M/s. L.T. Foods Ltd, New Delhi V. DCIT, New Delhi

ITA 3654/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8173 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 27-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GARIMA BHAGAT
• Keywords: Bonafide belief; Wrong claim; Difference of opinion; Set aside
• Section: 271(1)(c); 80IB

Judgement Text

ITA NO. 3654/DEL/09 A.Y. 2005-06 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 3654/DEL/2009 A.Y. : 2005-06 M/S L.T. FOODS LTD., VS. DCIT, CIRCLE 4(1), A-21, GREEN PARK, AURBINDO MARG, ROOM NO. 407, NEW DELHI 110 016 C.R. BUILDING, [PAN: AAACL 0259 K] NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. GARIMA BHAGAT, SR,. DR DEPARTMENT BY : SHRI SALIL KAPOOR, ADV. O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDERS OF THE LD. CIT(A) DATED 8.5.2009 PERTAINING TO ASSESSMENT YEAR 2005-06. 2. THE ISSUE RAISED IS THAT LD. CIT(A) IN UPHOLDI NG THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE IT ACT AMOUNTING TO RS. 1 4 LACS. 3. IN THIS CASE, DURING THE COURSE OF ASSESSMENT, A O HAS DISALLOWED THE STAFF TRAINING EXPENSES INCURRED OF RS. 22,24,659/- ON THE EDUCATION OF SHRI ABHINAV ARORA SON OF SHRI VK ARORA, MANAGING DIREC TOR OF THE ASSESSEE COMPANY HOLDING THE SAME TO BE PERSONAL IN NATURE. AO FURTHER RECOMPUTED THE CLAIM OF DEDUCTION UNDER SECTION 80IB. HE RED UCED THE ASSESSEES CLAIM BY RS. 1585702/- ON TWO COUNTS FIRSTLY, DEPRECIATIO N WAS CHARGED AS PER RATE PROVIDED IN THE COMPANIES ACT. INSTEAD OF THAT AS PER INCOME TAX ACT, SECONDLY AO HAS DISALLOWED THE ASSESSEES CLAIM OF 80IB DEDUCTION ON ACCOUNT ITA NO. 3654/DEL/09 A.Y. 2005-06 2 OF EXPORT INCENTIVES. ON THESE FACTS PENALTY OF RS . 14 LACS WAS LEVIED BY THE AO. 4. UPON ASSESSEES APPEAL LD. CIT(A) CONFIRMED THE PENALTY. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ON ACCOUNT OF DISALL OWANCE OF STAFF TRAINING EXPENSES OF THE SAME PERSON LEVY OF PENALTY UNDER S ECTION 271(1)(C) HAS BEEN DELETED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN E ARLIER YEARS. HE REFERRED TO THE FOLLOWING OBSERVATIONS IN ITA NO. 151/DEL/08 FO R A.Y. 2002-03 WHEREIN THE TRIBUNAL HAD DELETED THE PENALTY VIDE ORDER DATED 3 .7.2009 BY CONCLUDING AS UNDER:- CONSIDERING THE DECISIONS OF JURISDICTIONAL HIGH C OURT AND THE DECISION OF HONBLE P & H HIGH COURT, WE FIND THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON THE DIFFERENCE OF OPINION. THE WRITTEN AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND SHRI ABHINAV ARORA HAS BEEN NOT PROVED FALSE BY THE REVENUE. IN COMPLIANCE OF TH IS AGREEMENT SHRI ABHINAV ARORA IS SERVING THE COMPANY AFTER THE COMP LETION OF THE STUDY. THUS, THERE IS NO MATERIAL ON RECORD BROUGHT BY THE REVENUE, WHICH CAN PROVE THAT THE AGREEMENT WAS A FALSE AND FABRICATED DOCUMENT. NO SUCH FINDINGS HAVE BEEN RECORDED IN THE QUANTUM AS WELL AS THE PENALTY ORDERS. IN SUCH A SITUATION PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY INVOKING THE PROVISO (1)(B) OF THE ACT COULD NOT BE IMPOSED. BY HOLDING SO, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND ALLO W THE ASSESSEES APPEAL. 7. AS REGARDS THE PENALTY ON REDUCTION OF CLAIM UND ER SECTION 80IB, LD. COUNSEL OF THE ASSESSEE CONTENDED THAT ALL THE DETA ILS OF THE CLAIM WERE FURNISHED BEFORE THE AO. HENCE, THERE IS NO QUESTI ON OF FURNISHING OF INACCURATE PARTICULARS OR MAKING ANY FALSE CLAIM. ITA NO. 3654/DEL/09 A.Y. 2005-06 3 8. AS REGARDS THE CLAIM OF DEDUCTION U/S 80IB ON EX PORT INCENTIVES LD. COUNSEL CLAIMED THAT THIS ISSUE WAS HIGHLY DEBATABL E AT THAT TIME AND THE ISSUE HAS BEEN SETTLED BY THE HONBLE APEX COURT IN THE C ASE OF LIBERTY INDIA LTD. ONLY RECENTLY. HENCE HE ARGUED THAT NO PENALTY BE LEVIED ON THIS ACCOUNT. 9. LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT SECTION 271(1)(C) OF THE ACT POSTULATES IMPOSITION OF PENAL TY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. IN THIS CAS E, ASSESSEE HAS CLAIMED EDUCATIONAL EXPENSES OF MANAGING DIRECTORS SON AS STAFF TRAINING EXPENSES. HOWEVER THE CLAIM HAS BEEN DISALLOWED BY THE REVEN UE. AS ALREADY NOTED IN THE ABOVE TRIBUNALS ORDER, THE SAID PERSON IS AN E MPLOYEE OF THE COMPANY AND THERE IS ALSO AN AGREEMENT OF HIS CONTINUOUS EMPLOY MENT AFTER THE TRAINING WITH THE COMPANY. UNDER SUCH CIRCUMSTANCES, T HE DISALLOWANCE OF CLAIM OF EXPENSES CANNOT LEAD TO A LEVY OF PENALTY UNDER SEC TION 271(1)(C) OF THE IT ACT. AS REGARDS THE DEDUCTION OF CLAIM OF SECTION 80IB, WE FIND THAT ALL THE NECESSARY PARTICULARS WERE DULY DISCLOSED BY THE AS SESSEE. THE ISSUE OF DEDUCTION ON ACCOUNT OF EXPORT INCENTIVE WAS ALSO D EBATABLE EARLIER. THE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE PALPABLY WRON G, NOR IT CAN BE SAID THAT THE CONDUCT OF THE ASSESSEE WAS CONTUMACIOUS. HENCE, I N OUR CONSIDERED OPINION PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE IN THIS CASE. 11. IN THIS REGARD, WE DRAW SUPPORT FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LOR DSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 W HEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A S TATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WILL N OT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN C ONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MEREL Y BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PE RFORM A STATUTORY OBLIGATION IS ITA NO. 3654/DEL/09 A.Y. 2005-06 4 A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERC ISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. E VEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE P ENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNIC AL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FR OM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 12. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELET E THE LEVY OF PENALTY AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/02/2010 AFTER CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI) [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 01/02/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES