The ACIT, Circle-8, Ahmedabad V. M/s. Torrent Pharmaceuticals Ltd., Ahmedabad

ITA 3617/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1657 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 03-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S PANWAR
• Keywords: Wrong claim; Capital expenditure
• Section: 80HHC; 27; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA NO.3617 AND 3618/AHD/2008 [ASSTT. YEAR : 2003-2004 AND 2004-2005] ACIT, CIR.8 AHMEDABAD. VS. TORRENT PHARMACEUTICALS LTD. TORRENT HOUSE ASHRAM ROAD, AHMEDABAD. PAN : AAACT 5456 A (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S.S.PANWAR ASSESSEE BY : SHRI S.N. SOPARKAR O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THESE ARE TWO REVENUES APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF I NCOME TAX(APPEALS)- XIV, AHMEDABAD DATED 25.08.2008 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 271(1)(C) TH E INCOME TAX ACT, 1961. 2. IN THESE TWO APPEALS OF THE REVENUE THE COMMON G ROUND IS AGAINST THE CANCELLATION OF PENALTY LEVIED UNDER SECTION 27 1(1)(C) OF THE ACT AS UNDER: ASSTT.YEAR AMOUNT (RS.) 2003-2004 51,02,889/- 2004-2005 2,35,21,113/- 3. IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT I N A.Y.2003-2004, THE PENALTY UNDER SECTION 271(1)(C) WAS LEVIED IN R ESPECT OF FOLLOWING TWO ADDITIONS: ITA NO.3617 AND 3618/AHD/2008 -2- I) DISALLOWANCE OF R&D EXPENDITURE OF RS.1,03,35,000/- ; II) PARTIAL DISALLOWANCE OF WITH RESPECT TO DEDUCTION U NDER SECTION 80HHC. IN A.Y.2004-2005, THE PENALTY WAS LEVIED IN RESPECT OF FOLLOWING ADDITIONS: I) DISALLOWANCE OF SOFTWARE DEVELOPMENT EXPENDITURE TREATING THE SAME AS CAPITAL EXPENDITURE OF RS.77,00,000/- II) DISALLOWANCE OF RESEARCH & DEVELOPMENT EXPENDIT URE OF RS.1,33,70,500/-; III) PARTIAL DISALLOWANCE OF DEDUCTION UNDER SECTION 80H HC. THAT IN THE QUANTUM APPEAL FOR A.Y.2003-2004, THE I TAT HAS DELETED THE DISALLOWANCE OF R&D EXPENDITURE AMOUNTING TO RS.1,0 3,35,000/- VIDE ORDER IN ITA NO.970/AHD/2007 DATED 21-5-2010. SIMI LARLY, THE DISALLOWANCE OUT OF SOFTWARE DEVELOPMENT EXPENDITUR E AS WELL AS RESEARCH AND DEVELOPMENT EXPENDITURE IN A.Y.2004-2005 WERE A LSO DELETED BY THE ITAT VIDE ORDER IN ITA NO.4343/AHD/2007 DATED 31-1- 2011. THUS, THE ONLY ADDITION REMAINS IN RESPECT OF WHICH PENALTY U NDER SECTION 217(1)(C) WAS LEVIED IS AGAINST PARTIAL DISALLOWANCE UNDER SE CTION 80HHC. THAT IN BOTH THE YEARS UNDER APPEAL, THE ASSESSING OFFICER REDUCED THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80HHC BY RECOMPUTI NG THE DEDUCTION CLAIMED. THAT MERELY BECAUSE THE ASSESSING OFFICER HAS RE-COMPUTED THE QUANTUM OF THE DEDUCTION CLAIMED UNDER SECTION 80HH C PENALTY UNDER SECTION 271(1)(C) CANNOT BE LEVIED. THAT THE ASSES SEE HAD FURNISHED FULL PARTICULARS BEFORE THE ASSESSING OFFICER AND IT IS NOT THE CLAIM OF THE ASSESSING OFFICER THAT THE ASSESSEE SUBMITTED ANY I NACCURATE FACTS OR INCORRECT PARTICULARS OF ANY FACT WHICH MAY BE RELE VANT FOR COMPUTATION OF ITA NO.3617 AND 3618/AHD/2008 -3- DEDUCTION UNDER SECTION 80HHC. MERELY THE ASSESSIN G OFFICER HAS EXCLUDED CERTAIN INCOME WHILE COMPUTING THE DEDUCTI ON UNDER SECTION 80HHC, THE ASSESSEE CANNOT BE HELD GUILTY OF CONCEA LMENT OF INCOME SO AS TO LIABLE FOR THE PENALTY UNDER SECTION 271(1)(C ). IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I) CIT VS. ASHIM KUMAR AGARWAL & ANOTHER, 275 ITR 48 II) CIT VS. INTERNATIONAL AUDIO VISUAL CO., 288 ITR 570 (DEL) III) CIT VS. NATH BROS. EXIM INTERNATIONAL LTD., 288 ITR 670 (DEL) IV) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 1 58 (SC). 4. THE LEARNED DR RELIED UPON THE ORDER OF THE ASSE SSING OFFICER AND HE STATED THAT THE REDUCTION UNDER SECTION 80HHC WA S MADE BY THE ASSESSING OFFICER IN RESPECT OF CERTAIN INCOME ON W HICH PRIMA FACIE DEDUCTION UNDER SECTION 80HHC IS NOT PERMISSIBLE. THEREFORE, THE CLAIM OF DEDUCTION UNDER SECTION 80HHC IN RESPECT OF THES E INCOME WAS PATENTLY WRONG. THAT THE PENALTY UNDER SECTION 271 (1)(C) IS TO BE LEVIED WHEN THE ASSESSEE MADE PATENTLY WRONG CLAIM OF DEDU CTION UNDER ANY PROVISIONS OF THE ACT. HE THEREFORE SUBMITTED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT SIMILA R ISSUE IS CONSIDERED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIA NCE PETROPRODUCTS PVT. LTD., 322 ITR 158 (SC) WHEREIN THEIR LORDSHIP HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. ITA NO.3617 AND 3618/AHD/2008 -4- SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS ' USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND T O BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY O F FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGI NATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. (EMPHASIS ADDED) THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULAR S ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRAC T PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOU S OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 2 71(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS . (EMPHASIS ADDED) FROM THE ABOVE IT IS EVIDENT THAT THEIR LORDSHIPS H AVE CLEARLY LAID DOWN THAT MERELY AN INCORRECT CLAIM WAS MADE BY THE ASSE SSEE, IT WOULD NOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO MAKE THE ASSESSEE LIABLE FOR PENALTY UNDER SECTION 271(1)(C) . IN THIS CASE, IT IS NOT IN DISPUTE THAT THE DETAILS SUPPLIED BY THE ASSESSE E WITH REGARD TO THE COMPUTATION UNDER SECTION 80HHC WERE NOT FOUND TO B E INCORRECT OR WRONG. MERELY BECAUSE ON CERTAIN INCOME THE ASSES SING OFFICER HELD THE ASSESSEE TO BE NOT ENTITLED TO DEDUCTION UNDER SECT ION 80HHC WILL NOT AMOUNT TO CONCEALMENT OF INCOME BY THE ASSESSEE. I N FACT IN BOTH THE YEARS, THE ASSESSING OFFICER HIMSELF HAS ALLOWED DE DUCTION UNDER SECTION 80HHC TO THE ASSESSEE. HE ONLY REDUCED THE QUANTUM OF THE DEDUCTION CLAIMED BY THE ASSESSEE. THAT THE HONBLE DELHI HI GH COURT IN THE CASE ITA NO.3617 AND 3618/AHD/2008 -5- OF INTERNATIONAL AUDIO VISUAL CO. AS WELL AS NATH B ROS. EXIM INTERNATIONAL LTD. (SUPRA) UPHELD THE DECISION OF T HE ITAT WHEREIN THE ITAT HAD CANCELLED THE PENALTY LEVIED UNDER SECTION 271(1)(C) ON ACCOUNT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80HHC. IN VIEW OF THE ABOVE, WE RESPECTFULLY FOLLOWING THE DECISION O F THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD. (S UPRA) AS WELL AS TWO DECISIONS OF THE HONBLE DELHI COURT CITED SUPRA UP HOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEALS OF THE REVENUE. 6. IN RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST MARCH, 2011 SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 31-03-2011 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