TMI Blog2015 (1) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the penalties levied u/s271(1) (c ) of the Act for the assessment years 2007-08 and 2008-09. - Decided in fvaour of assessee. - I.T.A Nos. 74 & 75/PNJ/2014 - - - Dated:- 20-1-2015 - Shri P. K. Bansal, AM And Shri D. T Garasia, JM,JJ. For the Appellant : Shri R. Durai Pandian, ld. DR For the Respondent : Shri Kirit R.Kamdar, CA, ld.AR ORDER Per Shri D.T Garasia, JM: Both the appeals have been filed by the department against the separate order of the ld. CIT(A), Panaji dated 26-11-2013 for the assessment years 2007-08.12-13 and 2013-14 respectively. 2. Both the appeals pertain to common issues, therefore, these are disposed of by this common order for the sake of convenience. 3. The following common grounds are raised by the department in ITA Nos. 74 75/PNJ/2014 for the assessment years 2007-08 and 2008-09 respectively:- 1. The ld. CIT(A) has erred in deleting the penalty levied by A.O u/s271(10( c) of the I.T Act amounting to ₹ 22,82,907/- ₹ 23,74,360/- 2. The ld.CIT(A) has erred in deleting the penalty levied by AO on inaccurate particulars of income furnish by the assessee by way of claiming excessive deduction under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings initiated u/s271(1)(c ) of the I.T Act. It is stated that the company under genuine belief that the interest earned from the investment of profit earned from manufacturing activity has claimed deduction u/s80IB of the I.T Act. Similarly, the income from sale of scrap and also insurance claim is also has been treated as part of the income earned from manufacturing activity. The company had appropriately disclosed all the relevant material and facts in relation to the above income in the return of income. Further, whether the above income is to be included for the purpose of computing deduction under section 80IB or not is a debatable issue. Number of judgments are in favour of the assessee. Therefore, the penalty under section.271(1) ( c) may be dropped. The AO did not accept the above explanation of the assessee and he levied the penalties under section.271(1)( c) of the Act for both the assessment years under consideration. 5. Matter carried to ld. CIT(A) and CIT(A) has disposed of the appeals by his order by observing as under:- Para 7 7. I have gone through the order imposing penalty u/s. 271(1) ( c) and contents of the submission of the appellant. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion or concealment of particulars of income or furnishing of inaccurate particulars of income. In the instant case, the A.O has made disallowance on the basis of details readily available on record, and nothing was concealed by the appellant. The A.O is directed to delete the penalty levied u/s271(1)(c ) amounting to ₹ 22,82,907/- ₹ 23,74,360/- accordingly. The appeal of the appellant is allowed. 6. Therefore, the department is in appeal against the decision of the ld.CIT(A). 7. During the course of hearing before us the ld.DR submitted that the assessee has claimed deduction u/s80IB on the income for provisions for doubtful debts written off, interest income, income from insurance claim and sale of scrap. This income does not relate to manufacturing activities. Therefore, the assessee itself has disallowed the same u/s80IB of the Act. Therefore, the AO is justified in imposing the penalties u/s271(1)( c) of the Act. 8. The ld. AR for the assessee has filed detailed written submission before us, which reads as under:- 1. Penalty is not leviable where the claim is bonafide and there is full disclosure of facts It is submitted that the aforesaid claim fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY2008-09. Further, the appellant has also withdrawn the claim for AYs2009-10 and 2010-11 in the revised return of income filed for the said years. It is submitted that CAPL was under a bonafide belief that the aforesaid items of income were to be considered as profits of the undertaking for the purpose of computing deduction under section 80IB of the Act. The appellant had furnished complete details of the said expenditure along with justifications for the same during the course of assessment proceedings. Further, the scrutiny proceedings under section 143(3) of the Act were completed on the basis of the information/details provided by the appellant during the course of the assessment proceedings. The items of the other income on which the deduction has not been granted were disclosed in the audit report in Form No.10CCB. Accordingly, the appellant had not furnished any inaccurate particulars or concealed any income in respect of the claim of deduction under section 80IB. Thus, the appellant s intentions were to honestly comply with the law. Further, the AO had disallowed 30% of the gross amounts instead of disallowing 100% as the year under consideration was the fifth year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been taken. It is been held time and again by various courts that a bona-fide claim which is made based on judicial precedents indicates that the issue is such on which two opinions exist and that difference of opinion between the A.O and the assessee in respect of allowability of a claim cannot be regarded as sufficient to subject an assessee to penalty on the ground that particulars given by the assessee were incorrect. Further, courts have also held that where an arguable, controversial or debatable deduction is claimed, the claim could not be said to be false, otherwise it would become impossible for any assessee to raise any claims or deduction which might be debatable, and it was not the intention of the legislature to make punishable such claims, if they were not accepted. It is submitted that the above ground on which penalty has been levied by the Assessing Officer and disallowance sustained by the Hon'ble CIT(A) is on account of legal issues and accordingly, cannot be construed as concealment of income or furnishing of inaccurate particulars of income. In this connection, reliance is placed on the following decisions: (a) CIT vs. Reliance Petroproducts P.L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... care Laboratories Ltd (92 ITD 11)(I.T.A.T. Cuttack) (ii) Insurance Claims Insurance claims are received towards damaged goods. The Company maintains records towards insurance claims put up and received, and accounts separately towards insurance claims on trading activity and manufacturing activity. The receipt of claim amount for raw materials and finished goods for the manufacturing activities are recorded and tracked separately. Thus, the amount added in profits under section 80IB is derived from manufacturing activity. These claims are in direct relation to and have a direct connection to the manufacturing activity. Decision in favour: CIT vs. Pfizer Ltd (233 CTR 521)(HCBom) (iii) Sale of scrap Scrap mainly comprises of drums, metal patty, corrugated boxes, wooden/plastic, pallets, plastic buckets etc. used in packing of raw material consumed by the Company in the process of manufacture. Trading activity does not generate any scrap as the material traded is neither re-packed nor opened and is sold on as-is basis. Consequently, no scrap is generated from the trading activity. It is submitted that the generation of scrap has a direct nexus with the production act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In assessment year 2006-07, the deduction u/s80IB was allowed u/s143(1) of the I.T Act 1961. In assessment year 2007-08, the assessee s claim of deduction u/s80IB of the Act was disallowed on the ground that the assessee is not eligible for deduction u/s80IB of the Act because the assessee has claimed the deduction in respect of provisions for doubtful debts written back, interest income, income from insurance claim and income from sale of scrap. The assessee has claimed this deduction on the ground that these are the business income, but this income had no nexus with manufacturing activities of the assessee. The AO in the said assessment year followed the decision of Hon'ble Madras High Court in the case of M/s. Pandian Chemicals Vs. CIT reported in 254 ITR 562(Mad). The AO held that the assessee has also claimed the deduction in respect of income, which is not generated from manufacturing activities of the assessee. The assessee went in appeal before the ld.CIT(A). The ld. CIT(A) did not allow the claim of the assessee in assessment year 2007-08. The assessee has accepted the order of the ld.CIT(A). The assessee has not filed before the Hon'ble Tribunal and the dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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