Vadehra Builders Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5780/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81876 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 30-09-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 26-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Question of law; Wrong claim; Difference of opinion; Assessment record
• Section: 80HHC

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H NEW DELHI BEFORE SHRI I.C. SUDHIR, JM AND SHRI J.SUDHAKAR REDDY, J.M ITA NO:5780/DEL/2011 AY : - 2004-05 M/S. VADEHRA BUILDERS PVT. LTD. VS. DCIT, D-40, CIRCLE 17 (1) DEFENCE COLONY NEW DELHI. NEW DELHI PAN AAACV0694C (APPELLANT) (RESP ONDENT) APPELLANT BY :S HRI S.R. WADHWA, ADVOCATE AND MR. Y.S. BHATNAGAR, CA RESPONDENT :SH RI DEVI SHARAN SINGH, SR. DR O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- XIX NEW DELHI DATED 3.10.2011 FOR THE ASSTT. YEAR 2004-05, WHEREIN THE FIRST APPELLAT E AUTHORITY CONFIRMED THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 2. FACTS IN BRIEF : THE ASSESSEE IS CARRYING ON THE BUSINESS IN THREE LINES VIZ. I. CIVIL CONSTRUCTION II. INTERIOR WORKS III. VADHEREA ART GALLERY WHICH DEALS IN TRADING OF PAI NTINGS, CONDUCTING EXHIBITIONS, EXPORT OF PAINTINGS. ITA 5780/DEL/2011 AY 2004-05 VADEHRA BUILDERS PVT. LTD. VS. DCIT 2 THE APPELLANT FILED A RETURN OF INCOME ON 30.10.200 4 FOR THE ASSESSMENT YEAR 2004-05 DECLARING AN INCOME OF RS. 44,99,980. IN THE RETURN THE ASSESSEE CLAIMED DEDUCTION U/S 80HHC FOR RS. 64,42,156. THE AO IN THE ASSESSMENT COMPLETED U/S 1 43(3) ON 4.12.2006 DETERMINED THE INCOME AT RS. 75,45,000. I N THE SCRUTINY ASSESSMENT, THE AO ALLOWED 80HHC DEDUCTION FOR RS. 38,89,924 AGAINST THE CLAIM OF THE APPELLANT FOR RS . 64,42,156. THE CIT(A) ALLOWED DEDUCTION AT RS. 41,92,580. THUS AS ON THE DATE OF FINALIZING THE PENALTY PROCEEDINGS THE DEDU CTION STOOD ALLOWED AT RS. 41,92,580. THE EXCESS DEDUCTION WAS WORKED OUT AT RS. 22,49,576. 3. THE AO LEVIED PENALTY U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS KNOWINGLY BY C LAIMING EXCESS DEDUCTION U/S 80HHC AND HAS FAILED TO OFFER AND PRO VE ANY BONAFIDE EXPLANATION. THE LD. CIT(A) REJECTED ALL THE CONTE NTIONS OF THE ASSESSEE AND CONCLUDED AS FOLLOWS :- 27.1 IT IS SETTLED NOW THAT CLAIMING EXCESSIVE D EDUCTIONS ALSO AMOUNT TO CONCEALMENT OF INCOME. FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FIRMS: EITHER AN ITEM OF RECEIPT MAY BE SUPPRES SED FRAUDULENTLY, OR AN ITEM OF EXPENDITURE MAY BE FALSELY CLAIMED. BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME. BOTH TYPES AMOUNT TO CO NCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING O F INACCURATE PARTICULARS OF INCOME. PENALTY, MAY BE IMPOSED FOR EITHER OR BOTH SUCH ATTEMPTS (CIT V/S INDIA SEA FOODS, 1976 105 ITR 708 , KERALA; NAGIN CHAND SHIV SAHAI V/S CIT (1938) 6 ITR 534 (LAH): CI T V/S GATES FOAN AND RUBBER COMPANY (1973) 91 ITR 467 (KER). 27.2 IN A NUTSHELL, THE AO HAS CONCLUSIVELY PROV ED THAT THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTION U/S 80HHC BY FURNIS HING INACCURATE PARTICULARS OF INCOME AS DISCUSSED ABOVE TO EVADE T HE TAXES. THERE WAS A DELIBERATE ATTEMPT TO DEFRAUD THE REVENUE. THE FI NDINGS OF THE AO WERE NOT AT ALL CONTROVERTED BY THE ASSESSEE. ITA 5780/DEL/2011 AY 2004-05 VADEHRA BUILDERS PVT. LTD. VS. DCIT 3 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD SHRI S.R. WADHWA LD. SR. COUNSE L ON BEHALF OF THE ASSESSEE AND SHRI DEVI SHARAN SINGH LD. SR. DR ON B EHALF OF THE REVENUE. 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDER S OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS :- 6.1 THE DISALLOWANCE IN QUESTION IS DUE TO DIFFER ENCE OF OPINION IN COMPUTATION OF RELIEF U/S 80HHC. THE ASSESSEE HAD C LAIMED DEDUCTION U/S 80HHC (3) OF THE ACT FOR PAINTINGS EXPORTED BY VADH EREA ART GALLERY. SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED FOR EACH OF THE THREE BUSINESSES OF THE ASSESSEE. 6.2 THE DIFFERENCE IN COMPUTATION OF RELIEF U/S 80HHC WAS DUE TO THE AO CONSIDERING INDIRECT COST ATTRIBUTABLE TO EXPORTS A T RS. 3,13,59,810/- AND CONSIDERING DIRECT COST AT RS. 1,56,71,491/- AS AGA INST THE ASSESSEES CLAIM OF INDIRECT COST ATTRIBUTABLE TO EXPORTS AT RS. 1,3 7,26,588/- AND DIRECT COST AT RS. 1,56,71,491/-. ON APPEAL LD. CIT(A) REDUCED THE DIRECT COST TO RS. 1,43,36,639/- AND INDIRECT COST WAS INCREASED TO RS . 3,26,93,825/-. 6.3 ANOTHER AREA OF DIFFERENCE OF OPINION IS O F INCLUSION OF EXPORT CONSIGNMENT SALE IN TOTAL TURNOVER, WHICH WAS DECID ED IN FAVOUR OF THE ASSESSEE IN THE EARLIER ASSESSMENT YEAR. 6.4 THE CONTENTIONS OF THE ASSESSEE ARE THAT ITA 5780/DEL/2011 AY 2004-05 VADEHRA BUILDERS PVT. LTD. VS. DCIT 4 A) THE DEDUCTION U/S 80HHC WAS CLAIMED AS PER THE CERTIFICATE ISSUED BY THE AUDITORS IN THE PRESCRIBED FORM NO. 10CCAC B) THE BASIS OF CALCULATION OF DEDUCTION IN THIS YEAR IS THE SAME AS WAS CLAIMED IN THE EARLIER ASSESSMENT YEAR. C) THE BASIS OF CALCULATION IS A SUBJECT MATTER OF DISPUTE AND THERE IS A GENUINE DIFFERENCE OF OPINION ON THE MANNER AND MOD E OF CALCULATION. 7. SHRI WADHWA SUBMITS THAT THE INCLUSION OF V ALUE OF STOCKS SOLD ON EXPORT CONSIGNMENT IN THE TOTAL TURNOVER, WAS DECID ED IN FAVOUR OF THE ASSESSEE IN THE EARLIER ASSESSMENT YEARS AND THAT O N THE GROUND OF CONSISTENCY, THIS ISSUE SHOULD HAVE BEEN ALLOWED T HIS YEAR WHICH WOULD HAVE INCREASED THE RELIEF THAT WOULD HAVE BEEN ALLO WABLE TO THE ASSESSEE. ON THE ISSUE OF DETERMINATION OF DIRECT AND INDIRECT COST, HE CONTENDS THAT THE AO INCLUDED THE COST INCURRED BY THE ASSESSEE IN CI VIL CONSTRUCTION BUSINESS AS WELL AS IN THEIR INTERIOR WORKS BUSINESSES WHIL E CALCULATING THE COSTS IN VADHEREA ART GALLERY WHICH IS FUNDAMENTALLY INCORRE CT. HE SUBMITS THAT COMPUTATION OF RELIEF U/S 80HHC WAS MADE BY THE ASS ESSE IN THE EARLIER YEAR BASED ON THE REPORT OF THE CHARTERED ACCOUNTAN T, WHICH WAS THE SAME BASIS AS WAS MADE THIS YEAR WAS ALLOWED. 8. LD. DR RELIES ON THE ORDER OF THE FIRST AP PELLATE AUTHORITY ON THE MERITS OF THE CASE AND ARGUED THAT THE ASSESSEES SUBMISSI ONS CANNOT BE ACCEPTED. HE CONTENDED THAT THE AUDITOR REPORT IS NOT SACROSA NCT. MAKING A WRONG CLAIM DELIBERATELY TENTAMOUNTS TO FURNISH INCORREC T PARTICULARS OF INCOME. ITA 5780/DEL/2011 AY 2004-05 VADEHRA BUILDERS PVT. LTD. VS. DCIT 5 9. IN OUR VIEW, THE EXPLANATION GIVEN BY THE AS SESSEE IS BONAFIDE, FOR THE REASON THAT THE ENTIRE CLAIM HAS BEEN MADE BASED ON A REPORT GIVEN BY THE CHARTERED ACCOUNTANT IN THE PRESCRIBED FORM NO. 10C C AC, AS PER INCOME TAX ACT 1962. THE ASSESSEE HAS FURNISHED ALL THE PA RTICULARS AND IT WAS ONLY A CASE OF INTERPRETATION OF THE PROVISION ON WHICH THERE IS A DIFFERENCE OF OPINION, WHICH LED TO DISALLOWANCE OF A PART OF THE CLAIM OF DEDUCTION U/S 80HHC. IT IS ALSO NOT DENIED THAT THE ASSESSEE HAS BEEN CONTINUOUSLY CLAIMING DEDUCTION U/S 80HHC ON THE VERY SAME BASIS IN THE EARLIER ASSESSMENT YEARS AND HIS CLAIMS HAVE BEEN ACCEPTED BY THE REVENUE. IT IS ALSO TRUE THAT WHILE DETERMINING IN THE INDIRECT C OST OF THE EXPORT BUSINESS, THE AO HAS ERRONEOUSLY CONSIDERED THE EXPENDITURE I NCURRED BY THE ASSESSEE IN THE BUSINESS OF CONSTRUCTION WORK AND IN THE BU SINESS OF INTERIOR WORKS ALSO. THE ISSUE AS TO WHETHER CONSIGNMENT OF EXPORT SALE HAS TO BE CONSIDERED IN TOTAL TURNOVER WAS ALSO ADJUDICATED I N FAVOUR OF THE ASSESSEE. THUS ON FACTS THE QUANTIFICATION OF THE CLAIM ALLOW ABLE U/S 80HHC BY THE LD. CIT(A) IS ITSELF DEBATABLE. 10. WE NOW CONSIDER THE LEGAL POSITION. IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD. 322 ITR 158 THE HONBLE SUPREME COURT HELD THAT THE ASSESSEE CANNOT BE EXPOSED PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PENALTY PROVISIONS AND THAT MERELY MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW B Y ITSELF WILL NOT AMOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME O F THE ASSESSEE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INTERNATIONAL AUDIO VISUAL CO. (2007) 288 ITR 570 (DELHI) HELD TH AT WHERE THE ASSESEE HAD ITA 5780/DEL/2011 AY 2004-05 VADEHRA BUILDERS PVT. LTD. VS. DCIT 6 A BONAFIDE BELIEF THAT BY SELLING DUBBING RIGHTS TO A FOREIGN COMPANY, IT WAS SELLING GOODS OR MERCHANDISE WITHIN THE MEANING OF SECTION 80HHC, MERE DISALLOWANCE OF ITS CLAIM FOR DEDUCTION UNDER SECTI ON 80HHC WOULD NOT WARRANT IMPOSITION OF PENALTY. THE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT VS. DEEP TOOLS PVT. LTD. (2004) 274 ITR 603 (P&H) HELD THAT THERE WAS NOTHING TO SHOW THAT THE MISTAKE BY THE CA WAS NOT BONA FIDE AND THE MER E FACT THAT THE CERTIFICATE ISSUED BY THE CA WAS NOT IN ACCORDANCE WITH SECTION 80HHC(4) WAS NOT ENOUGH TO HOLD THAT THE MISTAKE WAS NOT BON A FIDE. AT ANY RATE, AS FAR AS THE ASSESSEE WAS CONCERNED, NO MALA FIDES CO ULD BE ATTRIBUTED TO IT, AS THE CLAIM FOR DEDUCTION WAS BASED ON THE CERTIFICAT E OF CA WITH WHOM NO COLLUSION HAD BEEN PROVED. IN VIEW OF THE FINDINGS RECORDED BY THE TRIBUNAL THAT ERROR OF THE CA WAS INADVERTENT AND DID NOT LA CK BONA FIDES, CANCELLATION OF THE ORDER OF PENALTY WAS CLEARLY JU STIFIED. THUS, NO QUESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL. ACCORD INGLY, INSTANT APPEAL WAS TO BE DISMISSED. THE GUJRAT HIGH COURT IN THE CASE OF GEETA PRINTS ( P) LTD. V.ACIT (2012) 247 CTR (GUJ) 620 HELD THAT WHERE THE ASSESS EE HAD MADE FULL DISCLOSURE ABOUT ITS CLAIM U/S 80HHC WHICH WAS ALSO CERTIFIED BY CHARTERED ACCOUNTANT, NO PENALTY COULD BE LEVIED U/S 271(1)(C ) JUST BECAUSE CLAIM ON MERITS WAS NOT GRANTED IN FAVOUR OF THE ASSESSEE. CIT VS. LAKHANI INDIA LTD. (2010) 324 ITR 73 (P & H) HELD THAT PENALTY IMPOSED ON THE ASSESSEE U/S 271(1)(C) ON ACCOUNT OF EXCESS DEDUCTION CLAIMED BY THE ASSESSEE U/S 80HHC BY TAKING WHOLE O F PROFIT FROM EXPORT ITA 5780/DEL/2011 AY 2004-05 VADEHRA BUILDERS PVT. LTD. VS. DCIT 7 UNIT AS ELIGIBLE FOR DEDUCTION INSTEAD OF TAKING IN TO ACCOUNT RATIO OF EXPORT TURNOVER TO TOTAL TURNOVER WHILE COMPUTING SAID DED UCTION, WAS NOT JUSTIFIED. DCIT VS. MAHARASHTRA SEAMLESS P LTD. (2010) 36 DTR 36 (DEL) (TRIB) HELD THAT ASSESSEE HAVING ADMITTEDLY DISCLOSED COM PLETE DETAILS OF ITS CLAIM FOR DEDUCTION UNDER S. 80HHC IN ITS RETURN, AND TH E AO HAVING DISALLOWED THE CLAIM ON THE BASIS OF A RULING OF THE SUPREME C OURT WHICH WAS PRONOUNCED MUCH AFTER THE DATE OF THE FILING OF RET URN BY THE ASSESSEE. CHEMFIT V. ACIT (2012) 25 TAXMANN.COM 145 /16 ITR ( TRIB) 211 (AHD.) HELD THAT IN THIS CASE, THE ASSESSEE HAD CLAIMED DE DUCTION U/S 80HHC. HOWEVER, IN THE COURSE OF ASSESSMENT PROCEEDINGS TH E AO RECALCULATED AN INCREASE IN THE TOTAL TURNOVER, THEREBY REDUCING TH E DEDUCTION CLAIMED. THE ASSESSEE AGREED WITH THE CONTENTION OF THE AO AND F ILED A REVISED STATEMENT OF TOTAL INCOME AND A REVISED CLAIM OF DEDUCTION. D ELETING THE PENALTY LEVIED U/S 271(1)(C) ON ACCOUNT OF EXCESS DEDUCTION CLAIME D UNDER SECTION 80HHC, THE TRIBUNAL HELD THAT SINCE THE BASIS OF REVISION OF THE CALCULATION OF DEDUCTION U/S 80HHC WAS VERY MUCH BEFORE THE ASSESS ING OFFICER AND THE REVISION WAS BASED UPON THE FACTS AND FIGURES ALREA DY AVAILABLE ON THE ASSESSMENT RECORD, THERE WAS NO OCCASION TO ALLEGE THAT THERE WAS CONCEALMENT OF FACTS ON THE PART OF THE ASSESSEE. M OREOVER, THE ASSESSEE HAD ALSO DEMONSTRATED THE REASON FOR THE SAID REVISION WHICH APPEARED TO BE LOGICAL AND, HENCE, EVEN OTHERWISE THIS WAS NOT THE CASE OF FURNISHING INACCURATE PARTICULARS AS TO LEVY CONCEALMENT PENAL TY. WHERE THE ASSESSEE CLAIMED DEDUCTION OF AN AMOUNT WHICH WAS DEBATABLE, PENALTY U/S 271(1)(C) COULD NOT BE LEVIED. ITA 5780/DEL/2011 AY 2004-05 VADEHRA BUILDERS PVT. LTD. VS. DCIT 8 MODEL FOOTWEAR (P) LTD. V. ITD (2009) 319 I TR (TRIB) 51 (DELHI) HELD THAT SIMPLY BECAUSE THE ASSESSEE CLAIMED DEDUCTION U/S 80HHC WITH REFERENCE TO INTEREST INCOME AND MISCELLANEOUS INCO ME WITHOUT REDUCING 90 PER CENT THEREOF FROM THE NET PROFIT, THAT BY ITSEL F CANNOT BE A BASIS TO HOLD THAT THE ASSESSEE HAD MADE AN INCORRECT CLAIM WITH A VIEW TO EVADE PAYMENT OF TAXES. 11. APPLYING THE PROPOSITION LAID DOWN TO THE F ACT OF THIS CASE WE CANCEL THE PENALTY AND ALLOW THE APPEAL OF THE ASSESSEE A S IN OUR VIEW THE EXPLANATION GIVEN BY THE ASSESSEE IS A BONAFIDE AND THE CLAIM MADE IS GENUINE AND BONAFIDE AND THE DISALLOWANCE WAS A RES ULT OF DIFFERENCE OF OPINION. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER,2014. SD/- SD/- (I.C. SUDHIR) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 20 TH OCTOBER,2014 *VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT(A); 5. DR; 6. GUARD FILE BY ORDER ASST. REGISTRAR