ACIT, New Delhi V. M/s United Exports, New Delhi

ITA 4186/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65714 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2001-2002
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHUMANA SEN
• Assessee Lawyers: B B BHAGAT
• Keywords: Bonafide belief; Retrospective amendment
• Section: 80HHC; 28

Judgement Text

ITA NO. 4186/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4186/DEL/2012 A.Y. : 2000-01 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 31(1), ROOM NO. 185A, C.R. BLDG., NEW DELHI VS. M/S UNITED EXPORTS, FLAT NO. 12/2, CENTRAL LANE, BENGALI MARKET, NEW DELHI 110001 (PAN/GIR NO. : AAAFU1678G) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. B.B. BHAGAT, ADV. DEPARTMENT BY : SMT. SHUMANA SEN, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXVI, NEW D ELHI DATED 30.5.2012 PERTAINING TO ASSESSMENT YEAR 2000-01. 2. THE GROUNDS RAISED READ AS UNDER:- A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. COMMISSIONER OF INCOME TAX (A) WAS JUSTIFIED IN DELETING PENALTY U/S. 271(1)(C) OF ` 11,29,567/- WHERE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOMES. ITA NO. 4186/DEL/2012 2 B) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. COMMISSIONER OF INCOME TAX (A) WAS JUSTIFIE D IN HOLDING THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN LEVYING PENALTY U/S. 271(1)(C) WHERE ASSESSEE WILLF ULLY CLAIMED EXCESS DEDUCTION U/S. 80HHC. C) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY / ALL THE GROUNDS OF APPEAL BEFORE OR DUR ING THE COURSE OF HEARING OF THE APPEAL. 3. THE FACTS LEADING TO THE INITIATION OF PENALTY P ROCEEDINGS ARE THAT WHILE CALCULATING THE DEDUCTION U/S. 80HHC, THE ASS ESSING OFFICER NOTED THAT THE ASSESSEE HAD TAKEN PROFIT FROM EXPORT OF TRADING GOODS AS NIL WHEREAS IN FACTS THERE WAS LOSS OF ` 80,54, 287/-, WHICH ACCORDINGLY TO THE ASSESSING OFFICER , THE ASSESSEE HAS INFLATED THE BUSINESS PROFIT FOR THE PURPOSE OF CLAIMING DEDUCTIO N U/S. 80HHC. THE ASSESSING OFFICER THEREFORE, HELD THAT THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE SAID EXTENT AND CLAIMED EXCESS DEDUCTION. 3.1 IN RESPONSE TO THE SHOW CAUSE NOTICE OF THE ASS ESSING OFFICER, THE ASSESSEE FILED ITS REPLY DATED 18.2.2010 AS UNDER:- IN TERMS OF AMENDMENT, NO DEDUCTION UNDER SECTION 80HHC COULD BE CLAIMED ON DEPB IF THE TURNOVER OF TH E ASSESSEE EXCEEDS ` 10 CRORES. SINCE THE ASSESSEES CASE WAS COVERED BY THE AMENDMENT, THE ASSESSMENT HAS BEEN REFRAMED UNDER SECTION 148/143(3). BASED ON THE ABOVE AMENDMENT AND THE CHANGES BROUGHT UNDER SECTION 28, THE INCOME OF THE ASSESSEE WAS COMPUTED AT ` 9281790/-. SINCE THE CHANGES HAVE ITA NO. 4186/DEL/2012 3 COME WITH RETROSPECTIVE EFFECT, THE ASSESSEE WAS NO T AWARE AT THAT TIME THAT DEDUCTION UNDER SECTION 80HHC WOULD HAVE TO BE WORKED OUT ON THE BASIS OF THE LAW WHICH HAS COME INTO FORCE NOW, EVEN THOUGH EFFECTIVE FROM 1.4.2001. THE DEPARTMENT VIDE CIRCULAR NO. 2/2006 DATED 17.1.2006 CLARIFIED THAT THERE WOULD BE NO PENALTY INITIATED AND FURTHER IN CASE THE SAME HAS BEEN INITIATED, THE PENALTY PROCEEDING S INITIATED SHALL BE DROPPED. 3.2 THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE. IN THIS CONTEXT, THE ASSESSING OFFICER H AS OBSERVED THAT THE ASSESSEES RELIANCE ON CBDT CIRCULAR NO. 2/2006 DA TED 17.1.2006 FOR CLAIM OF DEDUCTION U/S. 80HHC ON DEPB, WHICH HAS NO BEARING ON THE ISSUE FOR WHICH PENALTY PROCEEDINGS WERE INITIATED FOR WRONGFUL DETERMINATION OF ADJUSTED PROFIT OF THE BUSINESS FOR THE CLAIM U/S. 80HHC. IN VIEW OF THE ABOVE FACTS, THE ASSESSING O FFICER OBSERVED THAT THE CONCEALMENT OF INCOME WAS DUE TO THE FACT THAT THE ASSESSEE WHILE CALCULATING THE DEDUCTION U/S. 80HHC TOOK THE PROFIT FROM EXPORT OF TRADING GOODS AT NIL AS AGAINST NET LOSS OF ` 80 ,54,287/- WHICH WAS TO BE ADJUSTED WHILE CALCULATING THE DEDUCTION U/S. 80 HHC. THE ASSESSING OFFICER HAS, THEREFORE, HELD THAT DUE TO THE WRONG SUBMISSIONS OF THE FACTS, THE ASSESSEE HAD MADE A C LAIM OF DEDUCTION U/S. 80HHC AT ` 58,60,336/- AS THE ACTUAL DEDUCTION WORKED BY THE ASSESSING OFFICER IN HIS ORDER U/S. 143(3)/147 AT ` 29,26,395/-, LEADING TO EXCESS DEDUCTION AT ` 29,33,941/-. THE ASSESS ING OFFICER HAS ALSO MENTIONED IN HIS PENALTY ORDER THAT THE ASSESSEES Q UANTUM APPEAL WAS DISMISSED BY THE LD. COMMISSIONER OF INCOME TAX (A) VIDE HIS ORDER DATED 10.12.2008. THE ASSESSING OFFICER ON THESE FACTS ITA NO. 4186/DEL/2012 4 CONCLUDED THAT THE ASSESSEE HAS WILLFULLY FURNISHED INACCURATE OF INCOME LEADING TO THE CONCEALMENT OF INCOME BY WAY O F CLAIMING EXCESS DEDUCTION OF ` 29,33,941/- U/S. 80HHC. THE ASSESSING OFFICER THEREFORE, IMPOSED PENALTY OF ` 11,29,567/- U/S. 271 (1)(C) OF THE I.T. ACT, 1961 ON THE SAID CONCEALMENT OF ` 29,33,941/- @100% OF TAX SOUGHT TO EVADED. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) HELD AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE, WRITTEN SUBMISSIONS OF THE ASSESSING OFFICER, THE CASE LAW RELIED UPON BY THE ASSESSEE AND THE AMENDMENT IN SECTION 80HHC AS PER TAXATION LAWS (SECOND AMENDMENT) ACT, 2005. THE EFFECT OF AMENDMENT MADE IN SECTION 80HHC IS TWO FOLDS, FIRSTLY, DEDUCTI ON IN RESPECT OF SALE OF DEPB LICENCE WHICH WAS NOT TO BE ALLOWED IN RESPECT OF EXPORTERS WHOSE TURNOVER EXCEEDED ` 10 CRORES. THIS AMENDMENT WAS RETROSPECTIVE WITH EFFECT FROM 1 ST APRIL, 1998, FOR DEPB SCHEME, AND SECONDLY, THE MAJOR AMENDMENT WAS MADE TO EXPLANATION (BA) AND (BAA) AT THE END OF SECTION 80HHC TO INCLUDE (IIID) AND (IIIE) ALONGWI TH (IIIA), (IIIB) AND (IIIC) OF SECTION 28 EXCLUDING THE SAME FROM TOTAL TURNOVER AND INCLUDING THE SAME FROM TOTA L PROFITS. THIS HAS BEEN MADE EFFECTIVE FROM 1 ST APRIL, 1998. IT WAS ALSO MADE CLEAR THAT IF THERE WAS DI RECT LOSS IN EXPORT, SUCH LOSS HAS TO BE SET OFF AGAINS T THE INCENTIVE PROFITS. THEREFORE, THE INTERPRETATION THAT ITA NO. 4186/DEL/2012 5 WHERE THERE WAS A LOSS, IT COULD BE TREATED AS NIL FOR ARRIVING AT ELIGIBLE PROFITS WAS NOT POSSIBLE. THE PROVISION TO TREAT LOSS AS NIL WAS MADE RETROSPECTIVE FROM 1 ST APRIL, 1992 WHEN INCENTIVE PROFIT RELATED TO (IIIA), (IIIB) AND (IIIC). THE SAME PR OVISION WILL APPLY FOR THE INCENTIVES NOW INCLUDED IN (IIID ) AND (IIIE). THIS INCLUSION WAS, HOWEVER, EFFECTIVE FROM 1 ST APRIL, 1998. THOSE AMENDMENTS WERE MADE TO DILUTE THE EFFECT OF THE HONBLE SUPREME COURT DECISION IN IPCA LABORATORY LTD. VS. DCIT 266 ITR 521 WHEREIN THE HONBLE APEX COURT HAS HELD THAT AN ASSESSEE WHO HAD NO PROFIT FROM EXPORTS BUT HAD ONLY INCENTIVE PROFITS WAS NOT ENTITLED TO RELY ON INCENTIVE PROFI TS THOUGH THESE PROFIT FORMS A PART OF TOTAL PROFIT. THIS WAS NOT THE VIEW ADOPTED BY CHARTERED ACCOUNTANTS I N CERTIFICATES ISSUED IN FORM NO. 10CCAC UNDER SECTION 80HHC(4). IT WAS IN THIS CONTEXT, THAT THE AMENDMENTS WERE MADE AS STATED ABOVE. PRIOR TO THE AMENDMENTS THE CHARTERED ACCOUNTANTS CALCULATING THE DEDUCTION U/S. 80HHC IN THE PRESCRIBED FORM NO. 10CCAC WERE TAKING LOSS AT NIL. AT THE TIME OF WHEN THE RETURN WAS FILED BY T HE ASSESSEE ON 31.10.2000, THE ASSESSEE MADE A BONAFIDE DEDUCTION U/S. 80HHC, ON THE BASIS OF THE CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT IN T HE PRESCRIBED FORM NO. 10CCAC, COPY OF WHICH WAS ONLY ATTACHED WITH THE RETURN OF INCOME. AT THE TIME WH EN ITA NO. 4186/DEL/2012 6 THE RETURN WAS FILED ALL THE MATERIAL FACTS FOR COMPUTING THE INCOME WAS DISCLOSED BY THE ASSESSEE. IT IS AN ADMITTED POSITION THAT THE AMENDMENTS MADE IN SECTION 80HHC BY WAY OF TAXATION LAWS (AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFFECT FROM 1.4.1998 WERE NOT THERE IN RELEVANT SECTION AT TIME WHEN ASSESSEE FILED RETURN WHOM ORIGINAL RETURN WAS ACCEPTED U/S. 143(1) ON 22.3.2001. WHEN THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS FOR COMPUTATION OF HIS INCOME, IT COULD NOT BE SAID THAT AT TIME WHEN ASSESSEE FILED RETURN, HE HAD FAILED T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT BECAUSE AMENDMENT WHICH INTRODUCED RETROSPECTIVELY WAS NOT THERE AT ALL. I HAVE REL IED ON THE RATIO OF THE HONBLE DELHI HIGH COURT JDUGEMENT IN THE CASE OF C.I.T. VS. SIL INVESTMENT LTD. (2011) 20 2 TAXMAN 96. IN VIEW OF AFORESAID DISCUSSION, I HOLD THAT THE PENALTY OF ` 11,29,567/- LEVIED BY ASSESSING OFFICE R U/S. 271(1)(C) IS NOT JUSTIFIED. ACCORDINGLY, THE PENALTY U/S. 271(1)(C) LEVIED BY THE ASSESSING OFFICER IS DELETED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND IN THIS CASE THAT DISALLOWANCE HAS RESULTE D ON ACCOUNT OF RETROSPECTIVE AMENDMENT IN SECTION 80HHC BY WAY OF TAXATION LAWS (SECOND AMENDMENT) ACT, 2005 WITH RETROSPECTIVE EFF ECT FROM 1.4.98. ITA NO. 4186/DEL/2012 7 LD. COMMISSIONER OF INCOME TAX (A) HAS GIVEN A CATEGOR ICAL FINDING THAT THESE PROVISIONS WERE NOT THERE IN THE RELEVAN T SECTION AT TIME WHEN ASSESSEE FILED RETURN OF INCOME ON 31 ST OCTOBER, 2000. AT THIS TIME THE ASSESSEE MADE A BONAFIDE DEDUCTION U/S. 80H HC, ON THE BASIS OF CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT I N THE PRESCRIBED FORM NO. 10CCAC. MOREOVER, WHEN ASSESSEE HAS DISCLOS ED ALL THE MATERIAL FACTS FOR COMPUTATION OF HIS INCOME, IT COULD NOT BE SAID THAT THE AT TIME WHEN ASSESSEE FILED RETURN, HE HAD FAIL ED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMEN T. THUS, WE FIND HERE THAT THE DISALLOWANCE IN THIS CASE HAS PRIMARI LY ARISEN DUE TO THE FACT THAT THERE WAS A RETROSPECTIVE AMENDMENT IN T HE CONCERNED ACT AND ASSESSEE CANNOT BE SAID TO HAVE FORESEEN THE AM ENDMENT. UNDER THE CIRCUMSTANCES, RIGORS OF SECTION 271(1)(C) ARE N OT ATTRACTED IN THIS CASE. WE FIND THAT SECTION 271(1)(C) OF THE ACT POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. IN THE PRESENT CASE, WE FIND THAT ASSESS EE HAS DISCLOSED ALL THE MATERIAL FACTS FOR COMPUTATION OF INCOME AND IT CANNOT BE SAID THAT ASSESSEES ACT WAS CONTUMACIOUS SO AS TO WARRA NT THE LEVY OF PENALTY U/S. 271(1)(C). 7. IN THIS REGARD, WE PLACE RELIANCE FROM THE APE X COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF T HEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMIN AL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PA RTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT ITA NO. 4186/DEL/2012 8 CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY B ECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAI LURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF T HE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL T HE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBE D, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 8. WE WOULD ALSO LIKE TO REFER TO THE HONBLE APE X COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2 010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE C ONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDE R TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WA S HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C ). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED ITA NO. 4186/DEL/2012 9 BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSE SSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INT ENDMENT OF LEGISLATURE. 9. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (A), HENCE, WE AFFIRM THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/10/2012. SD/- SD/- [ [[ [U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 19/10/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES