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2015 (9) TMI 955 - ITAT LUCKNOW

2015 (9) TMI 955 - ITAT LUCKNOW - TMI - Penalty under section 271(1)(c) - disallowance of deduction under section 80IB and 80HHC - Held that:- Undisputedly the issue of deduction under section 80IB and 80HHC of the Act on export incentive was debatable. Various Benches of the Tribunal have taken a contrary view; rather there was a conflict in the view of different High Courts. The controversy in this regard was set at rest by the Hon'ble Apex Court in the case of Liberty India vs. CIT (2009 (8) .....

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at the ld. CIT(A) has adjudicated the issue in the light of the judicial pronouncements of the Apex Court and various High Courts. Since we do not find any 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: T .....

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ports 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 under section 80IB of the Act and 80HHC of the Act was claimed. In response to query, it was contended on behalf of the assessee that deduction was claimed on the basis of the lega .....

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ted penalty proceedings under section 271(1)(c) of the Act and during the penalty proceedings, it was contended on behalf of the assessee that the assessee has neither concealed any income nor furnished any inaccurate particulars of income. The deductions were claimed on the basis of prevailing legal position. Being not convinced with the explanations of the assessee, the Assessing Officer has levied penalty at ₹ 1.25 crores under section 271(1)(c) of the Act. 3. The assessee preferred an .....

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as it has a direct link with the business activity of industrial undertaking. The view of the Tribunal was reversed by the Hon'ble High Court in the case of CIT vs. Ritesh Industries Ltd. 4. So far as deduction claimed under section 80HHC of the Act is concerned, provisions of section 80HHC of the Act was amended and deductions are to be computed as per the amended provisions. It was further contended that the controversy with regard to the deduction under section 80IB of the Act on export i .....

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ona-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 t .....

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her and is eligible for deductions u/s 80IB &. 80HHC. The assessee had produced the books of account which were examined and test checked. No discrepancy or defects were pointed out in the books of account. As a matter of fact, even no defects had been pointed out in the audit reports filed by the assessee in support of the deductions claimed. There is no change in the system of accounting followed by the assessee and the AO has not rejected the books of account also. It is also undisputed t .....

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s on record that the issue regarding deduction of 80IB in respect of export incentives, such as duty draw back was not free from doubt and was debatable and the same was brought to the notice of the AO during the course of assessment proceedings itself and the AO took cognizance of the same in para 4 of the assessment order mentioning as such Regarding disallowing the benefit of 80 IB in respect of export incentives, assessee has vide its letter dated 09.03.2006 submitted "the issue is not .....

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er of the High Court has an overriding effect on the order of ITAT. In its order the Hon'ble High Court has clearly laid down that export incentives are a sort of benefit given by the Government in addition to the benefit of exemption/deduction u/s 80IA/80IB etc., and 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 .....

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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 High Court in the case of Avani Exports vs. CIT and others 348 ITR .....

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ts have already been concluded. In other, words in this type of substantive amendment, retrospective operation can be given only if it is for the benefit of the assessee but not in a case where it effects even a fewer section of the assessee. We accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of the earlier assessment years of the assessees whose export turnover is above ͅ .....

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spective operation-Amendment of s. 80HHC(3) by insertion of certain conditions in the third and fourth provisos thereto with retrospective effect by Taxation Laws (Second Amendment) Act, 2005, is violative of Art. 14 of the Constitution as it denies the benefit of deduction under s. 80HHC to the class of assessees having export turnover of more than ₹ 10 crores whose assessments were still pending while allowing such concluded- It is also invalid for the reason that its retrospective opera .....

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eme 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 .....

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as duly disclosed, in the shape of income &. expenditure account and in the audit reports filed in support of the said claim. It is out and out, a case of legal deduction and the claim of the assessee has been denied on account of difference of opinion. Be it may, the bonafide of the assessee also cannot be doubted for the reason, that the deduction claimed u/s 80IB and 80HHC were duly supported by audit reports to which the assessee was legally entitled. None of the facts and figures in res .....

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rm the basis of treating the return filed earlier as false or incorrect. The decision of Apex Court in the case of Reliance Petro Products Ltd. 322 ITR 158 has held as under: S.271(1)(c) penalty cannot be imposed even for asking unsustainable claims. The assessee claimed deduction u/s 36 (1) (iii) for interest paid on loan taken for purchase of shares. The AO disallowed the interest u/s 14A and levied penalty u/s 271 (1) (c) on the ground that the claim was unsustainable. The penalty was deleted .....

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hat the details supplied in the Return are not accurate, not exact or correct, not according to truth or erroneous. In the absence of a finding by the AO that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c). (ii) The argument of the revenue that "submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income" is not correct. By no .....

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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 2 .....

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by the department held (i) that merely because the assessee agreed to the addition and the assessment order was passed on the basis of this addition, when the assessee had paid the tax and the interest thereon in the absence of any material on record to show the concealment of income, it could be inferred that the addition was on account of concealment. AAoreover, the assessee had offered an explanation. The explanation was not found to be false. On contrary, it was held to be bona fide. The can .....

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ted the "on-money but claimed that it was taxable only on completion of the projects under the 'completed contract method. The assessee's claim was rejected by all the authorities including the High Court. In the s. 271(1)(c) penalty proceedings, the assessee claimed that there was a mistake-in the entries regarding the sale of flats to J. B. Exports in as much as the rate at which the property was shown as sold to the said party was much higher than the rate at which the property w .....

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. 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 C .....

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giving a cogent and reliable explanation. If the department did not agree with the explanation, the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. Such onus has not been discharged by the department and so the Tribunal's finding cannot be interfered with (Dharmendra Textile's Processors 306 ITR 277 (SC) A Reliance Petroproducts 322 ITR 158 (SC) referred) I have also gone through the copies of the ord .....

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tcome of a debatable position of deduction, allowable on export incentives with reference to deduction u/s 80IB, would not invite penal action. The agreed addition is not supported by any specific discrepancy detected by the AO. Further, any specific malafide on the part of the assessee is also not substantiated. The remaining additions i.e. other than ₹ 2 crores are all relatable to legal deductions and do not call for levy of penalty on the very face of it. It is further noticed and as a .....

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rious decisions of the Apex Court, I am of the considered view that there is no failure on the part of the assessee either to conceal the particulars of its income or furnish inaccurate particulars of income attracting the provisions of section 271(1)(c), even the bonafide as per the Explanation 1 to sec.271(l)(c) is obvious and apparent. Accordingly, the penalty levied u/s.271(l)(c) is unjustified, hence stands deleted. 5. Now the Revenue is in appeal before the Tribunal and the ld. D.R. has pl .....

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el 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 Industri .....

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