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2016 (5) TMI 1371 - AT - Income TaxLevy of penalty under section 271(1)(c) - claim of deduction under section 10B - Held that - No findings have been given by the authorities below that assessee made incorrect or erroneous or false claim for claiming deduction under section 10B of the Income Tax Act. Therefore we are of the view that assessee did not furnish inaccurate particulars of income in the return of income with regard to claim of deduction under section 10B of the Act on account of sale of incentives under Vishesh Krishi Upaj Yojna so as to attract provisions of Section 271(1)(c) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act. 2. Time limitation for imposing the penalty under section 275 of the Income Tax Act. 3. Merits of the penalty imposed for claiming deduction under section 10B of the Income Tax Act. Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act: The case revolves around the assessee's appeal against the levy of penalty under section 271(1)(c) for furnishing inaccurate particulars of income. The CIT had initiated proceedings under section 271(1)(c) after finding that the assessee claimed excessive deduction under section 10B of Rs. 2,57,88,547/- on account of sale incentives received from the Ministry of Commerce under Vishesh Krishi Upaj Yojna (VKUY). The Tribunal had previously upheld the CIT's decision, referencing the Supreme Court case Liberty India Vs. CIT, which linked the incentives to the FOB value of exports, thus disqualifying them from deduction under section 10B. 2. Time Limitation for Imposing the Penalty under Section 275 of the Income Tax Act: The assessee argued that the penalty order was time-barred, as it should have been passed within six months from the end of the month when the original ITAT order was received by the CIT, not from the date when the Miscellaneous Application was disposed of. The Tribunal received the original order on 24.01.2014, which means the penalty order should have been passed by 31.07.2014. However, the penalty order was passed on 09.02.2015, making it time-barred. The Tribunal agreed with the assessee, citing Section 275 and relevant case law, including the Hon'ble Allahabad High Court's decision in CIT-II Kanpur Vs. M/s K.M. Sugars Ltd., which clarified that the limitation period cannot be extended merely because an application under Section 254 was filed by the assessee. 3. Merits of the Penalty Imposed for Claiming Deduction under Section 10B: On the merits, the assessee contended that the claim for deduction under section 10B was made in good faith and based on the law as it stood at the time of filing the return. The return was filed on 30.10.2006, whereas the Supreme Court's decision in Liberty India was delivered on 31.08.2009. The Tribunal noted that the issue was debatable, as evidenced by different judicial opinions, including the Bombay High Court's decision in CIT Vs. Arts & Crafts Exports and the ITAT (Special Bench) decision in Maral Overseas Ltd., which allowed similar deductions. The Tribunal held that the assessee had disclosed all particulars and made the claim based on a bona fide interpretation of the law. Therefore, the penalty for furnishing inaccurate particulars was not justified. Conclusion: The Tribunal set aside the penalty order, ruling it time-barred and unjustified on merits. The appeal was allowed, and the penalty under section 271(1)(c) was canceled. The findings were clarified to be relevant only to the penalty matter.
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