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TMI Blog2012 (11) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... laimer certificate issued. (vi) Disallowance of Rs.1,31,406/- on account of consultation fees paid to Dalal Macdonald. The A.O. had initiated penalty proceedings u/s 271(l)(c) of the IT Act in respect of the above disallowances. In response to show cause notice issued for levy of penalty u/s. 271(1)(c) of the Act the appellant replied that it had not committed any default of concealing particulars of is income or furnishing inaccurate particulars of income; the penalty with regard to concealment was not applicable as the deduction u/s. 80HHC was duly claimed in the return of income on the basis of export achieved during the year and the deduction has been claimed on the basis of the certificate issued by the Chartered Accountant, who had duly verified all the export turnover figures. Further, merely on the basis of difference of opinion/interpretation during the assessment proceedings, whereby inspite of giving all the explanations and submission with- regard to tenability of the claim, submissions were not accepted and additions have been made, which did not amount to concealment and the appellant preferred appeal before the CIT(Appeals) and subsequently before Hon'ble ITAT. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances in which major disallowances were made by the A.O. .The disallowances were confirmed by the CIT(A), on the ground that no one could appear before the CIT (A). It was argued that the order passed by the A.O. was not a speaking order and the explanation given by the appellant could not have been rejected arbitrarily and without any material to the contrary in this context, reliance was placed by the A.R. on the decisions in the cases of (i) M/s. Roshanlala D. Hatti vs. CIT 107 ITR 938 (SC); (ii) M/s. R.B.M.S. Naid vs. CIT 29 ITR 194 (Nag) & (iii) M/s. Lajwantilal Sial vs. CIT 30 ITR 228 (Nag). The A.O. levied the penalty solely and exclusively relying upon the findings given by the A.O. in the assessment order and at no point of time, he has taken pains to give his own findings. The A.O. further failed to appreciate the fact that the appellant had filed its return of income on the basis of advice given by its consultant and claim u/s. 80HHC was made as per the report given by a qualified CA. By placing reliance on the decision of Gujarat High Court in the case of BTX Chemicals Pvt. Ltd. v. CIT reported in 288 ITR 196 (Guj), the A.R. contended that if the appellant bonafi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de mistake would not be sufficient for levying penalty for concealment. The A.R. further submitted that in the tax audit report the auditor has not pointed disallowability of public issue expenditure and as such the appellant has relied upon the professional advice of auditors with regard to allowability of this expenditure, details of which were submitted before the AO at the time of assessment. It was submitted that by disallowing the same merely by difference of opinion, it cannot be said to be a case of concealment. Similarly it was submitted that consultancy fee paid to Dalai Mot Macdonald for studying and identifying investment opportunities, infrastructure project in Gujarat was normally ongoing business expenditure regularly incurred by the appellant development of. business possibilities and it was business expenditure, and the A.O. has disallowed the same by difference of opinion « so the same cannot be termed as concealment. As regards disallowance of 10% of DEPB licence against indirect expenses for deduction u/s.80HHC, the appellant had claimed the same on the basis of prevailing decision and professional advice/opinion given by the experts at the time of filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the appellant as expenditure for the consultancy fee paid to Dalai Macdonald of Rs.1,31,406/-ns rejected by the A.O. As regards the claim of the appellant in respect of the above two expenses as revenue expenditure, though there is a column in the tax audit report i.e. column no. 17 to report amounts debited to profit and loss account as capital expenditure, the auditor has not reported the same as capital expenditure which shows that the appellant's claim of the same as revenue expenditure was supported by the auditor. As regards the public issue expenses it is noticed that there was no increase in share capital and the expenses were incurred not for increase of share capital, but as legal expenses and appraisal fees for offloading of shares of directors for securing loan from financial institutions as advised by the latter. Thus the appellant had bonafide belief that the expenses were admissible as revenue expenditure. Even in respect of claim of deduction u/s. 80HHC the appellant had bonafide belief that the claim made by it was admissible as the same was based on the certificate of the auditor and 10 CCAC report of the Auditor. Thus the disallowances of claims have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealment. In the instant case, it is found that a different view has been taken by the A.O. out of the two possible views while rejecting the claim of the appellant and while recalculating the deduction u/s 80HHC and the recomputation / recalculation of deduction u/s 80HHC will not amount to concealment of income or furnishing of inaccurate particulars of income. Further it is noticed that the claim of the appellant was supported by the advice of the tax expert and report of the auditor in form 10CCAC. Hence, I am of the considered opinion that there is no conscious/deliberate attempt to conceal any income on the part of the appellant. I also find that Honorable Madras High Court has held in the case of Caplin Point Laboratories Ltd., 293 ITR 524 that by rejection of assessee's claim by relying on different interpretation it could not be said that particulars of income have been concealed. The decision of Delhi High Court in CIT vs Eicher Goodearth Ltd. reported in wherein it was held that there is no justification to levy penalty when the A.O. nad not found particulars furnished by the assessee to be false and had not unearthed any material facts or particulars which assessee had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing both the parties and perusing the records, we find that in view of the Circular No.2/2006, dated 17-1-2006 relied upon by the learned counsel of the assessee, the AO should not have imposed the penalty at all in this case in respect of addition made u/s 80HHC of the Act with respect to DEPB in view of para 2 of the said Circular, which reads as under:- "2. The amendments relating to Duty Entitlement Pass Book Scheme and Duty Replenishment Certificate have been brought into the statute with retrospective effect. Therefore, it has been decided that no penalty shall be levied or interest shall be charged in respect of any fresh demand raised consequent to the enactment of Taxation Laws (Amendment) Act, 2005, on account of variation in the returned/assessed income attributable to profits on sale of DEPB credits or DFRC. Further, in such cases where assessments have already been completed and, - (i) interest has been charged, the Chief Commissioner of Income tax shall waive the interest relating to claim of profit on sale of DEPB credits or DFRC for deduction under section 80HHC; (ii) penalty has been levied, the Chief Commissioner of Income-tax shall waive the penalty relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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