The ACIT, Central Circle-1(1), Ahmedabad V. Shri Vijaykumar D.Gupta, Ahmedabad

ITA 3426/AHD/2010

• Counselvise Citation: 342620514 RSA 2010
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-09-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 27-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Question of law; Difference of opinion; Unabsorbed depreciation
• Section: 143(3); 80HHC; 115JB; 10B

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH .. , , , , , , , , ! ! ! ! . .. . . .. .'#$% '#$% '#$% '#$%, , , , & & & & ' ' ' ' BEFORE S/SHRI T.K. SHARMA, JUDICIAL MEMBER AND A.K. GARODIA , ACCOUNTANT MEMBER ITA NO. APPELLANT RESPONDENT 3424/AHD/2010 A.Y.2003-2004 ACIT, CENT.1(1) AHMEDABAD. VS. GUJARAT AMBUJA EXPORTS LTD. AMBUJA TOWER OPP: MEMNAGAR FIRE STATION NAVRANGPURA, AHMEDABAD. PAN AAACG 3980 A 3425/AHD/2010 A.Y. 1995-1996 ACIT, CENT.1(1) AHMEDABAD. VS. SMT.SULOCHANA GUPTA 8, PRATIMA SOCIETY, NR. DADASAHEBS PAGLA NAVRANGPURA, AHMEDABAD. PAN ADHPG 1324 P 3426/AHD/2010 A.Y. 1995-1996 ACIT, CENT.1(1) AHMEDABAD. VS. SHRI VIJAYKUMAR D. GUPTA 8, PRATIMA SOCIETY, NR. DADASAHEBS PAGLA NAVRANGPURA, AHMEDABAD. PAN AANPG 7703 R 3427/AHD/2010 A.Y. 1997-1998 ACIT, CENT.1(1) AHMEDABAD. VS. SHRI VIJAYKUMAR D. GUPTA 8, PRATIMA SOCIETY, NR. DADASAHEBS PAGLA NAVRANGPURA, AHMEDABAD. PAN AANPG 7703 R ( ) * / REVENUE BY : SHRI VINOD TANWANI , -. ) * / ASSESSEE BY : SHRI TUSHAR HEMANI /,0 ) .&/ DATE OF HEARING : 14 TH OCTOBER, 2011 1#2 ) .&/ DATE OF PRONOUNCEMENT : 25 TH OCTOBER, 2011 / O R D E R 3424, 3425, 3426 AND 3427/AHD/2010 -2- PER A.K. GARODIA, ACCOUNTANT MEMBER : ALL THESE FOUR APPEALS ARE FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-I, AHMEDABAD DATED 18.10.20 10 IN FOUR DIFFERENT BUT CONNECTED CASES FOR A.Y.2003-2004 IN THE CASE OF GUJARAT AMBUJA EXPORTS LTD., A.Y. 1995-1996 IN THE CASE OF SMT.SULOCHANA G UPTA AND IN THE CASE OF SHRI VIJAYKUMAR D. GUPTA FOR A.Y.1995-96 AND 1997-9 8. SINCE ISSUE RAISED IN ALL THESE APPEALS IS COMMON, FOR THE SAKE OF CONVEN IENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. 2. IN ALL THESE APPEALS, THE ONLY COMMON GRIEVANCE RAISED BY THE REVENUE IS REGARDING DELETION OF PENALTY UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT IMPOSED BY THE AO. HENCE, WE REPRODUCE THE GROUND OF APPEAL AS RAISED IN ITA NO.3424/AHD/2010 FOR A.Y.2003-2004 IN THE CASE OF THE COMPANY AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.69,13,790/- LEVIED U/S.271(1)(C) OF T HE ACT. 3. IN THE CASE OF THE COMPANY, M/S.GUJARAT AMBUJA E XPORTS LTD., FOR A.Y.2003-2004, THE RETURN OF INCOME WAS FILED BY TH E ASSESSEE DECLARING THE TOTAL INCOME OF RS.NIL AND IN THE ASSESSMENT ORDER, THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.NIL BUT THE BOOK PROFIT UNDER SE CTION 115JB OF THE IT ACT WAS ASSESSED AT RS.4,71,16,061/-. FOR DOING SO, TH E AO HAS DISALLOWED DEDUCTION OF RS.8,57,760/- CLAIMED BY THE ASSESSEE UNDER SECTION 35D AND REDUCED THE CLAIM UNDER SECTION 10B TO RS.7,25,68,8 00/- AS AGAINST THE CLAIM OF RS.7,91,17,830/- AND NO DEDUCTION WAS ALLOWED BY T HE AO UNDER SECTION 80HHC AGAINST CLAIM OF RS.1,63,10,271/-. ALTHOUGH THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.NIL, AFTER ALLOWING SET OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF EARLIER YEAR, BUT IT HAS RESULTED INTO CARRY FORWARD OF LESSER AMOUNT OF SUCH BROUGHT FORWARD UNABSORBED DE PRECIATION. THE AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) AND IMPOSED PENALTY OF 3424, 3425, 3426 AND 3427/AHD/2010 -3- RS.69,13,790/-. AGAINST THE PENALTY, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO DELETED THE PENALTY AND NOW THE REVENUE IS IN APPEAL BEFORE US. 4. IN THE CASE OF SMT.SULOCHANA GUPTA FOR A.Y.1995- 1996, THE FACTS ARE THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE DECLARING A TOTAL INCOME OF RS.38,042/- BUT THE ASSESSMENT WAS COMPLETED BY THE AO UNDER SECTION 143(3) OF THE ACT ON 30-3-1998 BY ASSESSING INCOME AT RS.7 9,24,930/-. FOR DOING SO, THE AO MADE THE DISALLOWANCE OF INTEREST CLAIMED ON FUNDS ADVANCED BY THE ASSESSEE TO GUJARAT AMBUJA COTSPIN LTD. (GACL FOR SHORT) OF RS.28,60,274/- AND HE ALSO MADE DISALLOWANCE OF LOSS IN TRANSACTIO N OF SHARES OF GACL OF RS.40,75,900/- AND MADE ADDITION ON ACCOUNT OF PROF IT ON SALE OF SHARES OF RS.9.48 LAKHS. FOR ALL THE THREE ISSUES, THE AO IN ITIATED PENALTY PROCEEDINGS. IT IS NOTED BY THE AO IN PENALTY ORDER THAT AGAINST TH ESE TWO ADDITIONS OF RS.28,60,274/- AND RS.40,75,900/-, THE ASSESSEE WEN T IN APPEAL BEFORE THE LEARNED CIT(A) WHO DELETED THE DISALLOWANCES. BUT ON FURTHER APPEAL, THE TRIBUNAL HAS REVERSED THE ORDER OF THE CIT(A) AND C ONFIRMED THE ASSESSMENT ORDER ON ACCOUNT OF DISALLOWANCE OF INTEREST ON FUN DS ADVANCED BY THE ASSESSEE TO GACL OF RS.28,60,274/-. IN THE MEANTIME, TH E AO INITIATED PENALTY PROCEEDINGS AND IN THE PENALTY ORDER PASSED ON 29.5 .2009, HE IMPOSED THE PENALTY OF RS.14,98,310/- IN RESPECT OF TWO ADDITIO NS I.E. RS.28,60,274 ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIMED ON FUND S ADVANCED TO GACL AND PROFIT ON SALE OF SHARES OF RS.9,48,000/- TOTALING TO RS.38,08,274/-. AGAINST THIS PENALTY ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) WHO DELETED THE PENALTY AS PER THE IMPUGNED ORDER AGAIN ST WHICH NOW THE REVENUE IS IN APPEAL BEFORE US. 5. IN THE THIRD CASE, I.E. IN THE CASE OF SHRI VIJA YKUMAR D. GUPTA FOR A.Y.1995-96, THE RETURN OF INCOME WAS FILED BY THE ASSESSEE DISCLOSING TOTAL INCOME AT RS.8,39,600/-. IN THAT CASE, THE ASSESSM ENT WAS COMPLETED BY THE AO UNDER SECTION 143(3) AS PER THE ASSESSMENT ORDER DA TED 30-3-1998 AT RS.1,72,11,640/- AND FOR DOING SO, HE MADE DISALLO WANCE OF INTEREST CLAIMED 3424, 3425, 3426 AND 3427/AHD/2010 -4- BY THE ASSESSEE ON FUNDS ADVANCED TO GACL OF RS.2 8,60,274/- AND HE ALSO MADE DISALLOWANCE OF INTEREST CLAIM FOR INVESTMENT IN SHARES OF GACL IN THE NAME OF POOJA FREIGHT AND CARRIERS LTD., AMOUNTING TO RS.42,90,411/- AND ALSO MADE DISALLOWANCE OF INTEREST ON FUNDS BORROWED FOR INVESTMENT BY WAY OF SHARE APPLICATION MONEY IN POOJA FREIGHT & CARRIERS P. LTD. AGAINST THESE ADDITIONS, THE ASSESSEE WENT IN APPEAL BEFORE THE L EARNED CIT(A) WHO DELETED THE DISALLOWANCES MADE BY THE AO. BUT ON FURTHER A PPEAL BY THE REVENUE, THE TRIBUNAL REVERSED THE ORDER OF THE LEARNED CIT(A) O N ALL THREE ISSUES AND CONFIRMED THE ASSESSMENT ORDER ON THESE ISSUES. I N THE MEANWHILE, THE AO INITIATED THE PENALTY PROCEEDINGS AND IMPOSED PENAL TY OF RS.63,09,750/- . AGAINST THE PENALTY ORDER ALSO, THE ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE CIT(A) AND HE DELETED THE PENALTY AS PER THE IM PUGNED ORDER AND NOW THE REVENUE IS IN APPEAL BEFORE US. 6. SIMILAR IS THE CASE FOR THE ASSESSMENT YEAR 1997 -98 IN THE CASE OF THE SAME ASSESSEE WHEREIN THE RETURN OF INCOME WAS FILE D BY THE ASSESSEE DECLARING TOTAL LOSS OF RS.48,61,877/-, BUT THE ASSESSMENT WA S COMPLETED BY THE AO ON 8- 3-2000 ASSESSING THE INCOME OF THE ASSESSEE AT A NE T LOSS OF RS.11,91,128/-. FOR DOING SO, THE AO HAD MADE THE DISALLOWANCE OF INTER EST CLAIM OF RS.36,70,749/- ON SIMILAR BASIS AS IN A.Y.1995-96. AGAINST THIS D ISALLOWANCE OF INTEREST, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A) AND IN THIS YEAR ALSO, THE CIT(A) DELETED THE DISALLOWANCE. BUT ON FURTHE R APPEAL BY THE REVENUE, THE TRIBUNAL REVERSED THE ORDER OF THE CIT(A) IN TH IS YEAR ALSO AND CONFIRMED THE ASSESSMENT ORDER. IN THE MEANWHILE, THE AO INI TIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND IMPOSED PENA LTY OF RS.14,31,300/- . AGAINST THE PENALTY ORDER, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE CIT(A) FOR THIS YEAR ALSO AND AS PER THE COMBINED IMPUGNED ORDER OF THE LEARNED CIT(A) FOR A.Y.1995-96 AND 1997-98 HE DELETED THE P ENALTY IN THIS YEAR ALSO AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 3424, 3425, 3426 AND 3427/AHD/2010 -5- 7. IT WAS SUBMITTED BY THE LEARNED DR OF THE REVENU E THAT IN ALL THE CASES, THE PENALTY WAS WRONGLY DELETED BY THE LEARNED CIT( A) ON THE BASIS THAT THE CLAIM OF THE ASSESSEE WAS ALLOWED BY THE CIT(A) BUT THAT ORDER OF THE CIT(A) WAS REVERSED BY THE TRIBUNAL AND HENCE, IT IS A FAC T THAT MORE THAN ONE VIEWS IS POSSIBLE REGARDING ALLOWABILITY OF INTEREST AND THE REFORE, THE PENALTY WAS DELETED. IT WAS SUBMITTED BY HIM THAT WHEN THE DISA LLOWANCE WAS CONFIRMED BY THE TRIBUNAL AFTER REVERSING THE ORDER OF THE LEARN ED CIT(A), THE PENALTY WAS RIGHTLY IMPOSED BY THE AO AND THE SAME SHOULD BE CO NFIRMED. AS AGAINST THIS, IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSE SSEE THAT IN THE PRESENT CASE, IN THE QUANTUM PROCEEDINGS, THE TRIBUNAL HAS FOLLOW ED ITS DECISION IN QUANTUM PROCEEDINGS IN THE CASE OF DCIT VS. M/S.PRAMUKH OXY GEN PVT. LTD., ITA NO.3939/AHD/2002 AND 1936/AHD/2001 FOR A.Y.1996-97 TO 1998-99 AND DISALLOWANCE OF INTEREST IN THE PRESENT CASE IS CON FIRMED. IT WAS SUBMITTED BY HIM THAT IT SHOWED THAT THE FACTS IN THE PRESENT CA SE AND IN THE CASE OF PRAMUKH OXYGEN PVT. LTD. (SUPRA) ARE IDENTICAL. HE FURTHER SUBMITTED THAT IN THE CASE OF PRAMUKH OXYGEN PVT. LTD. ALSO, PENALTY WAS IMPOSED BY THE AO UNDER SECTION 271(1)(C) AND IN THAT CASE, THE PENALTY WAS DELETED BY THE LEARNED CIT(A) AND THE MATTER WAS CARRIED TO THE TRIBUNAL BY THE REVEN UE. HE SUBMITTED COPY OF THE TRIBUNAL ORDER IN THE CASE OF PRAMUKH OXYGEN PV T. LTD. (SUPRA) FOR A.Y.1996-97 TO 1998-99 IN ITA NO.594 TO 596/AHD/200 7 DATED 20.11.2007. HE SUBMITTED THAT THE SAID COMPANY LATER ON WAS AMA LGAMATED WITH M/S.AIM INDUSTRIES LTD., AND THEREFORE, THE ORDER OF THE TR IBUNAL, IN THAT CASE IS IN THE NAME OF AIMS INDUSTRIES LTD. IT IS STATED IN THE O RDER OF THE TRIBUNAL THAT THIS COMPANY WAS FORMERLY KNOWN AS M/S.PRAMUKH OXYGEN PV T. LTD. HE SUBMITTED THAT IN THAT CASE, THE PENALTY WAS DELETED BY THE T RIBUNAL AND HENCE BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, THE PENALTY SHOULD BE DELETED IN THE PRESENT CASES ALSO BECAUSE IN THE PRESENT CASE ALSO, THE FACTS ARE SIMILAR AND BY FOLLOWING THE TRIBUNAL ORD ER IN QUANTUM PROCEEDINGS, IN THE CASE OF PRAMUKH OXYGEN PVT. LTD., THE DISALL OWANCE WAS CONFIRMED BY THE TRIBUNAL IN QUANTUM PROCEEDINGS OF THE PRESENT CASES. IT WAS FURTHER 3424, 3425, 3426 AND 3427/AHD/2010 -6- SUBMITTED THAT EVEN OTHERWISE, ALSO NO PENALTY IS J USTIFIED BECAUSE IN THE QUANTUM PROCEEDINGS, AS THE ASSESSEE HAS PREFERRED APPEAL IN THE HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL AND THE HIGH COUR T HAS ADMITTED THE APPEAL AND IS PENDING FOR FINAL HEARING, AS PER THE HIGH C OURTS ORDER AVAILABLE ON RECORD AT PAGE NOS.125 TO 126 OF THE PB. HE PLACED RELIANCE ON THE DECISIONS OF THE TRIBUNAL RENDERED IN THE CASE OF RUPAM MERCANTI LE LTD. VS. DCIT, 91 ITD 237 (TM), AHMEDABAD IN SUPPORT OF HIS CONTENTION TH AT ONCE THE TAX APPEAL IS ADMITTED ON THE GROUND OF SUBSTANTIAL QUESTION OF L AW, NO PENALTY CAN BE LEVIED. IT WAS FURTHER SUBMITTED THAT AS PER THE DECISION O F THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS P.LTD., 322 ITR 158, WHERE THE ASSESSEE FURNISHED ALL THE DETAILS OF EXPENDITURE AS WELL AS ITS INCOME IN THE RETURN OF INCOME AND WHERE THE DETAILS WERE NOT FOUND TO BE I NACCURATE, IT COULD NOT BE TREATED AS CONCEALMENT OF INCOME AND MERELY BECAUSE THE ASSESSEE HAS CLAIMED AN EXPENDITURE AND SUCH CLAIM WAS NOT ACCEPTED OR W AS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT ATTRACT THE PENALT Y UNDER SECTION 271(1)(C). IT WAS SUBMITTED BY THE LEARNED COUNSEL THAT IN THE PR ESENT CASES ALSO, ALL THE FACTS WERE DULY DISCLOSED BY THE ASSESSEE AND THE SAME WE RE NOT FOUND TO BE FALSE OR INACCURATE AND THEREFORE, AS PER THIS JUDGMENT OF T HE HONBLE APEX COURT, NO PENALTY IS JUSTIFIED IN THE PRESENT CASES. 8. REGARDING DELETION OF PENALTY IN THE CASE OF GA CL, IT WAS SUBMITTED THAT THE LEARNED CIT(A) HAS DELETED THE PENALTY ON THE BASIS THAT THERE WAS ENHANCEMENT OF BOOK PROFIT BY THE LEARNED CIT(A) IN QUANTUM PROCEEDINGS AND IN THAT ORDER OF THE LEARNED CIT(A), NO PENALTY PRO CEEDINGS HAD BEEN INITIATED ON THE ENHANCEMENT OF THE BOOK PROFIT AND THEREFORE , NO PENALTY IS LEVIABLE WITH REGARD TO THE ENHANCEMENT OF THE BOOK PROFIT BY THE LEARNED CIT(A). IT IS ALSO SUBMITTED THAT THE LEARNED CIT(A) HAS ALSO FOLLOWED THE JUDGMENT RENDERED IN THE CASE OF CIT VS. LAKHDIR LALJI, 85 ITR 77 (GUJ). 9. REGARDING DISALLOWANCE UNDER SECTION 35D, EXEMPT ION UNDER SECTION 10B AND REJECTION OF CLAIM OF DEDUCTION UNDER SECTI ON 80HHC, IT IS HELD BY THE 3424, 3425, 3426 AND 3427/AHD/2010 -7- LEARNED CIT(A) THAT COMPLETE DISCLOSURE WAS MADE BY THE ASSESSEE AND THEREFORE, NO CASE WAS MADE OUT REGARDING CONCEALME NT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D THE JUDGMENTS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN TWO INDIVIDU AL CASES VIZ. SMT. SULOCHNA GUPTA FOR A.Y.1995-96 AND SHRI VIJAYKUMAR D. GUPTA FOR A.Y.1995-96 AND A.Y.1997-98, THE PENALTY WAS LEVIED BY THE AO ON AC COUNT OF DISALLOWANCE OF INTEREST. IN QUANTUM PROCEEDINGS, SUCH DISALLOWANC E OF INTEREST WAS DELETED BY THE LEARNED CIT(A) IN BOTH THE CASES. BUT THE TRIB UNAL REVERSED THE ORDER OF THE LEARNED CIT(A) IN QUANTUM PROCEEDINGS AND RESTORED THE ASSESSMENT ORDER REGARDING THE DISALLOWANCE OF INTEREST BY FOLLOWING THE TRIBUNAL DECISION IN THE CASE OF M/S.PRAMUKH OXYGEN PVT. LTD (SUPRA). IN TH AT CASE ALSO, THE PENALTY WAS LEVIED BY THE AO UNDER SECTION 271(1)(C) AND TH E SAME WAS DELETED BY THE LEARNED CIT(A) IN THAT CASE ALSO AGAINST WHICH, THE REVENUE WAS IN APPEAL BEFORE THE TRIBUNAL. IN THAT CASE ALSO, THE TRIBUN AL CONFIRMED THE ORDER OF THE LEARNED CIT(A) REGARDING THE DELETION OF PENALTY. I N THAT CASE ALSO, PENALTY WAS DELETED BY THE TRIBUNAL ON THE BASIS THAT THE CIT(A ) HAS OBSERVED THAT THE PRIMARY FACTS HAVE BEEN DISCLOSED BY ASSESSEE AND T HE CONTROVERSY HAS ARISEN BECAUSE OF THE DIFFERENCE OF OPINION DRAWN ON SIMIL AR SET OF FACTS. IT IS ALSO NOTED BY THE TRIBUNAL IN THAT CASE THAT THE DIFFERE NCE OF OPINION WAS ALSO REFERRED TO THE HIGH COURT AND IN THESE CIRCUMSTANC ES, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT IT IS NOT A FIT CASE FOR IMPOSITION FOR PENALTY FOR CONCEALMENT. IN THE PRESENT CASES ALSO, FINDING IS GIVEN BY THE LEA RNED CIT(A) THAT IN THE PRESENT CASES, AT THE MOST, IT IS THE CASE WHERE THE EXPLAN ATION OFFERED BY THE ASSESSEE IS NOT ACCEPTED BY THE REVENUE AUTHORITY, BUT THE SAME HAD NOT BEEN FOUND TO BE FALSE BY ANY OF THE AUTHORITIES. HE HAS ALSO GIVEN A FINDING THAT IT IS A CASE WHERE THE ASSESSEE HAS GIVEN THE EXPLANATION WHICH IS DISBELIEVED BY THE REVENUE AUTHORITY BUT THE EXPLANATION SO GIVEN WAS NOT FOUND TO BE FALSE. IN THE PRESENT CASES ALSO, THE QUESTION OF LAW HAD BEEN AD MITTED BY THE HONBLE 3424, 3425, 3426 AND 3427/AHD/2010 -8- GUJARAT HIGH COURT AND HENCE, AS PER THE DECISION O F THE TRIBUNAL IN THE CASE OF RUPAM MERCANTILE LTD. (SUPRA), PENALTY IS NOT JUSTI FIED. UNDER THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE LEARN ED CIT(A) HAD RIGHTLY HELD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT BECAUSE ALL THE NECESSARY FACTS WERE DISCLOSED BY T HE ASSESSEE AND EXPLANATION WAS ALSO GIVEN BY THE ASSESSEE WHICH WAS SIMPLY NOT ACCEPTED BY THE REVENUE, BUT NOT FOUND TO BE FALSE OR INACCURATE. THEREFORE , BY RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL RENDERED IN THE CASE O F PRAMUKH OXYGEN PVT. LTD. (SUPRA), NOW AMALGAMATED WITH AIMS INDUSTRIES LTD., WE DECLINE TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) REGARDING DELE TION OF PENALTY IN THE CASE OF THESE TWO INDIVIDUALS I.E. SMT. SULOCHANA GUPTA FOR A.Y.1995-96 AND IN THE CASE OF SHRI VIJAYKUMAR D. GUPTA FOR A.Y.1995-96 AN D 1997-98. 11. NOW, WE TAKE UP THE CASE OF COMPANY, I.E. GUJAR AT AMBUJA EXPORTS LTD. IN THIS CASE, THE PENALTY WAS DELETED BY THE LEARNE D CIT(A) VIDE PARA 8 TO 8.2 OF THE IMPUGNED ORDER, WHICH IS REPRODUCED BELOW: 8. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT, FACTS OF THE CASE AND GONE THROUGH THE CASE LAWS RELIED BY THE L D. AR. IN THE PRESENT PENALTY ORDER UNDER APPEAL, THE PENALTY HAS BEEN LE VIED ON THE ENHANCEMENT MADE TO THE BOOK PROFIT, THE ENHANCEMEN T HAS BEEN MADE BY CIT(A)-VIII, AHMEDABAD IN THE APPELLATE ORDER AG AINST ORDER U/S. 143(3) OF THE ACT. HOWEVER, I FIND THAT IN THE APPE LLATE ORDER, NO PENALTY PROCEEDING HAS BEEN INITIATED ON THE ENHANCEMENT OF BOOK PROFIT. THE LAW IS WELL SETTLED THAT THE AUTHORITY, WHICH IS AD DING THE INCOME HAS TO RECORD A SATISFACTION TO THE EFFECT THAT PENALTY IS REQUIRED TO BE LEVIED. IN ABSENCE OF SUCH SATISFACTION AND ANY MENTION OF INI TIATION OF PENALTY IN THE APPELLATE ORDER MAKING ENHANCEMENT IN BOOK PROF IT, PENALTY IS NOT LEVIABLE THIS VIEW IS DIRECTLY SUPPORTED BY THE DEC ISION OF THE JURISDICTIONAL HIGH COURTS IN THE CASE OF LAKHDHIR LALJI, 185 ITR 77 (GUJ), WHEREIN, IT WAS HELD THAT WHEN THE VERY BASIS OF QU ANTUM ADDITION UNDERGOES A CHANGE, THE INITIATION OF PENALTY MADE AGAINST THE OLD BASIS OF QUANTUM ADDITION IS NOT GOOD ENOUGH FOR THE PURP OSE OF LEVYING PENALTY ON THE CHANGED BASIS OF QUANTUM ADDITION. A CCORDINGLY, ON A CONSIDERATION OF THE FACTS ON RECORDS, THE CONTENTI ONS MADE AND THE DECISIONS CITED, I HOLD THAT IT IS NOT A FIT CASE F OR LEVY OF PENALTY AS NO PENALTY PROCEEDING IS INITIATED BY THE CIT(A)-VIII, AHMEDABAD, ON ENHANCED BOOK PROFIT, THEREFORE, THE PENALTY LEVIED U/S. 271(1)(C) ON 3424, 3425, 3426 AND 3427/AHD/2010 -9- ACCOUNT OF ENHANCEMENT OF BOOK PROFIT IS DIRECTED T O BE CANCELLED. 8.1 IN CONNECTION TO THE DISALLOWANCE U/S. 35D, RE DUCTION IN EXEMPTION U/S. 10B AND REJECTION OF CLAIM U/S. 80HH C, IN THE FACTS OF THE PRESENT CASE, COMPLETE DISCLOSURE AS TO THE CLAIM O F DEDUCTION UNDER SECTION 35D, 10B AND 80HHC OF THE ACT WERE MADE AND THEREFORE, NO CASE IS MADE OUT IN SO FAR AS CONCEALMENT OR FURNIS HING OF INACCURATE PARTICULARS ARE CONCERNED. IN ORDER TO LEVY PENALTY UNDER SECTION 271(1)(C) UNDER SUCH CIRCUMSTANCES, ONE HAS TO LOOK AT EXPLANATION 1 TO THE SAID SECTION. UNDER THE SCHEME OF THE ACT, THE SAID EXPLANATION 1 GETS ATTRACTED ONLY WHEN AN ASSESSEE FAILS TO SUBSTANTIA TE ITS CLAIM OF EXPENDITURE OR THE EXPLANATION GIVEN BY THE ASSESSE E IS FOUND TO BE FALSE. HOWEVER, WHEN THE EXPLANATION GIVEN BY THE ASSESSEE IS SIMPLY NOT ACCEPTED BY THE REVENUE, THE SAME CANNOT BE MADE A GROUND FOR LEVYING THE PENALTY. IN THE FACTS OF THE PRESENT CASE, AT T HE MOST, IT IS A CASE WHERE THE EXPLANATION OFFERED BY ASSESSEE IS NOT ACCEPTED BY THE REVENUE AUTHORITIES. HOWEVER, THE SAME HAS NOT BEEN FOUND T O BE FALSE BY ANY OF THE AUTHORITIES. THIS IS A SITUATION WHERE AN ASSES SEE HAS GIVEN AN EXPLANATION, WHICH IS DISBELIEVED BY THE REVENUE AU THORITIES BUT THE EXPLANATION SO GIVEN IS NOT FOUND TO BE FALSE. 8.2 AS THE APPELLANT HAS DISCLOSED THE FACTS REGARD ING CLAIM OF EXPENDITURE IN THE STATEMENT OF INCOME AND IN PROFI T & LOSS ACCOUNT, THERE IS NO NON-DISCLOSURE OF FACTS AND THERE IS NO QUESTION OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS BASICALL Y A REJECTION OF CLAIM OF THE APPELLANT AND IS A DEBATABLE ISSUE. AFTER THE D ECISION OF THE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD . (322 ITR 158), THERE IS VERY LITTLE SCOPE FOR LEVYING PENALTY MERELY BEC AUSE AN EXPENDITURE OR CLAIM THEREOF HAS BEEN DISALLOWED. ACCORDINGLY, ON A CONSIDERATION OF THE FACTS ON RECORDS, THE CONTENTIONS MADE AND THE DECISIONS CITED, I HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY ON AC COUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME, THEREFORE, THE PE NALTY LEVIED U/S. 271(1)(C) ON ACCOUNT OF DISALLOWANCE U/S. 35D, REDU CTION IN EXEMPTION U/S. 10B AND REJECTION OF CLAIM U/S.80HHC IS DIRECT ED TO BE CANCELLED. 12. IN THE ABOVE PARAS OF THE ORDER OF THE LEARNED CIT(A), WE FIND THAT THE FIRST OBSERVATION OF THE LEARNED CIT(A) WAS THAT TH ERE WAS ENHANCEMENT MADE BY THE LEARNED CIT(A) IN THE QUANTUM PROCEEDINGS RE GARDING BOOK PROFIT, BUT NO PENALTY PROCEEDINGS HAD BEEN INITIATED ON THE EN HANCEMENT OF THE BOOK PROFIT. HE ALSO STATED THAT LAW IS WELL SETTLED TH AT THE AUTHORITY, WHICH IS ADDING THE INCOME HAS TO RECORD A SATISFACTION TO THE EFFE CT THAT THE PENALTY IS REQUIRED TO BE LEVIED. IN THE ABSENCE OF SUCH SATISFACTION AND ANY MENTION OF INITIATION 3424, 3425, 3426 AND 3427/AHD/2010 -10- OF PENALTY IN THE APPELLATE ORDER MAKING ENHANCEMEN T IN BOOK PROFIT, PENALTY IS NOT LEVIABLE. IN THE PENALTY ORDER OF THE COMPANY, WE FIND THAT THE AO HAS LEVIED PENALTY OF RS.69,13,790/- BEING 7.5% OF THE TAX ALONG WITH SURCHARGE ON BOOK PROFIT WHICH WAS ENHANCED BY THE LEARNED CIT(A ) BY RS.8,77,94,182/-. IN VIEW OF THIS FINDING OF THE LEARNED CIT(A) IN PARA- 8 OF HIS ORDER, WHICH COULD NOT BE CONTROVERTED BY THE LEARNED DR OF THE REVENU E, WE ARE OF THE CONSIDERED OPINION THAT NO PENALTY IS JUSTIFIED IN RESPECT OF ENHANCEMENT OF BOOK PROFIT BY THE LEARNED CIT(A). IN ADDITION TO THIS, THERE IS AN ADDITION OF RS.178.84 LAKHS IN NORMAL INCOME ALSO AND THIS ADDITION IS ON ACCOU NT OF DISALLOWANCE UNDER SECTION 35D, REDUCTION IN EXEMPTION UNDER SECTION 1 0B AND REJECTION OF CLAIM UNDER SECTION 80HHC. REGARDING THESE THREE ADDITIO NS, PENALTY HAS BEEN DELETED BY THE LEARNED CIT(A) ON THE BASIS THAT THE EXPLANATION-1 TO SECTION 271(1)(C) GETS ATTRACTED ONLY WHEN THE ASSESSEE FAI LED TO SUBSTANTIATE ITS CLAIM TO EXPLAIN OR THE EXPLANATION GIVEN BY THE ASSESSEE WERE FOUND TO BE FALSE. BUT WHEN THE EXPLANATION GIVEN BY THE ASSESSEE IS SIMPL Y NOT ACCEPTED BY THE REVENUE, THE SAME CANNOT BE MADE A GROUND FOR LEVY OF PENALTY. HE HAS FURTHER HELD THAT IN THE PRESENT CASE, AT THE MOST, IT IS A CASE WHERE THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT ACCEPTED BUT THE SAME HAS NOT BEEN FOUND TO BE FALSE BY ANY OF THE AUTHORITIES. HE H AS DELETED THE PENALTY WITH REGARD TO THESE THREE DISALLOWANCE ON THIS BASIS AN D SAME COULD NOT BE CONTROVERTED BY THE LEARNED DR OF THE REVENUE AND T HEREFORE, IN THE PRESENT CASE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) REGARDING DELETION OF PENALTY IN THE CASE OF THE COMPANY ALSO. 13. IN THE RESULT, ALL THE FOUR APPEALS OF THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( .. /T.K. SHARMA ) /JUDICIAL MEMBER ( . .. . . .. .'#$% '#$% '#$% '#$% /A.K. GARODA) & & & & /ACCOUNTANT MEMBER 3424, 3425, 3426 AND 3427/AHD/2010 -11- C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD