ACIT, V. Sri. K.S. Ramakrishna,

ITA 254/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89888 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-04-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 19-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD JT
• Assessee Lawyers: B K MANJUNATH
• Section: 80HHC; 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.254/BANG/2014 ASSESSMENT YEAR : 2002-03 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6(1), BANGALORE. VS. SHRI K.S. RAMAKRISHNA, PROP. KAYS ROSES, APT. NO.204, EMBASSY CENTRE, NO.11, CRESCENT ROAD, BANGALORE 560 001. PAN: ADIPK 7411G APPELLANT RESPONDENT APPELLANT BY : DR. SHANKAR PRASAD, JT. CIT(DR) RESPONDENT BY : SHRI B.K. MANJUNATH, C.A. DATE OF HEARING : 01.04.2015 DATE OF PRONOUNCEMENT : 10.04.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 25.11.2013 OF THE CIT(APPEALS)-II, BANGALORE RELATING TO ASSES SMENT YEAR 2002-03. 2. IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE O RDER OF CIT(APPEALS), WHEREBY THE CIT(A) CANCELLED THE ORDE R OF AO IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1)(C) OF THE ACT. ITA NO.254/BANG/2014 PAGE 2 OF 5 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE WERE AS FOLLOWS. THE ASSESSEE IS AN I NDIVIDUAL. HE WAS RUNNING THE BUSINESS OF EXPORTING CUT FLOWERS UNDER THE NAME & STYLE, M/S. KAYS ROSES. THE ASSESSEE CLAIMED DEDUCTION U/S. 10 B OF THE ACT OF A SUM OF RS.41,44,202. ACCORDING TO THE REVENUE, THE ASS ESSEE WAS NOT ENTITLED TO DEDUCTION U/S. 10B OF THE ACT, BECAUSE HE WAS GR ANTED ONLY A LETTER OF PERMISSION DATED 21.3.2000 FOR SETTING UP A 100% EO U AT NARANAHALLI VILLAGE, DODDABALLAPUR, BANGALORE, FOR MANUFACTURE AND EXPORT OF CUT FLOWERS. SINCE THE UNIT DID NOT IMPLEMENT THE PROJ ECT, THE PERMISSION WAS CANCELLED BY DEVELOPMENT COMMISSIONER, COCHIN SPECI AL ECONOMIC ZONE. THE ASSESSEE THEREUPON CLAIMED DEDUCTION U/S. 80HHC OF THE ACT ON THE GROUND THAT IT DERIVED INCOME FROM THE MANUFACTURE AND EXPORT OF ARTICLES OR THINGS. THIS WAS ALSO REJECTED BY THE AO FOR THE R EASON THAT THE PRESCRIBED AUDIT REPORT IN FORM 10CCAC WAS NOT ENCLOSED. 4. ON APPEAL BY THE ASSESSEE, THE FIRST APPELLATE A UTHORITY ALLOWED THE CLAIM OF THE ASSESSEE U/S. 80HHC. ON FURTHER APPEA L BY THE ASSESSEE, THE TRIBUNAL REVERSED THE ORDER OF THE CIT(APPEALS) AND RESTORED THE ORDER OF AO. 5. IN RESPECT OF DENIAL OF DEDUCTION U/S. 10B AND 8 0HHC OF THE ACT, THE AO IMPOSED PENALTY ON THE ASSESSEE U/S. 271(1)(C) O F THE ACT, HOLDING THAT THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURA TE PARTICULARS OF INCOME. ITA NO.254/BANG/2014 PAGE 3 OF 5 6. ON APPEAL, THE CIT(APPEALS) WAS OF THE VIEW THAT SINCE THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY ONE OF THE AUTHOR ITIES UNDER THE ACT, VIZ., CIT(APPEALS), THE CLAIM MADE BY THE ASSESSEE CANNOT BE SAID TO BE A UNSUSTAINABLE CLAIM AND THEREFORE IMPOSITION OF PEN ALTY UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE CANNOT BE SUSTA INED. 7. AGAINST THE ORDER OF THE CIT(APPEALS) CANCELLING THE PENALTY, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING OF THE APPEAL, IT WAS BRO UGHT TO OUR NOTICE THAT AS AGAINST THE ORDER OF TRIBUNAL IN ITA NO.177 & 11 5/BANG/2006 DATED 31.3.2005 IN THE QUANTUM PROCEEDINGS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HONBLE HIGH COURT OF KARNATAKA IN ITA N O.44/2009. THE HONBLE HIGH COURT BY JUDGMENT DATED 25.11.2014 HEL D THAT IN PRINCIPLE ASSESSEE WAS ENTITLED TO DEDUCTION U/S. 80HHC, BUT, NEVERTHELESS, REMANDED THE MATTER BACK TO THE AO TO FIND OUT AS T O WHETHER ALL THE REQUIREMENTS U/S. 80HHC HAVE BEEN COMPLIED WITH BY THE ASSESSEE. THE ORDERS OF THE TRIBUNAL WERE SET ASIDE BY THE HONBL E HIGH COURT. IT WAS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE ABOVE CIRCUMSTANCES, IMPOSITION OF PENALTY CANNOT BE SUST AINED AS THE VERY BASIS OF THE ORDER ON WHICH PENALTY WAS IMPOSED HAS BEEN SET ASIDE BY THE HONBLE HIGH COURT. ITA NO.254/BANG/2014 PAGE 4 OF 5 9. THE LD. DR RELIED ON THE ORDER OF THE AO IMPOSIN G PENALTY. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE VERY BASIS OF THE ORDER ON WHICH PENALTY WAS IMPOSED VIZ ., FURNISHING OF INACCURATE PARTICULARS OF INCOME, IN MAKING A CLAIM FOR DEDUCTION U/S. 10B OF THE ACT OR IN THE ALTERNATIVE U/S 80HHC OF THE A CT WAS NOT SUSTAINABLE. THE HONBLE HIGH COURT IN ITS DECISION REFERRED TO EARLIER, HAS HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S. 80HHC OF TH E ACT AND THAT THE DEDUCTION CLAIMED CANNOT BE REJECTED ON A TECHNICAL PLEA BY THE REVENUE THAT AUDIT REPORT WAS NOT FILED. THE HONBLE HIGH COURT ALSO OBSERVED THAT IF THE ASSESSEE HAS EXPORTED CUT FLOWERS AND DERIVED I NCOME THEREFROM, THERE IS NO REASON WHY HE SHOULD NOT BE ALLOWED THE BENEF IT OF DEDUCTION U/S. 80HHC MERELY ON TECHNICALITIES. THE HONBLE HIGH C OURT HAS SET ASIDE THE ORDER OF TRIBUNAL AND REMANDED THE ISSUE OF ALLOWIN G DEDUCTION U/S. 80HHC OF THE ACT TO THE ASSESSEE FOR FRESH CONSIDERATION BY THE AO. IN THE CIRCUMSTANCES, THE VERY BASIS ON WHICH PENALTY WAS IMPOSED ON THE ASSESSEE NO LONGER SURVIVES. THEREFORE, THE ORDER OF AO IMPOSING PENALTY ON THE ASSESSEE CANNOT BE SUSTAINED. WE THEREFORE CONFIRM THE ORDER OF THE CIT(APPEALS) AND DISMISS THE APPEAL BY THE REVE NUE. ITA NO.254/BANG/2014 PAGE 5 OF 5 11. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF APRIL , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 10 TH APRIL , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.