COMMISSIONER OF INCOME TAX-I V. M/S HIMLAND AGRO FOODS LTD.

ITA/28/2008

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax against M/s Himachal Agro Foods Ltd., concerning a penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 for allegedly furnishing inaccurate particulars of income. The assessee had initially claimed a 100% deduction under Section 80 IB, which was later corrected to 30% upon realization of the mistake, leading to the revised return. The penalty was contested at various levels, with the CIT(A) deleting it on grounds of the mistake being bonafide, a decision later upheld by the Tribunal. The Revenue's appeal to the High Court was dismissed, affirming the Tribunal's findings and decision.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 719830 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 03-04-2008
• Assessment Year: misc
• Other Referred Cases: M/s Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: S K NARWANA
• Keywords: Assessment; Concealment of income; Deduction; Inaccurate particulars; Penalty; Revised return; Scrutiny
• Section: 271(1)(c); 274; 260A; 143(1)(a); 80-IB

Judgement Text

"ITA No.28 of 2008 1 In the High Court for the States of Punjab and Haryana at Chandigarh … ITA No.28 of 2008 Date of decision:3.4.2008 The Commissioner of Income Tax -I,Chandigarh Appellant Versus M/s Himachal Agro Foods Ltd. Chandigarh Respondent Coram: Hon’ble Mr.Justice Satish Kumar Mittal Hon'ble Mr.Justice Rakesh Kumar Garg Present: Mr.S.K.Garg Narwana,Advocate for the Revenue-appellant. Rakesh Kumar Garg,J 1. The Revenue has filed the present Appeal under Section 260A of the Income Tax Act, 1961(for short ‘the Act’) against the order of the Income Tax Appellate Tribunal, Chandigarh , Bench ‘B’ Chandigarh (for short ‘the Tribunal’), dated 30.7.2007 passed in ITA No.245/CHANDI/2007 for the Assessment Year 2003-04 raising the following substantial question of law: - “Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is justified in law in deleting the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961, when the assessee company had deliberately ITA No.28 of 2008 2 furnished inaccurate particulars of its income in the original return and had admitted the mistake by filing the revised return only after the defect was pointed out by the department ? The assessee-company filed its return of income for the assessment year 2003-04 on 1.12.2003 declaring NIL income which was processed under Section 143(1)(a) of the Act on 11.3.2004. Thereafter, the case was selected for scrutiny. It was found that the assessee had claimed 100 % deduction under Section 80 IB of the Act in the original return, whereas the company was entitled to only 30 % deduction as per the said provisions. It was admitted by the assessee that the deduction under Section 80 IB of the Act was being claimed wrongly by mistake. Thereafter, the assessee revised the return on 24.3.2005 declaring income of Rs.10,04,200/- and claimed Rs.4,30,371/- as deduction under Section 80 IB and thereafter the assessment was completed. The Assessing Officer also initiated penalty proceedings under Section 274 read with Section 271(1)(c) against the assessee. Vide order dated 28.9.2006, the Income Tax Officer, Ward-1(2) Chandigarh imposed the penalty under Section 271(1)(c) for furnishing inaccurate and concealing particulars of income. The said order of penalty was challenged by the assessee by filing appeal before the Commissioner of Income Tax (Appeals), Chandigarh(for short the “CIT(A)”) on the ground that the mistake committed by the assessee was bonafide and therefore, the assessee cannot be penalized under the provisions of Section 271(1)(c) of the Act. The CIT(A) vide his order dated 18.12.2006 ITA No.28 of 2008 3 accepted the appeal and deleted the penalty. Aggrieved against the said order, the Revenue filed the appeal before the Tribunal raising the plea that the assessee had deliberately concealed the particulars of income as the assessee had claimed wrong deduction and therefore, the penalty proceedings were rightly initiated against the assessee. However, the appeal of the Revenue was dismissed by the Tribunal holding that no definite finding has been recorded by the Assessing Officer that there is a concealment of income by the assessee and it was merely a case of a wrong claim under mistaken belief as to which five years, the assessee was entitled to deduction under Section 80 IB of the Act and it was a debatable issue. We have heard Shri S.K.Garg Narwana, Advocate, learned counsel for the Revenue. The facts of the case are not in dispute. The assessee was entitled to 100 % deduction under section 80 IB of the Act for five assessment years beginning with the initial assessment year of the profits and gains derived from such an industrial undertaking. As per certificate No.1978 dated 6.3.2002 issued by the District Industries Centre, Solan, which was attached with the return of income, the unit commenced manufacturing of the goods w.e.f. 28.3.1998 i.e., 3 days of the Financial Year 1997-98(Assessment Year 1998-99) and the assessee has taken deduction under Section 80 IB inadvertently taking the first assessment year of exemption starting from 1999-2000 and the said mistake was a bonafide mistake committed by the Chartered Accountant of the assessee ITA No.28 of 2008 4 who has duly audited the return. The scope of reasonable cause/bonafide mistake has been debated upon in a catena of judgments. The Hon'ble Apex Court in the case of M/s Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) has categorically held that penalty is not imposable if there is no conscious breach of law. In the present case, since the main dispute was for calculation of number of years, it cannot be said that the assessee deliberately concealed the particulars of income or furnished inaccurate particulars of income and even if it is presumed that the counsel for the assessee made a bonafide mistake in calculation of such assessment years, still it can be said that no penalty should be imposed upon the assessee for the mistake of his counsel. Even otherwise, the Tribunal has given a specific finding that the Revenue has failed to pin point any specific defect in the conclusions of the CIT(A). Thus, in view of the aforesaid finding of facts given by the Tribunal, we are not inclined to interfere in the order of the Tribunal. No question of law arises in the appeal and the same is hereby dismissed. (RAKESH KUMAR GARG) JUDGE April 3,2008 (SATISH KUMAR MITTAL) nk JUDGE "