TMI Blog2015 (9) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... ny infirmity in the order of the ld. CIT(A), we confirm his order deleting the penalty. - Decided in favour of assessee. - ITA No.339/LKW/2014 - - - Dated:- 27-8-2015 - SHRI SUNIL KUMAR YADAV AND SHRI. A. K. GARODIA, JJ. For The Appellant by: Shri. A. K. Singh, CIT(DR) For The Respondent by: Shri. Rakesh Garg, Advocate ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the Revenue against the order of the ld. CIT(A) deleting the penalty of ₹ 1.25 crores levied under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter called in short the Act ). 2. The facts in brief, on the impugned issue, are that the assessee is a partnership firm carrying on business of manufacturing and export of finished leather. The return was filed on 1.12.2003 declaring income of ₹ 2,05,02,305/- along with audited accounts, tax audit reports under section 44AB, under rule 18BBA(3) and 18BBB of the Act. The assessment was completed on a total income of ₹ 5,32,37,594/- after including a sum of ₹ 2 crores on account of agreed addition. During the course of assessment proceedings, it was noticed by the Assessing Officer that excess deduction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that after the judgment of the Hon'ble Apex Court in the case of Topman Exports vs. CIT, 342 ITR 49 (SC), the deduction under section 80HHC of the Act are to be computed in terms of the said judgment. Therefore, whatever deductions were claimed, it was claimed under a bona-fide belief and on the basis of the legal position prevailing at the relevant point of time. The ld. CIT(A) has re-examined the claim of the assessee and was of the view that there was neither any concealment nor furnishing of inaccurate particulars on the part of the assessee. The ld. CIT(A) accordingly deleted the penalty. The relevant observations of the ld. CIT(A) are extracted hereunder for the sake of reference:- I have considered the facts and circumstances of the case, gone through the assessment order as well as the paper book and the submissions advanced by the AR. The undisputed facts are that the return of income was filed by the assessee on 01.12.2003 claiming deductions u/s 80IB and 80HHC duly supported by the auditor's report. The return was filed on 01.12.2003, much prior to the decision of Ritesh Industries Ltd, dated 23/09/2004 and also much before the enactmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d does not, therefore, constitute the income from incentives is, therefore, not allowed to the assessee. It is also abundantly clear, that the deduction claimed u/s 80IB on export incentives was not false or was wrongly computed or was based on wrong data. It was only a question of opinion, as to whether the export incentives received by the assessee in the shape of duty draw back would be eligible for deduction while computing deduction u/s 80IB. This matter was not free from doubt and at that relevant time there were several decisions of different High Courts cutting the edge both ways. It was only in the case of Liberty India, 317 ITR 218, decision dated 31/08/2009 that finally the Apex court concluded the matter and held that deduction u/s 8QIB was not allowable on duty draw back since it was not directly linked with the activity of the industrial undertaking. As far as the Taxation Laws Amendment Act 2005 is concerned, the same has been held to be violative to the provisions of law because it differentiates between the class and categories of the exporters which has been held to be not in accordance with the provisions of law. The Gujarat Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, that the Taxation Laws Amendment Act 2005 are violative to the provisions of law in as much it cannot be applied retrospectively. The same is to be applied prospectively. Of late, the Supreme Court in the case of Topman Exports, 344 ITR 49 has held that deduction u/s 80HHC is available on all export incentives, thus putting at rest the speculation created by the department, that deduction u/s 80HHC would also not be available on the export incentives. Admittedly, during the course of assessment proceedings, the AO could not lay his hands upon any new source of income other than that declared by the assessee, not there is any additional income discovered by the AO, which has been added to the income declared by the assessee. At the same time there is nothing in record to suggest that the assessee did not disclose its entire income or furnished inaccurate particular of its income. Whatever agreed addition has come to be made, is only out of the incentives received by the assessee in respect of exports, which receipt of incentives is not in doubt. It is a case where the deduction u/s 80IB has been claimed for which there was all material available with the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not .amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature. (iii) The law laid down in Dilip Shroff 291 ITR 519 (SC) as to the meanings of the words conceal and inaccurate continues to be good law because what was overruled in Dharmendra Textile Processors 306 ITR 277 (SC) was only that part in Dilip Shroff where it was held that mensrea was an essential requirement for penalty u/s 271 (1)(c). CIT vs. Manjunatho Cotton Sinning Factory 359 ITR 565 (Kar) The High Court had to consider whether penalty u/s 271(1)(c) can be levied in a case where the assessee agrees to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court, HELD dismissing the appeal'. Merely because the assessment proceedings have been confirmed does not automatically mean that penalty u/s 271(1)(c) is justified. Unless the case is strictly covered by s. 271(1)(c), penalty cannot be invoked. For sustaining penalty, the bona fide explanation of the assessee must be looked at so that the contumacious conduct of the assessee for the purpose of sustaining the penalty would be taken as condition that is the main requirement u/s 271(1)(c). In Mak Data P. Ltd vs. CTT the Supreme Court held that when a difference is noticed by the AO between the reported and assessed income, the Explanation to Section 271(1) raise a presumption of concealment and the burden is on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the Explanation has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted undisclosed income. On facts, the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. If the department did not agree with the explanation, the onus was on the department to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal and the ld. D.R. has placed reliance upon the order of the Assessing Officer; whereas the ld. counsel for the assessee has placed heavy reliance upon the order of the ld. CIT(A). Besides, it was also contended that the assessee has surrendered an amount of ₹ 2 crores with a clear understanding that no penal action would be taken. But the Assessing Officer has partly accepted the surrender letter of the assessee and levied the penalty under section 271(1)(c) of the Act. In support of his contention, the ld. counsel for the assessee has placed reliance upon the judgment of the Delhi Bench of the Tribunal in the case of Income Tax Officer vs. Rakesh Kumar Gupta in I. T. A. No. 2690/Delhi/2009, in which relying upon the said proposition that penalty under such circumstances cannot be levied, the Tribunal has deleted the penalty. It was further contended that the assessee has filed the return on 1.12.2003 before the judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. Ritesh Industries Ltd. (supra) which was pronounced on 23.9.2004 and that too before the enactment of the Tax Laws Amendment Act, 2005. It was further contended that at the relevant point ..... X X X X Extracts X X X X X X X X Extracts X X X X
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