Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Home Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles News Highlights
Case Laws
 
Home Case Index All Cases Income Tax Tri Income Tax + Tri
← Previous Next →
TMI ID= 212908
  • Contents
  • Cases Cited

2012 (4) TMI 470 - ITAT MUMBAI

Renfro India (I) (P.) Ltd. Versus Assistant Commissioner of Income-tax, 10(3)

Confirmation of the penalty u/s. 271(1)(c) by CIT (A) as on the date of filing of return no judicial pronouncement was available in his favour of assessee – assessee contested that appellant had disclosed all the details with respect to claim u/s. 10B in the computation of income and notes thereon and the said claim was as per Form 56G issued by the Chartered accountant – Held that:- Availability/non-availability of a particular pronouncement on a particular date cannot be the basis for imposing penalty u/s. 271(1)(c) - deduction has to be allowed in respect of three eligible units and loss of the fourth 10A unit has to be set off against the normal business income - Provision of s. 271(1)(c) are valid when there exists concealment of the particulars of the income of the assessee or the assessee have furnished inaccurate particulars of his income - no information given in the return was found to be incorrect or inaccurate – in favour of assessee.

No.- IT Appeal No. 7085 (Mum.) of 2011

Dated.- April 25, 2012

Citations:

  1. COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. - 2010 (3) TMI 80 - SUPREME COURT

  2. CIT., Delhi Versus Atul Mohan Bindal - 2009 (8) TMI 44 - SUPREME COURT

  3. The Commissioner of Income Tax10 Versus M/s. Galaxy Surfactants Ltd. - 2012 (3) TMI 101 - BOMBAY HIGH COURT

  4. Hindustan Unilever Limited Versus 1. Deputy Commissioner of Income tax 1 (1) , 2. Union of India - 2010 (4) TMI 206 - BOMBAY HIGH COURT

  5. Capgemini India (P.) Ltd. Versus Additional Commissioner of Income-tax, Range-10 (2) , Mumbai - 2011 (5) TMI 509 - ITAT, MUMBAI

  6. FCI. Technology Services Ltd. Versus. Assistant Commissioner of Income-tax, Circle-1(2), Ernakulam - 2010 (6) TMI 439 - ITAT, COCHIN

  7. Honeywell International (India) (P) Limited. Versus Deputy Commissioner Of Income-Tax. - 2007 (2) TMI 248 - ITAT DELHI-F

D.K. AGARWAL, RAJENDRA, JJ.

ORDER

Rajendra, Accountant Member

The following Grounds of Appeal were filed by the Appellant:

(i)  On the facts and circumstances of the case, the learned CIT (A) had grossly erred in confirming the penalty imposed by AO by applying explanation 1 to section 271(c) thereby, completing ignoring the fact that the appellant had disclosed all the details with respect to claim u/s. 10B in the computation of income and notes thereon and the said claim was as per Form 56G issued by the Chartered accountant.

(ii)  On the facts and circumstances of the case, the learned CIT (A) had grossly erred in confirming the penalty of Rs. 50,92,791/- u/s. 271(1)(c ) levied by Assessing Officer ignoring related legal decision cited by appellant.

2. This appeal is directed against the penalty order for the A.Y. 2005-06 passed u/s. 271(1)(c) of the Income Tax Act, 1961 (Act), on 25-03-2011 by ACIT-10(3), Mumbai and confirmed by the CIT(A) – 22, Mumbai vide his order dt. 05-08-2011.

In this case, return of income was filed on 31-10-2005 declaring loss of Rs. 3,40,89,011/-. The assessment u/s. 143(3) was completed on 28-11-2008 determining loss at Rs. 1,83,72,750/-. The assessee had claimed deduction u/s. 10B without setting off of the loss of Pune unit against the income of the Nashik Unit. Deduction claimed u/s. 10B was disallowed by the Assessing Officer (AO), and was sustained by CIT(A). The A.O. initiated penalty proceedings u/s. 271(1) (c) and imposed penalty of Rs. 50,92,791/- thereon.

3. AO after considering the reply filed by the appellant in response to notice issued for levying penalty concluded as under:

"When the facts and circumstances of the assessee's case are examined against the background of above legal position and principles, it is seen that the assessee has failed to justify its claim of deduction u/s. 10B in respect of it's Pune Unit before setting off the same against the loss of another 10B unit during the year and thus it had furnished inaccurate particulars of it's income and concealed the particulars of it's income to the extent of claim of above deduction. Thus, the assessee's case is squarely covered by the Explanation-1 to section 271(1)(c) as also plain and clear concealment of income and furnishing inaccurate particulars of income".

"Section 273B of the Act provides that no penalty is to be levied in the case of an assessee under the various sections specified therein if he proves that there was reasonable cause for the said failure. In the instant case, the assessee company has failed to prove existence of any reasonable cause for the failure on its part to declare its true and correct income. Hence, the assessee is not entitled to any relief u/s. 273B of the Act. Hence, all the preconditions required for levying the penalty u/s. 271(1)(c) are satisfied in assessee's case. Hence, this is a fit case for levy of penalty u/s. 271(1)(c)."

"Upon carefully considering the submissions made and after examining the assessee's case in the light of various judicial parameters as discussed above, I hold that in terms of Explanation-1 to Section 271(1)(c) of the Act, the assessee company has furnished inaccurate particulars of income and concealed its income to the extent of Rs. 1,39,17,582/-. Hence, this is a fit case for levy of penalty u/s. 271(1)(c) of the Act".

4. CIT(A) vide para 6 of his order confirmed the said penalty order in the following words:

"As per explanation (1) to section 271(1)(c) where any disallowances or additions are made by the A.O. and assessee offers explanation but fails to prove that such explanation is bonafide, then the amount disallowed/added is deemed to represent concealed income and penalty is imposable. In this case, the appellant failed to furnish evidence to support its view that the claim was bonafide and was based on any judicial pronouncements existing as on the date of filing of return i.e., 31-10-2005. All the decisions quoted by it relate to subsequent dates and hence in my opinion the appellant's claim of deduction u/s. 10A without setting off the loss of the order unit was not bonafide".

5. Authorised Representative (AR) of the appellant submitted that the appellant was maintaining separate books of accounts for all the units, that it had filed separate audit reports for each of the units, that appellant had not filed inaccurate particulars of income or had concealed particulars of income.

He relied upon the case of Hindustan Unilever Ltd., 325 ITR 102 (Bombay). Drawing over attention to page 24 of the said order he submitted that loss sustained by the Pune unit was eligible for set off against the profit of other units. He also relied upon the cases of FCI Technology Services Ltd., 48 SOT 460 (Cochin). Capgemini India (P) Ltd., (C Bench, Mumbai) and Galaxy Surfactants Ltd., (69 DTR (Bom) 42). Finally, relying upon the matter of Reliance Petro Products (P) Ltd., [322 ITR 15(P) SC] he submitted that penalty should not have been levied.

6. Departmental Representative (DR) relied upon the order of the AO and the CIT(A).

7. We have heard both the parties and perused the material produced before us. CIT(A) dismissed the appeal filed by the appellant because on 31-10-2005 on the date of filing of return no judicial pronouncement was available in his favour. He has stated "All the decisions quoted by it relate to subsequent dates and hence in my opinion ……………………………..". In this regard, we will like to observe that availability/non-availability of a particular pronouncement on a particular date cannot be the basis for imposing penalty u/s. 271(1)(c). Pronouncement of a decision after a particular date does not affect the legal position existing on or before the date of pronouncement. Courts only interpret law. So, if interpretation is on a later date, it does not mean that prior to that law was somewhat different. If a new section is introduced, it takes time for judicial forums to decide issues related with it. Interpretation of such section and judicial pronouncements naturally take place in due course of time. Till the issues arising out of controversies of a particular section does not reach to ITAT or HC certainty, to some extent, will not emerge. In these circumstances stand taken by the CIT(A) for confirming the penalty cannot be endorsed.

8. Secondly, claim made by the appellant with regard to section 10-A was based on the advice of a professional person i.e., C.A. Setting off the loss of a unit against the income of the another unit can hardly be termed filing of inaccurate particulars or 'concealment of income'. The said issue has been logically deliberated upon in the case of Capgemini India (P) Ltd., in para 22 of the said order 'C' Bench of ITAT, Mumbai has held as under:

"We have perused the records and considered the rival contentions carefully. The dispute is regarding set off of loss of a 10A unit against the taxable profit of other units. The assessee had four 10A units in respect of which deduction under section 10A was allowable and one non 10-A unit. The assessee had incurred loss from one 10A unit which had been set off against the taxable profit of other 10A units. The Assessing Officer however took the view that since income from 10A unit was exempt, loss from 10A unit has to be ignored or alternatively the loss has to be adjusted against the profit of another 10A unit before allowing deduction under section 10A. We have gone through the provisions of Section 10A and find that as per the provisions in force prior to assessment year 2001-02, the profit and gain from the eligible undertaking was not to be included in the total income which meant that the income from the eligible unit was exempt from tax. However, provisions were amended with effect from assessment year 2001-02 and as per the amended provisions, the profit and gain derived by an eligible undertaking is required to be deducted from the total income. Thus, from A.Y. 2001-02, section 10A is no longer an exemption provision and it allows only deduction from total income. The deduction is to be allowed in respect of each eligible undertaking separately which has also been clarified by the CBDT. We also note that prior to assessment year 2001-02 when section 10A was an exemption provision, section 10(6) provided restriction on set off and carried forward of business loss and unabsorbed depreciation. However subsequently, section 10(6) was amended by Finance Act 2003 with effect from assessment year 2001-02 and such restriction was withdrawn which was consistent with the new scheme of section 10A which is a deduction provision and not exemption provision from assessment year 2001-02. Therefore, the loss from 10A unit has to be adjusted against taxable profits of other units after deduction under section 10A has been allowed in respect of each eligible unit. Same view has been taken by the Hon'ble High Court of Mumbai in case of Hindustan Unilever Ltd., (supra) in which it was held that deduction has to be allowed in respect of three eligible units and loss of the fourth 10A unit has to be set off against the normal business income. The Tribunal in case of Honeywell International India (P) Ltd., (supra) has also followed the same view. Therefore, respectfully following the above judgments, the order of the Additional CIT cannot be sustained. We accordingly set aside the order of the Additional CIT and allow the claim of the assessee".

9. In the case of Reliance, Petro Apex Court has laid down "guideline for imposing penalty u/s. 271(1)(c). Relevant portion of the order is reproduced here:

"A glance at the provision of s. 271(1)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the s. 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious that it must be shown that the conditions under s. 271(1) (c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income - CIT v. Atul Mohan Bindal [2009] 225 CTR(SC) 248; [2009] 28 DTR (SC) 1; [2009] 9 SCC 589 followed".

10. Respectfully following the above orders, we allow the appeal filed by the appellant and reverse the order of the CIT(A).

 
 
← Previous Next →
Forum
what is new what is new
  ↓     bird's eye view     ↓  


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version