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2015 (5) TMI 891 - ITAT MUMBAI

2015 (5) TMI 891 - ITAT MUMBAI - TMI - Penalty u/s. 271(1)(c) - claim of deduction u/s. 10A - Held that:- It can be safely concluded that when the assessee has filed the return for the year under consideration, it was well aware of the view taken by the department in earlier assessment years, in so far as the allocation of expenses is concerned, yet the assessee did not allocate the expenses in the manner in which they were allocated in the earlier assessment years by the AO.

The clai .....

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cation of expenses, the basis of which was taken as turnover of the respective unit. Taking the liberty for the third time on the same set of facts is nothing but filing of inaccurate particulars by concealment of income by increasing the expenses of non STP unit vis--vis STP units.

The assessee has deliberately inflated the expenses of taxable units keeping in mind that this issue was not accepted in earlier assessment years yet the assessee took a chance because it was well aware .....

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ts (2010 (3) TMI 80 - SUPREME COURT ) has held that everything would depend upon the return filed because that is the only document, where the appellant can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability of penalty u/s. 271(1)(c) would arise. In the instant case, the assessee has repeatedly claimed the skewed allocation of common expenses between the STP unit and the non STP unit so as to artificially inflate the claim of deduction u/s. 10A .....

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rming the penalty u/s. 271(1)(c) of the Act amounting to ₹ 71 lakhs. The assessee is further aggrieved by the fact that the Ld. CIT(A) confirmed the penalty on the claim of deduction u/s. 10A overlooking the fact that orders of assessment for assessment year 2006-07 and 2007- 08 were passed after the return for assessment year 2008-09 was finalized. 3. The roots for the levy of penalty u/s. 271(1))(c) of the Act lie in the assessment order dt. 21.12.2011 made u/s. 143(3) of the Act. While .....

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/deduction u/s. 10A, the assessee was asked to file details of various units, the date of incorporation, location, manpower employed in each unit and nature and details of activities carried out by each unit. The assessee was also asked to furnish separate profit & loss account for each of the unit and also of corporate office indicating the expenses both direct and indirect attributable to such units and the basis of apportionment of indirect expenses. The assessee filed a detailed reply vi .....

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le unit. Section 10A unfortunately does not provide any guidance in the matter. However, the basis of computing the profits was explained by way of note to the computation of 10A profits. During the assessment proceedings for assessment year 2007-08, the AO had chosen to modify the basis for arriving at such profits. In the appeal there against the CIT(A) had made further modifications thereto. The company is in appeal to the Tribunal there against. As a practical measure and in order to avoid p .....

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accepted by the AO except for two expenses namely (1) software purchase expenses and (2) interest expenses. The AO was of the opinion that the assessee has allocated only ₹ 16,73,989/- out of total software purchase expenses of ₹ 1,19,24,949/- to STP unit. Similarly, out of total bank interest expenses of ₹ 1,13,16,836/-, only ₹ 1,59,295/- is allocated to STP unit. According to AO, the assessee has distributed these expenses to different units in a very skewed manner. 4.1 .....

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e penal proceedings, the assessee was asked to show cause as to why penalty u/s. 271(1)(c) should not be imposed for concealing the income by filing inaccurate particulars of income. The assessee responded vide letter dt. 25.1.2012 claiming that there is no concealment and no inaccurate particulars were filed. The assessee further submitted that allocation of expenses is inherently a contentious issue on which more than one view is possible. The submissions made by the assessee were not accepted .....

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. 4.3. Drawing support from the decision of the Hon ble Delhi High Court in the case of Zoom Communication (P) Ltd 327 IYTR 510, Hon ble Supreme Court in the case of K.P. Madhusudhan Vs CIT 251 ITR 99 and Hon ble Supreme Court in the case of Dharmendra Textile Processors & Others 295 ITR 244 the AO proceeded by imposing penalty u/s. 271(1)(c) of the Act at ₹ 71 lakhs. 5. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) and reiterated what has been submitted befo .....

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nued its furnishing of inaccurate particulars of income by claiming excessive deduction u/s. 10A of the Act. The Ld. CIT(A) further observed that only a small percentage of the income tax returns are picked up for scrutiny the AO. If the assesses make a claim which is not only incorrect in law but is also unsubstantiated and the explanation furnished by the assessee for making such a claim is not satisfactory, it would be difficult to say that they would still not be liable to penalty u/s. 271(1 .....

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particulars inasmuch as all the expenses have been debited in the profit and loss account. The dispute is only in respect of the allocation of expenses which cannot tantamount to concealment of income or furnishing inaccurate particulars of income. In support of his submission, the Ld. Counsel relied upon the decision of the Hon ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. 322 ITR 158, Bombay High Court in the case of Aditya Birla Nova Ltd in ITA No. 3899/2010, Tribunal Mumb .....

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td in ITA 912/2010, ITAT Delhi Bench in the case of Super Casettes Industries Ltd in ITA Nos. 4421,4422 & 4423/Del/2012, ITAT Mumbai Bench in the case of Oasis Securities Ltd. 37 SOT 63, Hon ble High Court of Punjab & Haryana in the case of Sangrur Vanaspati Mills Ltd. 303 ITR 53, Karnataka High Court in the case of Oscar Udyog Ltd in ITA No. 311/2013 and the High Court of Bombay in the case of Zandu Pharmaceutical Works Ltd. In ITA No. 8 of 2007. 8. Per contra, the Ld. Departmental Repr .....

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utiny assessment and during the course of the scrutiny assessment of these two assessment years, the allocation of expenses between the STP unit and the non STP unit was the contentious issue. Thus, it can be safely concluded that when the assessee has filed the return for the year under consideration, it was well aware of the view taken by the department in earlier assessment years, in so far as the allocation of expenses is concerned, yet the assessee did not allocate the expenses in the manne .....

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location of expenses therefore it cannot be said that the assessee was not aware of the allocation of expenses, the basis of which was taken as turnover of the respective unit. Taking the liberty for the third time on the same set of facts is nothing but filing of inaccurate particulars by concealment of income by increasing the expenses of non STP unit vis-à-vis STP units. It is a common practice of allocating expenses between all the units on a reasonable basis. It is also a common prac .....

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