ITO 25(1)(4), MUMBAI V. BIO VET INDUSTRIES, MUMBAI

ITA 6243/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9000 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 21-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 09-09-2011
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Bonafide belief; Reasonable cause; Difference of opinion
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.6243/MUM/2011 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER 25(1)(4), MUMBAI VS M/S BIO VET INDUSTRIES SHANTI VILLA, NEAR ST. LAWRENCE SCHOOL, DEVIDAS LANE, BORIVALI (W), MUMBAI 400 103 PAN : AADFB3600L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUMAN KUMAR RESPONDENT BY NONE DATE OF HEARING : 22-12-2016 DATE OF ORDER : 11 -01-2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-35, MUMBAI [HE REINAFTER CALLED CIT(A)] DATED 20-06-2011 PASSED AGAINST THE PENALTY ORDER U/S 271(1)(C) DATE 25-03-2010 FOR AY 2005-06 ON THE FOLLOWING GRO UNDS : (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE PE NALTY UNDER SECTION 271(L)(C ) OF THE INCOME TAX ACT. 196 1.' 2 I.T.A. NO.6243/MUM/2011 (II) 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD.CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSES SING OFFICER BE RESTORED.' 2. DURING THE COURSE OF HEARING, NONE APPEARED ON BEHA LF OF THE ASSESSEE. LD. DR RELIED UPON THE ORDER OF THE AO. 3. THE BRIEF BACKGROUND OF THE CASE IS THAT THE ASSESS EE IS HAVING MANUFACTURING FACILITY AT DAMAN COMPRISING OF 2 UNI TS, I.E. UNIT I AND UNIT II. ASSESSEE HAD SHOWN LOSS IN RESPECT OF UNIT I W HEREAS CLAIMED DEDUCTION U/S 80IB IN RESPECT OF UNIT II. DURING T HE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT EXPENSES OF THE UNIT S ARE NOT PROPORTIONATE TO THE PRODUCTION OR TURNOVER ACHIEVE D BY EACH UNIT. THE AO, THEREFORE, RE-ALLOCATED THE TOTAL EXPENSES OF B OTH THE UNITS AND RE- WORKED THE PROFIT OF BOTH THE UNITS AND ALSO RE-WOR KED THE DEDUCTION AVAILABLE U/S 80IB. IN THIS MANNER, CLAIM OF DEDUC TION U/S 80IB WAS REDUCED FROM RS.57,55,175/- TO RS.7,90,631/-. ASSE SSEE CONTESTED THE QUANTUM UPTO THE TRIBUNAL, BUT NO RELIEF WAS GRANTE D. SUBSEQUENTLY, AO INITIATED PENALTY PROCEEDINGS AND SUBMITTED THAT TH ERE WAS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY ASSESSEE. THE EXPENSES WERE CLAIMED IN BONA FIDE MANNER AND N OTHING IN-GENUINE OR WRONG WAS DETECTED BY THE AO. RE-WORKING OF THE DEDUCTION HAS BEEN DONE BY THE AO ON THE BASIS OF HIS UNDERSTANDING OF LAW AND FACTS WITHOUT POINTING OUT ANYTHING BOGUS OR FALSE THEREFORE, NO PENALTY SHOULD BE LEVIED. BUT THE AO DID NOT AGREE WITH THE ASSESSEE AND LEVIED THE PENALTY OF RS.19,73,160/- ON THE DISALLOWANCE MADE BY THE A O BY REDUCING THE CLAIM OF DEDUCTION U/S 80IB. 4. IN THE APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE R EITERATED ITS SUBMISSION IN DETAIL. IT WAS SUBMITTED THAT BIFURC ATION OF EXPENSES WAS RE-WORKED BY THE AO ON THE BASIS OF AN HONEST AND G ENUINE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AO WHICH CANNO T BE SAID TO BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IT WAS FURTHER SUBMITTED THAT THE AO DID NOT DOUBT THE GENUINENESS OF THE EXPENSES INCURRED AND THE DIFFERENCE OF OPINION WAS RESTRICTED TO ALLOCATION OF EXPENSES. IT WAS ALSO SUBMITTED THAT ALL THE MATERIAL FACTS REQUIRED FOR COMPUTATION OF TOTAL INCOME INCLUDING BIFURCATION OF 3 I.T.A. NO.6243/MUM/2011 EXPENSES WERE SUBMITTED TRULY AND CORRECTLY. THE R E-WORKING WAS DONE BY THE AO ONLY ON THE GROUND THAT THE ASSESSEE HAD SHOWN HIGHER TURNOVER OF THE ELIGIBLE UNIT. IT WAS ALSO SUBMITT ED THAT THE CLAIM OF EXPENSES WAS BASED UPON THE ALLOCATION DONE ON THE BASIS OF CERTIFICATE OBTAINED FROM A PROFESSIONAL EXPERT I.E. SHRI PM JO SHI, CHARTERED ACCOUNTANT IN FORM 10CCB. UNDER THESE CIRCUMSTANCE S, IT CAN BE SAID THAT THE CLAIM WAS BASED UPON GENUINE AND BONAFIDE BELIE F OF THE ASSESSEE, MORE SO, WHEN NOTHING FALSE OR BOGUS HAS BEEN DETEC TED BY THE REVENUE. LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESS EE AND HELD THAT IN THIS CASE NO PENALTY SHOULD HAVE BEEN LEVIED AS THERE WA S NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE OBSERVATIONS MADE BY LD. CIT(A) ARE REPRODUCED BELO W:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRES ENTATIVE AND THE STAND TAKEN BY THE A.O. AFTER CONSIDERING THE O RDER OF THE HON'BLE TRIBUNAL, IT IS SEEN THAT THE VARIATION WIT H REFERENCE TO THE ADMITTED INCOME IS ONLY IN RESPECT OF BIFURCATI ON OF EXPENSES BETWEEN THE TWO UNITS IN RESPECT OF ADMINISTRATIVE EXPENSES AND SELLING EXPENSES AND ASSESSMENT OF INTEREST INCOME UNDER THE HEAD OTHER SOURCES. REGARDING BIFURCATION OF EXPENS ES, IT IS SEEN THAT THE SAME WAS CLAIMED ON THE BASIS OF CERTIFICA TE ISSUED BY C.A. IN FORM NO.10CCB. THE A.O. DID NOT DISPUTE THE FACT THAT THE CLAIM WAS MADE IN ACCORDANCE WITH THE CERTIFICATE I SSUED BY C.A. AS CONTENDED BY THE REPRESENTATIVE, THERE WAS HONES T AND BONAFIDE DIFFERENCE OF OPINION REGARDING THE APPORT IONMENT OF EXPENSES WHICH CANNOT HE SAID TO BE CONCEALMENT OF INCOME. IN ANY CASE, THE APPELLANT HAD BONAFIDE BELIEF THAT IT WAS ENTITLED TO DEDUCTION U/S.801B AS QUANTIFIED BY THE C.A. AND ACCORDINGLY THE DEDUCTION WAS CLAIMED IN THE RETURN FILED, I AC CEPT THE PLEA OF THE REPRESENTATIVE THAT WHEN THE CLAIM IS MADE BASE D ON THE CERTIFICATE ISSUED BY THE CA., NO CONCEALMENT PENAL TY COULD BE LEVIED BECAUSE THE APPELLANT HAD BONAFIDE BELIEF TH AT THE CERTIFICATE ISSUED BY THE C.A. WAS CORRECT. EVEN IF EXPLANATION 1 IS INVOKED, THERE IS ONLY A REBUTTABLE PRESUMPTION OF CONCEALMENT IN LAW AND THE SAME CAN BE SAID TO BE REBUTTED BY T HE ASSESSEE 4 I.T.A. NO.6243/MUM/2011 WHEN THE CLAIM IS BASED ON THE CERTIFICATE ISSUED B Y A QUALIFIED C.A. AND THIS WOULD CONSTITUTE BONAFIDE BELIEF AND REASONABLE CAUSE FOR NOT IMPOSING PENALTY. AS CONTENTED BY THE REPRESENTATIVE, HON'BLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETRO PRODUCTS PVT LTD (322 ITR 158) HAS R ECENTLY HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABL E IN LAW WOULD NOT AMOUNT TO FURNISHING INACCURATE PARTICULA RS. AS CONTENDED BY THE REPRESENTATIVE, THE HON'BLE CHANDI GARH BENCH TRIBUNAL IN THE CASE OF ACIT VS ARISUDANA SPINNING MILLS LTD (19 DTR 1) HELD AS UNDER: 'NOW, THE QUESTION IS AS TO WHETHER THE DENIAL OF T HE CLAIM MADE IN THE RETURN OF INCOME CAN LEAD TO AN AUTOMATIC I MPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT IS SUFFICIENT TO SAY THAT THE ASSESSMEN T PROCEEDINGS AND THE SUBSEQUENT PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS. THE FINDINGS AND CONCLUSIO NS DRAWN THE AUTHORITIES IN THE ASSESSMENT PROCEEDINGS ARE RELEVANT BUT CANNOT BE CONSTRUED AS CONCLUSIVE SO A S TO FASTEN THE ASSESSEE WITH THE CHARGE OF CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS THE REOF. A SIMILAR SITUATION WAS BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DEEP TOOLS (P) LT D. 'SUPRA). IN THE SAID CASE TOO, THE ASSESSEE HAD STA KED CLAIM FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT, WHICH WAS DECLINED. THE AO LEVIED PENALTY U/S 271(1)(C) OF THE ACT. THE STAND OF THE ASSESSEE WAS THAT THE CLAIM WAS MISTAKEN BUT WAS BASED ON BONA FIDE CONSIDERATIONS. THE HON'BLE HIGH COURT OBSERVE D THAT THE CLAIM THOUGH UNTENABLE WAS BASED ON THE REPORT OF A CHARTERED ACCOUNTANT IN TERMS OF SECTION 80HHC AND THE SAID FACT LED TO THE CONCLUSION THAT IT WAS A BONAF IDE MISTAKE. IN OUR VIEW, THE SAID PARITY OF REASONING IS APPLICABLE IN THE PRESENT CASE TOO. IN THE CASE OF T.ASHOKPAI VS. CIT2007)210CTR(SC) 259: (2007)292 IT R 5 I.T.A. NO.6243/MUM/2011 11, HON'BLE SUPREME COURT ALSO OBSERVED THAT THE PE NALTY UNDER SECTION 271(1)(C) WAS NOT EXIGIBLE WHERE THE CLAIM OF THE ASSESSEE WAS BASED ON THE REPORT OF AN EXPERT. IN THE PRESENT CASE TOO, AS OBSERVED EARLIE R, THE ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED. THE RETURN OF INCOME WAS ACCOMPANIED BY THE AUDIT REPORT REQUIRED UNDER SECTION 80IA AND THERE IS NOTHING TO SUGGEST, RATHER THERE IS NO CHARGE AGAINST THE ASSESSEE THAT THE REPORT OF THE AUDITOR WAS COLLUSIVE'. FROM THE ABOVE, IT IS CLEAR THAT WHEN THE CLAIM OF THE ASSESSEE IS BASED ON THE OPINION OF THE TECHNICAL E XPERT INCLUDING REPORT OF C.A. IN FORM NO.1OCCB, NO CONCEALMENT PENALTY COULD BE IMPOSED. I, THEREFORE, HOLD THAT THERE IS NO GROUND FOR LEVYING PENALTY REGARDING APPORTIONMENT OF EXPENSES RELATING TO UNI T-I& UNIT-H. REGARDING INTEREST INCOME, IT IS TRUE THAT THE APPE LLANT DID RIOT PRESS THE GROUND BEFORE THE HON'BLE TRIBUN AL BUT THE NECESSARY AND RELEVANT FACTS WERE SUBMITTED BEFORE THE A.O. AND THE APPELLANT WAS UNDER THE BONAFIDE BELIEF THAT THE INTEREST IS ASSESSABLE UND ER THE HEAD BUSINESS AS THE RECEIPT OF INTEREST WAS CLOSEL Y LINKED WITH THE BUSINESS OF THE INDUSTRIAL UNDERTAKING AND IN A NY CASE THE SAME WAS CERTIFIED BY THE QUALIFIED CHARTERED ACCOU NTANT IN FORM 1OCCB. THUS, THERE IS NO CASE FOR LEVY OF CONCEALMENT PENALTY EVEN IN RESPECT OF INTEREST INCOME EVEN THOUGH THE APPELLANT DID NOT PRESS THIS GROUND BEFO RE THE HON'BLE TRIBUNAL. IN VIEW OF THE ABOVE, I HOLD THAT THERE IS NO JUSTIFICATION FOR LEVY OF CONCEALMENT PENALTY AND T HE SAME IS CANCELLED. 5. WE HAVE CAREFULLY GONE THROUGH THE DETAILED AND WEL L REASONED FINDINGS OF THE LD. CIT(A). IT IS NOTED THAT NOTHI NG HAS BEEN BROUGHT BEFORE US TO SHOW WHETHER ANY OF THE EXPENSES WERE FOUND TO BE BOGUS 6 I.T.A. NO.6243/MUM/2011 OR FALSE. THE CLAIM OF THE ASSESSEE MADE U/S 80-IB WAS REDUCED ONLY BECAUSE OF RE-ALLOCATION OF EXPENSES DONE BY THE AO . THE EXERCISE OF REALLOCATION WAS DONE BY THE AO ON THE BASIS OF HIS INFORMATION AND UNDERSTANDING DISREGARDING THE CLAIM OF THE ASSESSE E, WHICH WAS BASED UPON A CERTIFICATE IN FORM 10CCB ISSUED BY A PROFES SIONAL EXPERT. NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW IF THE CERTIFICATE WAS BASED UPON ANY ERRONEOUS PREMISES OR WRONG FACTS SUPPLIED BY THE ASSESSEE. DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSES SEE FURNISHED DETAILED EXPLANATION IN THIS REGARD AND AGAIN TOOK HELP OF H IS ARGUMENT THAT THE CLAIM U/S 80IB WAS MADE RELYING UPON THE CERTIFICAT E WHEREIN BIFURCATION OF EXPENSES WAS MADE BY A PROFESSIONAL EXPERT. THE AO DID NOT EXAMINE THE CONCERNED CHARTERED ACCOUNTANT DURING THE COURS E OF PENALTY PROCEEDINGS BEFORE REJECTING THE EXPLANATION OF THE ASSESSEE. NOTHING WAS BROUGHT ON RECORD BY THE AO TO NEGATE THE ASSER TION OF THE ASSESSEE THAT THE CLAIM U/S 80-IB WAS BASED UPON HIS BONA FI DE BELIEF FOR MAKING APPORTIONMENT OF EXPENSES IN THE MANNER AS WAS DONE BY THE ASSESSEE. 6. EVEN OTHERWISE, THE RE-ALLOCATION EXERCISE DONE BY THE AO WOULD ALSO INVOLVE SOME KIND OF GUESS WORK WHICH CANNOT B E SAID TO BE PURELY SCIENTIFIC OR DEVOID OF ANY FLAWS. IF THE ALLOCATI ON DONE BY THE ASSESSEE WAS NOT PRECISE AND CORRECT AS PER FACTS OF THE CAS E, THEN, IT CAN ALSO NOT BE SAID THAT THE RE-ALLOCATION EXERCISE DONE BY THE AO WAS FREE FROM ANY DOUBTS OR IFS AND BUTS. THUS, IT IS A CASE WHERE T HE HYPOTHESIS OF THERE BEING A CONCEALMENT OF INCOME AND THERE NOT BEING C ONCEALMENT OF INCOME ARE EQUAL. UNDER THESE CIRCUMSTANCES, IN OU R CONSIDERED OPINION, IT CANNOT BE SAID THAT THERE WAS ANY KIND OF CONCEA LMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. 7. FURTHER, IT IS NOTED BY US THAT WHILE DELETING THE PENALTY, THE LD. CIT(A) HAS RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD (SUPRA) WHEREIN IT WAS HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW W OULD NOT AMOUNT TO 7 I.T.A. NO.6243/MUM/2011 FURNISHING OF INACCURATE PARTICULARS. FURTHER, THE LD. CIT(A) HAS RIGHTLY RELIED UPON THE JUDGMENT OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS ARISUDANA SPINNING MILLS LTD (SUPRA) WHEREIN IT WAS HELD THAT IF THE CLAIM OF THE ASSESSEE IS BASED ON AN IN FORMATION OF TECHNICAL EXPERT, THEN, IT CANNOT BE CATEGORIZED AS A CASE OF CONCEALMENT OF INCOME UNLESS SOMETHING BOGUS OR FICTITIOUS IS DETECTED. IT IS NOTED BY US THAT THE AFORESAID JUDGMENT OF THE CHANDIGARH BENCH HAS BEEN CONFIRMED BY HONBLE PUNJAB & HARYANA HIGH COURT VIDE ITS ORDER DATED 19-11-2009 REPORTED AT 326 ITR 429 (P & H) . THIS JUDGMENT WAS SUBSEQUENTLY FOLLOWED BY PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS TUDOR KNITTING WORKS PVT LTD IN ITA NO.122 OF 2012 WHEREIN IT WAS FOUND THAT PENALTY WAS NOT LEVIABLE ON THE DISALLOWANCE MADE B Y REDUCING THE CLAIM OF DEDUCTION U/S 80IB. IT WAS HELD THAT MERE MAKIN G OF THE CLAIM, WHICH WAS NOT SUSTAINABLE IN LAW, BY ITSELF WOULD NOT AMO UNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING INCOME OF THE ASSE SSEE, UNLESS ANY FINDING IS RECORDED WITH THE HELP OF SUPPORTING MAT ERIAL THAT DETAILS FILED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE ERRO NEOUS OR FALSE. 8. THUS, TAKING INTO ACCOUNT THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE BROUGHT BEFORE US AND LEGAL POSITION AS DI SCUSSED ABOVE, WE FIND THAT LD.CIT(A) WAS JUSTIFIED IN DELETING THE PENALT Y. NO INTERFERENCE IS CALLED FOR IN HIS ORDER. THEREFORE, SAME IS CONFIR MED. 9. AS A RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS 11 TH DAY OF JANUARY, 2017. SD/- SD/- (JOGINDER SINGH ) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 11 TH JANUARY, 2017 COPY TO : PATEL/PS 8 I.T.A. NO.6243/MUM/2011 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES