Asstt. Commissioner of Income Tax-I, Kanpur V. M/s Allah Dad Tannery, Kanpur

ITA 339/LKW/2014

• Counselvise Citation: 33923714 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-08-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Difference of opinion; Agreed addition; Benefit of exemption
• Section: 80HHC; 14A; 80IB; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.339/LKW/2014 ASSESSMENT YEAR:2002-03 ACIT-1 KANPUR V. M/S ALLAH DAD TANNERY 99/85-A, JAJMAU KANPUR (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. A. K. SINGH, CIT(DR) RESPONDENT BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 04 08 2015 DATE OF PRONOUNCEMENT: 27 08 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY OF RS.1.25 CRORES LEVIED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 2. THE FACTS IN BRIEF, ON THE IMPUGNED ISSUE, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON BUSINESS OF MANUFACTURING AND EXPORT OF FINISHED LEATHER. THE RETURN WAS FILED ON 1.12.2003 DECLARING INCOME OF RS.2,05,02,305/- ALONG WITH AUDITED ACCOUNTS, TAX AUDIT REPORTS UNDER SECTION 44AB, UNDER RULE 18BBA(3) AND 18BBB OF THE ACT. THE ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.5,32,37,594/- AFTER INCLUDING A SUM OF RS.2 CRORES ON ACCOUNT OF AGREED ADDITION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT EXCESS DEDUCTION UNDER SECTION 80IB OF THE ACT AND 80HHC :- 2 -: OF THE ACT WAS CLAIMED. IN RESPONSE TO QUERY, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT DEDUCTION WAS CLAIMED ON THE BASIS OF THE LEGAL POSITION AVAILABLE AT THE RELEVANT POINT OF TIME, BUT LATER ON WHEN IT WAS REALIZED THAT THE VIEW TAKEN BY THE TRIBUNAL WAS REVERSED BY THE HON'BLE HIGH COURT, THE ASSESSEE HAS AGREED FOR THE ADDITION OF RS.2 CRORES WITH A CONDITION THAT NO PENAL ACTION WILL BE INITIATED AGAINST THE ASSESSEE. THROUGH LETTERS DATED 10.3.2006 AND 14.3.2006 ADDITIONAL INCOME WAS OFFERED TO TAX AND ACCORDINGLY ASSESSMENT WAS COMPLETED AT AN AMOUNT OF RS.5,32,37,594/-. THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND DURING THE PENALTY PROCEEDINGS, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THE DEDUCTIONS WERE CLAIMED ON THE BASIS OF PREVAILING LEGAL POSITION. BEING NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS LEVIED PENALTY AT RS.1.25 CRORES UNDER SECTION 271(1)(C) OF THE ACT. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND FILED DETAILED EXPLANATIONS WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. IN RESPECT OF EXPORT INCENTIVE, THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS NOT WITHOUT DOUBT AND WAS ARGUABLE AND DEBATABLE. HE HAS ALSO MADE A REFERENCE TO THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. VIPIN SARDANA DATED 17.6.2005, IN WHICH IT WAS HELD THAT DEDUCTION UNDER SECTION 80IB OF THE ACT IS ALLOWABLE ON THE AMOUNT OF DUTY DRAWBACK, AS IT HAS A DIRECT LINK WITH THE BUSINESS ACTIVITY OF INDUSTRIAL UNDERTAKING. THE VIEW OF THE TRIBUNAL WAS REVERSED BY THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. RITESH INDUSTRIES LTD. 4. SO FAR AS DEDUCTION CLAIMED UNDER SECTION 80HHC OF THE ACT IS CONCERNED, PROVISIONS OF SECTION 80HHC OF THE ACT WAS AMENDED AND :- 3 -: DEDUCTIONS ARE TO BE COMPUTED AS PER THE AMENDED PROVISIONS. IT WAS FURTHER CONTENDED THAT THE CONTROVERSY WITH REGARD TO THE DEDUCTION UNDER SECTION 80IB OF THE ACT ON EXPORT INCENTIVES IS SET AT REST BY THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT, 317 ITR 218 THAT NO DEDUCTION UNDER SECTION 80IB OF THE ACT IS ALLOWABLE ON EXPORT INCENTIVES. IT WAS ALSO CONTENDED THAT AFTER THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT, 342 ITR 49 (SC), THE DEDUCTION UNDER SECTION 80HHC OF THE ACT ARE TO BE COMPUTED IN TERMS OF THE SAID JUDGMENT. THEREFORE, WHATEVER DEDUCTIONS WERE CLAIMED, IT WAS CLAIMED UNDER A BONA-FIDE BELIEF AND ON THE BASIS OF THE LEGAL POSITION PREVAILING AT THE RELEVANT POINT OF TIME. THE LD. CIT(A) HAS RE-EXAMINED THE CLAIM OF THE ASSESSEE AND WAS OF THE VIEW THAT THERE WAS NEITHER ANY CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. THE LD. CIT(A) ACCORDINGLY DELETED THE PENALTY. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE PAPER BOOK AND THE SUBMISSIONS ADVANCED BY THE AR. THE UNDISPUTED FACTS ARE THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 01.12.2003 CLAIMING DEDUCTIONS U/S 80IB AND 80HHC DULY SUPPORTED BY THE AUDITOR'S REPORT. THE RETURN WAS FILED ON 01.12.2003, MUCH PRIOR TO THE DECISION OF RITESH INDUSTRIES LTD, DATED 23/09/2004 AND ALSO MUCH BEFORE THE ENACTMENT OF TAXATION LAWS AMENDMENT ACT, 2005. THE ASSESSEE IS TOTALLY INTO EXPORT BUSINESS OF FINISHED LEATHER AND IS ELIGIBLE FOR DEDUCTIONS U/S 80IB &. 80HHC. THE ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNT WHICH WERE EXAMINED AND TEST CHECKED. NO DISCREPANCY OR DEFECTS WERE POINTED OUT IN THE BOOKS OF :- 4 -: ACCOUNT. AS A MATTER OF FACT, EVEN NO DEFECTS HAD BEEN POINTED OUT IN THE AUDIT REPORTS FILED BY THE ASSESSEE IN SUPPORT OF THE DEDUCTIONS CLAIMED. THERE IS NO CHANGE IN THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT ALSO. IT IS ALSO UNDISPUTED THAT THE ASSESSEE HAS NO OTHER SOURCE OF INCOME. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD SUGGESTING THAT THE ASSESSEE ENJOYS OR HAS ANY OTHER SOURCE OF INCOME OTHER THAN AS DECLARED BY IT. FROM THE FACTS AS ENUMERATED ABOVE AND THE DISCUSSIONS MADE IN THE ASSESSMENT ORDER, THE ASSESSEE CAME TO BE ASSESSED ON AN AGREED ADDITION OF RS. 2 CRORES ONLY FOR THE PURPOSE OF BEING TAXED ON THE INCENTIVES CLAIMED BY THE ASSESSEE IN RESPECT OF EXPORTS ON WHICH DEDUCTION U/S 80IB WAS ELIGIBLE. IT IS ON RECORD THAT THE ISSUE REGARDING DEDUCTION OF 80IB IN RESPECT OF EXPORT INCENTIVES, SUCH AS DUTY DRAW BACK WAS NOT FREE FROM DOUBT AND WAS DEBATABLE AND THE SAME WAS BROUGHT TO THE NOTICE OF THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF AND THE AO TOOK COGNIZANCE OF THE SAME IN PARA 4 OF THE ASSESSMENT ORDER MENTIONING AS SUCH REGARDING DISALLOWING THE BENEFIT OF 80 IB IN RESPECT OF EXPORT INCENTIVES, ASSESSEE HAS VIDE ITS LETTER DATED 09.03.2006 SUBMITTED 'THE ISSUE IS NOT WITHOUT DOUBT AND ARGUABLE AND DEBATABLE. IN A SUBSEQUENT DECISION GIVEN BY THE ITA T DELHI ON 17TH JUNE, 2005 IN THE CASE OF ACIT VS. VIPIN SARDDNA, IT HAS BEEN HELD THAT DEDUCTION U/S 80IB IS ALLOWABLE ON AMOUNT OF DUTY DRAWBACK AS IT HAS A DIRECT LINK WITH THE BUSINESS ACTIVITY OF THE INDUSTRIAL UNDERTAKING. IN THIS DECISION THE CASE OF CIT VS. M/S KITESH INDUSTRIES LTD. HAS ALSO BEEN REFERRED TO.' ASSESSEE'S CONTENTIONS IN THIS REGARD ARE NOT ACCEPTABLE CONSIDERING THE FACT THAT ORDER OF THE HIGH COURT HAS AN OVERRIDING EFFECT ON THE ORDER OF ITAT. IN ITS ORDER THE HON'BLE HIGH COURT HAS CLEARLY LAID DOWN THAT EXPORT :- 5 -: INCENTIVES ARE A SORT OF BENEFIT GIVEN BY THE GOVERNMENT IN ADDITION TO THE BENEFIT OF EXEMPTION/DEDUCTION U/S 80IA/80IB ETC., AND DOES NOT, THEREFORE, CONSTITUTE THE INCOME FROM INCENTIVES IS, THEREFORE, NOT ALLOWED TO THE ASSESSEE. IT IS ALSO ABUNDANTLY CLEAR, THAT THE DEDUCTION CLAIMED U/S 80IB ON EXPORT INCENTIVES WAS NOT FALSE OR WAS WRONGLY COMPUTED OR WAS BASED ON WRONG DATA. IT WAS ONLY A QUESTION OF OPINION, AS TO WHETHER THE EXPORT INCENTIVES RECEIVED BY THE ASSESSEE IN THE SHAPE OF DUTY DRAW BACK WOULD BE ELIGIBLE FOR DEDUCTION WHILE COMPUTING DEDUCTION U/S 80IB. THIS MATTER WAS NOT FREE FROM DOUBT AND AT THAT RELEVANT TIME THERE WERE SEVERAL DECISIONS OF DIFFERENT HIGH COURTS CUTTING THE EDGE BOTH WAYS. IT WAS ONLY IN THE CASE OF LIBERTY INDIA, 317 ITR 218, DECISION DATED 31/08/2009 THAT FINALLY THE APEX COURT CONCLUDED THE MATTER AND HELD THAT DEDUCTION U/S 8QIB WAS NOT ALLOWABLE ON DUTY DRAW BACK SINCE IT WAS NOT DIRECTLY LINKED WITH THE ACTIVITY OF THE INDUSTRIAL UNDERTAKING. AS FAR AS THE TAXATION LAWS AMENDMENT ACT 2005 IS CONCERNED, THE SAME HAS BEEN HELD TO BE VIOLATIVE TO THE PROVISIONS OF LAW BECAUSE IT DIFFERENTIATES BETWEEN THE CLASS AND CATEGORIES OF THE EXPORTERS WHICH HAS BEEN HELD TO BE NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE GUJARAT HIGH COURT IN THE CASE OF AVANI EXPORTS VS. CIT AND OTHERS 348 ITR 391 (SUJ). HAS HELD AS UNDER: 'ON CONSIDERATION OF THE LEARNED MATERIALS ON RECORD, WE, THEREFORE FIND SUBSTANCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONER THAT THE IMPUGNED AMENDMENT IS VIOLATIVE FOR ITS RETROSPECTIVE OPERATION IN ORDER TO OVERCOME THE DECISION OF THE TRIBUNAL, AND AT THE SAME TIME, FOR DEPRIVING THE BENEFIT EARLIER GRANTED TO A CLASS OF THE :- 6 -: ASSESSEE WHOSE ASSESSMENT WERE STILL PENDING ALTHOUGH SUCH BENEFIT WILL BE AVAILABLE TO THE ASSESSEE WHOSE ASSESSMENTS HAVE ALREADY BEEN CONCLUDED. IN OTHER, WORDS IN THIS TYPE OF SUBSTANTIVE AMENDMENT, RETROSPECTIVE OPERATION CAN BE GIVEN ONLY IF IT IS FOR THE BENEFIT OF THE ASSESSEE BUT NOT IN A CASE WHERE IT EFFECTS EVEN A FEWER SECTION OF THE ASSESSEE. WE ACCORDINGLY, QUASH THE IMPUGNED AMENDMENT ONLY TO THIS EXTENT THAT THE OPERATION OF THE SAID SECTION COULD BE GIVEN EFFECT FROM THE DATE OF AMENDMENT AND NOT IN RESPECT OF THE EARLIER ASSESSMENT YEARS OF THE ASSESSEES WHOSE EXPORT TURNOVER IS ABOVE RS.10 CRORES, IN OTHER WORDS, THE RETROSPECTIVE AMENDMENT SHOULD NOT BE DETRIMENTAL TO ANY OF THE ASSESSEES. THE WRIT APPLICATIONS ARE, THUS, DISPOSED IN TERM OF THE ABOVE ORDER. IN THE FACTS AND CIRCUMSTANCES, THERE WILL BE, HOWEVER, NO ORDER AS TO COSTS.' AGAIN, THE BOMBAY HIGH COURT IN THE CASE OF VIJAY SILK HOUSE (BANGALORE) LTD. VS. UNION OF THE INDIA 257 CTR 67- DEDUCTION UNDER SECTION 80HHE CONSTITUTIONAL VALIDITY OF THIRD AND FOURTH PROVISOS TO S. 80HHC (3)- DISCRIMINATION AND RETROSPECTIVE OPERATION-AMENDMENT OF S. 80HHC(3) BY INSERTION OF CERTAIN CONDITIONS IN THE THIRD AND FOURTH PROVISOS THERETO WITH RETROSPECTIVE EFFECT BY TAXATION LAWS (SECOND AMENDMENT) ACT, 2005, IS VIOLATIVE OF ART. 14 OF THE CONSTITUTION AS IT DENIES THE BENEFIT OF DEDUCTION UNDER S. 80HHC TO THE CLASS OF ASSESSEES HAVING EXPORT TURNOVER OF MORE THAN RS. 10 CRORES WHOSE ASSESSMENTS WERE STILL PENDING WHILE ALLOWING SUCH CONCLUDED- IT IS ALSO INVALID FOR THE REASON THAT ITS RETROSPECTIVE OPERATION TAKES AWAY THE BENEFIT FROM ONE CLASS OF ASSESSEES- IMPUGNED AMENDMENT IS QUASHED TO THE EXTENT THAT THE OPERATION OF SECTION COULD BE GIVEN EFFECT FROM THE DATE OF AMENDMENT AND NOT IN :- 7 -: RESPECT OF EARLIER ASSESSMENT YEAR IN THE CASE OF ASSESSEE WHOSE EXPORT TURNOVER IS MORE THAN RS. 10 CRORE HAS HELD, THAT THE TAXATION LAWS AMENDMENT ACT 2005 ARE VIOLATIVE TO THE PROVISIONS OF LAW IN AS MUCH IT CANNOT BE APPLIED RETROSPECTIVELY. THE SAME IS TO BE APPLIED PROSPECTIVELY. OF LATE, THE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS, 344 ITR 49 HAS HELD THAT DEDUCTION U/S 80HHC IS AVAILABLE ON ALL EXPORT INCENTIVES, THUS PUTTING AT REST THE SPECULATION CREATED BY THE DEPARTMENT, THAT DEDUCTION U/S 80HHC WOULD ALSO NOT BE AVAILABLE ON THE EXPORT INCENTIVES. ADMITTEDLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO COULD NOT LAY HIS HANDS UPON ANY NEW SOURCE OF INCOME OTHER THAN THAT DECLARED BY THE ASSESSEE, NOT THERE IS ANY ADDITIONAL INCOME DISCOVERED BY THE AO, WHICH HAS BEEN ADDED TO THE INCOME DECLARED BY THE ASSESSEE. AT THE SAME TIME THERE IS NOTHING IN RECORD TO SUGGEST THAT THE ASSESSEE DID NOT DISCLOSE ITS ENTIRE INCOME OR FURNISHED INACCURATE PARTICULAR OF ITS INCOME. WHATEVER AGREED ADDITION HAS COME TO BE MADE, IS ONLY OUT OF THE INCENTIVES RECEIVED BY THE ASSESSEE IN RESPECT OF EXPORTS, WHICH RECEIPT OF INCENTIVES IS NOT IN DOUBT. IT IS A CASE WHERE THE DEDUCTION U/S 80IB HAS BEEN CLAIMED FOR WHICH THERE WAS ALL MATERIAL AVAILABLE WITH THE ASSESSEE WHICH WAS DULY DISCLOSED, IN THE SHAPE OF INCOME &. EXPENDITURE ACCOUNT AND IN THE AUDIT REPORTS FILED IN SUPPORT OF THE SAID CLAIM. IT IS OUT AND OUT, A CASE OF LEGAL DEDUCTION AND THE CLAIM OF THE ASSESSEE HAS BEEN DENIED ON ACCOUNT OF DIFFERENCE OF OPINION. BE IT MAY, THE BONAFIDE OF THE ASSESSEE ALSO CANNOT BE DOUBTED FOR THE REASON, THAT THE DEDUCTION CLAIMED U/S 80IB AND 80HHC WERE DULY SUPPORTED BY AUDIT REPORTS TO WHICH THE ASSESSEE WAS LEGALLY ENTITLED. NONE OF THE FACTS AND FIGURES IN RESPECT OF THE DEDUCTIONS HAVE BEEN FOUND TO BE FALSE OR UNTRUE. THE EXPLANATION GIVEN BY THE ASSESSEE THROUGHOUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE IS ELIGIBLE FOR THE SAID DEDUCTION IN :- 8 -: VIEW OF THE PROVISIONS OF THE SAID SECTION AND ALSO IN VIEW OF THE SEVERAL DECISIONS. IT IS ALSO AN ADMITTED FACT THAT BOTH DECISIONS OF RITESH INDUSTRIES LTD. AND TAXATION LAWS AMENDMENT ACT, 2005 CAME SUBSEQUENTLY TO THE FILING OF THE RETURN BY THE ASSESSEE. A SUBSEQUENT EVENT CANNOT FORM THE BASIS OF TREATING THE RETURN FILED EARLIER AS FALSE OR INCORRECT. THE DECISION OF APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD. 322 ITR 158 HAS HELD AS UNDER: S.271(1)(C) PENALTY CANNOT BE IMPOSED EVEN FOR ASKING UNSUSTAINABLE CLAIMS. THE ASSESSEE CLAIMED DEDUCTION U/S 36 (1) (III) FOR INTEREST PAID ON LOAN TAKEN FOR PURCHASE OF SHARES. THE AO DISALLOWED THE INTEREST U/S 14A AND LEVIED PENALTY U/S 271 (1) (C) ON THE GROUND THAT THE CLAIM WAS UNSUSTAINABLE. THE PENALTY WAS DELETED BY THE APPELLATE AUTHORITIES. ON APPEAL BY THE DEPARTMENT TO THE SUPREME COURT, HELD DISMISSING THE APPEAL: (I) S. 271 (1) (C) APPLIES WHERE THE ASSESSEE 'HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. THE PRESENT WAS NOT A CASE OF CONCEALMENT OF THE INCOME. AS REGARDS THE FURNISHING OF INACCURATE PARTICULARS, NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. THE WORDS 'INACCURATE PARTICULARS' MEAN THAT THE DETAILS SUPPLIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY U/S 271(1)(C). (II) THE ARGUMENT OF THE REVENUE THAT 'SUBMITTING AN INCORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING :- 9 -: INACCURATE PARTICULARS OF SUCH INCOME' IS NOT CORRECT. BY NO STRETCH OF IMAGINATION CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT .AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY U/S 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. (III) THE LAW LAID DOWN IN DILIP SHROFF 291 ITR 519 (SC) AS TO THE MEANINGS OF THE WORDS 'CONCEAL' AND 'INACCURATE' CONTINUES TO BE GOOD LAW BECAUSE WHAT WAS OVERRULED IN DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) WAS ONLY THAT PART IN DILIP SHROFF WHERE IT WAS HELD THAT MENSREA WAS AN ESSENTIAL REQUIREMENT FOR PENALTY U/S 271 (1)(C). CIT VS. MANJUNATHO COTTON & SINNING FACTORY 359 ITR 565 (KAR) THE HIGH COURT HAD TO CONSIDER WHETHER PENALTY U/S 271(1)(C) CAN BE LEVIED IN A CASE WHERE THE ASSESSEE AGREES TO AN ADDITION MADE BY THE AO SO AS TO BUY PEACE OF MIND. MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION DOES NOT LEAD TO THE INFERENCE THAT SAID ADDITION IS ON ACCOUNT OF CONCEALMENT IF THE ASSESSEE HAS OFFERED AN EXPLANATION WHICH IS NOT FOUND TO BE FALSE. THE MERE FACT THAT THE ASSESSEE AGREED TO PAY TAX AND DID NOT CHALLENGE THE ASSESSMENT ORDER DOES NOT MEAN THAT HIS CONDUCT IS MALA FIDE. THE HIGH COURT DISMISSING THE APPEAL FILED BY THE DEPARTMENT HELD (I) THAT MERELY BECAUSE THE ASSESSEE AGREED TO THE ADDITION AND THE ASSESSMENT ORDER WAS PASSED ON THE BASIS OF THIS ADDITION, WHEN THE ASSESSEE HAD PAID THE TAX AND THE :- 10 -: INTEREST THEREON IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THE CONCEALMENT OF INCOME, IT COULD BE INFERRED THAT THE ADDITION WAS ON ACCOUNT OF CONCEALMENT. AAOREOVER, THE ASSESSEE HAD OFFERED AN EXPLANATION. THE EXPLANATION WAS NOT FOUND TO BE FALSE. ON CONTRARY, IT WAS HELD TO BE BONA FIDE. THE CANCELATION OF PENALTY BY THE TRIBUNAL WAS JUSTIFIED. OF LATE THE MADRAS HIGH COURT HAS ONCE AGAIN EXPLAINED IN THE CASE OF CIT VS. M/S. GEM GRANITES (KARNATAKA) (MADRAS HIGH COURT) 'S. 271(1)(C) PENALTY CANNOT BE LEVIED IF THE ASSESSEE DISCHARGES THE PRIMARY BURDEN BY A COGENT EXPLANATION AND THE AO IS UNABLE TO REBUT IT- MAK DATA (5C) EXPLAINED. PURSUANT TO A SEARCH CONDUCTED U/S 132 IT WAS REVEALED THAT THE ASSESSEE HAD 'ON-MONEY TRANSACTIONS IN REAL ESTATE DEALINGS. THE ASSESSEE ACCEPTED THE 'ON-MONEY BUT CLAIMED THAT IT WAS TAXABLE ONLY ON COMPLETION OF THE PROJECTS UNDER THE 'COMPLETED CONTRACT METHOD. THE ASSESSEE'S CLAIM WAS REJECTED BY ALL THE AUTHORITIES INCLUDING THE HIGH COURT. IN THE S. 271(1)(C) PENALTY PROCEEDINGS, THE ASSESSEE CLAIMED THAT THERE WAS A MISTAKE-IN THE ENTRIES REGARDING THE SALE OF FLATS TO J.B. EXPORTS IN AS MUCH AS THE RATE AT WHICH THE PROPERTY WAS SHOWN AS SOLD TO THE SAID PARTY WAS MUCH HIGHER THAN THE RATE AT WHICH THE PROPERTY WAS SOLD TO OTHER PARTIES. THE AO AND CIT(A) REJECTED THE CLAIM BUT THE TRIBUNAL ACCEPTED IT ON THE BASIS THAT THE HUGE DIFFERENCE IN THE RATE OF SALE OF THE FLAT RECORDED IN OTHER CASES AND IN THE CASE OF J.B. EXPORTS SUPPORTED THE ASSESSEE'S CONTENTION THAT THERE MAY :- 11 -: BE A MISTAKE IN RECORDING THE RATE. IT HELD THAT AS THE DEPARTMENT HAD FAILED TO PROVE CONCEALMENT WITHOUT ANY DOUBT, PENALTY COULD NOT BE IMPOSED. ON APPEAL BY THE DEPARTMENT TO THE HIGH COURT, HELD DISMISSING THE APPEAL'. MERELY BECAUSE THE ASSESSMENT PROCEEDINGS HAVE BEEN CONFIRMED DOES NOT AUTOMATICALLY MEAN THAT PENALTY U/S 271(1)(C) IS JUSTIFIED. UNLESS THE CASE IS STRICTLY COVERED BY S. 271(1)(C), PENALTY CANNOT BE INVOKED. FOR SUSTAINING PENALTY, THE BONA FIDE EXPLANATION OF THE ASSESSEE MUST BE LOOKED AT SO THAT THE CONTUMACIOUS CONDUCT OF THE ASSESSEE FOR THE PURPOSE OF SUSTAINING THE PENALTY WOULD BE TAKEN AS CONDITION THAT IS THE MAIN REQUIREMENT U/S 271(1)(C). IN MAK DATA P. LTD VS. CTT THE SUPREME COURT HELD THAT WHEN A DIFFERENCE IS NOTICED BY THE AO BETWEEN THE REPORTED AND ASSESSED INCOME, THE EXPLANATION TO SECTION 271(1) RAISE A PRESUMPTION OF CONCEALMENT AND THE BURDEN IS ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION HAS BEEN DISCHARGED BY THE ASSESSEE, THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED UNDISCLOSED INCOME. ON FACTS, THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED BY GIVING A COGENT AND RELIABLE EXPLANATION. IF THE DEPARTMENT DID NOT AGREE WITH THE EXPLANATION, THE ONUS WAS ON THE DEPARTMENT TO PROVE THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. SUCH ONUS HAS NOT BEEN DISCHARGED BY THE DEPARTMENT AND SO THE TRIBUNAL'S FINDING CANNOT BE INTERFERED WITH (DHARMENDRA TEXTILE'S PROCESSORS 306 ITR 277 (SC) A RELIANCE PETROPRODUCTS 322 ITR 158 (SC) REFERRED) I HAVE ALSO GONE THROUGH THE COPIES OF THE ORDER SHEET ENTRIES AND FIND THAT THE AO HIMSELF HAS MENTIONED THAT PENALTY :- 12 -: PROCEEDINGS WOULD BE CONSIDERED LIBERALLY. THIS SHOWS THAT THE AO WAS NOT SERIOUS NEITHER IN INITIATING NOR LEVYING THE PENALTY. THE ORDER SHEET ENTRIES ALSO DO NOT SUGGEST THAT THE AO CAME ACROSS ANY SUCH INCRIMINATING MATERIAL OR CORNERED THE ASSESSEE, ATTRACTING THE PENALTY PROVISIONS. THE MERE FACT THAT THE ASSESSEE AGREED TO BE ASSESSED ON AN ADDITIONAL INCOME OF RS. 2 CRORES, AND THAT TOO ONLY ON ACCOUNT OF THE OUTCOME OF A DEBATABLE POSITION OF DEDUCTION, ALLOWABLE ON EXPORT INCENTIVES WITH REFERENCE TO DEDUCTION U/S 80IB, WOULD NOT INVITE PENAL ACTION. THE AGREED ADDITION IS NOT SUPPORTED BY ANY SPECIFIC DISCREPANCY DETECTED BY THE AO. FURTHER, ANY SPECIFIC MALAFIDE ON THE PART OF THE ASSESSEE IS ALSO NOT SUBSTANTIATED. THE REMAINING ADDITIONS I.E. OTHER THAN RS.2 CRORES ARE ALL RELATABLE TO LEGAL DEDUCTIONS AND DO NOT CALL FOR LEVY OF PENALTY ON THE VERY FACE OF IT. IT IS FURTHER NOTICED AND AS ARGUED BY THE AR, THAT THE PENALTY IMPOSED, IS BAD IN LAW FOR THE REASON THAT THE PENALTY HAS BEEN IMPOSED ON THE ENTIRE INCOME ASSESSED WHEREAS WITHOUT PREJUDICED THE EFFECTIVE INCOME WOULD BE RS.1 CRORE. (RS.2 CRORES SURRENDERED LESS RS.1 CRORE ALLOWED AS DEDUCTION U/S 80HHC). THE LEVY OF PENALTY ON THE ENTIRE ASSESSED INCOME IS MISCONCEIVED. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, SUBMISSIONS MADE BY AR AS WELL AS THE LEGAL PROPOSITIONS AS LAID DOWN BY VARIOUS DECISIONS OF THE APEX COURT, I AM OF THE CONSIDERED VIEW THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE EITHER TO CONCEAL THE PARTICULARS OF ITS INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME ATTRACTING THE PROVISIONS OF SECTION 271(1)(C), EVEN THE BONAFIDE AS PER THE EXPLANATION 1 TO SEC.271(L)(C) IS OBVIOUS AND APPARENT. ACCORDINGLY, THE PENALTY LEVIED U/S.271(L)(C) IS UNJUSTIFIED, HENCE STANDS DELETED. 5. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. D.R. HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE :- 13 -: LD. COUNSEL FOR THE ASSESSEE HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE LD. CIT(A). BESIDES, IT WAS ALSO CONTENDED THAT THE ASSESSEE HAS SURRENDERED AN AMOUNT OF RS2 CRORES WITH A CLEAR UNDERSTANDING THAT NO PENAL ACTION WOULD BE TAKEN. BUT THE ASSESSING OFFICER HAS PARTLY ACCEPTED THE SURRENDER LETTER OF THE ASSESSEE AND LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE JUDGMENT OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS. RAKESH KUMAR GUPTA IN I.T.A. NO. 2690/DELHI/2009, IN WHICH RELYING UPON THE SAID PROPOSITION THAT PENALTY UNDER SUCH CIRCUMSTANCES CANNOT BE LEVIED, THE TRIBUNAL HAS DELETED THE PENALTY. IT WAS FURTHER CONTENDED THAT THE ASSESSEE HAS FILED THE RETURN ON 1.12.2003 BEFORE THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RITESH INDUSTRIES LTD. (SUPRA) WHICH WAS PRONOUNCED ON 23.9.2004 AND THAT TOO BEFORE THE ENACTMENT OF THE TAX LAWS AMENDMENT ACT, 2005. IT WAS FURTHER CONTENDED THAT AT THE RELEVANT POINT OF TIME, THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. VIPIN SARDANAN (SUPRA) WAS AVAILABLE, IN WHICH DEDUCTION UNDER SECTION 80IB OF THE ACT WAS ALLOWABLE ON THE AMOUNT OF DUTY DRAWBACK, AS IT IS DIRECTLY LINKED WITH THE BUSINESS ACTIVITY OF THE INDUSTRIAL UNDERTAKING. THEREFORE, THERE WAS A CONFLICT OF OPINIONS WITH RESPECT TO THE ALLOWABLE DEDUCTION UNDER SECTION 80IB AND 80HHC OF THE ACT ON THE EXPORT INCENTIVES. THE POSITION WAS CLARIFIED SUBSEQUENTLY BY THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA). IT WAS FURTHER CONTENDED THAT NOW DEDUCTIONS UNDER SECTION 80HHC OF THE ACT ARE TO BE COMPUTED AS PER THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (SUPRA). THEREFORE, IN SUCH A CIRCUMSTANCES, PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED ON INACCURATE CALCULATIONS OF DEDUCTION UNDER SECTION 80IB AND 80HHC OF THE ACT. :- 14 -: 6. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ISSUE OF DEDUCTION UNDER SECTION 80IB AND 80HHC OF THE ACT ON EXPORT INCENTIVE WAS DEBATABLE. VARIOUS BENCHES OF THE TRIBUNAL HAVE TAKEN A CONTRARY VIEW; RATHER THERE WAS A CONFLICT IN THE VIEW OF DIFFERENT HIGH COURTS. THE CONTROVERSY IN THIS REGARD WAS SET AT REST BY THE HON'BLE APEX COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA). BUT BEFORE THIS JUDGMENT, THE ISSUE WAS HIGHLY DEBATABLE AND THEREFORE ON A DEBATABLE ISSUE PENALTY SHOULD NOT BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT, AS THE CLAIM OF DEDUCTION WAS MADE ON THE BASIS OF A BONA FIDE BELIEF AFTER RELYING UPON CERTAIN JUDGMENTS OF THE TRIBUNAL/HIGH COURTS. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED. WE HAVE ALSO CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) AND WE FIND THAT THE LD. CIT(A) HAS ADJUDICATED THE ISSUE IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS OF THE APEX COURT AND VARIOUS HIGH COURTS. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), WE CONFIRM HIS ORDER DELETING THE PENALTY. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH AUGUST, 2015 JJ:1708 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) :- 15 -: 4. CIT 5. DR ASSISTANT REGISTRAR