Dy. Commissione of Income Tax 4, Kanpur V. M/s.Dhuper Shoe Aid(P) Ltd., Kanpur

ITA 194/LKW/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7847 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 13-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUJA RAJ
• Assessee Lawyers: PRADEEP MEHROTRA
• Keywords: Business income; Wrong claim
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI B. R. JAIN , ACCOUNTANT MEMBER ITA NO. 194/LKW/2012 ASSESSMENT YEAR: 2002 - 03 DCIT 4 KANPUR V. M/S DHUPER SHOE AID (P.) LTD. 7/8 2, TILAK NAGAR KANPUR PAN: AAACB5803H (APP LIC ANT) (RESPONDENT) APP LIC ANT BY: SMT. PUJA RAJ, D.R. RESPONDENT BY: SHRI. PRADEEP MEHROTRA, ADVOCATE DATE OF HEARING: 13.06.2012 DATE OF PRONOUNCEMENT: 15.06.2012 O R D E R PER B. R JAIN : THIS AP PEAL BY THE REVENUE IS AGAINST THE ORDER DATED 27.1.2012 OF THE LD. CIT(A) - II, KANPUR RAISING THE FOLLOWING GROUNDS OF APPEAL: - 1 . THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IS NOT CONSIDERING THE FACT THAT THE ASSESSEE IS DEEMED TO HAVE CONCEALED INCOME UNDER EXPLANATION ( 1 B) OF SECTION 271(1)(C) OF THE IT. ACT, 1961. 2 . THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IS NOT CONSIDERING THE CONCLUSIVE EVIDENCE BROUGHT ON RECORD BY THE A.O. REGARDING THE BOGUS CLAI M OF EXEMPTION OF INTEREST INCOME ON FDRS U/S. 80IB OF THE I . T. ACT BY THE ASSESSEE AND ON T HE PENALTY U/S 271(1)(C) OF THE ACT IS I S LEVIABLE. : - 2 - : 3 . IN DOING SO, LD. CIT(A) IGNORED THE RATIO LAID DOWN IN THE CASE OF M/S. V.G. PANEER DAS VS. CIT(MADRAS) 284 ITR 444 WHEREIN IT HAS BEEN HELD THAT 'THERE SHOULD BE SOME COGENT EVIDENCE FOR SUCH BONAFIED BELIEF REGARDING THE NON - TAXABILITY OF CERTAIN INCOME'. 4 . THAT THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) BEING ERRONEOUS IN LAW AND ON FACTS DESERVES TO BE VACATED AND THAT THE ORDER OF THE ASSESSING OFF ICER BE RESTORED. 2 . BRIEFLY THE FACTS ARE THAT THE ASSESSEE MANUFACTURES RUBBER SOLES FOR SHOE INDUSTRY AND HAS DECLARED INCOME FROM INDUSTRIAL UNDERTAKING AT ` 37,98,308 INCLUDING INTEREST AMOUNTING TO ` 6,78,183 ON FDRS WITH THE BANK AND INTEREST FROM CUSTOM ERS AS HIS BUSINESS INCOME . THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE INCOME EARNED FROM INTEREST. THE ASSESSING OFFICER, HOWEVER, HELD THAT THE ASSESSEES INCOME FROM INTEREST ON FDRS IS HIS INCOME FROM OTHER SOURCES. HE ACCOR DINGLY RESTRICTED THE DEDUCTION UNDER SECTION 80IB OF THE ACT TO ` 9,46,539 BY DISALLOWING DEDUCTION OF ` 2,03,455 ON ACCOUNT OF INCOME FROM INTEREST ON FDRS, ETC. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE ALSO INITIATED SEPARATELY. IN RE SPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE FURNISHED EXPLANATION ON 24.8.2007 AND 27.8.2007. IN HIS EXPLANATION, THE ASSESSEE STATED THAT INCOME ON ACCOUNT OF INTEREST HAD DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE AS FIXED D EPOSITS WERE MADE FOR GIVIN G MARGIN MONEY TO THE BANK FOR OPENING LETTER OF CREDIT ACCOUNT REQUIRED FOR IMPORT OF PLANT AND MACHINERY AND RAW MATERIALS, ETC. IT WAS ALSO STATED THAT THE JUDGMENT OF PANDIAN CHEMICALS LTD. V. COMMISSIONER OF INCOME - TAX [2003] 262 ITR 278 (S C) AS REFE RRED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WAS A JUDGMENT DELIVERED IN APRIL, 2003 , A DATE FALLING MUCH AFTER THE DATE OF RETURN FILED BY THE ASSESSEE. THAT APART, THE ASSESSEES CLAIM IS RESTED ON TWO VIEWS ON THE ISSUE UNDER CONSIDERATION AND AS SUCH IT CANNOT : - 3 - : BE A CASE OF WRONG OR FALSE CLAIM BY THE ASSESSEE. THE PENALTY IN SUCH A CASE, THEREFORE, IS NOT LEVIABLE AND RELIANCE HAS BEEN PLACED ON THE JUDGMENT BY HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. SIVANANDA S TEELS LTD. [2002] 256 ITR 683 (MAD.) . THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED BY THE ASSESSEE FOR THE REASON THAT E XPLANATION 1 DEEMS SUCH INCOME AS CONCEALED INCOME AND ALSO THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS E XPLANATION THAT HE MADE A BONA - FIDE CLAIM IN THE RETURN OF INCOME. SINCE THE INCOME FROM INTEREST IS NOT ASSESSEES INCOME DERIVED FROM INDUSTRIAL UNDERTAKING, HE TOOK IT AS A WRONG CLAIM OF DEDUCTION MADE UNDER SECTION 80IB OF THE ACT BY AN AMOUNT OF ` 2, 03,455 LEADING TO FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. ACCORDINGLY 100% OF TAX SOUGHT TO BE EVADED EQUAL TO ` 72,633 STOOD IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 3 . THE LD. CIT(A) FOUND NO JUSTIFICATION IN IMPOS I TION OF PENALTY , AS ON TH E GIVEN FACTS OF THIS CASE TWO VIEWS WERE POSSIBLE AND THERE WAS NO INTENTION OF THE ASSESSEE TO DEFRAUD THE REVENUE. PLACING RELIANCE O N THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158(SC), PEN ALTY SO LEVIED STOOD CANCELLED. 4 . THE LD. D.R. ASSAILING THE IMPUGNED ORDER CONTENDS THAT THIS WAS A CASE OF WRONG CLAIM MADE BY THE ASSESSEE. THE JUDGMENT BY HON'BLE SUPREME COURT IN CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) IN A CASE LIKE THIS WAS N OT APPLICABLE. HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ZOOM COMMUNICATION (P.) LTD. [2010]327 ITR 510 (DELHI) AFTER CONSIDERING THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HAS COME TO A CONCLUSION T HAT IF THE CLAIM, BESIDES BEING INCORRECT IN LAW, IS MALA - FIDE, EXPLANATION 1 TO SECTION : - 4 - : 271(1)(C) OF THE ACT WOULD COME INTO PLAY. THE LD. CIT(A) IN THE ENTIRE JUDGMENT HAS NOT SHOWN AS TO HOW ASSESSEES CASE IS COVERED BY THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA). SHRI. JAGDISH, CIT (DR) JOINS THE ISSUE AND CONTENDS THAT THE BURDEN WAS ON THE ASSESSEE TO SHOW THAT HE HAS ACTED BONA - FIDELY. REFERENCE IN SUPPORT HAS BEEN MADE TO THE JUDGMENT OF HON'BLE A LLAHABAD HIGH COURT IN THE CASE OF RAM SEWAK RAM CHANDRA V. CIT [1998] 98 TAXMAN 416 (ALL.) . HE FURTHER CONTENDS THAT WHERE THE ASSESSEE FAILS TO SUBSTANTIATE ITS EXPLANATION AND THERE BEING NO MATERIAL TO SHOW THAT EXPLANATION WAS BONA - FIDE AND ALL MATER IAL FACTS HAS BEEN DISCLOSED BY THE ASSESSEE, LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS JUSTIFIED. FOR THIS PROPOSITION, RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. LAL CHAND TIRATH RAM [1997] 92 TAXMAN 320. RELIANCE HAS ALSO BEEN PLACED ON THE JUDGMENT OF HON'BLE MADRAS HIGH COURT IN THE CASE OF V.G. PANNERDAS AND CO. P. LTD. V. CWT [2006] 284 ITR 444 (MAD.) WHERE IN THE ABSENCE OF ANY EVIDENCE THAT THE ASSESSEE ACTED BONA - FIDELY, PENA LTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD BE UPHELD. IT, THEREFORE, HAS BEEN CONTENDED THAT THE LD. CIT(A) HAS ERRED IN CANCELLING THE PENALTY WITHOUT ANY GOOD REASON. 5 . ON THE OTHER HAND, ASSESSEES COUNSEL PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE LD. CIT(A). IT WAS CONTENDED THAT THE ASSESSEE MADE A BONA - FIDE CLAIM IN THE BACKDROP OF THE FACT THAT INTEREST INCOME DERIVED FROM BANK AND OTHER CONCERNS WAS HIS INCOME FROM BUSINESS WHICH UNDER THE SIMILAR CIRCUMSTANCES AND IN SCRUTINY ASSESSMENT ARE ACCEPTED BY THE REVENUE ITSELF IN ASSESSEES OWN CASE FOR EARLIER YEARS INCLUDING FOR ASSESSMENT YEAR 2001 - 02. THIS HAS BEEN SO SHOWN (SUPRA) HIS RECORDS AND COPY LAID ON RECORD AS PER DIRECTIONS OF THE TRIBUNAL. SINCE THERE WERE TWO VIEWS POSSIBLE O N THE ISSUE UNDER CONSIDERATION, IT CANNOT BE A CASE OF FALSE : - 5 - : EXPLANATION AND AS SUCH PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A). 6 . WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND CASES LAWS BROUGHT T O OUR NOTICE. THE DELHI HIGH COURT IN THE CASE OF CIT V. ZOOM COMMUNICATION (P.) LTD. (SUPRA) FOUND THAT ASSESSEES CLAIM WAS THAT DEDUCTION FOR EQUIPMENT WRITTEN OFF AND INCOME TAX PAID HAS BEEN CLAIMED DUE TO OVERSIGHT. HE DID NOT EXPLAIN EITHER TO THE INCOME - TAX AUTHORITIES OR TO THE TRIBUNAL AS TO IN WHAT CIRCUMSTANCES AND ON WHAT ACCOUNT OF WHOSE MISTAKE THE AMOUNTS CLAIMED AS DEDUCTIONS WERE NOT ADDED WHILE COMPUTING THE INCOME OF THE ASSESSEE - COMPANY . THE CLAIM BESIDES BEING INCORRECT IN LAW WAS M ALA - FIDE AND AS SUCH EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT WAS APPLICABLE WHEREAS SUCH FACTUAL POSITION WAS NOT PREVALENT IN THE JUDGMENT BEFORE THE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA). SINCE THE ASSESSEE IN T HE CASE BEFORE HON'BLE DELHI HIGH COURT COULD NOT BE TAKEN TO HAVE ACTED BONA - FIDELY, HON'BLE COURT ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE AND SET ASIDE THE ORDER PASSED BY THE TRIBUNAL. IN THE PRESENT CASE IN APPEAL BEFOR E US , THE APPELLANT HAS DEMONSTRATED THAT INTEREST ON FDRS AND INTEREST RECEIVED FROM CUSTOMERS HAD NEXUS WITH BUSINESS INASMUCH AS SUCH A CLAIM MADE BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2001 - 02 WHERE MISCELLANEOUS INCOME INCLUDING INTEREST WAS DISCLOSED AT ` 22,30,180 AS HIS BUSINESS INCOME , THE ASSESSING OFFICER HIMSELF ALLOWED DEDUCTION UNDER SECTION 80IB OF THE ACT ON SUCH CLAIM MADE BY HIM. IT IS IN THIS BACKDROP THE ASSESSEE CAN BE SAID TO HAVE ACTED BONA - FIDELY WHILE CLAIMING DEDUCTION O N SIMILAR INTEREST AS HIS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING THEREBY CLAIMING DEDUCTION UNDER SECTION 80IB OF THE ACT IN THE SAME MANNER AS WAS DONE IN THE IMMEDIATELY PRECEDING YEAR. IN ANY EVENT, AT THE TIME WHEN THE ASSESSEE RETURNED INCOME AND MADE CLAIM, THERE WERE TWO VIEWS POSSIBLE : - 6 - : ON THE ISSUE UNDER CONSIDERATION AND AS SUCH THE ASSESSEE CANNOT BE SAID TO HAVE MADE A FALSE OR MALA - FIDE CLAIM IN THE RETURN OF INCOME FILED BY HIM. THE ASSESSING AUTHORITY ALSO HAS NOT RECORDED ANY FINDING THAT THE EXPLANATION OF THE ASSESSEE IS FALSE OR THAT IT IS NOT BONA - FIDE. THE LD. CIT(A) ESSENTIALLY FOUND TO HAVE COME TO THE CONCLUSION THAT EVEN THOUGH DEDUCTION CLAIMED BY THE ASSESSEE IS NOT SUSTAINABLE IN LAW, THE ASSESSEES CLAIM RESTED ON TWO OPINIONS ON THE ISSUE UNDER CONSIDERATION. IN THE PRESENT CASE IN APPEAL THE ASSESSEE HAVING DEMONSTRATED THAT HE MADE A BONA - FIDE CLAIM AND THE ASSESSING AUTHORITY HAVING NOT RECORDED ANY FINDING THAT THE ASSESSEE HAS FURNISHED PARTICULARS WHICH ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, IT CANNOT BE A CASE OF FURNISHING OF INACCURATE PARTICULARS NOR IT CAN BE SAID THAT EXPLANATION TENDERED BY THE ASSESSEE IS FALSE. MERELY BECAUSE IT IS HELD THAT CLAIM IS NOT SUSTAINABLE IN LAW THAT BY ITSELF WILL ALSO NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEE AND AS SUCH IT WOULD NOT ATTRACT PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THIS VIEW OF THE MATTER, THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ZOOM COMMUNICATION (P.) LTD. (SUPRA) IS FOUND DISTINGUISHABLE ON FACTS AND THE ASSESSEE HAVING DISCHARGED THE ONUS AND HAVING SUBSTANTIATED THE EXPLANATION, THE LD. CIT(A) IS FOUND TO HAVE CANCELLED THE PENALTY FOR JUSTIFIABLE REASONS. WE, THEREFOR E, FIND NO REASON TO INTERFERE WITH THE DECISION TAKEN BY HIM. ACCORDINGLY FINDING NO MERIT IN THE APPEAL RA ISED BY THE REVENUE, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.6.2012. SD/ - SD/ - [SUNIL KUMAR YADAV] [B. R. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15.6.2012 JJ: 1306 : - 7 - : COPY FORWARDED TO: 1 . APP LIC ANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR