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Shri Manoj Kumar Johari Versus Assistant Commissioner of Income Tax, Circle, Sikar.

2016 (7) TMI 1183 - ITAT JAIPUR

Penalty u/s 271(1)(c) - eligibility of deduction under section 10BA - Held that:- All the material facts were duly disclosed by the assessee in its return of income. The revenue has not disputed this fact. The assessee under the bona fide belief was of the view that it was eligible for deduction under section 10BA of the Act. Under these facts, when revenue has not pointed out the deliberate act on the part of the assessee which demonstrates furnishing of inaccurate particulars or concealment of .....

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sment year 2008-09. The assessee has raised the following ground of appeal :- That on the facts and in the circumstances of the case, the ld. CIT (A) is wrong, unjust and has erred in law in confirming penalty of ₹ 24,20,000/- imposed by the ld. Assessing Officer u/s 271(1)(c) of the I.T. Act, 1961. 2. Briefly stated the facts are that while framing the assessment under section 143(3) of the IT Act, 1961, the AO made disallowance of deduction under section 10BA of the I.T. Act, 1961 (herei .....

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n submissions and submitted that the authorities below were not justified in imposing penalty and confirming the same. The ld. Counsel submitted that merely because a claim made by the assessee was disallowed by the Assessing Authority, would not ipso facto make the assessee liable for penalty under section 271(1)(c) of the Act. He submitted that penalty proceedings and the assessment proceedings are two different and distinct proceedings. In the present case, the conditions as envisaged under t .....

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d in the Income Tax Appeal No. 7/2015. The ld. Counsel placed reliance on the judgment of Hon ble Punjab & Haryana High Court rendered in the case of Principal CIT vs. S.S. Food Industries, 382 ITR 388 (P&H) to buttress the contention that the issue was debatable. 3.2. On the contrary, the ld. D/R supported the orders of the authorities below and contended that post judgment of Hon ble Supreme Court, the law is well settled that duty draw back/DEPB do not form part of industrial undertak .....

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point. However, the position was settled by the judgment of Hon ble Supreme Court rendered in the case of Liberty India (supra). The ld. CIT (A) has not accepted the contention and decided the issue in para 4.3 of his order by observing as under :- 4.3. I have carefully considered the submission of the appellant as also the findings of the AO in respect of imposition of penalty. It may be noted the AO has imposed penalty u/s 271(1)(c) of I.T. Act amounting to ₹ 24.20 lacs on account of re .....

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.T. Act. The AO accordingly held that by making such claim the appellant furnished inaccurate particulars of income and therefore liable to penalty u/s 271(1)(c) of I.T. Act. On the other hand the appellant case that such claim was made in bonafide manner at the time of filing of return on 23.09.2009 and that as per the existing decision of the various courts such receipts on account of DEPB and duty draw back were treated to be part of business receipts and considered eligible for deduction u/s .....

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. Another justification for not imposition of penalty u/s 271(1)(c) of I.T. Act by the appellant is that whether the receipts on account of DEPB/duty draw back should be part of business receipts is always a debatable issue in as much as before the decision of Hon ble Supreme Court in the Liberty India vs. CIT, various courts including the jurisdiction High court in the case of Saraf Seasoning Udyog vs. ITO, (2009) 317 ITR 207 has held such receipts to be part of business profit and that in the .....

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f relevant facts it may be stated that as regards the contention of the appellant that malafide intention/mens rea is to be proved for imposition of penalty, the Hon ble Supreme Court in its subsequent decision in the case of Union of India vs. Dharmendra Textile Processor (2008) 306 ITR 277 held that penalty u/s 271(1)(c) of IT Act indicated an element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return and there was no necessity of m .....

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raw back/DEPB should be part of the business profit for computing deduction u/s 10BA/80IB was definitely a debatable issue till the decision of Hon ble Supreme Court in the case of Liberty India vs. CIT (2009) 317 ITR 218. The Hon ble Supreme Court delivered the decision on 31.08.2009 and in the judgment the Hon ble Court has very clearly held that the duty draw back receipts/DEPB benefits do not form part of the net profit of eligible industrial undertaking for the purpose of sec.80I/80IA/80IB .....

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urn of the income for A.Y. 2008-09 has been filed before the decision of the Hon ble Supreme Court in as msuch as the return of income has been filed after the decision of the Hon ble Supreme Court in the case of Liberty India vs. CIT, the claim of deduction on the receipts from DEPB/duty draw back was definitely not allowable. All these facts were before the appellant when the return of income was filed and knowing very well that with the decision of the Hon ble Supreme Court such receipts from .....

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e decision of the Hon ble Supreme Court there was no doubt or any issue of debatable nature and in such circumstances the appellant has definitely furnished inaccurate particulars by making such claim. For such findings reliance is also placed on the following case laws : i) Prem Prakash Gupta vs. ITO (2012) 25 Taxman.com 447 13 ITR (Trib.) 334 (ITAT Chandigarh) ii) Asst CIT vs. Sundar Lal Chopra (2010) 2 ITR (Trib) 790 (Delhi) iii) Gujrat State Financial Services Ltd. vs. ACIT (2010) 39 SOT 570 .....

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l facts in his return of income. Therefore, the assessee cannot be held liable for concealment of income or furnishing of inaccurate particulars of income. The coordinate Bench in the case of ITO vs. Flora Exports in ITA No. 4147/Del/2009 on the identical facts dismissed the penalty by observing as under :- 8. We have duly considered the rival contentions and gone through the records carefully. There is no dispute on facts that assesses have disclosed complete details of their claims in the retu .....

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ere are divergent opinions on this issue by the different Hon ble High Courts. The Hon ble Delhi High court is of the opinion that deduction under s. 80-IB would be admissible on duty drawback and DEPB. In the case of Lakhvinder Singh in ITA No. 5169/Del/2004 decided on 28th Sept., 2005, then in the case of Asstt. CIT vs. Vipin Sardhana in ITA No. 5174/Del/2004 decided on 17th June, 2005 and again in the case of ITO vs. Ess Kay Enterprises, Tribunal Delhi Benches have allowed the deduction to th .....

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t this issue was a debatable one. Hon ble Punjab & Haryana High Court in the case of CIT vs. Budhewal Co-operative Sugar Mills (supra) has held that if an assessee has made a bona fide claim on the basis of law laid down by various Hon ble High Courts then penalty would not be levied upon such an assessee merely on the ground that his claim was disallowed. Similarly, the Hon ble Rajasthan High court in the case of CIT vs. Harshvardhan (supra) has held that if an assessee claims some deductio .....

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