ACIT, Ludhiana V. M/s Perfect Forgings, Ludhiana

ITA 777/CHANDI/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5373 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-03-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 22-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Wrong claim; Set aside
• Section: 271(1)(c); 80HHC; 80IB; 80IA; 27

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 777/CHD/2009 ASSESSMENT YEAR: 2002-03 THE ACIT, VS. M/S PERFECT FORGINGS, CIRCLE-V, LUDHIANA LUDHIANA PAN NO. AABFP3268J & ITA NO. 778/CHD/2009 ASSESSMENT YEAR: 2003-04 THE ACIT, CIRCLE V, VS. M/S PERFECT FORGINGS, LUDHIANA LUDHIANA PAN NO. AABFP3268J (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.JAISHREE SHARMA RESPONDENT BY: SHRI SUDHIR SEHGAL ORDER PER SUSHMA CHOWLA, JM THESE TWO APPEALS BY THE REVENUE ARE AGAINST THE S EPARATE ORDERS OF CIT(A)-II LUDHIANA DATED 8.5.2009 AND 15.5.2009 RELATING TO ASSESSMENT YEARS 2002-03 & 2004-05 RESPECTIVELY AGA INST THE PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE I.T. ACT, 1961. 2 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GRO UNDS OF APPEAL- 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACT S IN DELETING THE PENALTY AMOUNTING TO RS. 31,97,405/- ( FOR ASSESSMENT YEAR 2002-03 AND RS. 60,72,832/- (ASSESSMENT YEAR 2003-04) IMPOSED U/S 271 (1)(C) ON ACCOUNT OF WRONG CLAIM OF DEDUCTION U/S 80IB MADE B Y THE ASSESSING OFFICER. 2. THAT THE ORDER OF CIT(A)-II BE SET ASIDE AND THAT O F ASSESSING OFFICER BE RESTORED. 3. BOTH THE APPEALS RELATING TO THE REVENUE ON SAME ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 4. IN BOTH THE APPEALS FILED BY THE REVENUE THE ONL Y ISSUE RAISED IS AGAINST THE DELETION OF PENALTY LEVIED U/S 271 (1)( C) OF THE ACT. PENALTY OF RS. 31,97,405/- WAS LEVIED RELATING TO ASSESSMENT Y EAR 2002-03 AND PENALTY OF RS. 60,76,832/- WAS LEVIED RELATING TO A SSESSMENT YEAR 2003-04 U/S 271 (1)(C) OF THE ACT ON ACCOUNT OF WRONG CLAIM OF DEDUCTION U/S 80IB OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED RETURN OF INCOME AT NIL AFTER CLAIMING DEDUCTION U/S 80IB OF THE ACT AT RS. 89,56,312/- FOR ASSESSMENT YEAR 2002-03. THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT WAS DISALLOWED BY THE ASSESSING OFFICER, WHICH DISALLOWANCE WAS DELETED BY THE CIT(A). HOWEVER, THE TRIBUNAL C ONFIRMED THE DISALLOWANCE BY REVERSING THE ORDER OF CIT(A). THE ASSESSING OFFICER IN THE PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE ACT O BSERVED THAT DEDUCTION CLAIMED U/S 80IB OF THE ACT WAS HELD TO BE NOT ADMI SSIBLE ON TWO COUNTS. 3 THE FIRST GROUND WAS THAT THE ASSESSEE HAD CLAIMED THE AFORESAID DEDUCTION ON THE EXPORT INCENTIVE WHICH WAS NOT ALLOWABLE IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN STERLING FOODS LTD., 237 ITR 579 (SC) THE SECOND GROUND WAS THAT THE ASSESSEE HAD IN ADDITION TO THE ALREADY EXISTING BUSINESS OF MANUFACTURING OF HAND TOOLS, HAD STARTED MANUFACTURING OF SCAFFOLDING FOR WHICH PROPOSED MAC HINERY OF RS. 3,23,151/- WAS INSTALLED DURING THE YEAR IN ADDITIO N TO THE MACHINERY ALREADY INSTALLED. THE ASSESSEE WAS FOUND TO BE INV OLVED IN MANUFACTURING ACTIVITY FROM THE YEAR 1990 AND HAD ONLY ADDED TO I TS ACTIVITIES BY STARTING MANUFACTURING OF SCAFFOLDING. IN THE ABSENCE OF THE ASSESSEE SUBSTANTIATING THAT A NEW INDUSTRIAL UNDERTAKING WAS IN FACT ESTAB LISHED BETWEEN ELIGIBLE PERIOD I.E. 1.4.95 TO 31.3.2002, THE DEDUCTION CLAI MED U/S 80IB WAS DISALLOWED. THE ASSESSING OFFICER THUS LEVIED PENAL TY U/S 271 (1)(C) OF THE ACT AMOUNTING TO RS. 31,97,405/- RELATING TO ASSESS MENT YEAR 2002-03. THE CIT(A) IN RESPECT OF DISALLOWANCE ON ACCOUNT OF EXCLUSION OF EXPORT INCENTIVE WHILE COMPUTING DEDUCTION U/S 80IB OF THE ACT OBSERVED THAT THE ISSUE WAS DEBATABLE AS BEFORE THE RATIO LAID DOWN B Y THE HON'BLE SUPREME COURT IN STERLING FOODS LTD (SUPRA) THERE WERE VARY ING RATIOS LAID DOWN BY THE VARIOUS HIGH COURTS AND AS SUCH THE CLAIM MADE BY THE ASSESSEE WAS A BONAFIDE CLAIM AND NEGATE OF SUCH CLAIM DOES NOT AT TRACT LEVY OF PENALTY U/S 271 (1)(C) OF THE ACT. IN RESPECT OF THE SECON D GROUND ON WHICH DEDUCTION U/S 80IB OF THE ACT WAS DISALLOWED BY THE ASSESSING OFFICER IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE WAS EN GAGED IN THE BUSINESS OF MANUFACTURING OF HAND TOOLS SINCE THE YEAR 1990 AND IN THE YEAR 1995 THE BUSINESS ACTIVITIES WERE SWITCHED OVER TO MANUF ACTURING OF SCAFFOLDING FOR WHICH NEW MACHINERY WAS PURCHASED FROM THE YEAR 1995-96 TO 2001-02 TOTALING RS. 89,66,944/-. THE VALUE OF OLD MACHINE RY AS ON 31.3.1995 WAS RS. 21,91,932/- RESULTING IN VALUE OF TOTAL PLANT A ND MACHINERY AMOUNTING 4 TO RS. 1,11,58,876/-. THE RATIO OF OLD MACHINERY WORKED TO 19.64% AND OF THE NEW MACHINERY 80.36%. THE CIT(A) DURING THE PE NALTY PROCEEDINGS VIDE PARA 5.4 AT PAGE 9 OF THE APPELLATE ORDER THUS OBSERVED THAT THE ASSESSEE HAD IN VIEW OF THE SAME CONTENDED THAT THE CONDITIONS LAID DOWN IN SECTION 80IB OF THE ACT OF INSTALLATION OF NEW MACHINERY BEING IN EXCESS OF 80%, WAS FULFILLED FOR THE FIRST TIME IN FINANCIAL YEAR 2001-02 I.E THE YEAR UNDER APPEAL. THE CLAIM OF THE ASSESSEE W AS THAT IN VIEW OF THE VARIOUS DECISIONS ON THE POINT, IT WAS ENTITLED TO CLAIM OF DEDUCTION U/S 80IB OF THE ACT. THE CIT(A) NOTED THAT THOUGH THE T RIBUNAL HAD UPHELD THE FINDINGS OF THE ASSESSING OFFICER WITH REGARD TO TH E DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT, IN VIEW OF THE ACQUI SITION OF THE NEW MACHINERY FOR THE PROPOSED INDUSTRIAL UNDERTAKING, THE APPELLANT WAS NOT JUSTIFIED IN CLAIMING DEDUCTION BUT HOWEVER, IN VIE W OF THE RATIO LAID DOWN BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. SEEYAN PLYWOODS [56 TAXMAN 296 (KERALA)] AND BY HON'BLE MADRAS HIGH COURT IN CIT VS. GOPAL PLASTICS (P) LTD [215 ITR 136 (MADRAS)] AT B EST WAS A DEBATABLE ISSUE FOR WHICH PENALTY U/S 271 (1)(C) OF THE ACT W AS NOT ATTRACTED. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID FINDINGS / OBSERVATIONS OF THE CIT(A). 6. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THE CIT(A) WHILE DECIDING THE ISSUE OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT HELD THAT IN THE QUANTUM PROCEEDINGS, THE TRIBUNAL HAD HELD THE ASSESSEE NOT TO HAVE ESTABLISHED NEW INDUSTRIAL UNDERTAKING AND HENCE N OT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT, BUT HAD DELETED THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. THE LEARNED D.R. POINTED OUT THAT AS THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS UNDER SEC TION 80IB OF THE ACT, THE SAID DEDUCTION WAS NOT ALLOWED TO THE ASSESSEE AND THE PRESENT CASE WAS 5 NOT A CASE WHERE THERE WAS DIFFERENCE IN THE CALCUL ATION OF DEDUCTION ALLOWABLE UNDER SECTION 80IB OF THE ACT. 7 THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THA T PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED ON TWO ACCOUNTS I.E . A) EXPORT INCENTIVE/DEPB BEING NOT ELIGIBLE FOR DEDUCTION UND ER SECTION 80IB OF THE ACT AND; B) INCORRECT CLAIM OF DEDUCTION UNDER SECT ION 80IB OF THE ACT AND NON-FULFILLMENT OF THE CONDITIONS LAID DOWN UNDER T HE SECTION. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY CONCEDED THAT THE TRIB UNAL HAD CONFIRMED THE ADDITIONS ON BOTH THE ACCOUNTS. IT WAS FURTHER PO INTED OUT BY THE LEARNED A.R. THAT THE ISSUE BEING DEBATABLE DOES NOT WARRAN T LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IT WAS FURTHER POINTED OUT THAT THE ASSESSEE WAS FIRST ENGAGED IN THE MANUFACTURING OF HAND TOOLS. LATER THE UNIT WAS ESTABLISHED FOR MANUFACTURING OF SCAFFOLDING ON WHI CH DEDUCTION UNDER SECTION 80IB WAS CLAIMED. THE LEARNED A.R. POINTED OUT THAT SUCH DEDUCTION WAS CLAIMED ON THE BASIS OF THE REPORT OF C.A. AND ALL PARTICULARS IN CONNECTION WITH THE SAME WERE FILED BEFORE THE ASSESSING OFFICER AND NOTING WAS CONCEALED. THE LEARNED A.R . FURTHER SUBMITTED THAT THE ASSESSING OFFICER WHILE LEVYING OF PENALTY U/S 271(1)(C) OF THE ACT HAS RAISED NEW POINTS, WHICH WERE NOT CONSIDERE D WHILE PASSING THE ASSESSMENT ORDER. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. DEEP TOOLS PVT. LTD., 274 ITR 603 (P&H) THAT NO PENALTY IS LEVIABLE WHERE DEDUCTION IS CLAIMED ON THE BASIS OF C.A.S REPORT. FURTHER RELIANCE WAS PLACED ON THE RATIO LAID IN TELEBUILD CONSTRUCTION CO. PVT. LTD. VS. ACIT, 1 3 SOT 218 (MUM), M/S SUPREME YARNS LTD. VS. ACIT, I.T.A.NO. 649/CHD/ 2007, CIT VS. S.DHANABAL, 309 ITR 268 (DEL) AND ACIT VS. ARISUDAN A SPINNING MILLS LTD., 19 DTR (CHD-TRIB) 1. THE LEARNED A.R. FOR TH E ASSESSEE ALSO POINTED 6 OUT THAT THE ADDITION IN ASSESSMENT YEAR 2003-04 WA S MADE ON DIFFERENT FACTS I.E. THE COMPUTATION OF DEDUCTION UNDER SECTI ONS 80IB AND 80HHC OF THE ACT. IT WAS POINTED OUT THAT CBDT VIDE ITS CIR CULAR HAS DIRECTED THAT NO PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE WHE RE THERE IS REDUCTION IN CLAIM OF DEDUCTION UNDER SECTION 80IB/80HHC OF THE ACT IN VIEW OF THE DEPB. 8. THE LEARNED D.R. FOR THE REVENUE IN REJOINDER PO INTED OUT THAT COMPLETE PARTICULARS IN RESPECT OF ITS CLAIM OF DED UCTION UNDER SECTION 80IB OF THE ACT WERE NOT FURNISHED IN FORM NO.10CCB . FURTHER RELIANCE WAS PLACED ON THE RATIO LAID DOWN IN CIT VS. ZOOM C OMMUNICATION P. LTD., 327 ITR 510 THAT WHERE THERE ARE EXPRESS PROV ISIONS OF THE ACT WHICH ARE NOT COMPLIED WITH, THEN THERE IS JUSTIFICATION FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IN THE RETURN OF INCOME FILED FOR ASSESSME NT YEAR 2002-03 HAD CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT AT RS.89,56,318/-. THE SAID CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSE SSING OFFICER AS ACCORDING TO HIM, THE ASSESSEE HAD NOT FULFILLED TH E CONDITIONS UNDER SECTION 80IB OF THE ACT. THE ASSESSING OFFICER NOT ED THAT THE ASSESSEE WAS ALREADY ENGAGED IN THE MANUFACTURING ACTIVITIES FROM THE YEAR 1990 AND ONLY ADDED TO ITS ACTIVITIES BY STARTING MANUFA CTURING OF SCAFFOLDING IN ADDITION TO HAND TOOLS AND MADE ADDITION TO THE EXT ENT OF RS.3,23,351/- IN THE MACHINERY ACCOUNT. AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM OF ESTABLISHMENT OF NEW INDUSTRIAL UNDERTAKIN G WHICH WAS IN FACT ESTABLISHED BETWEEN ELIGIBLE PERIOD I.E. FROM 1.4.1 995 TO 31.3.2002, THE ASSESSEE WAS HELD NOT ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE ACT. THE 7 TRIBUNAL HELD THAT IN VIEW OF THE ABOVESAID FACTS O F THE ASSESSEE UTILIZING ITS OLD MACHINERY AND MAKING A SMALL ADDITION TO TH E MACHINERY ACCOUNT, COULD NOT BE SAID TO HAVE ESTABLISHED A NEW INDUSTR IAL UNDERTAKING THAT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T, IN THE LIGHT OF SUB- SECTION(2) OF SECTION 80IB OF THE ACT. FURTHER THE DEDUCTION CLAIMED UNDER SECTION 80IB OF THE ACT WAS DENIED ON THE EXPORT IN CENTIVES/DEPB. IN THE PENALTY PROCEEDINGS THE PLEA OF THE ASSESSEE WAS TH AT DEDUCTION WAS CLAIMED ON THE BASIS OF REPORT OF THE C.A. AND FURT HER THE ISSUE BEING DEBATABLE, NO PENALTY WAS LEVIABLE ON THE DIFFERENC E OF OPINION. THE ASSESSING OFFICER OBSERVED IN THE PENALTY ORDER PAS SED U/S 271(1)(C) OF THE ACT THAT THE ASSESSEES RELIANCE ON THE REPORT OF C .A. IS MISPLACED AS THE SAID REPORT WAS TOTALLY INCOMPLETE; THE PARTICULARS AS REQUIRED IN FORM NO.10CCB HAD NOT BEEN GIVEN. THE ASSESSING OFFICER FURTHER OBSERVES THAT THE SAID REPORT CONTAINS NO COMPUTATION OF DED UCTION AND OTHER PARTICULARS HAD NOT BEEN REFERRED. EVEN THE FIGURE OF DEDUCTION WORKED OUT WAS NOT GIVEN AND AS SUCH NO RELIANCE COULD BE PLAC ED ON THE SAID REPORT. WITH REGARD TO THE SECOND PLEA OF THE ASSESSEE BEIN G DEBATABLE, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE S UNIT WAS NOT A NEW INDUSTRIAL UNDERTAKING AND THE ADDITION IN THE MACH INERY BEING VERY SMALL, THE ASSESSEE WAS NOT ENTITLED TO THE SAID DEDUCTION . 10. WITH REGARD TO THE CLAIM OF DEDUCTION IN RESPEC T OF EXPORT INCENTIVES/DEPB THE ASSESSING OFFICER OBSERVED THAT AT THE TIME OF FILING OF THE RETURN OF INCOME THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN STERLING FOODS LTD. (SUPRA) WAS APPLICABLE AND A S SUCH THE ISSUE WAS NOT DEBATABLE. THE ASSESSEE WAS HELD TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME BY CLAIMING WRONG CLAIM FOR DEDUCTION AND PENALTY WAS LEVIED. 8 11. THE CIT(A) VIDE PARA-5 OBSERVED AS UNDER :- 5. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF T HE LD. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEVANT RECORD. AS ALREADY DISCUSSED PENALTY U/S 271(1)(C) OF THE A CT HAS BEEN LEVIED IN THIS CASE MAINLY ON ACCOUNT OF THE F ACT THAT DEDUCTION OF RS.89,56,318/- CLAIMED BY THE APPELLAN T U/S 80IB OF THE ACT WAS DISALLOWED BY THE A.O. AND THAT THE FINDINGS OF THE A.O. HAD BEEN FURTHER CONFIRMED BY THE HON'BLE ITAT IN THEIR ORDER DATED 19.6.2008. AS DI SCUSSED IN THE PENALTY ORDER ALSO ONE OF THE ISSUES INVOLVE D FOR DISALLOWANCE OF DEDUCTION U/S 80IB WAS WITH REGARD TO DEDUCTION UNDER THE PROVISIONS OF THIS SECTION IN RESPECT OF EXPORT INCENTIVES. THOUGH THE DISALLOWANCE WAS MAD E KEEPING IN VIEW THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF STERLING FOODS LTD., AS RIGHTLY POINTE D OUT BY THE LD. COUNSEL IN THE WRITTEN SUBMISSIONS, AT THE TIME OF FILING THE RELEVANT RETURN BY THE APPELLANT THERE WERE A N UMBER OF DECISIONS IN FAVOUR OF THE APPELLANT ALSO. THESE D ECISIONS WERE RENDERED BY DIFFERENT BENCHES OF ITAT AND DIFF ERENT HIGH COURTS DISTINGUISHING THE CASE OF STERLING FOO DS LTD. THOUGH SUBSEQUENTLY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT OF PUNJAB & HARYANA IN T HE CASE OF LIBERTY INDIA VS. CIT KARNAL WAS PRONOUNCED AND WHICH IS AGAINST THE ASSESSEE ON THIS ISSUE, THE FACT REMAIN S THAT AT THE TIME OF FILING THE RETURN OF INCOME BY THE APPE LLANT THERE WAS NO SUCH DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AGAINST IT. EVEN IN HIS ORDER DATED 16.2.200 6 PASSED BY MY PREDECESSOR IN APPEAL NO.205/IT/CIT(A)-II/LDH /04-05, DISALLOWANCE MADE BY THE AO ON THIS GROUND WAS NOT UPHELD KEEPING IN VIEW SUCH DECISIONS INCLUDING THE DECISI ON OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. I NDIA GELATINE & CHEMICALS LTD. 145 TAXMAN 303. IN HIS O RDER DATED 16.2.2006 MY PREDECESSOR HAS DULY BROUGHT OUT THESE DECISIONS IN SUPPORT OF THE APPELLANT. DECISION OF THE ITAT DELHI IN THE CASE OF MENTHA & ALLIED PRODUCTS PVT. LTD. VS. ITO 45 TTJ 333 (DELHI) AND IN THE CASE OF ACIT VS. VIPIN 9 SARDANA AS REPORTED IN 148 TAXMAN (2005) 41 HAVE FU RTHER BEEN REFERRED TO BY MY PREDECESSOR IN THIS REGARD. 12. IN VIEW OF THE ISSUE BEING DEBATABLE THE CIT(A) HELD THAT NO PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIABLE IF THE ADDITI ON WAS CONFIRMED IN A CASE ON ACCOUNT OF SUCH DEBATABLE ISSUE AND DIFFERE NCE OF OPINION. WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A) THAT WIT H REGARD TO THE CLAIM OF DEDUCTION ON ACCOUNT OF EXPORT INCENTIVES/DEPB U NDER SECTION 80IB OF THE ACT AT THE RELEVANT TIME OF MAKING THE AFORESAI D CLAIM, THERE WAS DIVERSITY OF OPINION BETWEEN VARIOUS COURTS AND THE TRIBUNAL EVEN IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN STERLING FOODS LTD. (SUPRA) AND THE HON'BLE PUNJAB & HARYANA HIGH COURT IN LIBERTY INDIA VS. CIT HAD DECIDED THE ISSUE AGAINST THE ASS ESSEE. HOWEVER, THERE IS NO MERIT IN HOLDING THE ASSESSEE TO HAVE FURNISH ED INACCURATE PARTICULARS OF INCOME IN RESPECT OF SUCH CLAIM, WHI CH WAS DEBATABLE. THE ASSESSEE HAS DISCLOSED THE MATERIAL FACTS RELEVANT FOR THE COMPUTATION OF ITS INCOME IN ITS RETURN OF INCOME AND HAD ALSO FUR NISHED A REPORT OF C.A., THOUGH INCOMPLETE. IN RESPECT OF SUCH A CLAIM, WE FIND NO JUSTIFICATION IN THE LEVY OF PENALTY WHERE THE CLAIM OF THE ASSESSEE IS BEING DENIED BEING A DEBATABLE ISSUE. 13. THE OTHER GROUND ON WHICH DEDUCTION UNDER SECTI ON 80IB WAS DISALLOWED BY THE ASSESSING OFFICER WAS NON-FULFILL MENT OF THE CONDITIONS PRESCRIBED UNDER SECTION 80IB OF THE ACT. THE ASSE SSEE CLAIMS THAT THE COMPANY WAS INCORPORATED IN 1990 AND WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF HAND TOOLS. IN THE YEAR 1995 THE BUSINESS ACTIVITIES WERE SWITCHED OVER BY THE ASSESSEE AND HAD STARTED ITS U NIT FOR THE MANUFACTURE OF SCAFFOLDING I.E. THE EQUIPMENT USED IN THE SHUTT ERING IN CONSTRUCTION 10 ACTIVITIES. THE YEARWISE DETAILS OF ADDITION TO M ACHINERY & MISC FIXED ASSETS W.E.F. 1.4.1995 ARE AS UNDER : VALUE AS ON 1.4.1995 MACHINERY MISC.FIXED ASSETS 1995-96 323351.00 0.00 1996-97 2326286.00 47269.00 1997-98 648320.50 27723.00 1998-99 550557.00 22625.50 1999-00 12111427.00 0.00 2000-01 1985800.00 0.00 2001-02 1823585.00 0.00 (1182140 + 641445) 8869326.90 97617.50 8966944.40 11158876.40 14. THE CLAIM OF THE ASSESSEE VIS--VIS ITS UNIT OF MANUFACTURING OF SCAFFOLDING WAS REJECTED AS THE ASSESSEE WAS FOUND TO HAVE MADE SMALL ADDITION TO THE PLANT & MACHINERY DURING THE YEAR U NDER CONSIDERATION AS COMPARED TO THE EARLIER ADDITION MADE TO THE UNIT. THE CIT(A) VIDE PARA 5.4 OBSERVED AS UNDER : 5.4 AS PER THESE DETAILS NEW MACHINERY WAS INTRODU CED FROM YEAR TO YEAR. THOUGH THE APPELLANT STARTED TH IS MANUFACTURING ACTIVITY IN THE YEAR 1995, AS CLARIFI ED IN THE DETAILS OF MACHINERY ACCOUNT GIVEN ABOVE, IT WAS ON LY IN THE YEAR 2001-02 THAT THE VALUE OF NEW MACHINERY INSTAL LED HAD TOUCHED TO THE TUNE OF RS. 1,11,58,876/-. THE VALU E OF OLD MACHINERY AS ON 31.3.2002 WAS OF RS. 21,91,932/- AN D THE VALUE OF NEW MACHINERY AS ON THAT DATE WAS OF RS. 89,66,944/-. THE PERCENTAGE RATIO OF THIS MACHINERY WORKED OUT TO RS. 19.64% AND OF NEW MACHINERY 80.36%. IT WAS ON THIS ACCOUNT THAT THE APPELLANT HAS CONTENDED THAT THE CONDITION LAID DOWN IN SECTION 80IB THAT THE NEW IN STALLED 11 MACHINERY SHOULD HAVE BEEN IN EXCESS OF 80% WAS FUL FILLED FIRST TIME IN YEAR 2001-02. THEREFORE, THOUGH THE MANUFACTURING ACTIVITY IN THE UNIT STARTED IN THE Y EAR 1995, THE APPELLANT COULD CLAIM DEDUCTION U/S 80IB ONLY F IRST TIME IN THE ASSESSMENT YEAR 2002-03 WHICH IS UNDER APPEA L. IN VIEW OF THE RATIO OF NUMBER OF DECISIONS THE APPELL ANT WAS ENTITLED TO CLAIM SUCH DEDUCTION UNDER THE CIRCUMST ANCES EXPLAINED ABOVE. DECISION OF HON'BLE KERALA HIGH CO URT IN THE CASE OF CIT V SEEYAN PLYWOODS 56 TAXMAN 296, RE LIED UPON BY THE LD. COUNSEL IS IN FAVOUR OF THE APPELLA NT AS FAR AS THIS ISSUE IS CONSIDERED. SIMILARLY THE CASE OF CIT V GOPAL PLASTICS (P) LTD 215 ITR 136 (MADRAS HIGH CO URT ) ALSO COVERS THE CASE OF THE APPELLANT IN ITS FAVOUR . THEREFORE, THOUGH ULTIMATELY THE HON'BLE ITAT UPHELD THE FINDI NGS OF THE ASSESSING OFFICER WITH REGARD TO THE DISALLOWANCE O F DEDUCTION U/S 80IB, IN VIEW OF THE RATIO OF THE ABO VE DECISIONS, IN THE FACTS & CIRCUMSTANCES WITH REGARD TO THE ACQUISITION OF NEW MACHINERY FOR THE INDUSTRIAL UND ERTAKING OF THE APPELLANT, THE APPELLANT WAS NOT UNJUSTIFIED IN CLAIMING THE DEDUCTION. MY PREDECESSOR ACCORDINGLY ALLOWED THE CLAIM OF THE APPELLANT. IN HIS ORDER DATED 16. 2.2006, MY LD. PREDECESSOR HAS REFERRED TO A NUMBER OF DECISIO NS TO BRING HOME THE POINT THAT AN ASSESSEE COULD ALSO US E THE SAME PREMISES / BUILDING FOR INSTALLING THE PLANT A ND MACHINERY OF NEW UNIT. IN VIEW OF THE ABOVE FACTUAL POSITION AND THE RATIO OF THE DECISION OF THE HON'BLE KERALA HIGH COURT AND THE HON'BLE MADRAS HIGH COURT MENTIONED A BOVE, THOUGH THE HON'BLE ITAT DID NOT AGREE WITH THE FIND INGS BEST DEBATABLE ISSUE. IN VIEW OF THE RATIO OF THE VARIO US DECISIONS MENTIONED IN THE PRECEDING PARAGRAPHS WHILE DEALING WITH THE ISSUE OF DEDUCTION U/S 80IB ON EXPORT INCENTIVE S AND WHICH HAVE BEEN RELIED UPON BY THE LD. COUNSEL IN T HE WRITTEN SUBMISSIONS REPRODUCED ABOVE, AGAIN PENALTY U/S 271 (1)(C) OF THE ACT CANNOT BE HELD TO BE JUSTIFIED IN RESPEC T OF THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IB IN THIS CASE WHICH WAS A DEBATABLE ISSUE AND ON WHICH MORE THAN ONE OPINIONS WERE POSSIBLE. 12 15. IN VIEW OF THE ABOVE FACTS WHERE THE ASSESSEE H AD DISCLOSED COMPLETE PARTICULARS VIS--VIS ITS CLAIM OF DEDUCTI ON UNDER SECTION 80IB OF THE ACT IN THE RETURN OF INCOME FILED BY IT, WHICH WAS ACCOMPANIED BY AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT AND AL SO AUDIT REPORT IN FORM NO.10CCB, THOUGH INCOMPLETE AS PER THE ASSESSI NG OFFICER, THERE IS NO MERIT IN LEVY OF PENALTY U/S 271(1)(C) OF THE AC T, WHERE CLAIM OF ASSESSEE IS REJECTED. IN THE ASSESSMENT ORDER ALSO THERE IS NO CHARGE AGAINST THE ASSESSEE NOT TO HAVE DISCLOSED COMPLETE PARTICULARS OR INFORMATION REQUIRED TO COMPUTE THE INCOME FOR THE YEAR UNDER CONSIDERATION. THE QUESTION WHICH ARISES IN THE PR ESENT CASE WAS WHETHER THE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT IN THE ABOVE SAID FACTS AND CIRCUMSTANCES WAS A BONAFIDE CLAIM AND WHETHER THE REJECTION OF SUCH A CLAIM WOULD ATTRACT PENALTY LEVIABLE U/S 271(1)(C) OF THE ACT. WE FIND THAT THE ASSESSEE HA D DISCHARGED ITS ONUS IN RESPECT OF ITS CLAIM OF DEDUCTION UNDER SECTION 80I B OF THE ACT. FIRSTLY BY MAKING SUCH A CLAIM VIDE DISCLOSURE IN ITS RETUR N OF INCOME AND ACCOMPANYING DOCUMENTS AND ALSO ITS BONAFIDES OF CL AIMING SUCH DEDUCTION IN THE YEAR UNDER APPEAL AFTER INSTALLATI ON OF THE MACHINERY. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE A SSESSEE HAD ACQUIRED NEW PLANT & MACHINERY OVER A PERIOD OF YEARS, THOUG H THE UNIT WAS STARTED IN THE YEAR 1995, THE APPELLANT COULD CLAIM THE DED UCTION IN ASSESSMENT YEAR 2002-03 ONLY AFTER THE VALUE OF MACHINERY INST ALLED REACHED 80%, MERELY BECAUSE THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT WAS DISALLOWED, BEING A DEBATABLE ISSUE, THERE IS NO ME RIT IN THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 13 16. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN ACIT VS. ARISUDANA SPINNING MILL S LTD. (SUPRA). THE TRIBUNAL VIDE PARA-8 OF THE ORDER HELD AS UNDER : 8. NOW, THE QUESTION IS AS TO WHETHER THE DENIAL O F THE CLAIM MADE IN THE RETURN OF INCOME CAN LEAD TO AN A UTOMATIC IMPOSITION OF PENALTY UNDER S. 271 (1)(C) OF THE A CT. IT IS SUFFICIENT TO SAY THAT THE ASSESSMENT PROCEEDINGS A ND THE SUBSEQUENT PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS. THE FINDINGS AND CONCLUSIONS DRAWN BY THE AUTHORITIES IN THE ASSESSMENT PROCEEDINGS ARE RELEV ANT BUT CANNOT BE CONSTRUED AS CONCLUSIVE SO AS TO FASTEN T HE ASSESSEE WITH THE CHARGE OF CONCEALMENT OF INCOME A ND FURNISHING OF INACCURATE PARTICULARS THEREOF. A SI MILAR SITUATION WAS BEFORE THE HON'BLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF DEEP TOOLS (P) LTD (SUPRA). I N THE SAID CASE TOO, THE ASSESSEE HAD STAKED CLAIM FOR DEDUCTI ON U/S 80HHC OF THE ACT, WHICH WAS DECLINED. THE ASSESSIN G OFFICER LEVIED PENALTY UNDER S. 271 (1)(C) OF THE A CT. THE STAND OF THE ASSESSEE WAS THAT THE CLAIM WAS MISTAK EN BUT WAS BASED ON BONA FIDE CONSIDERATIONS. THE HON'BLE HIGH COURT OBSERVED THAT THE CLAIM, THOUGH UNTENABLE, WA S BASED ON THE REPORT OF A CHARTERED ACCOUNTANT IN TERMS OF S. 80HHC AND THE SAID FACT LED TO THE CONCLUSION THAT IT WAS A BONA FIDE MISTAKE. IN OUR VIEW, THE SAID PARITY OF REASONING IS APPLICABLE IN THE PRESENT CASE TOO. IN THE CASE OF T. ASHOK PAL V CIT (2007) 210 CTR (SC) 259: (2007) 292 ITR 1 1 (SC), HON'BLE SUPREME COURT ALSO OBSERVED THAT THE PENALT Y 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 EARLIER, THE ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED. THE RETURN OF INCOME WAS ACCOMPA NIED BY THE AUDIT REPORT REQUIRED UNDER S. 80IA AND THERE I S NOTHING TO SUGGEST, RATHER THERE IS NO CHARGE AGAINST THE A SSESSEE, THAT THE REPORT OF THE AUDITOR WAS COLLUSIVE. 14 17. IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF T HE CIT(A) IN DELETING THE PENALTY LEVIED UNDER SECTION 80IB OF T HE ACT ON BOTH COUNTS OF DENIAL OF DEDUCTION UNDER SECTION 80IB OF THE AC T ON EXPORT INCENTIVE AND ALSO ON ACCOUNT OF NON-FULFILLMENT OF CONDITION S UNDER SECTION 80IB OF THE ACT. 18. NOW COMING TO THE FACTS IN I.T.A.NO. 778/CHD/20 09 RELATING TO ASSESSMENT YEAR 2003-04, WHEREIN PENALTY OF RS.60,7 6,832/- WAS IMPOSED U/S 271(1)(C) OF THE ACT. THE SAID PENALTY WAS LEV IED BY THE ASSESSING OFFICER ON THE REDUCTION OF CLAIM OF DEDUCTION UNDE R SECTIONS 80HHC AND 80IB OF THE ACT. THE ASSESSEE HAD CLAIMED DEDUCTIO N UNDER SECTION 80HHC OF THE ACT BY INCLUDING DEPB RECEIPTS AND EXP ORT INCENTIVE AS PROFITS OF THE BUSINESS. THE ASSESSEE WAS HELD TO B E NOT ELIGIBLE FOR REDUCTION ON SAID EXPORT INCENTIVE AND AS SUCH DEDU CTION CLAIMED UNDER SECTION 80HHC OF THE ACT WAS REDUCED. SIMILARLY TH E INCOME FROM INTEREST, REBATE AND DISCOUNT AND EXCISE DUTY REFUN D WAS EXCLUDED FROM THE ELIGIBLE PROFITS OF BUSINESS AND THE DEDUCTION CLAIMED UNDER SECTION 80HHC WAS RECOMPUTED. HOWEVER, THE ASSESSEE WAS HE LD TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPE CT OF SUCH CLAIM OF DEDUCTION AND PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED AND THE ASSESSEE WAS HELD TO HAVE FURNISHED INACCUR ATE PARTICULARS OF INCOME BY WRONGLY CLAIMING EXCESSIVE DEDUCTION OF R S.77,46,455/-. FURTHER DEDUCTION CLAIMED BY THE ASSESSEE UNDER SEC TION 80IB OF THE ACT WAS ALSO DISALLOWED BOTH ON EXPORT INCENTIVE AND AL SO BECAUSE OF NON- FULFILLMENT OF THE CONDITIONS PRESCRIBED UNDER SECT ION 80IB OF THE ACT. THE ASSESSEE WAS HELD TO HAVE CONCEALED THE PARTICU LARS OF INCOME TO THE 15 EXTENT OF RS.87,89,144/-. THE ASSESSING OFFICER AC CORDINGLY LEVIED PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.60 ,76,832/-. 19. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIAN CE ON THE CIRCULAR NO.2 OF 2006 DATED 17.1.2006 WHEREIN IT HAS BEEN P ROVIDED THAT WHERE THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTI ON 80HHC IN DEPB CREDITS HAS NOT BEEN ALLOWED, PENALTY RELATING TO S UCH DISALLOWANCE SHALL NOT BE INITIATED, IF LEVIED, SHALL BE WAIVED BY THE CHIEF COMMISSIONER. 20. ON THE PERUSAL OF THE RECORD AND THE ORDER OF T HE ASSESSING OFFICER AGAINST THE ORDER LEVYING PENALTY U/S 271(1)(C) OF THE ACT , WE FIND NO MERIT IN LEVY OF PENALTY U/S 271(1)(C) OF THE ACT O N DENIAL OF DEDUCTION UNDER SECTION 80IB OF THE ACT, IN VIEW OF OUR OBSER VATIONS IN PARAS HEREINABOVE IN RESPECT OF PENALTY LEVIED U/S 271(1) (C) OF THE ACT RELATING TO ASSESSMENT YEAR 2002-03. WE UPHOLD THE ORDER OF THE CIT(A) IN DIRECTING THE ASSESSING OFFICER TO DELETE THE PENAL TY LEVIED U/S 271(1)(C) OF THE ACT IN RESPECT OF NON-ALLOWANCE OF THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. 21. THE SECOND ASPECT OF THE PENALTY LEVIED U/S 27 1(1)(C) OF THE ACT IS THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80HHC O F THE ACT WHICH WAS MADE ON THE SUBSEQUENT AMENDMENT TO THE PROVISIONS OF SECTION 80HHC OF THE ACT IN RESPECT OF DEPB. THE SAID DEDUCTION WA S DISALLOWED BY APPLYING PROVISIONS INTRODUCED BY THE TAXATION LAWS (AMENDMENT) ACT, 2005. THE SAID AMENDMENT BEING NOT THERE AT THE TI ME OF FILING OF THE RETURN, THE ASSESSEE CANNOT BE HELD TO HAVE FURNISH ED INACCURATE PARTICULARS OF INCOME IN RESPECT OF ITS CLAIM OF DE DUCTION UNDER SECTION 80HHC OF THE ACT. EVEN OTHERWISE WHERE THE ASSESSE E HAS MADE CLAIM 16 BONAFIDELY, THERE IS NO BASIS FOR LEVY OF PENALTY U /S 271(1)(C) OF THE ACT, WHERE SAID CLAIM OF THE ASSESSEE HAS BEEN REJECTED. WE UPHOLD THE ORDER OF THE CIT(A) IN THIS REGARD IN DELETING THE PENALT Y LEVIED U/S 271(1)(C) OF THE ACT OF NON-ALLOWANCE OF DEDUCTION UNDER SECTION 80HHC OF THE ACT ON EXPORT INCENTIVES/DEPB. THE GROUNDS OF APPEAL RAIS ED BY THE REVENUE ARE DISMISSED. 22. IN THE RESULT, APPEALS OF THE REVENUE FOR ASSES SMENT YEAR 2002-03 AND 2003-04 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JUNE, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 ST JUNE, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 17