DCIT 9(2), MUMBAI V. HINDUSTAN OIL EXPLORATION CO. LTD, MUMBAI

ITA 54/MUM/2014

• Counselvise Citation: 5419914 RSA 2014
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 03-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SIVAM SUBRAMANIAN
• Assessee Lawyers: SHASHI BHUSSHAN PRASAD
• Section: 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA 54/MUM/2014 (ASSESSMENT YEAR : 2007-08) THE DCIT-9(2), ROOM NO.218, 2 ND FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 ... APPELLANT VS. M/S.HINDUSTAN OIL EXPLORATION CO. LTD. ANAND HOUSE, KHATWARI DARBAR ROAD, OF LINING ROAD, KHAR(W), MUMBAI 400 052 PAN: AAACH 1407P .... RESPONDENT APPELLANT BY : SHRI SHASHI BHUSSHAN PRASAD REVENUE BY : SHRI SIVAM SUBRAMANIAN DATE OF HEARING : 09/06/2015 DATE OF PRONOUNCEMENT : ....../08/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL BY THE REVENUE IS DIRECT ED AGAINST THE ORDER OF THE CIT(A)-20, MUMBAI DATED 23/10/2013 PERTAINING TO THE ASSESSMENT YEAR 2007-08, WHICH IN-TURN HAS ARISEN FROM AN ORDER 2 HINDUS TAN OIL EXPLORATION CO. LTD. PASSED BY THE ASSESSING OFFICER DATED 20/03/20 12 LEVYING A PENALTY OF RS.34,24,75,519/- UNDER SECTION 271(1)(C) OF TH E INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE GROUND OF APPEAL R AISED BY THE REVENUE READS AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN DELETING THE PENALTY IMPOS ED BY THE ASSESSING OFFICER U/S 271 (1 )(C) OF I.T. ACT, 1961, AMOUNTIN G TO RS.34,26,79,519/ WITHOUT APPRECIATING THAT THE ASSESSEE HAD FURNISHE D INACCURATE PARTICULARS IN SO FAR SO WAS NOT ELIGIBLE TO CLAIM DEDUCTION U/ S 8018(9) AS NO COMMERCIAL PRODUCTION OR REFINING OF MINERAL OIL WAS CARRIED O N AND THAT THE CLAIM FOR DEDUCTION U/S 8018 BEING PATENTLY INADMISSIBLE, AND PENALTY ON DISALLOWANCE U/S 14A AMOUNTING TO RS. 19,75,991/ AND U/S 42A AM OUNTING TO RS.2,55,07,5821 WERE LEVIED AS ASSESSEE HAS FURNIS HED INACCURATE PARTICULARS OF THE INCOME AND THE FACTS OF THE ASSESSEE'S CASE ARE DIFFERENT FROM THOSE OF RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158 SC) RELIED ON BY THE CIT(A)? 2. THE RESPONDENT ASSESSEE BEFORE US IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 AND IS INTER-ALIA, ENGAGED IN THE BUSINESS OF EXPLORATION, DEVELOPMENT AND PRO DUCTION OF CRUDE OIL AND GAS. FOR THE ASSESSMENT YEAR 2007-08, IT FILED A RETURN OF INCOME DECLARING NIL INCOME, WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT, WHEREBY THE TOTAL INCOME WAS DETERMINED AT AN AMOUN T OF RS.93,03,56,160/-. SUBSEQUENTLY, THE ASSESSING OFF ICER FOUND THE ASSESSEE GUILTY OF CONCEALMENT AND/OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTIO N 271(1)(C) OF THE ACT, QUA THE ADDITIONS MADE IN THE COURSE OF ASSESS MENT PROCEEDINGS AND, ACCORDINGLY, LEVIED A PENALTY OF RS.34,24,75,5 19/- UNDER SECTION 271(1)(C) OF THE ACT. THE SAID PENALTY HAS SINCE B EEN DELETED BY CIT(A), AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US ON THE AFORESAID GROUND OF APPEAL. 3 HINDUS TAN OIL EXPLORATION CO. LTD. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT, PENALTY U NDER SECTION 271(1)(C) OF THE ACT HAS BEEN LEVIED ON THE DIFFERE NCE BETWEEN THE REPORTED AND THE ASSESSED INCOME ON THE FOLLOWING FOUR ADDITIONS MADE IN THE QUANTUM ASSESSMENT PROCEEDINGS:- (I)DENIAL OF DEDUCTION U/S. 80-IB(9)OF THE ACT AMOU NTING TO RS.84,87,05,610/-; (II)TREATING INCOME FROM OTHER SOURCES AMOUNTING TO RS.14,89,91,744/- AS INELIGIBLE FOR DEDUCTION U/S . 80-IB(9)OF THE ACT; (III)DISALLOWANCE U/S.14A OF THE ACT OF RS.58,70,44 2/-; AND (IV)DISALLOWANCE OF RS.7,57,80,104/- U/S. 42 OF T HE ACT. 4. IN THE ABOVE CONTEXT, IT WAS A COMMON POINT BET WEEN THE PARTIES THAT SO FAR AS THE DENIAL OF DEDUCTION UNDER SECTI ON 80-IB(9) OF THE ACT AMOUNTING TO RS.84,87,05,610/- AND THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AMOUNTING TO RS.58,70,442/- ARE CONC ERNED, THE TRIBUNAL VIDE ITS ORDER IN ITA NO.61/MUM/2011 DATED 7/2/2014 HAS DELETED THE ADDITIONS. THUS, THE ADDITIONS, WHICH FORMED THE B ASIS FOR LEVY OF PENALTY STAND DELETED, PENALTY UNDER SECTION 271(1) (C) OF THE ACT TO THE SAID EXTENT DOES NOT SURVIVE. THE LD. REPRESENTATI VE FOR THE ASSESSEE POINTED OUT THAT THE ORDER OF THE TRIBUNAL DATED 7/ 2/2014(SUPRA) HAS BEEN RENDERED AFTER PASSING OF THE IMPUGNED ORDER BY THE CIT(A), WHICH IS DATED 23/10/2013, THEREFORE, THE CIT(A) DI D NOT HAVE THE BENEFIT OF THE ORDER OF THE TRIBUNAL. SO HOWEVER, CIT(A) HAS DEEMED IT FIT TO DELETE THE PENALTY ON THE GROUND THAT THE SA ME WAS NOT EXIGIBLE ON THE FACTS AND CIRCUMSTANCES OF CASE. BE THAT A S IT MAY, IN VIEW OF THE FACT THAT THE RESPECTIVE ADDITIONS ON ACCOUNT OF DI SALLOWANCE UNDER 4 HINDUS TAN OIL EXPLORATION CO. LTD. SECTION 80 IB(9) OF RS. RS.84,87,05,610/- AND UN DER SECTION 14A OF THE ACT AMOUNTING TO RS.58,70,442/- HAVE SINCE BEEN DEL ETED, THE CORRESPONDING PENALTY UNDER SECTION 271(1)(C) OF TH E ACT IS UNTENABLE AND DOES NOT SURVIVE. THUS, ON THIS ASPECT THE ULT IMATE DECISION OF THE CIT(A) IS UPHELD, ALBEIT ON A DIFFERENT GROUND. 5. THE NEXT ITEM ON WHICH THE PENALTY HAS BEEN LEVI ED IS WITH REGARD TO THE EXCLUSION OF CERTAIN INCOMES FOR COMPUTI NG THE DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. THE ASSESSING OF FICER EXCLUDED CERTAIN INCOMES, NAMELY INTEREST, DIVIDEND, FOREIGN EXCHANG E FLUCTUATION GAIN AND OTHER MISCELLANEOUS INCOME AMOUNTING TO RS.14,8 9,91,744/- WHILE COMPUTING THE DEDUCTION U/S. 80IB(9) OF THE ACT. T HE STAND OF THE ASSESSING OFFICER WAS THAT SUCH INCOMES CANNOT BE C ONSTRUED TO BE AN INCOME DERIVED FROM THE ACTIVITY OF EXTRACTING MI NERAL OIL BY THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE AND, THEREFO RE, SUCH INCOME WAS INELIGIBLE FOR THE BENEFITS OF SECTION 80IB(9) OF T HE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER IN THE IMPUGNED ORDER HAS LEV IED PENALTY WITH RESPECT TO THE DENIAL OF DEDUCTION UNDER SECTION 8 0-IB(9) OF THE ACT IN RELATION TO THREE ELEMENTS OF SUCH INCOME, NAMELY I NTEREST- RS.7,12,64,714/-; FOREIGN EXCHANGE FLUCTUATION GAIN RS.1,53,47,008/-; AND, OTHER INCOME OF RS.10,92,679/-, TOTALLING TO R S.8,77,04,401/- . 5.1 ON THE AFORESAID ASPECT, THE CIT(A) HAS DELETE D THE PENALTY ON THE GROUND THAT A MERE REJECTION OF A CLAIM OF DEDU CTION DOES NOT RESULT IN LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN AS MUCH AS THERE IS NO FURNISHING OF INACCURATE PARTICULARS O R CONCEALMENT OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF T HE ACT. 5 HINDUS TAN OIL EXPLORATION CO. LTD. 5.2 BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE POINTED OUT THAT IN THE GROUND OF APPEAL RAISED BY THE REVENUE THERE IS NO CHALLENGE TO THE ACTION OF THE CIT(A) DELETING THE PENALTY IN RELATION TO THE PARTIAL DENIAL OF DEDUCTION UNDER SECTION 80IB (9) OF THE ACT IN RELATION TO THE EXCLUSION OF AFORESAID THREE ELEM ENT OF INCOME. THE SAID PLEA OF THE ASSESSEE IS INDEED BORNE OUT OF TH E GROUND OF APPEAL RAISED BY THE REVENUE. 5.3 SO HOWEVER, LD. DEPARTMENTAL REPRESENTATIVE CO NTENDED THAT IN THE INITIAL PART OF THE GROUND OF APPEAL REVENUE H AS CHALLENGED THE ACTION OF THE CIT(A) IN DELETING THE ENTIRE AMOUNT OF PENALTY IMPOSED BY THE ASSESSING OFFICER WHICH INTER-ALIA, INCLUDES TH E AFORESAID ADDITION ALSO, AND THEREFORE, THE GRIEVANCE OF THE REVENUE AGAINST THE AFORE- STATED SPECIFIC ACTION OF THE CIT(A) IS ALSO MANIF ESTED IN THE GROUND OF APPEAL RAISED. LD. DEPARTMENTAL REPRESENTATIVE FU RTHER POINTED OUT THAT THE ASSESSEE ERRED IN CLAIMING DEDUCTION U NDER SECTION 80IB(9) OF THE ACT QUA THE AFORESAID THREE ELEMENT OF INCOM E, WHICH OSTENSIBLY CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE EL IGIBLE BUSINESS OF THE ASSESSEE. 5.5 IN OUR CONSIDERED OPINION, A MERE DENIAL OF AS SESSEES CLAIM FOR DEDUCTION UNDER SECTION 80-IB(9) OF THE ACT QUA THE THREE ELEMENTS OF INCOME DOES NOT INVITE THE PENAL PROVISIONS OF SECT ION 271(1)(C) OF THE ACT. QUITE CLEARLY, IN ORDER TO INVOKE THE PROVISI ONS OF SECTION 271(1)(C), THE CONDITIONS STATED THEREIN MUST BE ESTABLISHED, I.E. EITHER THE ASSESSEE SHOULD HAVE CONCEALED THE PARTICULARS OF I NCOME OR ASSESSEE SHOULD HAVE FURNISHED INACCURATE PARTICULARS OF SU CH INCOME. IN THE PRESENT CASE, THE PLEA OF THE ASSESSEE WAS THAT SUC H INCOMES HAVE 6 HINDUS TAN OIL EXPLORATION CO. LTD. BEEN EARNED IN THE COURSE OF CARRYING ON ITS ACTIVI TY OF EXPLORATION AND EXTRACTING OF OIL AND, THEREFORE, THE SAME WAS ELIG IBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80IB(9) OF THE ACT. OFCOUR SE, THE REVENUE HAS DIFFERED WITH THE ASSESSEE ON THIS ASPECT. THE HO NBLE SUPREME COURT IN THE CASE CIT VS. RELIANCE PETROPRODUCTS PVT. LTD ., 322 ITR 158 (SC) HELD THAT OF FURNISHING INACCURATE PARTICULARS IN THE CONTEXT OF SECTION 271(1)(C) OF THE ACT WOULD MEAN A SITUATION WHERE ANY OF THE PARTICULARS FILED BY THE ASSESSEE ARE FOUND TO BE UNTRUE OR FALSE. A MERE REJECTION OF CLAIM MADE IN THE RETURN OF INCOM E WITHOUT THERE BEING ANY FALSITY OR UNTRUTH IN THE PARTICULARS FIL ED WOULD NOT INVITE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. CONSID ERED IN THE AFORESAID LIGHT, IN OUR VIEW, THE CIT(A) MADE NO MISTAKE IN D ELETING THE PENALTY LEVIED UNDER SECTION 271(1)(C), QUA THE DENIAL OF D EDUCTION UNDER SECTION 80IB(9) OF THE ACT WITH RESPECT TO THE INCO MES ON ACCOUNT OF INTEREST, FOREIGN EXCHANGE FLUCTUATION GAIN AND OTH ER INCOME TOTALING RS.8,77,04,401/-. THUS, ON THIS ASPECT ALSO REVENU E FAILS. 6. THE LAST LIMB OF THE ADDITION ON WHICH PENALTY H AS BEEN LEVIED IS WITH REGARD TO A DISALLOWANCE OF DEDUCTION CLAIMED FOR EXPLORATION EXPENDITURE INCURRED FOR THE BUSINESS OF PROSPECT ING FOR OR EXTRACTION/PRODUCTION OF OIL UNDER SECTION 42(1) OF THE ACT AMOUNTING TO RS.7,57,80,104/-. IN THE RETURN OF INCOME ASSES SEE HAD CLAIMED DEDUCTION FOR PRODUCING PROPERTY FOR PROSPECTING BU SINESS UNDER SECTION 42(1) OF THE ACT. 6.1 AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE QUANTUM PROCEEDINGS, THE IS SUE CAME UP BEFORE 7 HINDUS TAN OIL EXPLORATION CO. LTD. THE TRIBUNAL AND VIDE ITS ORDER DATED 7/2/2014(SUPR A), THE MATTER WAS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR A DECISION AFRESH. 6.2 LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT TH AT THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING THE PENALTY AS TH E DEDUCTION CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME WAS FOR DEPLET ION IN PRODUCING THE PROPERTY, WHICH IS REFLECTED IN THE FIXED ASSETS BL OCK AND, THEREFORE, IT WAS A DISALLOWABLE ITEM AND THE ASSESSING OFFICER W AS JUSTIFIED IN ADDING IT TO THE RETURNED INCOME. AS A WRONG CLAI M WAS MADE, THE PENALTY U/S. 271(1)(C) OF THE ACT HAS BEEN RIGHTLY MADE. 6.3 ON THE CONTRARY, THE CLAIM OF THE ASSESSEE HAS BEEN THAT SUCH EXPENDITURE REPRESENTED AGGREGATE OF EXPENDITURE IN CURRED IN RESPECT OF DEVELOPMENT OF OIL BLOCK FROM WHICH OIL/GAS HAS BEEN FOUND AND COMMERCIAL PRODUCTION HAS COMMENCED. FOR THE PURPO SE OF TAX COMPUTATION, ASSESSEE CONSIDERED THE ACTUAL EXPENSE S INCURRED AS DEDUCTION WHICH WAS WORKED OUT PROPORTIONATELY ON T HE BASIS OF TOTAL OIL/GAS RESERVES ESTIMATED FROM SUCH BLOCKS AND TH E ACTUAL OIL/GAS PRODUCED DURING THE YEAR. THE ASSESSEE HAD JUST IFIED THE CLAIM OF DEDUCTION UNDER SECTION 42(1) OF THE ACT READ WITH THE PRODUCTION SHARING CONTRACT (PSC) ENTERED INTO WITH THE GOVERN MENT OF INDIA. SECTION 42 OF THE ACT IS A SPECIAL PROVISION FOR DE DUCTIONS IN THE CASE OF BUSINESS FOR PROSPECTING FOR EXTRACTION OR PRODUCT ION OF MINERAL OILS, ETC. IT, INTER-ALIA, PRESCRIBES FOR DEDUCTION OF C ERTAIN EXPENSES INCURRED FOR SUCH BUSINESSES. BROADLY SPEAKING, SECTION 42( 1) OF THE ACT SPEAKS OF ADMISSIBILITY OF DEDUCTION OF THREE TYPES OF ALL OWANCES, PROVIDED THEY ARE SPECIFIED IN THE RESPECTIVE PRODUCTION SHARIN G CONTRACTS WITH THE GOVERNMENT OF INDIA. THE CLAIM OF THE ASSESSEE HAS BEEN THAT THE 8 HINDUS TAN OIL EXPLORATION CO. LTD. IMPUGNED EXPENDITURE FALLS WITHIN THE SCOPE OF SECT ION 42(1) OF THE ACT, WHEREAS AS PER REVENUE THE IMPUGNED EXPENDITURE IS MERELY DEVELOPMENT EXPENDITURE, WHICH IS OUTSIDE THE SCOPE OF DEDUCTION PRESCRIBED IN SECTION 42(1) OF THE ACT. 7.4 BE THAT AS IT MAY, THE AFORESAID DISCUSSION WOU LD REVEAL THAT THAT THE DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE IS WITH REGARD TO THE SCOPE OF THE EXPENDITURE ENVISAGED IN SECTION 4 2(1) OF THE ACT. THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER OR EVEN IN THE PENALTY ORDER PASSED BY ASSESSING OFFICER, DOES NOT REFLECT THAT THE CLAIM OF THE ASSESSEE WAS FANCIFUL OR WAS PATENTLY ERRONEOUS SO AS TO SUGGEST ANY CONCEALMENT OF INCOME OR FURNISHING IN ACCURATE PAR TICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THE MERE CLAIM MADE BY THE ASSESSEE WHICH IS FOUND TO BE UNSUSTAIN ABLE BY THE ASSESSING OFFICER DOES NOT IPSO-FACTO LEAD TO A PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT AS HELD BY THE HONBLE SUPREM E COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD.(SUPRA) . IN OUR CONSIDERED OPINION IN THE PRESENT CASE THE DIFFERENCE BETWEEN THE ASSESSED AND THE REPORTED INCOME ON THE AFORESAID ASPECT IS BASE D ON VARYING PERCEPTION OF THE SCOPE OF SECTION 42(1) OF THE ACT AND IT IS NOT A CASE REFLECTING ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THEREFORE, ON THIS ASPECT OF THE MATTER ALSO WE FIND NO ERROR ON THE PART OF CIT(A) IN DELETING T HE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE AC T. 9 HINDUS TAN OIL EXPLORATION CO. LTD. 7.5 IN THE RESULT, THE ULTIMATE DECISION OF CIT(A) IN DELETING THE PENALTY ON ALL THE FOUR LIMBS OF THE ADDITION IS HE REBY AFFIRMED AS PER AFORESAID DISCUSSION. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 31/08/2015. SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER MUMBAI,DATED ...../8/2015 VM. COPY OF THE ORDER FORWARDED TO : / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBA I VM , SR. PS