TMI Blog2022 (12) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... er And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri Bandish Soparkar, AR Shri Parin Shah, AR For the Revenue : Shri Atul Pandey, Sr DR ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: The present appeal has been filed by the assessee against the order passed by the learned Commissioner of Income-Tax (Appeals)-1, Ahmedabad, ( CIT(A) in short) dated 26.03.2019 confirming the levy of penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961 ( the Act in short) for the Assessment Year 1999-2000. 2. The grounds of appeal raised by the assessee read as under: 1. Ld. CIT (A) erred in law and on facts in confirming penalty levied by AO of Rs.1,55,96,843/- invoking provisions of s. 271(1)(c) of the Act ignoring that appellant neither concealed income nor furnished inaccurate particulars of income. 2. Ld. CIT (A) erred in law and on facts dismissing ground challenging failure of AO initiating penalty on both the charges: furnishing inaccurate particulars as well concealment of income mechanically without application of mind that is not permissible under the law. 3. Ld. CIT (A) erred in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation statement, itwas noticed that the assessee had claimed deduction under section 80G, 80HHC and 80IA from its gross total income. During the course of assessment proceedings the representative of the assessee was asked to explain as to how deduction under chapter VI-A could be allowed when the gross total income of the assessee company comprised only Long Term Capital Gain. The element of any business income being absent from such income no deduction under any section covered under chapter VI-A was allowable. In response to this query the submission made by the assessee was perused but found not acceptable. In the present casethe entire gross total income remaining after set off of business loss of currentyear, comprised purely of long term capital gain and such a situation was governed by a specific provision of the Act u/s 112(2) of the I.T. Act. Provision of section 112(2) of the Act states as under: where the gross total income of an assessee includes any income arising from the transfer of long term capital assets the gross total income shall be reduced by the amount of such income and the deduction u/c VI-A shall be allowed as if the gross total income so reduced w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us, one of the contentions raised by the learned Counsel for the assessee was that this claim of deduction made by the assessee was inconsonance with the position of law as existing at the point of time when the return of income was filed by the assessee. He pointed out that the ITAT, Ahmedabad Benches in the case of assessee s sister concern namely M/s. Arvind Ltd. had held in favour of the assessee that even in the absence of any business profits, deduction under Section 80G and 80HHC of the Act was allowable against Long Term Capital Gains returned and the said decision was further upheld by the Hon ble jurisdictional High Court vide its order dated 11.09.2001 in the case of CIT Vs. Arvind Mills Ltd, reported in [2002] 254 ITR 529 (Gujarat). Copy of the said order was placed before us and our attention was drawn to the facts of the said case briefly outlined as under:- FACTS There was no profit to the assessee-exporter from the business of export. The Tribunal allowed the deductions under section 80HHC. The revenue contended that the provisions of section 80AB were applicable to all the sections which fell under the heading 'C.-Deductions in respect of cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not aware of the difference in other provisions falling under heading C of Chapter VI-A and the language employed in section 80HHC. On the contrary, there is an inherent indication in the Act when one reads the provision of section 80HHB which was introduced by the Finance Act, 1982, with effect from 1-4-1983. The language employed in both the provisions is entirely different though both the provisions have been made effective from the same date. [Para 12] Considering the matter from a slightly different angle, the provision of section 80HHC requires that deduction is to be made from the total income of an assessee. The scheme of the Act, as can be seen, is to fasten the charge of income-tax by virtue of section 4 in respect of the total income of the previous year. The term 'total income' has been defined by section 2(45) to mean the total amount of income referred to in section 5, computed in the manner laid down in the Act. Section 5 deals with the scope of total income to provide that the 'total income' of any previous year would include all income from whatever source. Once the Legislature has provided for inclusion of all incomes, the definition of ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de. He submitted that there was no income for the relevant assessment year the assessee was not liable to income tax excluding the MAT calculation and, therefore, as per the ratio laid down in the decision of Hon'ble Delhi High Court rendered in the case of Nalwa Sons Investments Ltd. (supra), no penalty u/s 271(1)(c) of the Act is leviable upon the assessee. 15. We have considered the rival submissions. We find that the issue of deduction u/s 80-IB of the Act was highly debatable in nature. At the time of filing the return for the assessment year 2004-05, there were pronouncements by the Hon'ble Courts in favour of the assessee. The CIT(A) has deleted the penalty by observing that similar addition made in the earlier assessment year 2003-04 was deleted by ITAT vide order dated 24.07.2009 and also that at the time of making the claim by the assessee, there were several decisions in favour of the assessee. Ld. CIT(A) has further observed that in any case, this issue was debatable and on such debatable issue, penalty u/s 271(1)(c) could not be levied. We find that this issue being debatable and there being decisions in favour of the assessee at the time of filing of retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied on debatable issue, held that the penalty cannot be levied in such debatable issues, wherein binding nature of judicial precedents are available on either side of the parties. The copy of the order is paced along with this submissions herewith marked as Annexure-B. He contended that this specific submission made by the assessee before the learned CIT(A) was not dealt with by the learned CIT(A) who simply upheld the order of the Assessing Officer holding that it was a clear case of furnishing of inaccurate particulars of income by the assessee andtherefore, the claim was not allowable in view of the specific provision provided in the statute denying set off of deductions under Chapter VI-A against Long Term Capital Gains income. He drew our attention to the order of the learned CIT(A) at paragraph No. 3.2.4 which reads as under:- 3.2.4. The appellant has also taken the ground that it has not furnished inaccurate particulars of income and the issue was debatable, and therefore, penalty is not leviable. I do not agree with the contention of the appellant as appellant has claimed deduction u/s.80HHC of Rs.4,44,02,159/- and Rs.1,60,250/- u/s. 80G against the long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2001. Therefore at the time of making of claim by the assessee and even thereafter up to 2001, the legal position was in favour of the assessee and the claim, therefore, made was bona fide. It was only subsequently the Hon ble Apex Court had held otherwise in the case of Jeyar Consultant Investment Pvt.Ltd in 373 ITR 87 vide order dated 1st April 2015 and in accordance with the said ruling therefore that the denial of the assessee s claim to such deduction was upheld by the ITAT. 9. The contention of the assessee, therefore, that the issue was debatable is correct. The Ld.CIT(A) has not dealt with this contention of the assessee at all, brushing it aside simply by stating that the claim is inadmissible as per law in view of section 112(2) of the Act. In view of the decision of the jurisdictional High Court laying down proposition in favour of the assessee it cannot be said that the claim was clearly inadmissible as per law. In these facts and circumstances of the case, the assessee cannot be charged with having furnished any inaccurate particulars of income so as to be exigible to levy of penalty u/s 271(1)(c)of the Act. The penalty so levied amounting to Rs.1,55,96,843/-is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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