DCIT, Sangrur V. M/s H.M. Steel Ltd., Sangrur

ITA 910/CHANDI/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8727 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Bonafide belief
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 910/CHD/2014 ASSESSMENT YEAR: 2006-07 DCIT, VS. H.M. STEEL LTD. CIRCLE SANGRUR ROAD SANGRUR DIRBA, DISTT. SANGRUR PAN NO.AABCH0164Q (APPELLANT) (RESPONDENT) APPELLANT BY : DR. AMARVEER SINGH RESPONDENT BY : SHRI. VIBHOR GARG DATE OF HEARING : 12/01/2015 DATE OF PRONOUNCEMENT : 21/01/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 28.08.2014 PASSED BY THE CIT(A)PATIALA. 2. GROUND RAISED IN THIS APPEAL IS GIVEN BELOW: 1. IN THE FACTS AN D CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED I N DELETING THE PENALTY IMPOSED U/S 271(1)(C) OF THE I NCOME TAX ACT, 1961 BY RELYING UPON THE OTHER DATED 17.06.2013 PAS SED BY THE HONBLE ITAT, CHANDIGARH IN ITA NO. 643/CHD/2011, W ITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS NOT A CCEPTED THE SAID ORDER DATED 17.06.2013 AND HAS FILED APPEAL BE FORE THE HONBLE PUNJAB & HARYANA HIGH COURT, CHANDIGARH WHI CH IS PENDING ON THE FOLLOWING QUESTIONS OF LAW:- (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN HOLDING THAT THE FREIG HT SUBSIDY RECEIVED FROM THE HIMACHAL GOVT. BY THE ASSESSEE IS ALLOWED TO BE INCLUDED AS PROFIT DERIVE D FROM INDUSTRIAL UNDERTAKING AND ELIGIBLE AS DEDUCTI ON U/S 80IC OF THE INCOME TAX ACT, 1961, WHEN IT HAS B EEN CLEARLY LAID DOWN BY SUPREME COURT IN ITS DECISION IN THE CASES OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. 2 VS. CIT 1978 (TR/SC) 50:/1978) 1/3 ITR 84/SC) THAT THE WORDS DERIVED FROM REFERRED TO IN THE SECTION 80IC HAS NARROWER MEANING THAN ATTRIBUTABLE TO AND THE FREIG HT SUBSIDY CANNOT BE TREATED AS PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING THROUGH IT MAY BE ATTRIBUTAB LE TO INDUSTRIAL UNDERTAKING ? (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN HOLDING THAT THE FREIG HT SUBSIDY WAS RIGHTLY TAKEN INTO CONSIDERATION BY THE ASSESSEE IN WORKING OUT THE PROFITS AND GAINS OF TH E BUSINESS UNDERTAKING RELYING ON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF MERINO PLY AND CHEMICALS LTD. VS. CIT(1004) 122 CTR (CAL) 262; (19 94) 209 ITR 508 (CAL) WHERE THE POINT IN ISSUE WAS WHET HER A RECEIPT ON ACCOUNT OF TRANSPORT / FREIGHT SUBSIDY WAS OF A REVENUE NATURE AND WAS INSEPARABLY CONNECTED WITH THE BUSINESS AND NOT WHETHER IT WAS INCOME DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTA KING AND ELIGIBLE FOR DEDUCTION U/S 80HH/80IA/80IB OF TH E INCOME TAX ACT, 1961? (III) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN NOT APPRECIATING THE JUDGMENT OF HONBLE HIMACHAL PRADESH HIGH COURT IN ITS DECISION IN THE CASE OF CIT VS. KIRAN ENTERPRISES REPORTED IN 327 ITR 520 AND M/S MEHAR PACKAGING PVT . LTD. VS. CIT REPORTED IN 24 TAXMAN 204 WHICH ARE APPLICABLE IN THIS CASE WHEREIN IT HAS ALREADY BEEN HELD THAT THE AMOUNT OF TRANSPORT / FREIGHT SUBSIDY RECEIVED FROM THE GOVT. BY THE ASSESSEE IS NOT A PR OFIT DERIVED FROM BUSINESS SINCE IT IS NOT AN OPERATIONA L PROFIT. THE SOURCE OF SUBSIDY IS NOT THE BUSINESS O F ASSESSEE BUT SCHEME OF CENTRAL GOVT. AND CANNOT BE INCLUDED IN THE PROFITS ELIGIBLE FOR DEDUCTION U/S 80IC. THE ITAT WAS ALSO NOT RIGHT IN LAW IN NOT APPRECIA TING THE RATIO OF HONBLE SUPREME COURT IN THE CASES OF M/S LIBERTY INDIA VS. CIT 225 CTR 23 (SC), CIT VS. STER LING FOODS 153 CTR 439, 237 ITR 589, VELLORE ELECTRIC CORPORATION LTD. VS. CIT 227 ITR 557 (HON'BLE SUPRE ME COURT. (IV) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN HOLDING THAT THE INCOM E FROM SALES TAX DEFERMENT REBATE RECEIVED BY THE ASSESSEE IS ALLOWED TO BE INCLUDED AS PROFITS DERIV ED FROM INDUSTRIAL UNDERTAKING AND ELIGIBLE FOR DEDUCT ION U/S 80IC OF THE INCOME TAX ACT, 1961, WHEN THE ASSESSEE RECEIVED IT FROM THE HIMACHAL GOVT. FOR TH E BENEFIT OF ANY INCENTIVE OF SALES TAX LEVIABLE ON T HE SALE OF MANUFACTURED GOODS UNDER HIMACHAL PRADESH GENERAL SALES ACT, 1968 AND THE INCOME DERIVED FROM SUCH REBATE IS NOT AN INCOME DERIVED FROM INDUSTRIA L UNDERTAKING. HOWEVER, THE IMMEDIATE SOURCE OF THIS REBATE WAS THE SCHEME OF GOVT. TO GIVE SUCH REBATE AND NOT THE CONDUCT OF THE BUSINESS OF THE INDUSTRI AL UNDERTAKING. (V) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ITAT WAS RIGHT IN LAW IN DIRECTING THE AO TO P ASS A FRESH ORDER, ON THE ISSUE OF BANK INTEREST, IN TERM S OF THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE O F VISHAL INDUSTRIES AS WELL AS IN THE LIGHT OF THE AP EX COURT DECISION IN THE CASE OF ACG ASSOCIATES CAPSUL ES PVT. LTD., IGNORING THE FACT THAT DECISION OF NETTI NG WAS 3 HELD TO BE CORRECT FOR COMPUTING DEDUCTION U/S 80HH C IN VIEW OF THE DEFINITION OF PROFITS OF BUSINESS IN EXPLANATION (BAA) TO SECTION 80HHC OF THE ACT AND N OT FOR SECTION 80IC OF THE ACT WHICH DEALS WITH PROFIT S DERIVED FROM THE ELIGIBLE BUSINESS, AND IS DIFFEREN T FROM THE COMPUTATION OF SECTION 80HHC. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS THE DEDUCTION CLAIM U/S 80 IC WAS REDUC ED BY THE FOLLOWING AMOUNT: 1 TRANSPORT SUBSIDY RS. 2,18,38,221/- 2 BANK INTEREST RS. 2,37,211/- 3 MIBOR PREMIUM RS. 2,25,000/- ON THE ABOVE ISSUE PENALTY PROCEEDINGS U/S 271 (1)( C) WERE ALSO INITIATED AND LATER ON MINIMUM PENALTY @ 100% WAS LEVIED AFTER CO NSIDERING THE SUBMISSIONS MADE DURING THE PENALTY PROCEEDING. 3. ON APPEAL IT WAS MAINLY SUBMITTED THAT MERELY CL AIM OF DEDUCTION U/S 80IC WOULD NOT LEAD TO THE CONCLUSION THAT ASSESSEE HAS FILED INCORRECT PARTICULARS OF INCOME OR CONCEALED ANY PARTICULARS OF INCOME. FURTHER IT WAS POINTED OUT THAT SIMILAR ADDITION HAVE ALSO BEEN DE LETED BY THE TRIBUNAL IN ASSESSMENT YEAR 2007-08. THE LD. CIT FOUND FORCE I N THE SUBMISSION AND DELETED THE PENALTY. 4. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER OF AO. 5. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT ISSUE IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL IN ITS OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO. 582/CHD/2014. 6. AFTER CONSIDERING THE RIVAL SUBMISSION WE FIND T HAT LD. CIT (A) HAS ADJUDICATED THIS ISSUE VIDE PARA 4.3 WHICH IS AS UN DER: 4.3 I HAVE CONSIDERED THE SUBMISSION MADE. THE ADDITIONS HAVE BEEN MADE BY THE A.O. AGAINST TRANSP ORT SUBSIDY, BANK INTEREST AND MIBORE PREMIUM. THE A.O. HAS DISALLOWED THE TRANSPORT SUBSIDY HOLDING THAT IT IS NOT EARNED THROUGH ANY MANUFACTURING PROCESS AND IT IS NOT A P ROFIT DERIVED FROM THE BUSINESS OF THE ASSESSEE. SIMILARL Y, THE BANK INTEREST AND MIBORE PREMIUM HAS BEEN DISALLOWED CONSIDERING THAT THESE INCOME ARE NOT DERIVED FROM INDUSTRIAL UNDERTAKING BUT ARE MERELY INCIDENTAL TO THE BUSINE SS OF INDUSTRIAL ENTERPRISES. HOWEVER, SIMILAR ADDITIONS MADE IN A.Y. 2007-08 HAS ALREADY BEEN DELETED BY THE HONBLE ITA T, 4 CHANDIGARH BENCH. IT IS FURTHER NOTED THAT IN A.Y. 2005-06, THE APPELLANT CLAIMED DEDUCTION U/S 80IC OF THE ACT WHI CH WAS ALLOWED U/S 143(3) OF THE IT ACT61. THE RETURN FOR A.Y. 2006-07 WAS FILED ON THE BASIS OF AUDITED BALANCE SHEET AND AUDIT CERTIFICATE ISSUED U/S 80IC WHICH WAS ALSO ALLOWED U/S 143(3) VIDE ORDER DATED 05-09-2008. THE ASSESSMENT ORDER W AS HOWEVER, SET ASIDE AND DISALLOWANCE WAS MADE SUBSEQUENTLY. ALL THE INFORMATION, PARTICULARS AND FACTS ARE DULY DISCLOSED WITH THE RETURN OF INCOME AND ONLY V IEW CONTRARY TO THE ORIGINAL ASSESSMENT WAS TAKEN IN TH E RE- ASSESSMENT PROCEEDINGS BASED ON THE SAME MATERIALS. THEREFORE, IT IS SEEN THAT THE APPELLANT HAD DULY D ISCLOSED THE PRIMARY FACTS IN THE RETURN. IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC), IT IS HEL D THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF TH E INCOME TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED IN IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY THE ASSESSEE MUST HAVE FURNI SHED INACCURATE PARTICULARS IN HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IN FOUND TO BE INCORRECT OF INACCURATE, THE ASSESSEE CANT BE THE HELD GUILTY OF FURNISHING INACCURATE P ARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH TH E PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRA CT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCU RATE, NOR EXACT OR CORRECT, NO ACCORDING TO THE TRUTH OR ERRO NEOUS. CONSIDERING THE FACTS OF THE CASE, THEREFORE, IT I S NOTED THAT ALL THE PARTICULAR AND PRIMARY FACTS ARE DULY DISCLOSED BY THE APPELLANT. THE BOOKS OF ACCOUNTS ARE AUDITED AN D AUDITORS CERTIFICATE U/S 80IC WAS SUBMITTED. THERE FORE, LOOKING INTO THE ENTIRETY OF THE FACTS AND THE CASE LAWS DISCUSSED ABOVE, IN MY OPINION, THERE IS NO CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS IN T HIS CASE. THE PENALTY IMPOSED BY THE A.O. IS, THEREFORE CONCEALED . 5.0 IN THE RESULT, THE APPEAL IS ALLOWED. 7. FURTHER IN THE SIMILAR CIRCUMSTANCES THE TRIBUNA L DELETED THE PENALTY IN ASSESSMENT YEAR 2007-08 BY MAKING FOLLOWING OBSERVA TIONS: THE LD. CIT(A) HAS CORRECTLY ADJUDICATED THE ISSUE BECAUSE PART OF THE ADDITION HAS ALREADY BEEN DELET ED BY THE TRIBUNAL. OTHERWISE MERE CLAIM OF DEDUCTION UNDER BONAFIDE BELIEF CANNOT BE TAKEN AS CONCEALMEN T OF INCOME OR FURNISHING INACCURATE PARTICULARS OF I NCOME PARTICULARS. IN THIS REGARD THE HON'BLE SUPREME CO URT 5 HAS CLEARLY OBSERVED IN CASE OF CIT V. RELIANCE PET ROPRODUCTS PVT LTD, 322 ITR 158 (SC): A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BED COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS IF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 2 71(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO IN FORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS T HE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INC OME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . THEREFORE FOLLOWING THE SAME WE UPHOLD THE ORDER OF THE LD. CIT(A). IN VIEW OF THE ABOVE FINDINGS WE ARE OF THE OPINION THAT LD. CIT(A) HAS CORRECTLY DECIDED THE ISSUE AND THEREFORE WE UPHOLD HIS ORDER . 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21/01/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21/01/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR