DCIT, CHENNAI V. Covanta (Madurai) Operating P. Ltd., CHENNAI

ITA 714/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86312 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 21-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: S SRIDHAR
• Keywords: Retrospective amendment; Wrong claim; Onus to prove
• Section: 80HHC; 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 714/MDS/2014 ( / ASSESSMENT YEAR: 2003-04) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(3), CHENNAI-600 034. VS M/S.COVANTA (MADURAI) OPERATING P.LTD., 101, 4 TH MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI-20. ` PAN: AAACO5538L ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S. DAS GUPTA, JCIT /RESPONDENT BY : MR. S.SRIDHAR, ADVOCATE /DATE OF HEARING : 12 TH FEBRUARY, 2015 /DATE OF PRONOUNCEMENT : 25 TH FEBRUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-CENTRAL -II, CHENNAI DATED 29.10.2013 FOR THE ASSESSMENT YEAR 2003- 04. THE ONLY GRIEVANCE OF THE REVENUE IN ITS APPE AL IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELE TING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2. BRIEF FACTS ARE THAT ASSESSEE FILED RETURN OF IN COME FOR THE ASSESSMENT YEAR 2003-04 ON 28.11.2003 DECLARING NIL 2 ITA NO.714/MDS/2014 INCOME UNDER NORMAL PROVISIONS OF ACT AFTER CLAIMIN G DEDUCTION UNDER SECTION 80IA OF THE ACT ON THE INC OME FROM OPERATION & MAINTENANCE OF POWER PLANT. THE ASSESSE E HAS ALSO RETURNED INCOME UNDER SECTION 115JB AND PAID BOOK PROFITS TAXES. THE CLAIM OF THE ASSESSEE UNDER SECT ION 80IA WAS DENIED BY THE ASSESSING OFFICER AS WAS DONE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2002-03. PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 271(1)(C) OF THE ACT AND AN ORDER WAS PASSED ON 28 TH MARCH, 2008 LEVYING PENALTY UNDER SECTION 271(1)(C) FOR CLAIMING WRONG DEDUCTIO N UNDER SECTION 80IA OF THE ACT ON THE GROUND THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IA DELIBERATELY. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE PENALTY FOLLOWING THE ORDER OF THE CO-ORDINATE BENC H OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 WHEREIN THE TRIBUNAL DELETED THE PENALTY LE VIED UNDER SECTION 271(1)(C) OF THE ACT. THE REVENUE IS IN APPEAL BEFORE US. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF ASSESSING OFFICER IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT STATING THAT THERE IS CONCEALM ENT OF 3 ITA NO.714/MDS/2014 INCOME AND FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME BY CLAIMING DEDUCTION UNDER SECTION 80IA TH OUGH THE ASSESSEE IS NOT ENTITLED FOR SUCH DEDUCTION. 4. COUNSEL FOR THE ASSESSEE RELIES ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 IN ITA NO.464/MDS/2007 DATED 4.12.2009 IN D ELETING PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION OF THIS TRIBUNAL RELIED ON. ON GO ING THROUGH THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.464/MDS/2007 DATED 4.12.2009 WE FIND THAT ON ID ENTICAL FACTS AND CIRCUMSTANCES THE TRIBUNAL DELETED THE PE NALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON THE C LAIM MADE BY THE ASSESSEE UNDER SECTION 80IA. WHILE HOLDING S O, THE TRIBUNAL OBSERVED AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, RELEVANT RECORDS, FACTS AND CIRCUMSTANCES OF THE CASE AND VARIOUS DECISIONS RELIED UPON BY EITHER OF THE PARTIES. IT IS UNDISPUTED FACT THAT THE ASSESSE E IS ENGAGED IN THE OPERATION AND MAINTENANCE OF A POWER PLANT, WHICH IS NOT OWNED BY THE ASSESSEE. THE ASSESSEE MADE A CLAIM OF DEDUCTION U/S.80-IAIN RESPECT OF THE INCOME EARNED FROM THE OPERATION AND 4 ITA NO.714/MDS/2014 MAINTENANCE OF POWER PLANT. DURING THE. ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED ALL THE RELEVAN T MATERIAL AND RECORDS. THE ASSESSEE HAS CLAIMED THAT THE ASSESSEE FOR SETTING UP OF THE FACILITIES INSTA LLED REQUIRED MACHINERY AND EQUIPMENTS AS WELL AS THE MAINTENANCE AND OPERATING FACILITIES. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF DEDUCTION U/S.80-IA ON THE GROUND THAT THE ASSESSEE IS NOT TH E OWNER OF THE UNDERTAKING, BUT ONLY OPERATING AND MAINTAINING THE UNDERTAKING. THEREFORE, THE ASSESSEE WAS FOUND NOT ELIGIBLE FOR THE DEDUCTION. IT IS UNDISPUTED FACT THAT THE EXPLANATION TOSEC.80-IA HAS BEEN BROUGHT IN THE STATUTE BY FINANCE ACT '200 9 WITH RETROSPECTIVE EFFECT FROM 2000. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31.10.02 AND THE ASSESSMENT ORDER WAS PASSED ON 17.03.03. THEREFORE, IT IS APPARENT THAT THE RETURN OF INCOME FILED BY THE ASSESSEEAS WELL AS THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WERE PRIOR TO THE INSERTION OF EXPLANATION TO SEC.80IA WHEREBY THE CONTRACT WORK HAS BEEN EXCLUDED FROM THE ELIGIBLE BUSINESS OF CLAIM FOR DEDUCTION U/S.80-IA OF THE ACT. 7. THE DISALLOWANCE OF THE CLAIM BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE I S NOT THE OWNER OF THE UNDERTAKING IS BASED ON THE MATERIAL AND EXPLANATION FURNISHED BY THE ASSESSEE DURING THE ASSESSMENT AND NOT DUE TO ANY INVESTIGATION CONDUCTED BY THE ASSESSING OFFICER. FROM THE RECORD, THERE IS NOTHING TO SHOW THAT THE PLEA AND EXPLANATION OF THE ASSESSEE IN MAKING THE CLAIM OF DEDUCTION U/S.-80-IA IS FALSE AND INHERENTLY IMPOSSIBLE. THOUGH THE CLAIM OF THE ASSESSEE WAS DISALLOWED AND DISALLOWANCE HAS BEEN SUSTAINED BY THE APPELLATE AUTHORITIES UP TO THE TRIBUNAL, BUT DISALLOWANCE OF A BONAFIDE CLAIM OF DEDUCTION CANNO T RESULT AND WARRANT LEVY OF PENALTY WHEN THE PRIMARY FACTS ARE DISCLOSED BY THE ASSESSEE IN FORM OF PROVIDING ALL THE RELEVANT MATERIAL SHOWING THE STA TUS AND THE BUSINESS CARRIED OUT BY THE ASSESSEE. FROM - THE FACTS AND CIRCUMSTANCES, IT DOES NOT INDICATE T HAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME WHEN THE ASSESSEE HAS MADE A CLAIM OF A DEDUCTION ON THE BASIS OF THE FACTS AND MATERIALS, WHICH WERE FURNIS HED DURING THE ASS ESSMENT. THUS, IT IS NOT A CASE WHERE THE ASSESSEE HAS CLAIMED A BOGUS DEDUCTION BY 5 ITA NO.714/MDS/2014 CONCEALING THE MATERIAL AND PRIMARY FACTS. DISALLOWANCE OF DEDUCTION DOES NOT IPSO FACTO WARRA NT LEVY OF PENALTY UNLESS AND UNTIL THE DISALLOWANCE/ADDITION IS DUE TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY IS NOT AUTOMATIC AND THE BURDEN TO PROVE IN PENALTY PROCEEDINGS VARIES FROM THAT OF THE ASSESSMENT PROCEEDINGS. THE FINDINGS IN THE ASSESSMENT PROCEEDINGS CANNOT AUTOMATICALLY BE ADOPTED IN THE PENALTY PROCEEDINGS. 8. IN CASE OF CIT VS. DEEP TOOLS (P) LTD (SUPRA), T HE HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT WHEN ADMITTEDLY CERTIFICATE ISSUED A CHARTERED ACCOUNTANT WAS NOT IN ACCORDANCE WITH SEE. 80HHC (4) OF THE A CT, THEN THERE IS NOTHING TO SHOW THAT MISTAKE BY THE CHARTERED ACCOUNTANT WAS NOT BONA FIDE. MERE FACT THAT CERTIFICATE ISSUED WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF ACT WAS NOT ENOUG H TO HOLD THAT MISTAKE WAS NOT BONAFIDE. IN THE CASE IN HAND, THE ASSESSEE HAS CLAIMED DEDUCTION U/ S. 80-I A ONLY AFTER THE CERTIFICATE OF THE CHARTERED ACCOUNT ANT. THEREFORE, THE CLAIM THAT WAS DISALLOWED BUT THE SA ME WAS A BONAFIDE ONE. 9. IN THE CASE OF BALAJI VEGETABLE PRODUCTS (P) LTD. (SUPRA), THE HON'BLE HIGH COURT OF KARNATAKA H AS HELD THAT MERELY BECAUSE THE REVENUE REFUSED TO ACCEPT THE CLAIM OF THE ASSESSEE AND TREATED THE .SAME AS INCOME, IT CANNOT BE SAID THAT THE ASSESSE E HAS CONCEALED THE INCOME. IN THE CASE OF CIT VS.HARSHVARDHAN CHEMICALS MINERAL LTD (SUPRA) HON'BLE HIGH COURT OF RAJASTHAN HELD THAT WHEN THE ASSESSEE HAS CLAIMED SOME AMOUNT, THAT IS DEBATABLE, IN.SUCH CASES IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS FOR EVASION OF TAX. IN THE CASE IN HAND, THE CLAIMS OF DEDUCTION U/S.80-IA OFTHE ASSESSEE WHO WAS MERELY OPERATING AND MAINTAINING THE UNDERTAKING OF POWER GENERATION WAS A DEBATABL E ISSUE TILL THE EXPLANATION WAS INSERTED VIDE FINANC E ACT 2009. IN THE CASE OF CIT VS. NATH BROS. EXIM INTERNATIONAL (SUPRA), HON'BLE DELHI HIGH COURT HEL D THAT ON THE LEGAL POSITION, THE ASSESSING OFFICER W AS NOT SATISFIED AND DID NOT AGREE WITH THE ASSESSEE B UT THAT BY ITSELF IS NOT A GROUND TO INVOKE THE PENALT Y PROVISION OF THE STATUTE. IN THE CASE OF CIT VS. CA PLIN POINT LABORATORIES LTD. (SUPRA), THE HON'BLE 6 ITA NO.714/MDS/2014 JURISDICTIONAL HIGH COURT HELD THAT 'IN THE PRESENT CASE ALSO THE ASSESSING OFFICER HAS NOT BEEN ABLE TO PRO VE THAT THE CLAIM OF THE APPELLANT COMPANY FOR DEDUCTI ON U/S.80HHC AND 80-1 WAS NOT BONA FIDE. IN VIEW OF THESE FACTS AND ABOVE REFERRED DECISIONS, I HOLD TH AT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE DO NOT JUSTIFY APPLICATION OF PROVISIONS OF S.271(1)(C ). ACCORDINGLY, THE PENALTY OF RS.30,00,000/- IMPOSED BY THE ASSESSING OFFICER IS HEREBY DELETED. THE APPELLANT SUCCEEDS ON THIS GROUND.' 10. IN THE CASE OF CIT VS. ESCORTS FINANCE LTD., (SUPRA) AS RELIED UPON BY THE LD.DR, HON'BLE DELHI HIGH COURT FOUND THAT THE CLAIM U/S.35D OF THE ACT, WAS NOT A 'WRONG CLAIM' PREFERRED BY THE ASSESSEE, BUT IS A CLEAR CASE OF 'FALSE CLAIM' AND IN THESE CIRCUMSTANCES, THE HON'BLE HIGH COURT HAS OBSERVED THAT IT CAN NOT A CASE OF BONAFIDE ERROR ON THE PAR T OF THEASSESSEE. SINCE IN THE CASE IN HAND, THE CLAIM MADE BY THE ASSESSEEAND I\ EXPLANATION FURNISHED BY THE ASSESSEE ARE NOT FOUND AS FALSE OR INHERENTLY IMPOSSIBLE BY THE LOWER AUTHORITIES, THEREFORE, THE DECISION RELIED 'UPON BY THE LD. DR WILL NOT HELP T HE REVENUE. 11. IN THE PRESENT CASE, AFTER GOING THROUGH THE ENTIRE.RECORD AND FROM FACTS AND CIRCUMSTANCES, IT DOES NOT INDICATE THAT THE 'ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, WHEN ALL THE RELEVANT PARTICULARS / DETAILS/ MATERIALS WERE FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT THE TIME OF FILING THE RETURN OF INCOME AND DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS GIVEN THE REASONS FOR MAKING THE CLAIM OF DEDUCTION U/S.80 IA. THEN IT CANNOT BE SAID THAT THE ASSESSEE HAS FAILED TO FURNISH THE BONA FIDE EXPLANATION FOR MAKING THE CLAIM OF DEDUCTION. IN VIEW OF THE ABOVE DISCUSSION, THE LEV Y OF PENALTY UNDER SECTION.271 (1 )(C) OF THE /\CTIS NEITHER JUSTIFIED NOR WARRANTED IN THE PRESENT CASE. ACCORDINGLY, WE DELETE THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT. THE ORDERS OF LOWER AUTHORITIES WERE SET A SIDE. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 7 ITA NO.714/MDS/2014 6. THE FACTS AND CIRCUMSTANCES BEING IDENTICAL, RESPECTFULLY FOLLOWING THE SAID DECISION, WE CONFIR M THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DEL ETING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 25 TH FEBRUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .