DCIT, New Delhi V. M/s Upkar International Pvt. Ltd., New Delhi

ITA 576/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3633 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 30-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief
• Section: 271(1)(c); 80IB; 274

Judgement Text

ITA NO. 576/DEL/2010 A.Y. 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 576/DEL/2010 A.Y. : 2005-06 DCIT, CIRCLE-18(1), M/S UPKAR INTERNATIONAL PVT. LTD R.NO. 211A, C.R. BUILDING, BUILDING NO. 10812, NEW DELHI VS. 17, PARTAP NAGAR, NEW DELHI (PAN: AAACU5468P ) [APPELLANT] (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SH. MANISH GUPTA, SR. D.R. PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONERS OF INCOME TAX (APPEALS) DATED 30.11.2 009 PERTAINING TO ASSESSMENT YEAR 2005-06. 2. THE GROUND RAISED READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. C.I.T.(A) HAS ERRED IN DELETING THE PENALTY AMOUNTING TO RS. 2,80,953/- IM POSED U/S 271(1)(C) OF INCOME TAX ACT IGNORING THE FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME BY WRONGLY CLAIMING DEDUCTION U/S 80IB OF INCOME TAX ACT. 3. THE ASSESSEE IN THIS CASE HAS CLAIMED DEDUCTION U/S 80IB. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN OTHER INC OME WHICH HAS BEEN TAKEN FOR THE PURPOSE OF ELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION U/S 80IB. THIS INCLUDED ITA NO. 576/DEL/2010 A.Y. 2005-06 2 A SUM OF RS. 33,31,892/- ON ACCOUNT OF EXPORT INCEN TIVES. ASSESSING OFFICER WAS OF THE OPINION THAT BENEFIT IS AVAILABLE U/S 80IB O N THE PROFIT AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING. IN HIS OPINION EXPOR T INCENTIVES DID NOT QUALIFY FOR THE SAME. ASSESSING OFFICER REFERRED TO SEVERAL CASE LAWS AND HELD THAT EXPORT INCENTIVE DID NOT QUALIFY FOR DEDUCTION U/S 80IB. O N SIMILAR ANALOGY ASSESSING OFFICER HELD THAT AN INTEREST INCOME AMOUNTING TO RS. 57,641/- AND BROKERAGE OF RS. 130882/- CANNOT BE SAID TO BE DERIVED FROM THE BUSINESS UNDERTAKING. ASSESSING OFFICER CONCLUDED THAT THE 25% OF THE DU TY DRAWBACK COMES TO RS. 832973/- I.E. X 3331892/- WHICH IS GREATER THAN T HE EXEMPTION CLAIMED BY ASSESSEE FOR RS. 7,67,790/-. THEREFORE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80-IB. PENALTY PROCEEDINGS WERE ALSO INITIATED. 3.1 IN THE PENALTY PROCEEDINGS ASSESSEE SUBMITTED T HAT CLAIM WAS MADE UNDER GOOD BELIEF AND ON THE BASIS OF REPORT OF THE QUAL IFIED CHARTERED ACCOUNTANT. IT WAS FURTHER CLAIMED THAT ASSESSEE WAS NOT AWARE TH AT EXPORT BENEFITS LIKE DUTY DRAW BACK SHOULD NOT BE CONSIDERED FOR DEDUCTION U/ S 80IB. ASSESSEE ALSO REFERRED TO THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF DILIP N. SHROFF 291 ITR 519. ASSESSING OFFICER WAS NOT CONVINCED FROM THE ABOVE. HE INTER-ALIA REFERRED TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS 295 ITR 044. ACCORDIN GLY, HE HELD THAT THERE WAS A LOSS ON REVENUE ON THE PART OF THE ASSESSEE BY NON- APPLICATION OF PROVISION. HE ITA NO. 576/DEL/2010 A.Y. 2005-06 3 HELD THAT ASSESSEE DECLARED INCORRECT INCOME. ACCO RDINGLY, PENALTY AMOUNTING TO RS. 280953/- WAS IMPOSED. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOM E TAX (APPEALS) HELD AS UNDER:- I HAVE CONSIDERED THE PENALTY ORDER OF THE ASSESS ING OFFICER AS WELL AS SUBMISSION MADE BY THE APPELLANT. IT IS SEEN FROM THE ASSESSMENT AS WELL AS PENALTY ORDER THAT THE ASSESSING OFFICER HAD PL ACED RELIANCE ON THE CASE OF RITESH INDUSTRIES (2005) 274 ITR 324 (DELHI) FOR MAKING DISALLOWANCE IN THE ASSESSMENT ORDER AND CONSEQUENTIAL IMPOSITION OF PENALTY. HOWEVER, IN THE CASE OF C.I.T. VS. ELTEK SGS PVT. LTD. (2008) 3 00 ITR 6 (DELHI), THE HONBLE DELHI HIGH COURT AFTER TAKING COGNIZANCE OF APEX CO URT DECISION IN THE CASE OF C.I.T. VS. STERLING FOOD 237 ITR 579, AS WELL AS THE CASES OF C.I.T. VS. INDIA GELETINE AND CHEMICALS 275 ITR 274 (GUJ) AND CAMBA Y ELECTRIC SUPPLY INDUSTRIAL CO. VS. C.I.T. (1978) 113 ITR 84 (SC) DI STINGUISHED ITS EARLIER DECISION IN THE CASE OF RITESH INDUSTRIES AND HELD THAT EXCISE DUTY DRAW BACK AS DERIVED FROM INDUSTRIAL UNDERTAKING IS ENT ITLED TO SPECIAL DEDUCTION U/S 80IB. THE HONBLE DELHI HIGH COURT OBSERVED A S UNDER:- WE ARE OF THE VIEW THAT THE DECISION IN RITESH IND USTRIES (2005) 274 ITR 324 (DELHI) IS DISTINGUISHABLE SINCE IT CONCERN S SECTION 80-I OF THE ACT WHICH AGAIN USES THE EXPRESSION PROFITS AND G AINS DERIVED FROM AN INDUSTRIAL UNDERTAKING. IT IS CRUCIAL TO APPRECIATE THE DIFFERENCE IN LANG UAGE IN SECTION 80HH, SECTION 80-I AND SECTION 80-IB OF THE ACT. WHILE THE LANGUAGE IN SECTION 80HH, OF THE ACT AND IN SECTION 80-I OF THE ACT IS SIMILAR, THERE IS A CLEAR DEPARTURE IN THE LANGUAGE USED IN SECTIO N 80-IB OF THE ACT AND IT IS THIS CHOICE OF WORDS THAT MAKES ALL THE D IFFERENCE THAT WE ARE CONCERNED WITH. THUS, IN THE LIGHT OF THE CONTENTION OF THE APPELLA NT THAT DISALLOWANCE OF DEDUCTION U/S. 80-IB IS DUE TO DIFFERENCE OF OPI NION AND JUDGEMENTS OF VARIOUS COURTS, AND A SPECIFIC DECISION IN THE CASE OF ELTEK SGS PVT. LTD. BY ITA NO. 576/DEL/2010 A.Y. 2005-06 4 THE JURISDICTIONAL HIGH COURT ON SECTION 80-IB AND O N THE SUBJECT MATTER OF DISALLOWANCE IN THE INSTANT CASE, TO THE CONTRARY, PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) DESERVES TO BE CAN CELLED. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE. UPON CAREFUL CONSIDERATION WE ARE OF THE OPINION THAT THIS MATTER CAN BE DISPOSED OF WITHOUT HEARING THE ASSES SEE. ACCORDINGLY, WE PROCEED TO ADJUDICATE THE ISSUE. 6.1 WE FIND THAT SECTION 271(1(C) OF THE ACT POSTUL ATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALME NT OF INCOME. WE ALSO FIND THAT PENALTY U/S 271(1)(C) IN THIS CASE HAS BEEN LE VIED ON ACCOUNT OF DENIAL OF DEDUCTION U/S 80IB ON ACCOUNT OF EXPORT INCENTIVES. WE FIND THAT THE ISSUE OF ELIGIBILITY OF EXPORT INCENTIVES I.E. DUTY DRAW BAC K FOR THE PURPOSE OF DEDUCTION U/S 80IB WAS A MATTER WHICH WAS SUBJECT MATTER OF CONFLI CTING DECISIONS IN THE COURTS AND WAS ULTIMATELY SETTLED BY THE HONBLE APEX COUR T RECENTLY IN THE CASE OF LIBERTY INDIA LTD. 6.1 FROM THE ABOVE, IT IS VERY CLEAR THAT THE MATTE R WAS NOT ATTAINED FINALITY WHEN THE ASSESSEE HAD MADE THE CLAIM. THE ASSESS EE HAD MADE THE CLAIM OF DEDUCTION U/S 80IB FROM THESE AMOUNTS BY FURNISHIN G ALL THE NECESSARY PARTICULARS. THE MATTER PLAINLY WAS OF TWO OPINION S WHILE ASSESSEE HAD CLAIMED DEDUCTION ON THE SAME, ASSESSING OFFICER WAS OF TH E OPINION THAT THE SAME WAS ITA NO. 576/DEL/2010 A.Y. 2005-06 5 NOT ALLOWABLE. THE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE EX-FACIE BOGUS. UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT A SSESSEE IS GUILTY OF FURNISHING INACCURATE PARTICULARS OR CONCEALING OF INCOME. HE NCE LEVY OF PENALTY U/S 271(1)(C) CANNOT BE SUSTAINED. 6.2 IN THIS REGARD WE PLACE RELIANCE FROM THE HONB LE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. I N CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2010 IT HAS BEE N HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE M EANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUS E WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILI P SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PE NALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTEN TION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENAL TY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 6.3 WE WOULD ALSO LIKE TO PLACE RELIANCE UPON THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LORDSHIPS 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 STATUTO RY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT OR DINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT ITA NO. 576/DEL/2010 A.Y. 2005-06 6 CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDIC IALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENA LTY IS PRESCRIBED, 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 P ROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OF FENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 6.4 IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENTS, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF T HE LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY, WE UPHOLD THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/06/2010 UP ON CONCLUSION OF HEARING. SD/- SD/- [R.P. TOLANI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 30/06/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES