The ITO, Ward-1(2), Ahmedabad V. Angiplast Pvt. Ltd., Ahmedabad

ITA 149/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0502 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-11-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 09-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: P M MEHTA
• Section: 271(1)(c); 80IA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, A-BENCH, AHMEDABAD. BEFORE: SHRI R.V. EASWAR, VICE PRESIDENT, AND SHRI M.V. NAYAR, ACCOUNTANT MEMBER. ITA NO.149/AHD/2007 (ASSESSMENT YEAR 2001-2002) INCOME TAX OFFICER, WARD-1(2), AHMEDABAD. VERSUS ANGIPLAST (P) LTD. 4803, PHASE-IV, GIDC, VATVA, AHMEDABAD . (APPELLANT) (RESPONDENT) PAN: AABCA 8320 P FOR THE APPELLANT: SHRI GOVIND SINGHAL, CIT-DR FOR THE RESPONDENT SHRI P.M. MEHTA, AR ORDER PER SHRI M.V. NAYAR, ACCOUNTANT MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-V, AHMEDABAD, IN APPEAL NO. CIT(A)-V/ITO OSD RANGE-1/4 4/2006-07, VIDE ORDER DATED 16-10-2006. THE GROUNDS OF THE RE VENUES APPEAL ARE AS GIVEN BELOW: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CA NCELING THE PENALTY U/S 271(1)(C) OF RS. 2,39,390/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 2. THE ASSESSING OFFICER IMPOSED A PENALTY OF RS. 2 39490/- ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE ACT. THE M ATTER WENT BEFORE LD. COMMISSIONER OF INCOME TAX(APPEALS), WHO HELD AS GI VEN BELOW: I HAVE CAREFULLY CONSIDERED THE ISSUE. THE ONLY I SSUE IN RESPECT OF WHICH PENALTY HAS BEEN LEVIED IS REGARDING DISALLOW ANCE OF CLAIM U/S. 80IA. ASSESSEE HAD CLAIMED DEDUCTION IN RESPE CT OF EXPORT 2 ITA NO.149/AHD/2007 ( ASSESSMENT YEAR 2001-2002 ) INCENTIVES, DIVIDEND, AS WELL AS INTEREST TREATING THEM TO BE PROFITS OF THE INDUSTRIAL UNDERTAKING. THE SAME WAS DISALL OWED IN ASSESSMENT AND ON THIS ISSUE ACTION OF THE ASSESSIN G OFFICER WAS UPHELD BY THE LEARNED LD. COMMISSIONER OF INCOME TA X(APPEALS) FOR THE REASON THAT THESE ITEMS CANNOT BE TREATED T O BE INCOME ARRIVED FROM INDUSTRIAL UNDERTAKING. SO FAR AS THE CLAIM MADE BY THE ASSESSEE WAS CONCERNED, IT WAS ALSO BASED ON CE RTAIN JUDICIAL DECISIONS OF ITATS AND HCS. THE ISSUE WHETHER THES E ITEMS OF INCOME WERE PROFIT DERIVED FROM INDUSTRIAL UNDERTAK ING OR NOT WAS A MATTER OF JUDICIAL CONTROVERSY AND IN RESPECT OF INTEREST, THE ISSUE WAS SETTLED LATER ON BY THE HON'BLE APEX COURT IN T HE CASE OF PANDIAN CHEMICALS. RATIO OF THAT DECISION SHOWS TH AT THESE ITEMS ON WHICH DEDUCTION U/S. 80IA HAVE BEEN CLAIMED COUL D NOT HAVE BEEN TREATED AS PROFIT DERIVED FROM INDUSTRIAL UNDE RTAKING. THIS LEGAL CONTROVERSY WAS SETTLED BY THE APEX COURT IN THE YEAR 2003 ONLY WHEN THE CASE OF PANDIAN CHEMICALS WAS DECIDED . THEREFORE, PRIOR TO THAT, THE ISSUE WAS SUCH ON WHICH JUDICIAL OPINION WAS DIVIDED. WHEN THE ISSUE IS DEBATABLE, THE SAME CAN NOT BE A VALID GROUND FOR LEVY OF PENALTY U/S. 271(1)(C) AS HELD B Y THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HARSHAVARDHAN CHE MICALS & MINERAL LTD. (2003) 259 ITR 212 AND CALCUTTA HIGH C OURT DECISION IN THE CASE OF DURGA KAMAL RICE MILLS VS. CIT REPOR TED AT 265 ITR 25. IT IS THUS APPARENT THAT THE DISALLOWANCE OF C LAIM IN RESPECT OF THE SAID ITEMS OF INCOME HAVE BEEN MADE ONLY ON ACC OUNT OF JUDICIAL OPINION WHICH WAS SETTLED FINALLY AT A LAT ER DATE. THEREFORE, AT THE TIME OF MAKING THE CLAIM FOR DEDU CTION, IT CANNOT BE SAID ASSESSEE HAD ANY MALAFIDE INTENTION OR HAD FURNISHED PARTICULARS OF INCOME WHICH WERE INACCURATE OR FALS E. IN THESE 3 ITA NO.149/AHD/2007 ( ASSESSMENT YEAR 2001-2002 ) CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIF IED IN LEVYING PENALTY U/S. 271(1)(C) AND THE SAME IS CANCELLED. IN THE RESULT, APPEAL IS ALLOWED. 3. THE REVENUE IS IN APPEAL AGAINST THE CANCELLATIO N OF THE PENALTY. THE LEARNED CIT-DR, RELYING ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF M/S. LIBERTY INDIA V CIT (JUDGMENT DATE D 31-8-2009 COPY FILED) SUBMITTED THAT SINCE IT HAS BEEN HELD THEREI N THAT RECEIPTS UNDER THE DEPB SCHEME AND DDB SCHEME WERE NOT ENTITLED TO THE DEDUCTION FROM THE PROFITS OF THE UNDERTAKING U/S 80-I, S. 80-IA A ND S.80-IB OF THE INCOME TAX ACT AND IN LIGHT OF THE JUDGMENT THE ASSESSEE M UST BE TAKEN TO HAVE CONCEALED ITS INCOME AND THE PENALTY LEVIED WAS THE REFORE JUSTIFIED. HE FURTHER CONTENDED THAT EVEN WHEN THE RETURN OF INCO ME WAS FILED ON , THE JUDGMENT OF THE SUPREME COURT IN STERLIN G FOODS (237 ITR 777) HELD THE FIELD, ACCORDING TO WHICH THE CLA IM OF THE ASSESSEE WAS UNTENABLE. HE THEREFORE SUBMITTED THAT THE PENALTY SHOULD BE RESTORED. HE ALSO DREW OUR ATTENTION TO THE JUDGMENT OF THE SUPR EME COURT IN PANDIAN CHEMICALS (262 ITR 268) IN WHICH THE MEANING OF THE EXPRESSION DERIVED FROM WAS EXPLAINED, AND SUBMITTED THAT TH E DEPB RECEIPTS DID NOT SATISFY THE TEST LAID DOWN IN THE SAID JUDGMENT IN ORDER THAT THE SAID RECEIPTS MAY BE TREATED AS PROFITS DERIVED FROM T HE UNDERTAKING. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, BESIDES ST RONGLY RELYING ON THE ORDER OF THE CIT(A), ALSO RELIED ON THE ORDER O F THE SUPREME COURT IN CIT V BANCO FOUNDATION (309 ITR ST.54-55). IT WAS S UBMITTED BY HIM THAT THE ASSESSEES CLAIM WAS BASED ON ITS INTERPRE TATION OF THE SECTION AND MERELY BECAUSE THE ASSESSING OFFICER DID NOT AGREE WITH THAT INTERPRETATION IT CANNOT BE SAID THAT THE ASSESSEE CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. HE FURTHE R POINTED OUT THAT SO FAR 4 ITA NO.149/AHD/2007 ( ASSESSMENT YEAR 2001-2002 ) AS DEPB IS CONCERNED, THE AHMEDABAD BENCH IN THE AS SESSEES OWN CASE IN ASSESSMENT PROCEEDINGS FOR THE SAME YEAR HAS HEL D IN ITA NO.3354/AHD/2004 DATED 28-08-09 THAT IT WAS ELIGIBL E FOR THE DEDUCTION U/S.80-IB AND THEREFORE THE PENALTY WITH REFERENCE TO THE SAID RECEIPT CANNOT IN ANY EVENT SURVIVE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IN THE QUANTUM APPEAL ALMOST ALL THE ADDITIONS HAVE BEEN D ELETED BY THE ITAT. WE ARE ALSO REPRODUCING THE RELEVANT PART OF THE JU DGMENT OF THE HON'BLE SUPREME COURT IN CIT VS. BANCO FOUNDATION WHICH IS AS GIVEN BELOW: 7-1-2009: THEIR LORDSHIPS S.H. KAPADIA AND AFTAB A LAM JJ. DISMISSED THE DEPARTMENTS SPECIAL LEAVE PETIT ION AGAINST THE JUDGMENT DATED APRIL 13, 2007 OF THE GUJARAT HIGH C OURT IN T.A. NO. 1078 OF 2006, WHEREBY THE HIGH COURT DISMISSED THE DEPARTMENTS APPEAL AT THE ADMISSION STAGE HOLDING THAT THERE WAS NO DISPUTE ON THE FACTS THAT THE ASSESSEE HAD NOT C ONCEALED THE INCOME BUT HAD CLAIMED DEDUCTIONS TO WHICH IT WAS N OT ENTITLED AND THAT HENCE NO CASE WAS MADE OUT FOR INTERFERENCE WI TH THE ORDER OF THE TRIBUNAL SETTING ASIDE THE PENALTY: CIT V. BANC O FOUNDATION: S.L.P. (C) NO. 862 OF 2009. 6. SO FAR AS THE PENALTY IMPOSED WITH REFERENCE TO CLAIM THAT THE DEPB RECEIPT IS ELIGIBLE FOR THE DEDUCTION U/S.80-I B IS CONCERNED, THE SAME CANNOT SURVIVE IN VIEW OF THE ORDER OF THE TRI BUNAL (CITED SUPRA) IN THE ASSESSEES OWN CASE. WHEN THE CLAIM FOR DEDUCTI ON IS UPHELD BY THE TRIBUNAL, THERE IS NO QUESTION OF LEVYING PENALTY W ITH REFERENCE TO THE DEPB CLAIM. THE CONTENTION OF THE LEARNED CIT-DR TH AT ASSESSMENT AND PENALTY PROCEEDINGS ARE DIFFERENT IS A PROPOSITION WHICH APPLIES IN A DIFFERENT CONTEXT IT ONLY MEANS THAT IF AN ADDITI ON OR DISALLOWANCE IS 5 ITA NO.149/AHD/2007 ( ASSESSMENT YEAR 2001-2002 ) MADE AND EVEN SUSTAINED AT THE APPELLATE STAGE, THE FINDINGS GIVEN IN THOSE PROCEEDINGS ARE NOT CONCLUSIVE SO FAR AS PENA LTY PROCEEDINGS ARE CONCERNED AND IN THE PENALTY PROCEEDINGS A FRESH AP PRAISAL OF ALL THE FACTS AND MATERIALS HAS TO BE MADE IN ORDER TO JUDGE THE GUILT OF THE ASSESSEE. BUT IF THE VERY BASIS OF THE PENALTY PROCEEDINGS HA S BEEN KNOCKED OUT THAT IS TO SAY, WHEN THE ADDITION OR THE DISALLOWAN CE IS DELETED AT THE APPELLATE STAGE THE PENALTY CANNOT SURVIVE. IN FA CT THE PENALTY CANNOT ALSO BE QUANTIFIED. THE ARGUMENT OF THE LEARNED CIT -DR OVERLOOKS THIS VITAL ASPECT AND HENCE CANNOT BE ACCEPTED. 7. AS REGARDS THE DIVIDEND AND INTEREST, WHICH WERE ALSO CLAIMED BY THE ASSESSEE TO BE ELIGIBLE FOR THE DEDUCTION, WE A RE OF THE VIEW THAT THE CLAIM WAS BASED ON THE ASSESSEES INTERPRETATION OF THE SECTION WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THERE IS NO DISPUTE THAT ALL THE RELEVANT FACTS RELATING TO THE CLAIM, AND THE NATUR E OF THE INCOME, WERE DISCLOSED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, M ERE REJECTION OF THE CLAIM ON THE BASIS OF THE ASSESSING OFFICERS OWN I NTERPRETATION OF THE SECTION, WITHOUT ANYTHING MORE, CANNOT IN OUR HUMBL E OPINION JUSTIFY PENALTY EITHER FOR CONCEALMENT OF INCOME OR FOR FUR NISHING INACCURATE PARTICULARS OF INCOME. REFERENCE IN THIS BEHALF MAY BE MADE TO THE JUDGMENTS OF THE DELHI HIGH COURT IN DELHI CLOTH & GENERAL MILLS (157 ITR 822), THE CALCUTTA HIGH COURT IN BURMAH SHELL O IL STORAGE 163 ITR 496) AND THE MADRAS HIGH COURT IN G.D. NAIDU (165 I TR 63) WHERE IT HAS BEEN HELD THAT MERE DISALLOWANCE OF THE CLAIM FOR D EDUCTION ON THE BASIS OF THE ASSESSING OFFICERS VIEW OF THE UNDISPUTED F ACTS AND THE INTERPRETATION OF THE SECTION CANNOT JUSTIFY PENALT Y. RESPECTFULLY FOLLOWING THESE JUDGMENTS, WE CONFIRM THE DECISION OF THE CIT (A) CANCELING THE PENALTY WITH REFERENCE TO THE CLAIM FOR DEDUCTION O N INTEREST AND DIVIDEND INCOME. 6 ITA NO.149/AHD/2007 ( ASSESSMENT YEAR 2001-2002 ) 8. THE LEARNED COUNSEL FOR THE ASSESSEE RAISED THE ISSUE OF NON- RECORDING OF THE SATISFACTION OF THE ASSESSING OFFI CER IN THE ASSESSMENT ORDER BEFORE INITIATING PENALTY PROCEEDINGS BUT DID NOT PURSUE THE SAME IN VIEW OF THE RETROSPECTIVE INSERTION OF SUB-SECTION (1B) OF SECTION 271(1) BY THE FINANCE ACT, 2008 FROM 1-4-1989. 9. IN THE RESULT, THE ORDER OF THE CIT(A) CANCELLI NG THE PENALTY IS CONFIRMED AND THE APPEAL OF THE DEPARTMENT IS DISMI SSED. NO COSTS. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 13 TH NOVEMBER, 2009. SD/- SD/- (R.V. EASWAR) (M .V. NAYAR) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED: 13/11/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.