THE CLAIM MADE IN THE RETURN OF INCOME COULD CONSTITUTE CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME BY THE ASSESSEE WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. ACCORDING TO THE REVENUE THE DENIAL IS IN LINE WITH THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LIBERTY INDIA (SUPRA) AND THEREFORE THE ASSESSEE WILLFULLY CLAIMED A WRONG DEDUCTION IN THE RETURN OF INCOME. IN THIS CONNECTION WE FIND THAT AT THE TIME OF THE FILING O F RETURN ON 29.10.2003 THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WAS NOT AVAILABLE. THEREFORE IT COULD NOT BE SAID THAT THE ASSESSEE DELIBERATELY MADE ANY WRONG CLAIM IN THE RETURN OF INCOME. THE CLAIM MADE BY THE ASSESSEE IN THE RETURN WAS MADE ON A BONAFIDE BASIS. EVIDENTLY THE DECISION OF THE 4 HONBLE GUJARAT HIGH COURT IN THE CASE OF INDIA GELATINE & CHEMICALS LIMITED (SUPRA) DATED APRIL,2004 SUPPORTED THE CASE OF THE ASSESSEE. EVEN THE JURISDICTIONAL TRIBUNAL IN THE CASE OF PARAMOUNT INDUSTRIAL CORPORATION 109 TTJ 295 (CHD) IN ITS ORDER DATED 31.07.2006 HELD THAT RELIE F UNDER SECTION 80IB WAS AVAILABLE ON INCOME BY WAY OF DUTY DRAWBACK. NO DOUBT, THIS POSITION PREVAILED PRIOR TO THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LIBERTY INDIA LIMITED (SUPRA) 22.09.2006. HOWEVER, ON THE ABOVE BASIS, WE ARE ONLY SEEKING TO POINT OUT THAT THE CLAIM OF THE ASSESSEE MADE IN THE RETURN OF INCOME WAS NOT WILLFULLY WRONG. FURTHER IT CAN BE DEDUCED THAT THE ISSUE RELATING TO THE ALLOWABILITY OF 80IB RELIEF ON INCOME BY WAY OF DUTY DRAWBACK IS DEBATABLE. THIS CAN BE SEEN FROM THE CONFLICTING JUDGMENTS OF VARIOUS HIGH COURTS. THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LIBERTY INDIA (SUPRA) IS AGAINST THE ASSESSEE WHEREAS THE HONBLE HIGH COURTS OF DELHI AND GUJARAT IN THE CASE OF ELTEK SGS (P) LTD. (SUPRA) AND INDIA GELATINE & CHEMICALS LIMITED (SUPRA) RESPECTIVELY ARE IN FAVOUR OF THE ASSESSEE. THE HONBLE SUPREME COURT HAS ALSO ADMITTED THE S.L.P. AND THUS THE ISSUE IS PENDING FOR FINAL ADJUDICATION BEFORE THE APEX COURT. FOR THE ABOVE REASONS, IN OUR VIEW, THE ISSUE CANNOT BE SAID TO B E FREE FROM DEBATE. UNDER SUCH CIRCUMSTANCES, THE CLAIM MADE IN THE RETURN, THOUGH DENIED BY THE ASSESSING OFFICER, CANNOT BE CONSTRUED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME SO AS TO ATTRACT PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT HAS BEEN HEL D BY THE HONBLE DELHI HIGH COURT IN THE CASE OF H. M. A. UDYOG (P) LTD. (SUPRA) THAT REJECTION OF ASSESSEES CLAIM, WHICH WAS OF DEBATABLE NATURE, WOULD NOT ATTRACT PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN OUR CONSIDERED OPINION, HAVING REGARD TO THE FACT THAT THE CLAIM WAS MADE BY THE ASSESSEE ON BONAFIDE CONSIDERATIONS AND BEING A DEBATABLE ISSUE, THE REJECTION OF THE SAME IN THE ASSESSMENT PROCEEDINGS DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO ATTRACT THE PENALT Y UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, WE FIND NO ERROR IN THE APPROACH OF THE CIT(A) IN DELETING THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 7. THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE U S IS IDENTICAL TO THE ISSUE BEFORE THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF M/S CHIRAG INTERNATIONAL (S UPRA). RESPECTFULLY, FOLLOWING THE RATIO LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S CHIRAG 5 INTERNATIONAL, WE UPHOLD THE ORDER OF CIT(A) WHO IN TURN HAD ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF T HE SAID DECISION AND ACCORDINGLY WE UPHOLD THE DELETION OF PENALTY LEVIED U/S 271 (1)(C) OF THE ACT IN RESPECT OF DIS ALLOWANCE ON CLAIM OF DEDUCTION ON EXPORT INCENTIVES U/S 80 IB O F THE ACT. 6. FURTHER THE HON'BLE SUPREME COURT IN CIT V RELIA NCE PETRO PRODUCTS LTD (SUPRA) HAVE LAID DOWN THE PROPOSITIO N THAT NO PENALTY U/S 271 (1)(C) OF THE ACT IS LEVIABLE BY HOLDING THAT MERELY MAKING OF AN INCORRECT CLAIM DOES NOT AMOUNT TO CONCEALMENT OF P ARTICULARS OF INCOME. FOLLOWING THE ABOVE SAID RATIO, WE ARE IN CONFORM ITY WITH THE ORDER OF CIT(A) IN DELETING THE PENALTY LEVIED U/S 271 (1)(C) OF THE ACT. 7. THE SECOND PLEA RAISED BY THE ASSESSEE BEFORE CI T(A) WAS THAT THE CLAIM OF DEDUCTION U/S 80IB WAS MADE ON THE BASIS O F CERTIFICATES ISSUED BY CHARTERED ACCOUNTANT AND HENCE THE CLAIM OF DEDU CTION WAS MADE IN A BONAFIDE MANNER NOT ATTRACTING LEVY OF PENALTY U/S 271 (1)(C) OF THE ACT, IS ALSO UPHELD IN VIEW OF THE RATIO LAID DOWN BY TH E HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. S.D. RICE MILLS [275 ITR 206 (P&H)]. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD ALSO AND DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF MARCH, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 10 TH MARCH, 2011 RKK 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR