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2016 (9) TMI 906 - ITAT AHMEDABAD

2016 (9) TMI 906 - ITAT AHMEDABAD - TMI - Penalty u/s.271(1)(c) - denial of claim of deduction u/s.80IB and u/s.80HHC & 80IA - Held that:- There is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We also get support from the judgement of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010 (3) TMI 80 - SUPREME COURT ), wherein the Hon’ble Apex Court has held that a .....

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.DR ORDER PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : These three appeals by the same assessee are directed against separate orders of the Commissioner of Income Tax(Appeals)-VIII, Ahmedabad ( CIT(A) in short) identically dated 18/01/2011 pertaining to Assessment Years (AYs) 2002-03, 2004-05 & 1995-96. 2. At the outset, ld.AR submitted that all the three appeals are with respect to levy of penalty u/s.271(1)(c) of the Act. He submitted that as far as penalty for AY 1995-96 is concerned, th .....

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as culled out from the materials on record are as under:- 3.2. Assessee is a company stated to be engaged in the business of manufacturing of electric furnaces. Assessee filed its return of income for AY 1995-96 on 30/11/1995 declaring total income of ₹ 91,98,630/-. The case was selected for scrutiny and thereafter assessment was framed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 31/03/1998 and the total income was determined a .....

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18,859/- 3.3 On the aforesaid disallowance/additions, AO vide order dated 16/4/2008 held that assessee has furnished inaccurate particulars of its income by claiming wrong deductions and therefore assessee was liable for penalty u/s.271(1)(c) of the Act. He accordingly levied penalty of ₹ 15,37,090/-. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 18/02/2011 (in Appeal No.CIT(A)-VIII/ITO-4(1)/049/08-09) granted p .....

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s of the case by confirming that the Assessing Officer has rightly levied penalty u/s.271(1)(c) on disallowance of bad debts of ₹ 17,25,888/-, disallowance of depreciation of ₹ 7,30,580/- and disallowance of excess claim of deduction u/s.80IA of ₹ 5,06,969/-. 3.4. Before us, Ld.AR reiterated the submissions made before AO and ld.CIT(A) and further submitted that as far as the addition on account of disallowance of bad debts is concerned, against the quantum addition the assesse .....

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ty for concealment of income would survive on the disallowance of bad debts. With respect to the disallowance of depreciation and excess claim of deduction u/s.80IA of the Act, he submitted that on identical facts, AO had levied penalty u/s.271(1)(c) of the Act in the case of assessee for AY 2003-04. The Coordinate Bench of Tribunal in ITA No.972/Ahd/2009 had deleted the penalty by order dated 29/07/2011. He placed on record the copy of the aforesaid order. On the merits, he submitted that along .....

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bmitted that mere making of the claim which is not sustainable in law and would not amount to furnishing inaccurate particulars of income and such claim made in the return cannot amount to inaccurate particulars. He therefore submitted that the penalty be deleted. Ld.DR, on the other hand, supported the orders of AO and ld.CIT(A). 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is .....

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. If the case of any assessee falls in any of these three categories, then according to the deeming provision provided in Explanation-1 to Section 271(1)(c) the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of clause (c) of Section 271(1), and the penalty follows. On the other hand, if the assessee is able to offer an explanation, which is not found by the authorities to be false, a .....

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itute the explanation and is also not able to prove that the explanation is bonafide, the addition made would amount to concealment of particulars, of income. It is well settled that the parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the p .....

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n the reasons and the facts which had resulted into addition. These submissions have not been controverted by the Revenue. Further, there is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We further find that Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010) 322 ITR 158 (SC) held that a mere making of the claim, which is not sustainable in law, by itself, will not .....

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ct. Thus, the ground of assessee is allowed. 5. In the result, the appeal of the Assessee in ITA No.1060/Ahd/2011 for AY 1995-96 is allowed. 6. Now, we shall take up the Assessee s appeal in ITA No.648/Ahd/2011 for AY 2002-03. 6.1. Brief facts of the case are that assessee filed its return of income for AY 2002-03 on 31/10/2002 declaring total income of ₹ 6,51,323/-. Subsequently, the case was reopened by issuing notice u/s.148 of the Act and thereafter the assessment was framed u/s.143(3) .....

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to ₹ 78,83,726/-. AO therefore concluded that assessee has furnished inaccurate particulars of income by making incorrect claim for deduction and was therefore liable for penalty u/s.271(1)(c) of the Act. He therefore vide order dated 19/03/2009 levied penalty of ₹ 2,23,424/-. Aggrieved by the order of AO, assessee carried the matter before the AO who vide order dated 18/10/2011 (in Appeal No.CIT(A)-VIII/ITO-4(1)/013/09-10) upheld the penalty by holding as under:- 2.2 I have carefull .....

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Ld. Counsel has not established as to how those decisions are relevant and how the same are applicable on the facts of the case, The Hon'ble Amritsar Tribunal has rightly observed in the case of Shree Balaji Alloys vs. ITO [2010] 127 TTJ 129 (Asr ) that "it Is crucial to point out that the Judicial precedents are to torn applied with care and caution and not mechanically, as each case depends on its own facts and a close similarity between one case and another is not enough because even .....

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ou will find yourself lost in thickets and branches. The path of justice must be clear of obstruction which could impede it. The observations of the Court must be read in the context in which they appear to have been stated. The assessee has placed reliance on the above decisions without discussing, as to how, the factual situation of the present case fits in the fact-situation of the relied upon." Same is the position here In this case. The Id, Counsel has placed reliance on the decisions .....

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ad Tribunal vide their aforesaid order had set aside the issue of deduction u/s 80HHC and u/s 80-lB on scrap sales to the file of the Assessing Officer. Therefore, the levy of penalty on disallowance of aforesaid deductions on scrap sales does not survive and required to be deleted. However, even after the decision of the CIT(A) and the Tribunal, the disallowance u/s 80HHC and u/s.80-IB remained the same as disallowed originally by the Assessing Officer. 2.4 After the decision of the Tribunal, t .....

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hich shows that the finding of the Assessing Officer was confirmed by the Hon'ble Tribunal. 2.5 I do not agree with the contention of the Id. Counsel that the claims of deduction made u/s 80HHC and 80IB are bonafide and genuine claims made by the Appellant. If the claim of the appellant was genuine and bonafide then what was the necessity not to press all the grounds of appeal before the Hon'ble Ahmedabad Tribunal except the grounds relating to service charges and scrap sales. Even the i .....

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rap sales vide para-2.4 of the said appellate order for the A.Y. 2004-05 as set aside by the Tribunal. The penalty on the disallowance of deduction u/s 80HHC and u/s. 80-IB on service income was deleted by the CIT(A) for the A.Y. 2003-04 on the ground that the claim was not made by fraud and appellant's explanation was not held to be lacking bonafides and the appellant had disclosed all the relevant facts and material before the Assessing Officer. I do not agree with the aforesaid finding of .....

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osed by resorting to the Explanation-1 to sec. 271(1)(c) of the Act. 2.6 The penalty had been levied for furnishing inaccurate particulars of income. Therefore, only thing to be considered Is as to whether the appellant had furnished inaccurate particulars of Income. The Inaccurate particulars had not been defined In the Act. As held by the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. 322 ITR 158 (SC), the words "inaccurate" and "particulars&quo .....

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was certainly not accurate or not correct and was erroneous and certainly amounted to inaccurate particulars of income. 2.7 As per the provisions of sec. 80HHC of the Act, the deduction is available to the assessee engaged in the business of export out of India of any goods or merchandise and the same is available for the profits derived by the from the export of such goods or merchandise. The restrictive meaning of the phrase "derived from" is well defined by the Hon'ble Supreme C .....

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cha F. Guzdar vs. CIT 27 ITR 1 (SC) had held in the case of Pandian Chemicals Ltd. vs. CIT 262 ITR 278 (SC) that "The word 'derived from' in sec. 80HH must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the de .....

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items derived from the industrial undertaking. Though the income was neither derived from export nor was derived from the industrial undertaking, the appellant was not entitled for the deduction u/s 80HHC and 80-IB of the Act. If these Items of Income are reduced from the gross total income, the resultant figures will be in negative and neither deduction u/s 80HHC nor deduction u/s 80-IB was allowable, Thus, the appellant had claimed the deduction u/s 80HHC and 80-IB of the Act for the sole purp .....

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)(c) of the Act for furnishing of inaccurate particulars of income, The penalty so levied for ₹ 2,23,423/- is hereby confirmed. The Assessing Officer is further directed to recompute the deduction u/s 80HHC and u/s 80IB for a precautionary matter as the Hon ble Ahmedabad Tribunal had set aside the issue of scrap sales after passing the impugned penalty order. 6.2. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us and has raised the following ground:- 1. The Learn .....

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ails for supporting its claim. During the course of assessment proceedings, assessee has furnished all the details and had neither concealed any income nor has furnished any inaccurate particulars of income. He further submitted that merely because the claim of the assessee has not been accepted, the assessee cannot be penalized. The ld.Sr.DR on the other hand supported the orders of lower authorities. 6.4. We have heard the rival submissions, perused the material available on record and gone th .....

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e of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010) 322 ITR 158 (SC), wherein the Hon ble Apex Court has held that 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. Such claim made in the return cannot amount to the inaccurate particulars. Considering the aforesaid facts and relying on the foresaid judgement of the Hon ble Apex Court in the case of CIT vs. Reliance Petropr .....

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