The ACIT, Circle-8, Ahmedabad V. Vishal Exports Overseas Limited, Ahmedabad

ITA 2593/AHD/2009

• Counselvise Citation: 259320514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 16-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Bonafide belief; Retrospective amendment; Wrong claim; Difference of opinion; Bonafide mistake; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 80HHC

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY - AM ITA NO.2593/AHD/2009 (ASSESSMENT YEAR:-2004-05) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-8, AHMEDABAD V/S VISHAL EXPORTS OVERSEAS LTD., VISHAL HOUSE, OPP. SALES INDIA, B/H ORIENTAL BANK OF COMMERCE, AHMEDABAD PAN: AAACV 2354 D [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI VINOD TANWANI, SR. DR ASSESSEE BY:- SMT. URVASHI SHODHAN, AR DATE OF HEARING:- 12-01-2012 DATE OF PRONOUNCEMENT:- 25-01-2012 O R D E R PER D K TYAGI (JM) :- THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 08-07-2009 DELETI NG PENALTY OF RS.2,35,75,803/- LEVIED U/S 271(1)(C) OF THE INCOME -TAX ACT, 1961 FOR ASSESSMENT YEAR 2004-05. 2 THE FACTS AS NOTED BY THE LEARNED CIT(A) IN HIS O RDER ARE AS UNDER:- 2.1 THE AO MADE THE FOLLOWING DISALLOWANCES IN TH E ASSESSMENT WHICH HAVE BEEN CONFIRMED BY THE CIT(A) VIDE HIS OR DER DATED 28-09- 2007. (I) NOT ALLOWING DEDUCTION U/S 80HHC W.R.T. DEPB INCOME . 2 (II) DISALLOWANCE ON ACCOUNT OF PUBLIC ISSUE EXPENSES OF RS.16,51,946/-. (III) NOT ALLOWING 10% OF DEPB LICENCE AGAINST INDIRECT EXPENSES FOR DEDUCTION U/S 80HHC. (IV) INTERPRETATION OF THE TERM TOTAL TURN OVER AND E XPORT TURN OVER FOR THE PURPOSE OF 80HHC(3). (V) NOT ALLOWING DEDUCTION IN RESPECT OF DISCLAIMER CER TIFICATE ISSUED. (VI) DISALLOWANCE OF RS.1,31,406/- ON ACCOUNT OF CONSULT ATION FEES PAID TO DALAL MACDONALD. THE A.O. HAD INITIATED PENALTY PROCEEDINGS U/S 271( L)(C) OF THE IT ACT IN RESPECT OF THE ABOVE DISALLOWANCES. IN RESPONSE TO SHOW CAUSE NOTICE ISSUED FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT THE APPELLANT REPLIED THAT IT HAD NOT COMMITTED ANY DEFAULT O F CONCEALING PARTICULARS OF IS INCOME OR FURNISHING INACCURATE P ARTICULARS OF INCOME; THE PENALTY WITH REGARD TO CONCEALMENT WAS NOT APPL ICABLE AS THE DEDUCTION U/S. 80HHC WAS DULY CLAIMED IN THE RETURN OF INCOME ON THE BASIS OF EXPORT ACHIEVED DURING THE YEAR AND THE DE DUCTION HAS BEEN CLAIMED ON THE BASIS OF THE CERTIFICATE ISSUED BY T HE CHARTERED ACCOUNTANT, WHO HAD DULY VERIFIED ALL THE EXPORT TU RNOVER FIGURES. FURTHER, MERELY ON THE BASIS OF DIFFERENCE OF OPINI ON/INTERPRETATION DURING THE ASSESSMENT PROCEEDINGS, WHEREBY INSPITE OF GIVING ALL THE EXPLANATIONS AND SUBMISSION WITH- REGARD TO TENABIL ITY OF THE CLAIM, SUBMISSIONS WERE NOT ACCEPTED AND ADDITIONS HAVE BE EN MADE, WHICH DID NOT AMOUNT TO CONCEALMENT AND THE APPELLANT PRE FERRED APPEAL BEFORE THE CIT(APPEALS) AND SUBSEQUENTLY BEFORE HON 'BLE ITAT. THE APPELLANT FURTHER SUBMITTED THAT IT WAS NOT CLEAR F ROM NOTICE AS TO WHETHER PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE INCREASE IN INCOME WAS ONLY DUE TO DISALLOWANCE OF CLAIM U/S. 80HHC. I T WAS FURTHER SUBMITTED THAT THE CLAIM U/S. 80HHC WAS MOST DEBATA BLE PROVISION UNDER THE INCOME TAX ACT AND THERE ARE VARIOUS DECI SIONS IN FAVOUR AND AGAINST THE APPELLANT AND HENCE IT WAS CLEAR THAT T HE ISSUE INVOLVED WAS VERY MUCH DISPUTED. FURTHER, BY RELYING ON THE DECI SION OF HON'BLE SUPREME COURT IN HINDUSTAN STEEL IN 83 ITR 27, IT W AS SUBMITTED THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT STATUTORY OBLIGATION IS THE RESULT OF A QUASI CRIMINAL PROCEEDINGS AND P ENALTY WILL NOT ORDINARILY BE IMPOSED, UNLESS THE PARTY OBLIGE EITH ER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMA CIOUS OR DEFIANCE OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. IN SUPPORT OF THIS 3 CONTENTION, THE APPELLANT ALSO RELIED UPON THE DECI SION OF HON'BLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERAISINGH ANIAH & CO., V. CIT, 123 ITR 457. THE A.O. HOWEVER, DID NOT ACCEPT THE CONTENTIONS OF THE APPELLANT, BY OBSERVING THAT AS BROUGHT OUT IN THE ASSESSMENT ORDER, IT WAS VERY CLEAR THAT THE APPELLANT HAD FUR NISHED INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED ITS INC OME AND ITS CASE SQUARELY FELL WITHIN THE AMBIT OF EXPLANATION 1 TO SEC. 271(1)(C ) . THE A.O. FURTHER OBSERVED THAT THE EXPLANATIONS ADDED T O SECTION 271(1) (C) IN THEIR ENTIRETY INDICATED ELEMENT OF STRICT LIABI LITY ON THE APPELLANT FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING RETURN. THE A.O. PLACED RELIANCE ON THE DECISIONS IN THE CA SE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2007) 295 UR 244(SC) AS WELL AS BANARAS TEXTORIUM VS. CIT (1988), 169 ITR 7 82 (ALL.), ZEEKOO SHOE FACTORY VS. CIT (1981) 127 ITR 837. IN VIEW OF THE ABOVE FACTS, THE A.O. HELD THAT THE APPELLANT HAD F AMISHED INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED ITS INC OME AND ACCORDINGLY A PENALTY OF RS.2,35,75,8037- HAS BEEN LEVIED. 3 THE LEARNED CIT(A) HAS DECIDED THE ISSUE IN THE F OLLOWING MANNER:- 2.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E A.R. OF THE APPELLANT SUBMITTED THAT THE AO WHILE FRAMING THE P ENALTY ORDER DID NOT CONSIDER THE DETAILED SUBMISSIONS MADE BY THE C OMPANY AND DID NOT APPRECIATE THE CIRCUMSTANCES IN WHICH MAJOR DIS ALLOWANCES WERE MADE BY THE A.O. .THE DISALLOWANCES WERE CONFIRMED BY THE CIT(A), ON THE GROUND THAT NO ONE COULD APPEAR BEFORE THE C IT (A). IT WAS ARGUED THAT THE ORDER PASSED BY THE A.O. WAS NOT A SPEAKING ORDER AND THE EXPLANATION GIVEN BY THE APPELLANT COULD NOT HAVE BEEN REJECTED ARBITRARILY AND WITHOUT ANY MATERIAL TO THE CONTRAR Y IN THIS CONTEXT, RELIANCE WAS PLACED BY THE A.R. ON THE DECISIONS IN THE CASES OF (I) M/S. ROSHANLALA D. HATTI VS. CIT 107 ITR 938 (SC); (II) M/S. R.B.M.S. NAID VS. CIT 29 ITR 194 (NAG) & (III) M/S. LAJWANTILAL SIAL VS. CIT 30 ITR 228 (NAG). THE A.O. LEVIED THE PENA LTY SOLELY AND EXCLUSIVELY RELYING UPON THE FINDINGS GIVEN BY THE A.O. IN THE ASSESSMENT ORDER AND AT NO POINT OF TIME, HE HAS TA KEN PAINS TO GIVE HIS OWN FINDINGS. THE A.O. FURTHER FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAD FILED ITS RETURN OF INCOME ON THE BAS IS OF ADVICE GIVEN BY ITS CONSULTANT AND CLAIM U/S. 80HHC WAS MADE AS PER THE REPORT GIVEN BY A QUALIFIED CA. BY PLACING RELIANCE ON THE DECIS ION OF GUJARAT HIGH COURT IN THE CASE OF BTX CHEMICALS PVT. LTD. V. CIT REPORTED IN 288 ITR 196 (GUJ), THE A.R. CONTENDED THAT IF THE A PPELLANT BONAFIDELY 4 RELIED UPON THE ADVICE OF C.A., NO PENALTY FOR CONC EALMENT SHOULD BE LEVIED . IT WAS SUBMITTED THAT THE CLAIM OF DEDUCTI ON U/S. 80HHC WAS A BONAFIDE BELIEF ON THE PART OF THE APPELLANT AND FU RTHER SUCH CLAIM HAD ALWAYS BEEN A MATTER OF LOT OF CONFUSION AMONGST AS SESSEES AS WELL AS REVENUE. THE A.R FURTHER RELIED ON THE DECISION IN THE CASE OF CIT V. MANU ENGINEERING WORKS (1980) 122 ITR 306 (GUJ) AND NEW SORATHIA ENGINEERING CO. V. CIT, 282 ITR 642 (GUJ) ETC. AND ARGUED THAT THERE WAS A FUNDAMENTAL DEFECT IN THE NOTICE I SSUED, AS IT WAS NOT SPECIFIED THEREIN WHETHER THE APPELLANT HAD CONCEAL ED THE PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS O F ITS INCOME. THERE WAS NO DELIBERATE ATTEMPT BY THE APPELLANT TO HIDE ANY INFORMATION OR PARTICULARS FROM THE DEPARTMENT. THE A.R, FURTHER S UBMITTED THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS AR E ENTIRELY DIFFERENT AND THE A.O. HAS NOT NARRATED THE NATURE OF ALLEGED CONCEALMENT OR FURNISHING OF ALLEGED INACCURATE PAR TICULARS OF INCOME IN A SPEAKING MANNER. THE PRESUMPTION OF A.O. THAT PENALTY IS AUTOMATIC ONCE THE ADDITIONS ARE CONFIRMED IS NOT C ORRECT. THE A.R. PLACED RELIANCE ON SEVERAL OTHER DECISIONS - HINDUS TAN STEEL V. STATE OF ORISSA 83 JTR 26 (SC). THE A.R. ALSO RELIED UPON DE CISION OF HOTEL SABAR PVT. LTD. VS. INCOME TAX OFFICER (1986) 26 TT J (AHD) 89 ETC. WHEREIN IT WAS HELD THAT THE REJECTION OF A CLAIM W OULD NOT PER SE ESTABLISH THE GUILT OF FURNISHING INACCURATE PARTIC ULARS OF INCOME WITHIN THE MEANING OF SEC. 271(1)(C) OF THE ACT. TH E A.R. FURTHER CONTENDED THAT WITH EVERY NEW MAJOR DECISION OF ANY COURT, LEGAL POSITION WITH RESPECT TO CLAIM U/S.80HHC KEPT ON CH ANGING AND THE LEGAL POSITION REGARDING CLAIM OF DEDUCTION U/S.80H HC HAD BEEN VERY UNCLEAR AND DISPUTABLE. UNDER THE ABOVE CIRCUMSTANC ES, IT IS NOT CORRECT TO SAY THAT THERE WAS FRAUD OR GROSS OR WIL LFUL NEGLIGENCE ON THE PART OF THE APPELLANT AND SIMPLE REJECTION OF APPEL LANT'S BONAFIDE EXPLANATION WITHOUT ANY THING MORE OR WITHOUT ASSIG NING ANY SPECIFIC VALID REASON TO REJECT THE SAME, DOES NOT MAKE IT G ROSS OR WILLFUL NEGLIGENCE ON THE PART OF THE APPELLANT. THE A.R. F URTHER RELIED ON THE DECISION IN THE CASE OF CIT VS. MANI BHAI AND BROTH ERS, (2007) 209 CTR 46 (GUJ) AND SUBMITTED THAT THE A.O. HAD MADE N O EFFORT TO SUBSTANTIATE ANY CONCEALMENT FOR ANY OF THE ITEMS D ISALLOWED AND DEFICIENCY IN CLAIM BY A BONAFIDE MISTAKE WOULD NOT BE SUFFICIENT FOR LEVYING PENALTY FOR CONCEALMENT. THE A.R. FURTHER S UBMITTED THAT IN THE TAX AUDIT REPORT THE AUDITOR HAS NOT POINTED DI SALLOWABILITY OF PUBLIC ISSUE EXPENDITURE AND AS SUCH THE APPELLANT HAS RELIED UPON THE PROFESSIONAL ADVICE OF AUDITORS WITH REGARD TO ALLO WABILITY OF THIS EXPENDITURE, DETAILS OF WHICH WERE SUBMITTED BEFORE THE AO AT THE TIME OF ASSESSMENT. IT WAS SUBMITTED THAT BY DISALL OWING THE SAME 5 MERELY BY DIFFERENCE OF OPINION, IT CAN NOT BE SAID TO BE A CASE OF CONCEALMENT. SIMILARLY IT WAS SUBMITTED THAT CONSUL TANCY FEE PAID TO DALAI MOT MACDONALD FOR STUDYING AND IDENTIFYING IN VESTMENT OPPORTUNITIES, INFRASTRUCTURE PROJECT IN GUJARAT WA S NORMALLY ONGOING BUSINESS EXPENDITURE REGULARLY INCURRED BY THE APPE LLANT DEVELOPMENT OF. BUSINESS POSSIBILITIES AND IT WAS BUSINESS EXPE NDITURE, AND THE A.O. HAS DISALLOWED THE SAME BY DIFFERENCE OF OPINION SO THE SAME CAN NOT BE TERMED AS CONCEALMENT. AS REGARDS DISALLOWAN CE OF 10% OF DEPB LICENCE AGAINST INDIRECT EXPENSES FOR DEDUCTIO N U/S.80HHC, THE APPELLANT HAD CLAIMED THE SAME ON THE BASIS OF PREV AILING DECISION AND PROFESSIONAL ADVICE/OPINION GIVEN BY THE EXPERTS AT THE TIME OF FILING OF RETURN. AS REGARDS INTERPRETATION OF THE TERM TO TAL TURNOVER AND EXPORT TURNOVER FOR THE PURPOSE OF DEDUCTION U/S.80 HHC AGAIN IT WAS SUBMITTED BY THE A.R, THAT THE APPELLANT HAD CLAIME D THE SAME BASED ON OPINION/ADVICE OF AUDITORS. SO FAR AS DISALLOWAN CE OF DEDUCTION IN RESPECT OF DISCLAIMER CERTIFICATES, IT WAS SUBMITTE D THAT THE APPELLANT HAS NOT EARNED ANY PROFIT WITH REGARD TO SUCH EXPOR T AS COULD BE SEEN FROM THE DETAILS SUBMITTED IN FORM NO. 1OCCAB DULY CERTIFIED BY THE AUDITORS THAT THE AMOUNT OF EXPORT AND THE COST TO SUPPORTING MANUFACTURER WAS SAME AND THERE WAS NO PROFIT ELEME NT THEREIN .THUS IT WAS ARGUED THAT THERE WAS NO CONCEALMENT IN THIS REGARD. 2.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLAN T. IT IS SEEN THAT THE CLAIM U/S. 80HHC HAS BEEN MADE BY THE APPELLANT BASED ON THE AUDITOR'S REPORT IN FORM NO. 10CCAC FILED ALONG WIT H THE RETURN OF INCOME. THE CLAIM OF THE APPELLANT OF REDUCTION O F INDIRECT EXPENSES BY 10% OF DEPB LICENCE FOR DEDUCTION U/S. 80HHC AN D INTERPRETATION OF THE TERM 'TOTAL TURN OVER' AND 'EXPORT TURN O VER' FOR THE PURPOSE OF 80HHC(3) AND CLAIM OF DEDUCTION IN RESPE CT OF DISCLAIMER CERTIFICATE ISSUED WERE MADE BASED ON THE AUDITOR 'S REPORT IN FORM NO.10CCAC FILED ALONG WITH THE RETURN OF INCOME, FU RTHER AS REGARDS CLAIM OF DEDUCTION U/S. 80HHC IN RESPECT OF DEPB IN COME, THE SAME HAS BEEN REJECTED BY THE C.I.T.(APPEALS) BECAUSE OF AMENDMENT BROUGHT OUT BY THE TAXATION LAWS AMENDMENT ACT 2005 WITH RETROSPECTIVE EFFECT AND BECAUSE THE CONDITIONS SPE CIFIED THEREIN WERE NOT SATISFIED. AS REGARDS CLAIM OF EXPENDITURE RELA TED TO PUBLIC ISSUE OF RS.16,51,9467-, THE APPELLANT HAD FURNISHED FULL PARTICULARS BEFORE THE A.O. AND HAD CLAIMED THE SAME AS REVENUE EXPENDIT URE, THE APPELLANT HAD CLEARLY POINTED OUT BEFORE THE A.O. THAT THERE WAS NO INCREASE IN SHARE CAPITAL NOR ANY FUNDS WERE RECEIVED BY THE APPELLANT AND THE 6 APPELLANT HAD RELIED UPON THE DECISION OF APEX COUR T IN THE CASE OF CU V. GENERAL INSURANCE CORPORATION 286 ITR 232. BUT T HE A.O. HAS REJECTED THE CLAIM OF THE APPELLANT ON THE GROUND T HAT IN THE CASE OF THE APPELLANT THERE DISINVESTMENT OF PROMOTER'S QUOTA A ND THE FACTS OF THE APEX COURT ARE DIFFERENT AND HENCE THE SAID DECISIO N DOES NOT APPLY. THE A.O. HELD THE SAME AS CAPITAL EXPENDITURE ALLOW ED DEDUCTION U/S.35D OF THE I.T. ACT .SIMILARLY THE CLAIM OF THE APPELLANT AS EXPENDITURE FOR THE CONSULTANCY FEE PAID TO DALAI M ACDONALD OF RS.1,31,406/-NS REJECTED BY THE A.O. AS REGARDS T HE CLAIM OF THE APPELLANT IN RESPECT OF THE ABOVE TWO EXPENSES AS R EVENUE EXPENDITURE, THOUGH THERE IS A COLUMN IN THE TAX AUDIT REPORT I. E. COLUMN NO. 17 TO REPORT AMOUNTS DEBITED TO PROFIT AND LOSS ACCOUNT A S CAPITAL EXPENDITURE, THE AUDITOR HAS NOT REPORTED THE SAME AS CAPITAL EXPENDITURE WHICH SHOWS THAT THE APPELLANT'S CLAIM OF THE SAME AS REVENUE EXPENDITURE WAS SUPPORTED BY THE AUDITOR. A S REGARDS THE PUBLIC ISSUE EXPENSES IT IS NOTICED THAT THERE WAS NO INCREASE IN SHARE CAPITAL AND THE EXPENSES WERE INCURRED NOT FOR INCR EASE OF SHARE CAPITAL, BUT AS LEGAL EXPENSES AND APPRAISAL FEES F OR OFFLOADING OF SHARES OF DIRECTORS FOR SECURING LOAN FROM FINANCIA L INSTITUTIONS AS ADVISED BY THE LATTER. THUS THE APPELLANT HAD BONAF IDE BELIEF THAT THE EXPENSES WERE ADMISSIBLE AS REVENUE EXPENDITURE. EV EN IN RESPECT OF CLAIM OF DEDUCTION U/S. 80HHC THE APPELLANT HAD BON AFIDE BELIEF THAT THE CLAIM MADE BY IT WAS ADMISSIBLE AS THE SAME WAS BASED ON THE CERTIFICATE OF THE AUDITOR AND 10 CCAC REPORT OF TH E AUDITOR. THUS THE DISALLOWANCES OF CLAIMS HAVE BEEN MADE DUE TO CHANGE OF OPINION AND IT CANNOT BE TERMED AS CONCEALMENT. FURTHE R, SINCE THE APPELLANT HAS CONTESTED THE DISALLOWANCES MADE BY T HE AO AND CONFIRMED BY THE C.I.T.(APPEALS) IN APPEAL BEFORE T HE HON'BLE ITAT, WHICH SHOWS THAT THE ISSUES INVOLVED ARE HIGHLY DEB ATABLE AND ON SUCH DEBATABLE ISSUES, A CONCLUSION CAN NOT BE ARRIVED A T THAT THE APPELLANT HAD DELIBERATELY MADE ATTEMPT TO EVADE THE TAX BY M AKING WRONG CLAIMS WHILE FILING THE RETURN OF INCOME. FURTHER T HE APPELLANT HAD DISCLOSED FULL FACTS OF SUCH CLAIMS IN THE STATEMEN TS ACCOMPANYING THE RETURN OF INCOME. I ALSO AGREE WITH THE CONTENTION OF THE A.R. THAT THE ASSESSMENT AND PENALTY PROCEEDINGS ARE ENTIRELY DIF FERENT AND FURTHER MERELY BECAUSE THE ADDITIONS STOOD CONFIRMED AT THE FIRST APPELLATE STAGE, THERE IS NO JUSTIFICATION IN HOLDING THAT TH ERE IS CONCEALMENT OF INCOME AND/OR FILING OF INACCURATE PARTICULARS OF I NCOME. BY FOLLOWING VARIOUS CASE LAWS, AS RELIED UPON BY THE A.R., AND CONSIDERING THE FACT THAT THE CLAIM MADE U/S. 80HHC OF THE ACT BY THE APPELLANT WAS AND WAS WELL SUPPORTED BY THE EXPERT ADVICE OF CHARTERE D ACCOUNTANT, THE CONCLUSION ARRIVED AT BY THE A.O. THAT THERE IS CON CEALMENT OF INCOME 7 IS NOT PROPER, AS THE APPELLANT IN FACT FURNISHED A LL NECESSARY DETAILS/EXPLANATIONS AND IT WAS NOT A CASE OF NOT F URNISHING THE DETAILS, BUT THE SAME WERE NOT ACCEPTED BY THE A.O. DUE TO D IFFERENCE OF ION . WHEN ALL THE FACTS WERE DISCLOSED BY THE APPELLANT REGARDING CLAIM U/S.80HHC CLAIM OF THE APPELLANT HAS BEEN REJECTED RELYING ON DIFFERENT JUDICIAL DECISIONS, IT CAN BE SAID THAT T HERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME, FURTHER IT IS NOT THE CASE THAT EXPLANATION OF THE APPELLANT IN RESPECT OF THE VARI OUS CLAIMS WHICH HAVE BEEN DISALLOWED AND FOR WHICH PENALTY HAS BEEN LEVIED HAS NOT BEEN SUBSTANTIATED OR FOUND TO BE FALSE SO AS TO AT TRACT EXPLANATION 1 TO SECTION 271(1)(C). FURTHER, THE ISSUE IS DISPUTABLE AND DEBATABLE AND SO DISALLOWANCES WOULD NOT RESULT INTO LEVY OF PENALTY U/S. 271(1)(C), AND NO PENALTY CAN BE LEVIED, UNLESS IT IS ESTABLISHED THAT THERE IS CLEAR CUT FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE ALL THE FACTS WERE DISCLOSED BY THE APPELLANT IN ASSESS MENT PROCEEDINGS AND FURTHER THE EXPLANATION FILED BY THE APPELLANT WAS REASONABLE AND WAS BONA FIDE. MOREOVER, MERE REJECTION OF THE APPE LLANT'S CLAIM CANNOT BE EQUATED WITH CONCEALMENT. IN THE INSTANT CASE, IT IS FOUND THAT A DIFFERENT VIEW HAS BEEN TAKEN BY THE A.O. OU T OF THE TWO POSSIBLE VIEWS WHILE REJECTING THE CLAIM OF THE APP ELLANT AND WHILE RECALCULATING THE DEDUCTION U/S 80HHC AND THE RECOM PUTATION / RECALCULATION OF DEDUCTION U/S 80HHC WILL NOT AMOUN T TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F INCOME. FURTHER IT IS NOTICED THAT THE CLAIM OF THE APPELLANT WAS SUPP ORTED BY THE ADVICE OF THE TAX EXPERT AND REPORT OF THE AUDITOR IN FORM 10CCAC. HENCE, I AM OF THE CONSIDERED OPINION THAT THERE IS NO CONSC IOUS/DELIBERATE ATTEMPT TO CONCEAL ANY INCOME ON THE PART OF THE AP PELLANT. I ALSO FIND THAT HONORABLE MADRAS HIGH COURT HAS HELD IN THE CA SE OF CAPLIN POINT LABORATORIES LTD., 293 ITR 524 THAT BY REJECTION OF ASSESSEE'S CLAIM BY RELYING ON DIFFERENT INTERPRETATION IT C OULD NOT BE SAID THAT PARTICULARS OF INCOME HAVE BEEN CONCEALED. THE DECI SION OF DELHI HIGH COURT IN CIT VS EICHER GOODEARTH LTD. REPORTED IN 170 TAXMAN 27 (DEL) WHEREIN IT WAS HELD THAT THERE IS NO JUSTI FICATION TO LEVY PENALTY WHEN THE A.O. NAD NOT FOUND PARTICULARS FUR NISHED BY THE ASSESSEE TO BE FALSE AND HAD NOT UNEARTHED ANY MATE RIAL FACTS OR PARTICULARS WHICH ASSESSEE HAD NOT DISCLOSED IS SQU ARELY APPLICABLE TO THE FACTS OF THE APPELLANT, AS THE PARTICULARS FURN ISHED BY THE APPELLANT HAD NOT BEEN FOUND FALSE BY THE A.O. FURTHER, EXPLA NATION (1) BELOW SECTION 271(1)(C) IS ALSO NOT APPLICABLE TO THE FAC TS OF THE APPELLANT'S CASE AS IT IS NOT A CASE WHERE THE APPELLANT FAILED TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE APPEL LANT WAS FOUND TO BE FALSE BY THE AO OR WHERE THE APPELLANT FAILED TO SUBSTANTIATE THE 8 EXPLANATION TO BE BONA FIDE. IN THE CASE OF THE APP ELLANT, THE APPELLANT HAD OFFERED THE EXPLANATION WHICH WAS BONAFIDE BUT THE A.O. REJECTED THE SAME DUE TO DIFFERENCE IN PERCEPTION. HENCE THE EXPLANATION (1) BELOW SECTION 271(1)(C) HAS NO APPLICABILITY TO T HE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. FURTHER, VAR IOUS CASE LAWS CITED BY THE A.R. SUPPORT THE CLAIM OF THE APPELLANT THAT DISALLOWANCE IN PART OF THE CLAIM FOR DEDUCTION U/S 80HHC WOULD NOT AMO UNT TO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. IN VIEW OF THE ABOVE FACTS AND CASE LAWS, I HOLD TH AT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S, 271(1)(C) AND SO I DIRECT THE PENALTY TO BE DELETED. 4 AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING, THE LEARNED DR SUBMITTED TH AT IN RESPECT OF ADDITION U/S 80HHC OF THE ACT, SINCE THE ADDITIO N HAS BEEN CONFIRMED BY THE TRIBUNAL, THE LEARNED CIT(A) SHOUL D NOT HAVE DELETED THIS PENALTY AND HE OUGHT TO HAVE UPHELD TH E ORDER OF THE AO. IN RESPECT OF OTHER ADDITIONS I.E. (II) TO (VI ) ABOVE, HE SUBMITTED THAT SINCE THE TRIBUNAL IN THE QUANTUM AP PEAL HAS SET ASIDE THE ISSUES TO THE FILE OF THE LEARNED CIT(A), THEREFORE, PENALTY PROCEEDINGS SHOULD ALSO BE RESTORED TO THE FILE OF THE LEARNED CIT(A) TO BE DECIDED AFRESH BY THE LEARNED CIT(A) AFTER DECIDING THE QUANTUM. 5 THE LEARNED COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, PLACING RELIANCE ON CIRCULAR NO.2/2006, DATED 17-1- 2006 SUBMITTED THAT IN RESPECT OF ADDITION U/S 80HHC WIT H RESPECT TO DEPB, THE AO IN FACT SHOULD NOT HAVE IMPOSED THE PE NALTY AT ALL, THEREFORE, THE ORDER PASSED BY THE LEARNED CIT(A) O N THIS ISSUE, MAY KINDLY BE UPHELD. SHE ALSO RELIED ON SOME DECIS IONS FOR MAKING SUBMISSION THAT NO PENALTY IS LEVIABLE ON TH E ADDITIONS MADE U/S 80HHC. AS FAR AS PENALTY ON OTHER ADDITION S IS 9 CONCERNED, SHE HAD NO OBJECTION IF THE MATTER GOES TO THE FILE OF THE LEARNED CIT(A). 6 AFTER HEARING BOTH THE PARTIES AND PERUSING THE R ECORDS, WE FIND THAT IN VIEW OF THE CIRCULAR NO.2/2006, DATED 17-1-2006 RELIED UPON BY THE LEARNED COUNSEL OF THE ASSESSEE, THE AO SHOULD NOT HAVE IMPOSED THE PENALTY AT ALL IN THIS CASE IN RESPECT OF ADDITION MADE U/S 80HHC OF THE ACT WITH RESPECT TO DEPB IN VIEW OF PARA 2 OF THE SAID CIRCULAR, WHICH READS AS UNDER:- 2. THE AMENDMENTS RELATING TO DUTY ENTITLEMENT PAS S BOOK SCHEME AND DUTY REPLENISHMENT CERTIFICATE HAVE BEEN BROUGHT INTO THE STATUTE WITH RETROSPECTIVE EFFECT. THEREFORE, I T HAS BEEN DECIDED THAT NO PENALTY SHALL BE LEVIED OR INTEREST SHALL BE CHA RGED IN RESPECT OF ANY FRESH DEMAND RAISED CONSEQUENT TO THE ENACTMENT OF TAXATION LAWS (AMENDMENT) ACT, 2005, ON ACCOUNT OF VARIATION IN T HE RETURNED/ASSESSED INCOME ATTRIBUTABLE TO PROFITS ON SALE OF DEPB CREDITS OR DFRC. FURTHER, IN SUCH CASES WHERE ASSES SMENTS HAVE ALREADY BEEN COMPLETED AND, (I) INTEREST HAS BEEN CHARGED, THE CHIEF COMMISSION ER OF INCOME- TAX SHALL WAIVE THE INTEREST RELATING TO CLAIM OF P ROFIT ON SALE OF DEPB CREDITS OR DFRC FOR DEDUCTION UNDER SECTION 80 HHC; (II) PENALTY HAS BEEN LEVIED, THE CHIEF COMMISSIONE R OF INCOME-TAX SHALL WAIVE THE PENALTY RELATING TO CLAIM OF PROFIT ON SALE OF DEPB CREDITS OR DFRC FOR DEDUCTION UNDER SECTION 80 HHC; OR (III) PENALTY RELATING TO CLAIM OF PROFIT ON SALE O F DEPB CREDITS OR DFRC FOR DEDUCTION UNDER SECTION 80HHC, HAS BEEN IN ITIATED BUT NOT LEVIED, THE PENALTY PROCEEDINGS SHALL BE DR OPPED. IN VIEW OF THE ABOVE, WE ARE NOT INCLINED TO INTERF ERE WITH THE ORDER OF THE LEARNED CIT(A) DELETING THE PENALTY AN D THE SAME IS HEREBY UPHELD. IN RESPECT OF OTHER ADDITIONS, SINC E IN QUANTUM, 10 THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF TH E LEARNED CIT(A), WE FEEL IT PROPER THAT PENALTY PROCEEDINGS IN RESPECT OF THOSE ADDITIONS SHOULD ALSO BE RESTORED TO HIS FILE . WE ORDER ACCORDINGLY. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 25-01-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 25-01-2012 COPY OF THE ORDER FORWARDED TO: 1. VISHAL EXPORTS OVERSEAS LTD., VISHAL HOUSE, OPP. SALES INDIA, B/H ORIENTAL BANK OF COMMERCE, AHMEDABAD 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRE, A WING, ASHRAM ROAD, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XIV, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD