TEA ESTATE INDIA PVT.LTD.(NOW MERGED WITH HINDUSTAN UNILEVER LTD), MUMBAI V. DY. C.I.T. 1(1), MUMBAI

ITA 5496/MUM/2007

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8040 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 03-04-2014
• Assessment Year: misc
• Appeal Filed On: 17-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTAVA
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Initiation of penalty proceedings; Reasonable cause; Wrong claim; Avoidance of tax; Revised return
• Section: 80HHC; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI !' , # $% & & & & , , $% ' BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : . : . : . : 5496 5496 5496 5496/ // / / // / 2007 / 1989-90 ITA NO. : 5496/MUM/2007 (ASSESSMENT YEAR: 1989-90) HINDUSTAN UNILEVER, 6 TH FLOOR, AMJ HOUSE, ORCHARD AVENUE, HIRANANDANI GARDENS, POWAI, MUMBAI -400 076 %0 # .: PAN: AAACH 1004 N VS DEPUTY COMMISSIONER OF INCOME- TAX 11, MUMBAI, ROOM NO. 804, OLD CGO BUILDING (ANNEX), M K ROAD, MUMBAI -400 020 01 (APPELLANT) 2301 (RESPONDENT) APPELLANT BY : SHRI P J PARDIWALLA & SHRI NISHANT THAKKAR RESPONDENT BY : SHRI S D SHRIVASTAVA 456# /DATE OF HEARING : 22-07-2014 78/ 456#/ DATE OF PRONOUNCEMENT : 08-08-2014 $ 9 $ 9 $ 9 $ 9 O R D E R , . . . . . .. . PER VIVEK VARMA, J.M. : THE INSTANT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 1, MUMBAI, DATED 15.06.2007, WHEREIN THE CIT (A) HAD SUSTAINED THE LEVY OF PENALTY OF RS. 25,31,304/- UN DER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE FACTS ARE THAT THE ASSESSEE IS IN THE BUSINE SS OF GROWING, MANUFACTURING AND SELLING TEA FROM ITS TEA GARDENS LOCATED IN NILGIRI, TAMIL NADU. IT IS ALSO GROWING, MANUFACTURING AND S ELLING OF COFFEE AND CARDAMOM. HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 2 3. INSTANT ASSESSMENT YEAR IS THE TRANSITIONAL ASSE SSMENT YEAR HAVING 21 MONTHS. 4. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.12 .1989, DECLARING AN INCOME OF RS. 3,58,14,589/-. IN THE RETURN, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80HH AT RS. 62,20,057/- AND FURTHER CLAIMED DEDUCTION UNDER SECTION 80HHC AT RS. 2,00,740/-. 5. THE ASSESSEE HAD VARIOUS UNITS LOCATED AT VARIOU S LOCATIONS WHERE TEA PLANTATION WAS BEING DONE, IN PARTICULAR FROM VENNIAR FACTORY AND FROM MANALAAR FACTORY. AS A PRACTICE, P RODUCE OF MANALAAR WAS SOLD UNDER THE BRAND OF PRODUCE OF VENNIAR FACT ORY. 6. IN THE RETURN THAT WAS FILED, THE ASSESSEE CLAIM ED THE DEDUCTION UNDER SECTION 80HH AT RS. 62,20,057/-, BEING 20% OF RS. 3,11,00,284/-. ACCORDINGLY, THE NET PROFIT WAS WORK ED OUT AT 42.06%. THE AO CALLED FOR AN EXPLANATION WITH REGARD TO HIG HLY INFLATED NET PROFIT OF 42% OF VENNIAR TEA GARDENS, IN WHOSE COMP ARISONS, THE OTHER TEA GARDENS WERE SHOWING THE NET PROFIT AT 20.43%. 7. ON THE ABOVE QUERY, AS RAISED BY THE AO, THE ASS ESSEE SOUGHT CLARIFICATIONS INTERNALLY FOR ALL UNITS WHERE THERE WERE TEA GARDENS AND PRODUCTION FACILITIES WERE LOCATED, ALONG WITH HO, AS THE ACCOUNTS OF EACH UNIT WAS MAINTAINED SEPARATELY. IT WAS ALSO NO TICED BY THE MANAGEMENT, THAT PROFIT & LOSS ACCOUNT OF VARIOUS U NIT, THOUGH THE SAME HAD BEEN PREPARED BUT WAS NOT YET AUDITED. FOR THAT REASON, THERE WAS NO AUTHENTICATION OF CORRECTNESS OF THE A CCOUNTS OF VENNIAR TEA GARDEN FACILITY. 8. AT THIS JUNCTURE, THE ASSESSEE RECAST ITS PROFIT & LOSS ACCOUNT OF VENNIAR UNIT. HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 3 9. VIDE ITS LETTER DATED 27.12.1991, THE ASSESSEE E XPLAINED TO THE AO THAT DUE TO SOME CONFUSION IN FIGURES ALONG WITH CERTAIN CLERICAL MISTAKES, INADVERTENTLY ENTERED IN THE ACCOUNTS. TO RECTIFY THE MISTAKES, THE SECRETARY OF THE ASSESSEE COMPANY PRE SENTED HIMSELF BEFORE THE AO AND EXPLAINED THE MISTAKES THAT HAD B EEN COMMITTED, CAUSED BY PRESENTATION OF UNAUDITED ACCOUNTS AND HE , THEREFORE, RECAST AND RECONCILED THE PROFIT OF VENNIAR UNIT AN D ALSO CORRECTLY CLAIMED THE PROFIT AT RS. 1,95,28,540/-, AS AGAINST RS. 3,15,64,748/-, SHOWN EARLIER. 9. THIS EXPLANATION AND EXERCISE BY THE ASSESSEE CO MPANY DID NOT IMPRESS THE AO, WHO POINTED OUT, THAT THE ISSUE OF MISTAKE WAS TAKEN UP BY THE ASSESSEE COMPANY ONLY WHEN CONFRONTED WIT H. IT WAS NOT THE CASE WHERE THE ASSESSEE VOLUNTARILY CAME FORWARD TO RECTIFY ITS MISTAKE. THE AO ALSO OBSERVED THAT THE FRESH COMPUT ATION OF THE DEDUCTION CLAIMED UNDER SECTION 80HH WAS TO BE IN A CCORDANCE WITH THE METHOD AS ILLUSTRATED IN CIRCULAR NO. 600, ISSU ED BY THE CBDT. THE AO, WHILE OBSERVING THIS, ALSO OBSERVED IN THE BODY OF THE ORDER THAT SINCE THERE WAS A MAJOR LAPSE ON THE PART OF T HE ASSESSEE, IT AMOUNTED TO FURNISHING INACCURATE PARTICULARS OF IN COME FOR WHICH PENALTY UNDER SECTION 271(1)(C) HAS TO BE INITIATED . 10. THE AO, IN CONSEQUENCE OF THIS OBSERVATION IN T HE BODY OF ORDER UNDER SECTION 143(3), INITIATED AND LEVIED PENALTY UNDER SECTION 271(1)(C) VIDE ORDER DATED 28.09.2005, WHICH INCLUD ED EXCESS CLAIM OF DEDUCTION UNDER SECTION 80HH AND 80HHC RESPECTIVELY . 11. THE ASSESSEE TOOK THE ISSUE OF PENALTY BEFORE T HE CIT(A), BEFORE WHOM THE ASSESSEE REITERATED ITS EXPLANATION WITH R EGARD TO THE COMMITTING OF THE MISTAKE, WITH REGARD TO THE CLAIM OF DEDUCTION UNDER HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 4 SECTION 80HH AND 80HHC. THE CIT(A), AFTER CONSIDERI NG THE DETAILED REPLY AND SUBMISSIONS MADE BEFORE HIM, OBSERVED, 6 I HAVE CAREFULLY CONSIDERED THE MATERIAL ON RECO RD. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT FILED ITS ORIGINAL RETURN ON 27.12.1989 DECLARING TOTAL INCOME AT RS. 3,5814,589/ - 7 DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE APPELLANT CLAIMED DEDUCTION UNDER SECTION. 80HH OF I.T. ACT, 1961 IN RESPECT OF THE PROFIT DERIVED FROM VENIYAR FACTORY LOCATED IN BACKWARD AREA IN TAMIL NADU FOR THE LAST SEVERAL ASSESSMENT YEARS. IN THE YEAR UNDER REFERENCE, THE APPELLANT C LAIMED DEDUCTION OF RS. 62,20,057/- UNDER SECTION 80HH OF T HE I. T. ACT, 1961. IN SUPPORT OF THE ABOVE CLAIM, THE APPELLANT ENCLOSED ANNEXURE V-12 WITH THE RETURN AS A STATEMENT SHOWIN G DEDUCTION UNDER SECTION. 80HH AT 20% OF RS. 3,11,00, 284/- AND IN ANNEXURE VI(14) ENCLOSING THE PROFIT & LOSS ACCO UNT FOR 21 MONTHS OF THE ACCOUNTING PERIOD DERIVING NET PROFI T OF RS. 3,15,64,748 AGAINST THE TOTAL SALE OF RS.7,50,30,922 /- SUCH THAT THE NET PROFIT RATE WORKED OUT AT 42.06% OF GROSS T URNOVER. THE APPELLANT WAS REQUESTED TO EXPLAIN THE BASIS FOR CO MPUTATION OF HIGHLY INFLATED NET PROFIT OF 42% OVER GROSS TURNOV ER FOR THE VENNIAR FACTORY WHEREAS FOR ALL THE GARDEN TAKEN TO GETHER THE NET PROFIT WAS 9,16,96,434 ON THE TOTAL TURNOVER OF RS. 44,86,98,935/- GIVING THE RATE OF 20.43%. 8 THE AO NOTICED THAT THE AUDITORS OF THE APPELLAN T NAMELY M/S. PRICE WATER HOUSES AUDITED ACCOUNTS OF EACH TEA GAR DEN AND THE HEAD OFFICE FROM THE REGULAR BOOKS OF ACCOUNTS MA INTAINED AT THE HEAD OFFICE AND THE GARDENS. HOWEVER, THE PROFI T & LOSS ACCOUNT FOR THE VENNIAR FACTORY WAS PREPARED BY THE OFFICIALS OF THE APPELLANT COMPANY AND WAS NOT AUDITED BY THE AU DITORS REGARDING THE CORRECTNESS OF RECEIPTS SHOWN IN THE P&L ACCOUNT. WHEN THE APPELLANT WAS CONFRONTED WITH THE ABOVE FA CTS, IT FILED A LETTER DTD. 27.12.1991 FOR REVISING THE CLAIM IN P&L A/C; OF THE VENNIAR FACTORY & SUBMITTED AN ENTIRELY NEW RECASTE D PROFIT AND LOSS ACCOUNT FOR THE VENNIAR FACTORY. IT DISCLOSED THE NET PROFIT OF RS. 1,95,28,540/- AGAINST THE ALREADY DECLARED PROFI T OF RS. 3,15,64,748/-.THE APPELLANT CLAIMED THAT DUE TO SOM E CONFUSION IN SOME FIGURES THERE WERE SOME CLERICAL MISTAKE IN THE COMPUTATION OF PROFIT FOR THE VENNAIR FACTORY WHICH WAS NOT AT ALL AUDITED BY THE AUDITORS AND WAS PREPARED BY THE OFF ICIAL OF THE APPELLANT COMPANY ON THEIR OWN AND IT WAS FOUND DUR ING THE ASSESSMENT PROCEEDINGS TO BE TOTALLY WRONG. THE AO R ECORDED HIS SATISFACTION FOR SUCH WRONG CLAIM AS UNDER : 'IT IS MORE SO BECAUSE OF THROUGHOUT THE ASSESSMENT PROCEEDINGS RIGHT FROM THE DATE OF FILING OF THE RETURN ON 27.1 2.1991, THE ASSESSEE COMPANY ON ITS OWN NEVER CAME FORWARD TO R ECTIFY THE CLERICAL MISTAKE THAT RESULTED IN APPARENTLY UNDER STATEMENT OF PROFIT OF TEA BUSINESS TO THE EXTENT OF 40% OF RS. 1 .2 CRS. IN THE TOTALITY OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE EXCESSIVE CLAIM OF DEDUCTION UNDER SECTION. 80HH OF THE I. T. ACT, 1961 MADE IN THE ORIGINAL RETURN OF INCOME THAN WHA T IS TOTALLY ADMISSIBLE CAN ONLY BE CONSIDERED AS AN ATTEMPT ON THE PART OF THE ASSESSEE IN FURNISHING INACCURATE PARTICULARS W ITH THE HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 5 OBJECTIVE OF REDUCING THE QUANTUM OF TOTAL ASSESSAB LE PROFIT AND THEREBY FACILITATING THE AVOIDANCE OF TAX PAYMENT. FOR SUCH ACT OF COMMISSION ON THE PART OF THE ASSESSEE COMPANY, A S EPARATE PENALTY PROCEEDINGS UNDER SECTION. 271(1)(C) OF I. T. ACT, 1961 HAS TO BE INITIATED'. 10 AFTER RECORDING THE ABOVE SATISFACTION TO FURNIS H INACCURATE PARTICULARS OF INCOME FOR CONCEALMENT, THE AO INITIA TED PENALTY PROCEEDINGS UNDER SECTION. 271(1)(C). THE AO RECOMPU TED THE ADMISSIBLE DEDUCTION UNDER SECTION. 80HH IN ACCORDA NCE WITH THE CBDT CIRCULAR NO. 310 DTD.29.7.1981 @ 20% ( 40% OF NET PROFIT OF VENNIAR FACTORY) OF RS. 1,90,64,076/- AMOU NTING TO RS. 15,25,926/-. AGAINST THE CLAIMED DEDUCTION @ 20% OF RS. 3,11,00,204/- AMOUNTING TO RS. 62,20,057/-, THEREBY DETERMINING THE EXCESSIVE CLAIM AT RS. 46,94,131/- ( 62,20,057/- - 15,25,926/-). FOR SUCH FALSE CLAIM OF DEDUCTION MAD E UNDER SECTION.8OHH AT RS. 46,94,131/- THE AO INITIATED PENA LTY PROCEEDINGS UNDER SECTION. 271(1)(C) READ WITH EXPL . 4 AND ALSO FOR MAKING WRONG CLAIM OF DEDUCTION UNDER SECTION. 80HHC IN THE ORIGINAL RETURN OF INCOME. 11 THE ARS ARGUMENT THAT THE AO RECORDED THE SATISFACT ION FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION. 27 1(1)(C) W.R.T. DEDUCTION UNDER SECTION. 80HH WHILE IN THE LAST BUT ONE PARA OF THE ASSESSMENT ORDERS HE ACTUALLY INITIATED PENALTY PROCEEDINGS UNDER SECTION. 80HHC FOR WRONG CLAIM OF DEDUCTION U NDER SECTION. 8OHHC IS NOT CORRECT AS THE ENTIRE ORDER I S TO BE READ IN TOTALITY. IT CONFIRMS THAT THE ADDITION OF LETTER ' C' WITH 80HH IN THE LAST BUT ONE PARA OF THE ASSESSMENT ORDER IS A TYPO GRAPHICAL ERROR IN THE ORDER DUE TO ABUNDANTLY CLEAR SATISFACTION R ECORDED IN PARA 8(PG 12) OF THE ASSESSMENT ORDER. THE AO CORRECTLY R ECORDED HIS SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR WRONG CLAIM UNDER SECTION 80HH. ENGLI SH LANGUAGE IS NOT THE MOTHER TONGUE OF THE AO AND THEREFORE ANY SUCH MISTAKE DOES BRING ILLEGALITY IN THE FACTS AND CIRC UMSTANCES. SIMILARLY, THE RECORDED SATISFACTION CONFIRMS THE E VASION OF TAX AND THE WORD 'AVOIDANCE' IS ONLY BECAUSE OF ENGLISH BEING A FOREIGN LANGUAGE. THE RECORDING OF SATISFACTION BY THE A.O IS LEGALLY CORRECT TO INITIATE PENALTY PROCEEDINGS UND ER SECTION. 271(1)(C) IN ACCORDANCE WITH THE JUDGMENTS OF THE H ONBLE SUPREME COURT IN THE CASE OF DILEP N. SHROFF VS JCI T, MUMBAI(SC) DTD. 18.5.2007, VARKEY CHACKO VS CIT, 203 ITR 885 ( SC), D.M. MANASVI VS CIT.86 ITR 557(SC). ACCORDINGLY, THE AO ISS UED SHOW CAUSE NOTICE DTD 30.3.1992 UNDER SECTION. 271(1)(C) TO THE APPELLANT FOR BEING HEARD AND THE SAME WAS DULY SER VED ON THE APPELLANT. 12 THE MATTER TRAVELLED TO THE CIT(A) AND THEN TO I TAT. AFTER THE ORDER OF THE ITAT, THE INCOME OF THE APPELLANT WAS C OMPUTED AT RS. 3,98,86,389/-. 13 AFTER THE RECEIPT OF THE ITAT ORDER, THE APPELLAN T WAS GIVEN ANOTHER OPPORTUNITY WHICH WAS RESPONDED BY THE APPE LLANT BY FILING A LETTER DTD. 21.9.2005. IT WAS CONSIDERED B Y THE AO BEFORE LEVY OF PENALTY UNDER SECTION. 271(1)(C) ON 28.9.20 05. IN VIEW OF THE AFORESAID FACTS, THE AO CONSIDERED THE PENALTY P ROCEEDINGS AS INDEPENDENT PROCEEDINGS OTHER THAN THE ASSESSMEN T. HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 6 PROCEEDINGS. ACCORDINGLY GROUND NOS. 1.1, 1.2, 2, 3. 1 & 3.2 ARE REJECTED. 14. THE FILING OF LETTER DTD. 27.12.2991 FOR REVISI NG THE NET PROFIT OF VENNAIR FACTORY DOES NOT AMOUNT FILING OF REVISE D RETURN AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF M/ S. GOETZ (INDIA) LTD VS CIT, 284 ITR 323. FURTHER THE LETTER DTD. 27.12.1991 WAS NOT FILED VOLUNTARILY RATHER IT WAS FILED WHEN THE APPELLANT WAS CONFRONTED WITH THE FACTS DURING THE ASSESSMENT PROCEEDINGS AFTER ISSUE OF NOTICE UNDER SECTION. 14 3(2) AND 142(1). THE HON'BLE M.P HIGH COURT IN THE CASE OF AD DL.CIT VS CNANDRAKANT, 205 ITR 607, HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS MAHIM, 149 ITR 737 AND CIT VS A. SRIN IWASA, 242 TAXMAN 29(KER,) HELD THAT PENALTY UNDER SECTION . 271(1)(C) EVEN AFTER REVISED RETURN IS LEGALLY CORRECT AS DIS CLOSURE WAS NOT VOLUNTARY. 15. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER AND I FIND THAT THE APPELLANT'S CLAIM FOR DEDUCTION UNDER SECTION. 8OHHC WAS REDUCED BY RS. 1,27,401/- (200740 73339) . THE REDUCTION OF THE CLAIM OF DEDUCTION UNDER SECTION. 80HHC WAS CONSEQUENTIAL TO THE REDUCTION OF DEDUCTION UNDER S ECTION. 8OHH AT RS. 46,94,131/-. IN THE COMPUTATION OF INCOME, TH E AO ALLOWED DEDUCTION UNDER SECTION. 80HHC IN ACCORDANC E WITH CBDT CIRCULAR NO. 600 AND DID NOT RECORD HIS SATISF ACTION FOR INITIATION OF PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER. IN MY CONSIDERED VIEW, THE AO WRONGLY INCLUDED RS. 1,27,401 /- TO LEVY PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME IS THIS DEDUCTION WAS CONSEQUENTIAL TO THE DEDUCTION ADMISS IBLE UNDER SECTION 80HHC. 16. THE DEDUCTION UNDER SECTION 80HH IS ALLOWABLE U NDER RULE 8 OF I T RULES,1962 AND THEREFORE THE APPELLANT WAS HA VING FULL KNOWLEDGE OF ADMISSIBLE DEDUCTION TO IT IN AY 1989- 90, THE FACTS OF THE CASE SIMPLY PROVE THAT THE APPELLANT, WITH DELIBERATE MOTIVE TO EVADE TAX, CLAIMED WRONG DEDUCTION UNDER SECTION. 8OHH BY FURNISHING INACCURATE PARTICULARS OF INCOME . THE LEVIED PENALTY UNDER SECTION. 271(1)(C) IS LEGALLY CORRECT IN VIEW OF THE JUDGMENTS IN THE CASES OF PADAM KUMAR JAIN VS CIT, 230 ITR 766 (PAT.), HUKUMCHAND PREMCHAND VS CIT, 143 ITR (ST ) 40 (SC), SUNEEL KUMAR MALHOTRA VS CIT, 249 ITR 125(GUJ. ), BEENA METALS VS CIT, 240 ITR 222 (KER.) AND JAIN BROTHERS VS CIT, 251 ITR 302 (DEL). 12. THE CIT(A), THUS SUSTAINED THE LEVY OF PENALTY UNDER SECTION 271(1)(C), BY THE AO. 13. AGAINST THIS ORDER OF THE CIT(A), THE ASSESSEE IS NOW BEFORE THE ITAT. 13. BEFORE US, THE AR ONCE AGAIN RAISED A TECHNICAL GROUND WITH REGARD TO THE INITIATION OF PENALTY, THAT THE AO IN THE BODY OF THE HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 7 ASSESSMENT ORDER MENTIONED THAT PENALTY HAS TO BE INITIATED, BUT WHILE ORDERING TO INITIATE THE PENALTY, HE DECIDED AGAINST THE INITIATION OF PENALTY WITH REGARD TO THE EXCESS CLAIM OF DEDUC TION UNDER SECTION 80HH IN ITS ORIGINAL RETURN. ON THIS TECHNICAL GROU ND, THE AR PLEADED THAT NO PENALTY IS LEVIABLE. THE AR FURTHER SUBMITT ED THAT THE BASIS OF COMPUTATION OF QUANTUM WAS BASED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF WARREN TEA LTD, REPORTED IN 236 ITR 492. THE AR IN ANY CASE SUBMITTED THAT THIS WAS A D ECISION, RENDERED BY SINGLE JUDGE AND THIS WAS LATER ON REVERSED BY T HE DIVISION BENCH OF HONBLE CALCUTTA HIGH COURT REPORTED IN 266 ITR 226 . SINCE THE QUANTUM WAS COMPUTED IN ACCORDANCE WITH DECISION OF HONBLE CALCUTTA HIGH COURT, WHICH LATER ON GOT REVERSED, B RINGS INTO THE REASONABLENESS OF A CORRECT BELIEF TO MAKE A CLAIM FOR DEDUCTION. THE AR SUBMITTED THAT THE ASSESSEE LOST ITS CASE ON QUA NTUM IN THE ITAT, ON THE BASIS OF THE SUBSEQUENT DECISION OF THE HON BLE CALCUTTA HIGH COURT, WHICH REVERSED THE EARLIER DECISION RENDERED BY THE SINGLE JUDGE, WHICH WAS IN FAVOUR OF THE ASSESSEE. 14. THE AR ONCE AGAIN DELVED ON THE ISSUE OF VOLUNT ARY RECTIFICATION AND SUBMITTED THAT THE ONCE THE ASSESSEE WAS MADE KNOWN THE DISCREPANCY THAT HAD BEEN COMMITTED BY IT, IT NOT ONLY RECTIFIED THE ACCOUNTING MISTAKE AND COMPUTATION MISTAKE FOR THE CURRENT YEAR, IT RECTIF IED THE SIMILAR MISTAKE, THAT HAD BEEN COMMITTED IN THE SUBSEQUENT YEAR. THE AR RELYING ON THE CASE OF PRICE WATERHOUSE COOPERS VS CIT, REPORTED IN 348 ITR 306, WHEREIN, THE HONBLE SUPREME COURT ACCEPTED THE SILLY MISTAKE COMMITTED BY THE MULTINATIONAL ACCOUNTING FIRM, DELETED THE PENALTY LEVIED ON IT. THE AR SUBMITTED IN THE SAME WAY, THE ASSESSEE ALSO COMMIT TED THE FIRST MISTAKE BY INCLUDING THE SALES OF MANALLAR UNIT, WHOSE PRODUCE WAS BEING SOLD UNDER THE BRAND OF VENNIAR, WHICH, INCIDENTALLY WAS BASED ON UNAUDITED ACCOUNTS. THE AR, THEREFORE, SUBMITTED THAT THOUGH THE ADDITI ON MAY HAVE GOT CONFIRMED IN QUANTUM PROCEEDINGS, BUT, IN PENALTY P ROCEEDINGS, THE ASSESSEE HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 8 HAD SHOWN THE REASONABLE GROUNDS, AS TO HOW, THE MI STAKE HAD CREPT IN AND HOW THE ASSESSEE HAD IMMEDIATELY REMOVED THE MISTAK ES. HE, THEREFORE, SUBMITTED THAT IN SUCH CIRCUMSTANCES, PENALTY, SHOU LD NOT BE SUSTAINED. 15. THE DR ON THE OTHER HAND VEHEMENTLY SUPPORTED T HE ORDERS OF THE REVENUE AUTHORITIES AND DELVED ON THE BASIC POINT T HAT THE ASSESSEE DID NOT SHOW THE CORRECT PICTURE. HE SUBMITTED THAT NOT ONL Y THE ASSESSEE BE CHARGED WITH CONCEALMENT OF INCOME, BUT SHOULD ALSO BE CHAR GED WITH FURNISHING OF INACCURATE PARTICULARS OF INCOME, AS THE AO HAD COR NERED THE ASSESSEE ON BOTH THE FRONTS. THE DR ALSO COUNTERED THE ARGUMENT S OF THE AR FOR ILLEGAL PENAL PROCEEDINGS, AS THERE WAS NO ORDER, FOR INITI ATING PENALTY UNDER SECTION 80HH. HE, SUBMITTED THAT THE AOS REMARK IN THE BOD Y OF THE ASSESSMENT ORDER, WHERE IT SAYS SEPARATE PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE IT ACT, 1961 HAS TO BE INITIATED . THE DR SUBMITTED THAT WHETHER THE MISTAKE WAS DUE TO OMISSION OR COMMISSION, UNDER BO TH SITUATIONS, THE ERROR ON THE PART OF THE ASSESSEE WAS CULPABLE. HE FURTHE R SUBMITTED THAT SALES OF MANALLAR UNIT ENTERING INTO THE SALES OF VENNIAR UN IT WAS NOT AN ERROR WHICH COULD BE SAID TO BE CLERICAL ERROR, RATHER IT WAS A MAJOR ERROR, WHICH, IF NOT DETECTED BY THE AO, WOULD HAVE GONE A LONG WAY AND BENEFITTED THE ASSESSEE YEAR TO YEAR. SINCE, THE AO DETECTED THE INACCURATE PARTICULARS BOTH ON SALES AND QUANTUM OF DEDUCTION, THE ASSESSEES CLAIM WAS REJECTED. THE DR, SUBMITTED THAT AS THE FACTS ARE EMERGING FROM THE A SSESSMENT ORDER, AT THIS POINT IN TIME, THE THEORY OF INADVERTENT MISTAKE CA NNOT BE ACCEPTED. 16. THE DR FURTHER SUBMITTED THAT IN LEGALITY AS WE LL, THE DECISION OF THE HONBLE CALCUTTA HIGH COURT HAS BEEN SUSTAINED BY THE HONBLE SUPREME COURT AND, THEREFORE, THE THEORY OF THE ASS ESSEE THAT IT HAD ACTED AS PER THE DECISION OF THE SINGLE JUDGE DECIS ION OF HONBLE CALCUTTA HIGH COURT, WOULD NOT HOLD WATER. 17. THE DR, THEREFORE, SUBMITTED THAT THE ORDERS OF THE REVENUE AUTHORITIES ARE CORRECT AND DESERVE TO BE SUSTAINED . HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 9 18. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A T LENGTH AND HAVE PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE ORDER OF THE COORDINATE BENCH OF THE ITAT ON QUANTUM. THE FACT T HAT THE ISSUE OF DEDUCTION REACHED THE HONBLE CALCUTTA HIGH COURT A ND ITS DECISION RENDERED BY THE HONBLE SINGLE JUDGE, WHICH WAS IN FAVOUR OF THE ASSESSEE, CANNOT BE BRUSHED ASIDE. THIS PLACED THE ASSESSEE IN THE ZONE OF REASONABLE CAUSE FOR CLAIMING THE DEDUCTION . BUT THE BASIS GOT REVERSED IS ALSO A FACT. IN THIS CIRCUMSTANCE, THE IMPUGNED ISSUE ON QUANTUM GOES INTO THE PRECINCT OF TWO REASONABLE AN D ACCEPTABLE VIEWS, WHICH OUSTS THE JURISDICTION OF LEVY OF PENA LTY. 19. BESIDES THIS FACT OF TWO REASONABLE AND ACCEPTA BLE VIEWS, THE FACT THAT THE CLAIM OF DEDUCTION WAS BASED ON UNAUD ITED ACCOUNTS, BECAUSE OF WHICH THE CLAIM OF DEDUCTION AT VENNIAR FACILITY WAS UNDULY HIGH, IN ITS ACCOUNTS, IS ALSO TO BE ADDRESSED. THE ISSUE, WHICH IS COMMON WITH BOTH THE PARTIES IS, ONCE THE UNDULY HI GH PROFIT AND DEDUCTION WAS BROUGHT TO THE NOTICE OF THE ASSESSEE , WAS RECTIFIED IMMEDIATELY AND RIGHTFUL CLAIM WAS MADE. THIS, AS P ER THE AR, WAS A MISTAKE AND AS PER THE REVENUE AUTHORITIES AND DR, IT WAS A MAJOR MISTAKE. IT GETS IRONED OUT, WHEN WE FIND THAT THE CLAIM WAS AS PER UNAUDITED ACCOUNTS OF VENNIAR FACILITY, WHICH ALLOW ED THE INFIRMITY TO CREEP IN. WE ACCEPT THE SUBMISSION OF THE AR THAT E VEN A MULTI NATIONAL ACCOUNTING FIRM, HAVING PRESENCE ACROSS TH E GLOBE COULD END UP IN MAKING SILLY MISTAKE, AS HELD BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF PRICE WATERHOUSE COOPERS (SUPRA) . WE FURTHER HOLD THAT UNDESIRED AND UNWANTED HUMAN ANOMALY CANNOT PU SH THE ASSESSEE INTO THE FIELD OF PENAL MENS REA. HENCE TH E PENALTY, AS LEVIED BY THE REVENUE AUTHORITIES MERIT TO BE DELETED. 20. WHILE HOLDING THAT THE ASSESSEE CANNOT BE CHAR GED WITH PENAL PROCEEDINGS, WE REJECT THE VEHEMENT ARGUMENT OF THE AR THAT THERE HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 10 WAS NO ORDER, AS SUCH, TO INITIATE PENAL PROCEEDING S IN THE ASSESSMENT ORDER. WHERE WE ACCEPT THE ASSESSEES PLEADING THAT THERE WAS AN UNDESIRED MISTAKE COMMITTED BY THE ASSESSEE AND WE HAVE ABSOLVED THE ASSESSEE OF THE IMPUGNED PENALTY, WE, LIKEWISE, HOLD THAT THE AO COMMITTED MISTAKE IN NOT WRITING THE WORDS 80HH, WHILE ORDERING INITIATION OF PENALTY PROCEEDINGS. THIS DECISION IS NOT QUID-PRO-QUO, BUT IS BASED ON THE FACT THAT THE ENTIRE ASSESSMENT ORDER IS BASED ON DENIAL OF DEDUCTION UNDER SECTION 80HH. SIMPLY TO A CCEPT THE LAPSE COMMITTED BY THE AO, IN THE FACTS OF THIS CASE, CAN NOT COMPREHEND THAT THE AO DID NOT INITIATE PENAL PROCEEDINGS. WE, THEREFORE, REJECT THE ARGUMENT OF THE ASSESSEE THAT THE PENAL PROCEEDINGS ARE NOT EXIGIBLE IN THIS CASE, AS THE AO DID NOT INITIATE THE PROCEEDIN GS. 21. SINCE WE HAVE HELD IN PARA 19 THAT THE IMPUGNED PENALTY IS TO BE DELETED, WE, THEREFORE, SET ASIDE THE ORDER OF T HE CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY, AS LEVIED BY HIM. CON SEQUENTLY, THE APPEAL, AS FILED BY THE ASSESSEE IS ALLOWED. 22. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2014. SD/- SD/- ( !' ) ( ) # $% $% (N.K. BILLAIYA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 8 TH AUGUST, 2014 25/ COPY TO:- HINDUSTAN UNILEVER ITA NO. 5496/MUM/2007 11 1) 01/ THE APPELLANT. 2) 2301/ THE RESPONDENT. 3) THE CIT (A)-3, MUMBAI. 4) : 11 , MUMBAI / THE CIT-11, MUMBAI. 5) ;<25 D , THE D.R. D BENCH, MUMBAI. 6) <=> COPY TO GUARD FILE. $9 / BY ORDER / / TRUE COPY / / [ ?/@ , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *BC@ .. * CHAVAN, SR. PS