Vallabh Yarns (P) Ltd., Ludhiana V. ACIT, Ludhiana

ITA 64/CHANDI/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1621 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S R CHHABRA
• Keywords: Business income
• Section: 80HHC; 133A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 64/CHD/2012 (ASSESSMENT YEAR: 2006-07) M/S VALLABH YARNS (P) LTD., VS THE A.C.I.T., 353/1, SUNDER NAGAR, CIRCLE-II, LUDHIANA. LUDHIANA. PAN NO.: AAACV5322K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.R. CHHABRA RESPONDENT BY : MS. CHANDER KANTA, DR DATE OF HEARING : 27.10.2015 DATE OF PRONOUNCEMENT : 10.12.2015 O R D E R PER RANO JAIN, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, LUDHIANA DATED 20.12.2011 FOR ASSESSMENT YEAR 2006-07. 2. BRIEFLY, THE FACTS OF THE CASE, TO THE EXTENT RELEVANT FOR DECIDING THE APPEAL IN QUESTION ARE TH AT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF HOSIERY KNITTED CLOTH & READYMADE GARMENTS FOR SALE IN INDIA & EXPORT. THE ASSESSING OFFICER DENIED THE ASSESSEE THE DEDUCTION UNDER SEC TION 80IB OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 2 ACCOUNT OF MACHINERY RENT RECEIVED BY IT AMOUNTING TO RS.16,730/- AND AN ADDITIONAL AMOUNT OF INCOME OF RS.44,00,000/- SURRENDERED BY THE ASSESSEE DURING T HE COURSE OF SURVEY. THE ASSESSEE IS OTHERWISE ELIGIBL E FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE AMOUNT OF RS.40,00,000/- SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY HAS BEEN CONFI RMED TILL THE LEVEL OF HIGH COURT. ON THE PENALTY PROCE EDING INITIATED BY THE ASSESSING OFFICER, ON THESE TWO AD DITIONS, THE REPLY OF THE ASSESSEE WAS THAT IT HAS NOT CONCE ALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULAR OF INCOME. REJECTING THE CONTENTION OF THE ASSESSEE, T HE ASSESSING OFFICER LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 3. BEFORE THE LEARNED CIT (APPEALS), ASSESSEE CONTENDED THAT THE AMOUNT OF RS.44,00,000/- AS ADDITIONAL INCOME FROM BUSINESS WAS DECLARED DURING SURVEY UNDER SECTION 133A OF THE ACT ON THE BASIS O F A LETTER OF SURRENDER DATED 10.11.2005. AS PER THIS LETTER, IT WAS SPECIFICALLY STATED THAT ADDITIONAL INCOME OF R S.44 LACS WAS SURRENDERED OUT OF THE BUSINESS OF THE COM PANY FOR ASSESSMENT YEAR 2006-07 SUBJECT TO NO PENALTY. THE ASSESSING OFFICER HIMSELF HAS ASSESSED THE SAID ADD ITIONAL INCOME AS INCOME FROM BUSINESS AND NOT UNDER ANY OT HER HEAD OR FROM ANY OTHER BUSINESS OTHER THAN THAT OF 3 MANUFACTURING OF HOSIERY CLOTH AND READYMADE GARMEN TS. FURTHER IT WAS CONTENDED THAT THE ASSESSING OFFICER IGNORED THE FACT THAT HAD THESE RECEIVABLES BEEN RE CORDED IN THE BOOKS OF ACCOUNTS, THEN THERE WOULD NOT HAVE BEEN ANY ADDITIONAL DECLARED INCOME. RELIANCE WAS PLACE D ON THE JUDGMENT OF HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS ALLIED INDIA (2009) 31 DTR 323 (HP), WHER EBY SUCH INCOME WAS HELD TO BE ELIGIBLE FOR DEDUCTION U NDER SECTION 80IB OF THE ACT. HOWEVER, IT IS A FACT TH AT THERE IS A JUDGMENT OF PUNJAB AND HARYANA HIGH COURT IN T HE CASE OF NATIONAL LEGGARD WORKS VS CIT (2007) 288 IT R 18 (P&H), WHEREBY THIS INCOME WAS HELD NOT ELIGIBLE FO R DEDUCTION UNDER SECTION 80HHC OF THE ACT. IN VIEW OF THESE TWO JUDGMENTS, IT WAS SUBMITTED THAT THE ISSU E IS DEBATABLE AND WHEN THERE ARE DIVERGENT VIEWS ON THE SAME ISSUE, NO PENALTY IS LEVIABLE ON THIS BASIS. RELIA NCE WAS PLACED ON A NUMBER OF JUDGMENTS OF VARIOUS HIGH COU RTS & THAT OF SUPREME COURT IN THE CASE OF CIT VS RELIANC E PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158(SC). AS REGARD S THE DISALLOWANCE ON MACHINERY RENT IT WAS SUBMITTED THA T THE CLAIM MADE BY THE ASSESSEE WAS BONOFIDE & SINCE THE AMOUNT IS SO SMALL THERE CANNOT BE ANY MALAFIDE OF THE ASSESS ATTACHED TO THE SAME. 4. THE LEARNED CIT (APPEALS) REJECTING THE SUBMISSION OF THE ASSESSEE, CONFIRMED THE PENALTY. AS REGARDS AMOUNT SURRENDERED DURING THE COURSE OF SURVEY 4 HE STATED THAT SINCE THE JUDGMENT OF THE JURISDICTI ONAL HIGH COURT IN THE CASE OF NATIONAL LEGGARED (SUPRA) WAS DELIVERED BEFORE THE DATE OF FILING OF RETURN BY T HE ASSESSEE, IT CANNOT BE SAID THAT THE ISSUE WAS DEB ATABLE AT THAT TIME. THEREFORE IS A CLEAR CASE OF FILING I NACCURATE PARTICULAR OF INCOME & THE EXPLANATION SUBMITTED FO R DOING SO IS NOT SATISFACTORY. HE RELIED ON THE JUDG MENT OF DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION PVT. LTD 327 ITR 51(DEL). AS REGARDS THE MACHINERY RENT, CIT(A) WAS OF THE VIEW THAT THE SMALLNESS OF AMOUNT INVOLVED CANNOT BE TAKEN TO BE SUFFICIENT FOR LEVYING PENALTY UNDER SECTION 271(1) (C) OF THE ACT. THIS WAY, PENALTY WAS CONFIRMED BY THE LE ARNED CIT (APPEALS). 5. AGGRIEVED BY THIS, THE ASSESSEE HAS COME IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: I. THE LD. COMMISSIONER OF INCOME TAX (APPEAL)-1, LUDHIANA HAS ERRED IN LAW AND ON FACTS OF THE CASE:- (I) BY ARBITRARILY AND WRONGLY SUSTAINED THE PENALTY IMPOSED U/S 271(1)(C) W.R.T. THE CLAIM OF DEDUCTION U/S 80IB ON FOLLOWING: (A) ON MACHINERY RENT RS. 16,730/- (B) ON ADDITIONAL BUSINESS INCOME RS. 44 LACS SURRENDERED U/S 133A OF THE INCOME TAX ACT, 1961. 5 II. THE ABOVE SAID ORDER IS BAD IN LAW & CONTRARY TO THE FACTS OF CASE. III. IT IS THEREFORE PRAYED THAT APPEAL MAY PLEASE BE ACCEPTED AND SUCH RELIEF MAY KINDLY BE ALLOWED WHICH MAY BE DEEMED FIT AND PROPER UNDER THE CIRCUMSTANCES OF THE CASE. IV. THE ASSESSEE CRAVES PERMISSION TO FILE/RAISE/AMEND ANY OTHER GROUND OF APPEAL BEFORE AT THE TIME OF HEARING. 6. THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE LOWER AUTHORITIES. AS RE GARDS THE MACHINERY RENT HIS PLEA WAS THAT THE SMALLNESS OF AMOUNT INVOLVES ITSELF SHOWS THAT THE CLAIM MADE BY THE ASSESSEE WAS BONAFIDE. AS REGARDS THE SURRENDERED INCOME IT WAS AGAIN CLARIFIED THAT EVEN AS PER SURR ENDER LETTER, IT WAS SURRENDERED AS BUSINESS INCOME ONLY. THE ASSESSEE HAS NO OTHER BUSINESS AND THE ASSESSING OF FICER HIMSELF HAS TREATED THE SAID INCOME UNDER THE HEAD BUSINESS INCOME. FURTHER, IT WAS ARGUED THAT SIN CE THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF NATIONAL LEGGARD WAS NOT AVAILABLE AT THE TIME OF F ILING OF RETURN, THE CLAIM WAS A BONAFIDE ONE & THE ISSUE BE ING HIGHLY DEBATABLE, PENALTY CANNOT BE LEVIED. 7. THE LEARNED D.R. RELIED ON THE ORDER OF LOWER AUTHORITIES AND ARGUED THAT SINCE THE CLAIM OF THE ASSEESSEE WAS AGAINST THE JUDGMENT OF THE JURISD ICTIONAL 6 HIGH COURT, THIS IS A CLEAR CASE OF FURNISHING INAC CURATE PARTICULAR. HE PLACED BEFORE US A COPY OF THE ORDER OF CHANDIGARH BENCH OF THE ITAT IN THE CASE OF MANSROV ER FORGINGS PVT. LTD VS ACIT, CIRCLE V, LUDHIANA, ITA NO. 873/CHD/2012 DATED 06.12.2012, WHEREBY PENALTY UNDE R SECTION 271(1)(C) OF THE ACT WAS CONFIRMED UNDER SU CH CIRCUMSTANCES. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT ASSESSEE SURRENDERED AN AMOUNT OF RS.44 LACS AS ADDITIONAL I NCOME DURING THE COURSE OF SURVEY. IN THE LETTER OF SURRE NDER ITS WAS CLAIMED TO BE ITS BUSINESS INCOME & A.O HAS ALS O TAXED THE SAME UNDER THE HEAD BUSINESS INCOME. HOWEVER, THIS IS ALSO A MATTER OF RECORD THAT THE A SSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT ON THE SAID INCOME, WHICH IS NOT AVAILABLE TO IT AS PER TH E JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL LEGGUARD (SUPRA), WHICH WAS DELIVERED AS O N 22.9.2006. THE ASSESSEE HAD FILED ITS RETURN OF IN COME AS ON 29.11.2006. THE CLAIM OF THE LEARNED COUNSEL FO R THE ASSESSEE THAT THE CASE OF NATIONAL LEGGUARD WAS PUB LISHED IN THE LAST EDITION OF 288 ITR, I.E. IN THE MONTH O F NOVEMBER/DECEMBER, 2007, CANNOT ALL TOGETHER BE IGNORED. SINCE AN ASSESSEE CANNOT BE EXPECTED TO KNOW 7 THE LAW AS LAID DOWN BY THE JURISDICTIONAL HIGH COU RT OR THAT BY THE SUPREME COURT ON DAY TO DAY BASIS. MOST OF THE TIMES, IT IS THE JOURNALS WHERE THESE CASES ARE REPORTED THROUGH WHERE A PERSON CAN BE EXPECTED TO KNOW THE LAW. THE FACT THAT THERE IS A JUDGMENT OF HIMAC HAL PRADESH HIGH COURT IN THE CASE OF ALLIED INDIA (SUP RA), WHICH IS IN FAVOUR OF THE ASSESSEE, FURTHER BUTTRES S THE ARGUMENT OF THE LEARNED COUNSEL OF THE ASSESSEE THA T THE ISSUE IS HIGHLY DEBATABLE. OTHER JUDGEMENTS ON THE SAME ISSUE INCLUDE THAT OF THE RAJASTHAN HIGH COURT IN C IT VS MEHTA GWAR GUM & CO. (2008) 12 DTR (RAJ) 219 AND TH AT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS SUMAN P APER & BOARD LTD. (2005) 18 DTR 297 (GUJ). OTHERWISE ALS O, ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB OF THE ACT HAS ALWAYS BEEN HIGHLY CONTROVERSIAL ISSUE. 9. THE FACT THAT THE ISSUE OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80IB OF THE ACT IN THE PRES ENT CASE IN QUANTUM PROCEEDINGS HAD TRAVELED TO THE HIG H COURT ITSELF PROVES THE FACT THAT THE ISSUE IS HIGH LY DEBATABLE AND CONTROVERSIAL. THE ASSESSEE HAS ALREA DY BEEN HELD EXIGIBLE TO TAX ON THE SAID INCOME. HOWEV ER, IN OUR VIEW NO PENALTY ON THE SAID ADDITION CAN BE LEV IED UNDER SECTION 271(1)(C) OF THE ACT. 10. AS REGARDS MACHINERY RENT, WE ARE IN AGREEMENT WITH THE SUBMISSION OF THE LD. COUNSEL OF THE ASSES SEE THAT THE AMOUNT BEING VERY SMALL AND THERE BEING A 8 NUMBER OF ITEMS UNDER THE DEDUCTION, THE BONAFIDE O F THE ASSESSEE CANNOT BE SUSPECTED. 10. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY UNDER SECTION 271(1) (C) OF THE ACT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF DECEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 10 TH DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH