ACIT, Cir.1(2), Pune, Pune V. Dhariwal Industries Ltd., Pune

ITA 581/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56435 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-08-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 12-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Bonafide belief; Question of law
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 580 AND 581/PN/2009 A.Y. 1999-00 AND 2000-01 ASSTT. CIT CIR. 1(2) PUNE APPELLANT VS. DHARIWAL INDUSTRIES LTD., MANIKCHAND HOUSE, PLOT NO. 100-101 D KENNEDY ROAD, BEHIND HOTEL LE MERIDIEN ROAD PUNE-411 001 PAN AAACD 5896 L RESPONDENT APPELLANT BY : SHRI S.K. SINGH ASSESSEE BY : SHRI KISHOR PHADKE DATE OF HEARING: 26-8-2011 DATE OF PRONOUNCEMENT: 30-8-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM BOTH THESE APPEALS PERTAIN TO THE SAME ASSESSEE ON SIMILAR ISSUE OF DELETING THE PENALTY LEVIED U/S 27 1(1)(C) OF THE ACT FOR A.Y. 1999-00 AND 2000-01. SO THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSING OFFICER LEVIED PENALTY OF RS. 5,90,00,000/- FOR A.Y. 1999-00 AND RS. 5,20,61,983/ - FOR A.Y. 2000-01 BY INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE/ADDITIONS ON ISSUE OF 2 ITA NO.580 AND 581/PN/2009 DHARIWAL INDUSTRIES A.Y. 1999-00 AND 2000-01 DEDUCTION U/S 80-I AND 80-IA OF THE ACT. SAME WAS O PPOSED BEFORE THE CIT(A) AND VARIOUS CONTENTIONS WERE RAIS ED ON BEHALF OF THE ASSESSEE. HAVING CONSIDERED CONTENTIO NS RAISED ON BEHALF OF THE ASSESSEE, PENALTY HAS BEEN DELETED BY THE CIT(A) IN BOTH THE YEARS. SAME HAS BEEN OPPO SED BY REVENUE. THE ISSUE IS SAME IN BOTH THE YEARS. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF PAN MASALA AND GUTKA. DUR ING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT ASSESSEES CLAIM OF DEDUCTION U/S 80-I AND 80-IA IN RESPECT OF UNDERTAKINGS MANUFACTURING GUTKA AND PAN MASALA WERE REJECTED BY THE ASSESSING OFFICER ON THE GROUND THA T THE PRODUCTS MANUFACTURED BY THE ASSESSEE, NAMELY GUTKA AND PAN MASALA ARE TOBACCO PREPARATIONS AS ENVISAGED IN ITEM NO. 2 OF ELEVENTH SCHEDULE OF THE I.T. ACT AND THER EFORE, NOT ELIGIBLE FOR DEDUCTION U/S 80-I AND 80-IA. CONSEQUE NTLY, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE I NITIATED. ON APPEAL IN QUANTUM PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE WAS HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80-I AND 80-IA AND THE DISALLOWANCES MADE BY THE ASSESSING O FFICER WERE DIRECTED TO BE DELETED. ON FURTHER APPEAL ON QUANTUM PROCEEDINGS BY THE DEPARTMENT THE ITAT PUNE BENCH HELD THAT THE PRODUCTS MANUFACTURED BY THE ASSESSEE, NAMELY GUTKA AND PAN MASALA ARE TOBACCO PREPARATIONS ARE WITHIN THE MEANING OF ITEM NO. 2 O F 3 ITA NO.580 AND 581/PN/2009 DHARIWAL INDUSTRIES A.Y. 1999-00 AND 2000-01 ELEVENTH SCHEDULE OF THE ACT AND ACCORDINGLY, REVER SED THE ORDER OF THE CIT(A) AND UPHELD THE DISALLOWANCES MA DE BY THE ASSESSING OFFICER. MEANWHILE, IN APPEAL, THE CI T(A) GRANTED RELIEF TO THE ASSESSEE ON THE POINT OF PENA LTY. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE . 3.1. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT FOR ALL THE PRIOR YEARS, THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80-I AND 80-IA FOR THE ELIGIBLE UNITS AT GHODNADI, HYDERABAD ETC. THE ASSESSEE HAS BEEN ALLOWED DEDUCT ION AT THE CIT(A)S STAGE. TILL FILING OF RETURN FOR A.Y. 1999-00, NO APPELLATE ORDER EXISTED WHICH WAS AGAINST THE ASSES SEE ON THIS GROUND. FURTHER, THE APPELLATE ORDER IN THE CA SE OF KOTHARI PRODUCTS LTD. VS. ACIT (38 ITED 285) HELD T HAT SIMILAR DEDUCTION ON ZARDA YUKT PAN MASALA WAS AVAI LABLE IN THE PUBLIC DOMAIN. AS SUCH THE ASSESSEE WAS UNDE R BONAFIDE BELIEF THAT THE CLAIM OF DEDUCTION U/S 80- IA WAS APPROPRIATE AND SUSTAINABLE. AS STATED ABOVE THE TR IBUNAL HAS DECIDED THE ISSUE AGAINST THE ASSESSEE IN QUANT UM PROCEEDINGS AND THE MATTER IS SUB-JUDICE BEFORE THE HIGH COURT AFTER BEING ADMITTED ON QUESTION OF LAW. ACCO RDING TO THE ASSESSEE, THE QUESTION OF LAW HAS BEEN ADMITTED BY THE BOMBAY HIGH COURT AND THE MATTER IS SUB-JUDICE FOR HEARING ON MERITS. EARLIER, SPECIAL BENCH OF TRIBUN AL WAS CONSTITUTED TO DECIDE WHETHER 80-IA DEDUCTION WAS AVAILABLE TO THE ASSESSEE OR NOT. IN THIS BACKGROU ND, THE 4 ITA NO.580 AND 581/PN/2009 DHARIWAL INDUSTRIES A.Y. 1999-00 AND 2000-01 LEARNED AR POINTED OUT THAT THE TRIBUNAL IN THE CAS E OF M/S. NAYAN BUILDERS AND DEVELOPERS PVT. LTD. VS. IT O WARD 7(1)(1) IN ITA NO. 2379/BOM/2009 FOR A.Y. 1997-98 OBSERVED THAT IN CASE APPEAL IS ADMITTED BY THE CO NCERNED HIGH COURT, CONSIDERING THE SUBSTANTIAL QUESTION OF LAW INVOLVED THEREIN, THE CONCEALMENT PENALTY OUGHT NOT TO SURVIVE CONSIDERING THE DEBATABLE NATURE OF ISSUE. TO BE MORE SPECIFIC, THE RELEVANT PARA 3 OF THE TRIBUNAL S DECISION IN THE CASE OF NAYAN BUILDERS (SUPRA) IS REPRODUCED BELOW: IT IS, THEREFORE, ABUNDANTLY CLEAR THAT THE ADDITI ONS IN RESPECT OF WHICH PENALTY WAS CONFIRMED HAVE BEEN ACCEPTED BY THE HONBLE BOMBAY HIGH COURT LEADING T O SUBSTANTIAL QUESTION OF LAW. WHEN THE HIGH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED U/S 271(1)(C) AS HAS BEEN HELD IN SEVERAL CA SES INCLUDING RUPAM MERCANTILE VS. DCIT (2004) 91 SITD 237 (AHD) (TM) AND SMT. RAMILA RATILAL SHAH VS. ACIT (1998) 60 TTJ (AHD) 171). THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HONBLE HIGH COU RT LENDS CREDENCE TO THE BONA FIDES OF THE ASSESSEE IN CLAIMING DEDUCTION. ONCE IT TURNS OUT THAT THE CLA IM OF THE ASSESSEE COULD HAVE BEEN CONSIDERED FOR DEDUCTION AS PER A PERSON PROPERLY INSTRUCTED IN LA W AND IS NOT COMPLETELY DEBARRED AT ALL, THE MERE FAC T OF CONFIRMATION OF DISALLOWANCE WOULD NOT PER SE LEAD TO THE IMPOSITION OF PENALTY. SINCE THE ADDITIONS, IN RESPECT OF WHICH PENALTY HAS BEEN UPHELD IN THE PRESENT PROCEEDINGS, HAVE BEEN HELD BY THE HONBLE HIGH COURT TO BE INVOLVING A SUBSTANTIAL QUESTION O F LAW, IN OUR CONSIDERED OPINION, THE PENALTY IS NOT EXIGIBLE UNDER THIS SECTION. WE, THEREFORE, ORDER FOR THE DELETION OF PENALTY. IN VIEW OF ABOVE, IT WAS SUBMITTED BY THE LEARNED A R THAT THE PENALTY IN QUESTION WAS RIGHTLY DELETED BY THE CIT(A). 5 ITA NO.580 AND 581/PN/2009 DHARIWAL INDUSTRIES A.Y. 1999-00 AND 2000-01 ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE O RDER OF THE ASSESSING OFFICER ON THE POINT OF PENALTY. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE ARE NOT INCLINE D TO INTERFERE WITH THE FINDING OF THE CIT(A) WHO HAS DE LETED THE PENALTY IN QUESTION FOR BOTH THE YEARS. THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE O F PAN MASALA AND GUTKA. FOR THIS PURPOSE, IT HAS MANUFAC TURING UNDERTAKING AT DIFFERENCE PLACES. AS DISCUSSED ABO VE, DEDUCTION U/S 80-I AND 80-IA WAS CLAIMED IN RESPECT OF PRODUCTS DERIVED FROM ITS UNDERTAKING WHICH WAS DEN IED BY THE ASSESSING OFFICER ON THE GROUND THAT THE PRODUC T MANUFACTURED BY THE ASSESSEE VIZ. GUTKA OR PAN MASA LA ARE TOBACCO PREPARATIONS AS ENVISAGED UNDER ITEM N O. 2 OF ELEVENTH SCHEDULE OF THE ACT AND THEREFORE, NOT ELI GIBLE FOR DEDUCTION U/S 80-I AND 80-IA OF THE ACT WHICH EXCLU DES DEDUCTION IN RESPECT OF ITEMS ENLISTED IN THE ELEVE NTH SCHEDULE. CONSEQUENTLY, PENALTY WAS ALSO INITIATED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. HO WEVER, IN QUANTUM PROCEEDINGS, THE CIT(A) GRANTED RELIEF WHIC H WAS REVERSED BY THE TRIBUNAL AND THE ORDER OF THE ASSES SING OFFICER ON THE SAID ISSUE WAS RESTORED. SUBSEQUENT LY, THE ASSESSEE APPROACHED THE JURISDICTIONAL HIGH COURT W HEREIN THE MATTER IS CLAIMED TO BE ADMITTED WHICH HAS NOT BEEN DISPUTED ON BEHALF OF THE REVENUE. THE FACTS AS ON DATE ARE THAT THE TRIBUNAL DISALLOWED THE CLAIM OF DEDUCTION U/S 80- I AND 80-IA WHICH IS SUB-JUDICE BEING ADMITTED BY T HE JURISDICTIONAL HIGH COURT FOR ADJUDICATION. WE FIN D THAT IN THE CASE OF NAYAN BUILDERS (SUPRA) WHEREIN AN ADMIS SION OF SUBSTANTIAL QUESTION OF LAW IN QUANTUM PROCEEDINGS BY THE JURISDICTIONAL HIGH COURT LENDS CREDENCE TO THE BON A FIDES OF THE ASSESSEE IN CLAIMING DEDUCTION. ONCE IT TURN S OUT 6 ITA NO.580 AND 581/PN/2009 DHARIWAL INDUSTRIES A.Y. 1999-00 AND 2000-01 THAT CLAIM OF THE ASSESSEE COULD HAVE BEEN CONSIDER ED FOR DEDUCTION AS PER A PERSON PROPERLY INSTRUCTED IN LA W AND IS NOT COMPLETELY DEBARRED AT ALL, THE MERE FACT OF CONFIRMATION OF DISALLOWANCE WOULD NOT PER SE LEAD TO IMPOSITION OF PENALTY. SINCE THE DISALLOWANCE IN Q UANTUM HAVE BEEN HELD BY THE JURISDICTIONAL HIGH COURT TO BE INVOLVING A SUBSTANTIAL QUESTION OF LAW, THE PENALT Y IS NOT EXIGIBLE UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. MOREOVER, PENALTY IS NOT AUTOMATIC ON THE BASIS OF QUANTUM ADDITION. IN VIEW OF ABOVE DISCUSSION, ORDE R OF THE CIT(A) DELETING PENALTIES IN BOTH THE YEARS NEEDS N O INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST 2011. SD/- SD/- (D. KARUNAKARA RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 30 TH AUGUST 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-I PUNE 4. THE CIT I PUNE 5. THE D.R, ITAT B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL 7 ITA NO.580 AND 581/PN/2009 DHARIWAL INDUSTRIES A.Y. 1999-00 AND 2000-01