TMI Blog2014 (11) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order is based on denial of deduction u/s 80HH - Simply to accept the lapse committed by the AO cannot comprehend that the AO did not initiate penal proceedings – the order of the CIT(A) is to be set aside - Decided in favour of assessee. - ITA No. 5496/Mum/2007 - - - Dated:- 8-8-2014 - N. K. Billaiya, AM And Vivek Varma, JM,JJ. For the Petitioner : Shri P J Pardiwalla Shri Nishant Thakkar For the Respondent : Shri S D Shrivastava ORDER Per Vivek Varma, J.M. The instant appeal is filed by the assessee against the order of CIT(A) 1, Mumbai, dated 15.06.2007, wherein the CIT(A) had sustained the levy of penalty of ₹ 25,31,304/- under section 271(1)(c) of the Income Tax Act, 1961. 2. The facts are that the assessee is in the business of growing, manufacturing and selling tea from its tea gardens located in Nilgiri, Tamil Nadu. It is also growing, manufacturing and selling of coffee and cardamom. 3. Instant assessment year is the transitional assessment year having 21 months. 4. The assessee filed its return of income on 27.12.1989, declaring an income of ₹ 3,58,14,589/-. In the return, the assessee claimed deduction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed in the body of the order that since there was a major lapse on the part of the assessee, it amounted to furnishing inaccurate particulars of income for which penalty under section 271(1)(c) has to be initiated. 10. The AO, in consequence of this observation in the body of order under section 143(3), initiated and levied penalty under section 271(1)(c) vide order dated 28.09.2005, which included excess claim of deduction under section 80HH and 80HHC respectively. 11. The assessee took the issue of penalty before the CIT(A), before whom the assessee reiterated its explanation with regard to the committing of the mistake, with regard to the claim of deduction under section 80HH and 80HHC. The CIT(A), after considering the detailed reply and submissions made before him, observed, 6 I have carefully considered the material on record. The brief facts of the case are that the appellant filed its original return on 27.12.1989 declaring total income at ₹ 3,5814,589/- 7 During the assessment proceedings, the AO noticed that the appellant claimed deduction under section. 80HH of I.T. Act, 1961 in respect of the profit derived from veniyar factory located in backwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1.2 crs. In the totality of the facts and the circumstances of the case, the excessive claim of deduction under section. 80HH of the I. T. Act, 1961 made in the original return of income than what is totally admissible can only be considered as an attempt on the part of the assessee in furnishing inaccurate particulars with the objective of reducing the quantum of total assessable profit and thereby facilitating the avoidance of tax payment. For such act of commission on the part of the assessee company, a separate penalty proceedings under section.271(1)(c) of I. T. Act, 1961 has to be initiated . 10 After recording the above satisfaction to furnish inaccurate particulars of income for concealment, the AO initiated penalty proceedings under section.271(1)(c). The AO recomputed the admissible deduction under section. 80HH in accordance with the CBDT circular No. 310 dtd.29.7.1981 @ 20% (40% of net profit of Venniar Factory) of ₹ 1,90,64,076/- amounting to ₹ 15,25,926/-. Against the claimed deduction @ 20% of ₹ 3,11,00,204/- amounting to ₹ 62,20,057/-, thereby determining the excessive claim at ₹ 46,94,131/- (62,20,057/- - 15,25,926/-). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are rejected. 14. The filing of letter dtd. 27.12.2991 for revising the net profit of Vennair factory does not amount filing of revised return as held by the Hon'ble Supreme Court in the case of M/s. Goetz (India) Ltd Vs CIT, 284 ITR 323. Further the letter dtd. 27.12.1991 was not filed voluntarily rather it was filed when the appellant was confronted with the facts during the assessment proceedings after issue of notice under section. 143(2) and 142(1). The Hon'ble M.P High Court in the case of Addl.CIT Vs Chandrakant, 205 ITR 607, Hon'ble Kerala High Court in the case of CIT Vs Mahim, 149 ITR 737 and CIT Vs A. Sriniwasa, 242 Taxman 29(Ker), held that penalty under section. 271(1)(c) even after revised return is legally correct as disclosure was not voluntary. 15. I have carefully gone through the assessment order and I find that the appellant's claim for deduction under section. 8OHHC was reduced by ₹ 1,27,401/- (200740 73339). The reduction of the claim of deduction under section. 80HHC was consequential to the reduction of deduction under section. 8OHH at ₹ 46,94,131/-. In the computation of income, the AO allowed deduction under section. 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eversed the earlier decision rendered by the single judge, which was in favour of the assessee. 14. The AR once again delved on the issue of voluntary rectification and submitted that the once the assessee was made known the discrepancy that had been committed by it, it not only rectified the accounting mistake and computation mistake for the current year, it rectified the similar mistake, that had been committed in the subsequent year. The AR relying on the case of Price WaterHouse Coopers vs CIT, reported in 348 ITR 306, wherein, the Hon ble Supreme Court accepted the silly mistake committed by the multinational accounting firm, deleted the penalty levied on it. The AR submitted in the same way, the assessee also committed the first mistake by including the sales of Manallar unit, whose produce was being sold under the brand of Venniar, which, incidentally was based on unaudited accounts. The AR, therefore, submitted that though the addition may have got confirmed in quantum proceedings, but, in penalty proceedings, the assessee had shown the reasonable grounds, as to how, the mistake had crept in and how the assessee had immediately removed the mistakes. He, therefore, subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s got reversed is also a fact. In this circumstance, the impugned issue on quantum goes into the precinct of two reasonable and acceptable views, which ousts the jurisdiction of levy of penalty. 19. Besides this fact of two reasonable and acceptable views, the fact that the claim of deduction was based on unaudited accounts, because of which the claim of deduction at Venniar facility was unduly high, in its accounts, is also to be addressed. The issue, which is common with both the parties is, once the unduly high profit and deduction was brought to the notice of the assessee, was rectified immediately and rightful claim was made. This, as per the AR, was a mistake and as per the revenue authorities and DR, it was a major mistake. It gets ironed out, when we find that the claim was as per unaudited accounts of Venniar facility, which allowed the infirmity to creep in. We accept the submission of the AR that even a multi national accounting firm, having presence across the globe could end up in making silly mistake, as held by the Hon ble Supreme Court of India in the case of Price Water House Coopers (supra). We further hold that undesired and unwanted human anomaly cannot push ..... X X X X Extracts X X X X X X X X Extracts X X X X
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