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TMI Blog2015 (8) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... ,99,760/-. ITA No. 638/PN/2014 (A.Y. 2004-05) 2. The assessee is a company registered under the provisions of Companies Act, 1956 and is engaged in manufacturing of brake adjuster (AMBA and SABA). For the assessment year 2004-05 the income of the assessee was assessed at Rs. 5,28,58,006/- vide order dated 28-12-2006 passed u/s. 143(3) of the Act. Thereafter, reassessment proceedings were initiated. In the course of reassessment proceedings the Assessing Officer made addition of Rs. 7,47,155/- u/s. 40(a)(ia) for non-deduction of tax on payment of commission on sales to the overseas entities. Another addition of Rs. 1,96,381/- was made on account of wrong claim of deduction u/s. 80HHC of the Act. The assessee had claimed deduction u/s. 80HHC on account of export sales. During the course of reassessment proceedings, it was found that export sales to the extent of Rs. 13,39,318/- were not realized from export debtors. However, the assessee had included the said amount while computing deduction u/s. 80HHC of the Act. The Assessing Officer disallowed the proportionate deduction of Rs. 1,96,381/- claimed by the assessee u/s. 80HHC of the Act. On account of these additions penalty proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in calculation of deduction u/s. 80HHC. Against these findings of the Commissioner of Income Tax (Appeals) the Revenue has come in appeal before the Tribunal. 4. Shri Hitendra Ninave representing the Department submitted that the Commissioner of Income Tax (Appeals) has erred in deleting the penalty. The ld. DR submitted that the assessee had claimed higher deduction u/s. 80HHC in a wrongful manner. The ld. DR vehemently supported the order of Assessing Officer in levying penalty and prayed for setting aside the impugned order. 5. On the other hand Shri R. D. Onkar appearing on behalf of the assessee supported the order of Commissioner of Income Tax (Appeals). The ld. AR reiterated the submissions made on behalf of the assessee before Commissioner of Income Tax (Appeals). The ld. AR submitted that the sales commission was paid to the overseas entities for procuring export orders. The said services were provided outside India. The services provided were not in the nature which would attract the provisions of section 9 of the Income Tax Act. In support of his submissions the ld. AR placed reliance on the decision of Hon'ble Madras High Court in the case of Faizan Shoes P. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign parties for procuring export orders, u/s. 40(a)(i) is not sustainable. Hence, no penalty can be levied on such unsustainable disallowance. 8. The second ground for levy of penalty is excess claim of deduction u/s. 80HHC. It is an undisputed fact that the assessee had substantial export turnover and is eligible to claim deduction u/s. 80HHC. During the relevant period the assessee has claimed deduction of Rs. 87,29,808/- u/s. 80HHC. It was during the reassessment proceedings that it transpired that the assessee had claimed excess deduction of Rs. 1,96,381/- u/s. 80HHC on unrealized exports of Rs. 13,39,318/-. It is not the case of Revenue that the assessee has not exported the goods worth the amount. The amount of excess deduction claimed only is a miniscule part of the total deduction claimed u/s. 80HHC. It seems to be bonafide error in calculating the deduction. The Hon'ble Supreme Court of India in the case of CIT Vs. Reliance Petro Products P. Ltd. (supra) has held that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have been paid in full in the succeeding year. It is an admitted position that the assessee is following mercantile system of accounting and has been making provision for the aforesaid incentives. It has come on record that the incentives are paid to the assessee in the subsequent year, if they are not claimed by the employees in the year in which provision is made. The assessee has been consistently following this method of creating provision and making payments in respect of aforesaid incentives. The assessee has brought on record ledger extracts to show that the liability has been paid in the subsequent year, where not claimed in the year of creating provision. The Hon'ble Supreme Court of India in the case of Bharat Earth Movers Vs. CIT reported as 245 ITR 428 has held that, "if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date". The Hon'ble Apex Court further held, "What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce/furnish bills for the newly added assets amounting to Rs. 94,51,713/-. Accordingly, the Assessing Officer disallowed the claim of depreciation to the tune of Rs. 16,99,760/- on the fixed asset for which the bills were not produced. In appeal, the Commissioner of Income Tax (Appeals) deleted the addition on the ground that the assessee has not been able to furnish the bills for assets amounting to Rs. 15,95,990/- which is only 1.64% of the total assets on which depreciation has been claimed. The Commissioner of Income Tax (Appeals) further held that the Assessing Officer has not brought on record that the assessee had inflated its purchase of fixed assets or has claimed excessive depreciation. The ld. DR submitted that the Assessing Officer had disallowed depreciation on assets, the purchase of which were not proved by the assessee. It was the stand of the assessee that due to the shifting of office some of the bills are misplaced. However, the Commissioner of Income Tax (Appeals) in his order has stated that the assessee has furnished bills amounting to Rs. 9,53,63,384/- out of Rs. 9,72,40,253/-. The observations of Commissioner of Income Tax (Appeals) are contrary to the s ..... 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