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TMI Blog2022 (12) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... iating penalty on both the charges: furnishing inaccurate particulars as well concealment of income mechanically without application of mind that is not permissible under the law. 3. Ld. CIT (A) erred in law and on facts confirming penalty levied by AO merely on the basis of disallowance of the claim ignoring that the appellant had disclosed complete details with relevant documents relating to claim made tendering full explanation during assessment proceedings. 4. Ld. CIT (A) erred in law and on facts rejecting submissions of the appellant that no penalty can be levied on debatable issue as to whether deduction under chapter VI-A is allowable in case of negative business income held in favour of the appellant by Hon'ble jurisdictional High Court at the time of filing return that was subsequently decided against the appellant by Hon'ble Apex Court. 3. The brief facts leading to the levy of penalty for concealing/furnishing inaccurate particulars of income u/s 271(1)(c) of the Act in the present case are that the assessee had filed return of income for the impugned assessment year, i.e. AY 1999-2000, declaring total income comprising of only Long Term Capital Gains amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the transfer of long term capital assets the gross total income shall be reduced by the amount of such income and the deduction u/c VI-A shall be allowed as if the gross total income so reduced were the gross total income of the assessee" From the above extract, it is clear that deduction under chapter VI-A would be allowed only after reduction of long term capital gain from the gross total income and the reduced gross total income would be considered gross total income of the assessee for the purpose of deduction under chapter VI-A. but in the instant case, the gross total income of the assessee company comprised only Long Term Capital Gain and if the same is reduced from such gross total income, the gross total income so reduced resulted in a negative figure. Thus the deduction claimed by the assessee company under chapter VI-A was disallowed by the AO as there was no business income and penalty proceedings u/s.271(1)(c) were initiated for furnishing inaccurate particulars of income. The Ld. CIT(A) andthe Hon'ble ITAT also confirmed the disallowance made by the AO on this count. 5. In view of the facts and legal position discussed above the assessee is held to have fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80HHC. The revenue contended that the provisions of section 80AB were applicable to all the sections which fell under the heading 'C.-Deductions in respect of certain incomes' and that section 80HHC was a provision which fell within the said heading. It was submitted that it was necessary that there should be profits from export activity and in the absence of such profits from export business, the Tribunal was clearly in error in holding that the assessee was entitled to deduction under section 80HHC against the income from other head, viz., 'Capital gains'. HELD On a plain reading of section 80HHC, it is apparent that a deduction can be claimed by an assessee if such assessee exports out of India during the previous year relevant to the assessment year any goods or merchandise as specified in the section. The deduction has to be made while computing the total income of the assessee of an amount specified out of the export turnover of such goods or merchandise whereas section 80AB requires that a deduction is required to be made or allowed under any section (except section 80M) included in Chapter VI-A under the heading 'C.-Deductions in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come' of any previous year would include all income from whatever source. Once the Legislature has provided for inclusion of all incomes, the definition of 'income' as provided in section 2(24) becomes relevant. Sub-clause (vi) of section 2(24) states that income includes any capital gains chargeable under section 45. Therefore, once capital gains form part of the income, which is to be included for the purpose of ascertaining the total income, the charge specified in section 4 gets attracted. Thus, the moment this exercise has been undertaken, the figure of total income is arrived at and it is from this figure that deduction under section 80HHC is provided being the specified percentage of the export turnover. Therefore, the Tribunal had rightly held that the assessee was entitled to deduction under section 80HHC on the facts and in the circumstances of the case. [Para 13]" 5. He further pointed out that an identical issue had arisen in the case of the assessee itself for AY 2004-05, wherein the assessee was found to be claimed excess deduction under Section 80-IB of the Act and the penalty was levied on account of the same on the assessee which was deleted by the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) could not be levied. We find that this issue being debatable and there being decisions in favour of the assessee at the time of filing of return for the relevant assessment year, it could not be said that the conduct of the assessee in claiming the deduction was not bona fide. In this view of the matter, we hold that it is not a fit case for levy of penalty u/s 271(1)(c) of the Act which was accordingly cancelled by the CIT(A) and the order of Ld. CIT(A) is confirmed. Ground No.3 of the revenue's appeal is dismissed." 6. The learned Counsel for the assessee, thereafter, pointed out that this aspect of the issue being debatable had been pointed out before the learned CIT(A) also and the submission of the assessee in this regard as recorded by the learned CIT(A) in his impugned order at page No.5, paragraph no. 4.10,are as under:- "4.10. That the issue was highly debatable and thus penalty u/s 27(1)(c) of the Act could not have been levied. 4.10.1. In this connection, the Appellant most respectfully submits that the issue as to whether deduction under chapter VI-A can be allowed in case of .negative business income, was settled in favour of the Appellant by the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant as appellant has claimed deduction u/s.80HHC of Rs.4,44,02,159/- and Rs.1,60,250/- u/s. 80G against the long term capital gain in the return of income which is clearly not admissible in view of section 112(2) of the I. T. Act, 1961. Therefore, the appellant has clearly furnished inaccurate particulars of income in respect of claim of deduction u/s. 80HHC and 80G of the I. T. Act,1961. The appellant has relied on the case of Reliance Petroproducts Pvt. Ltd. (supra) which is clearly not applicable over the facts of the case as appellant has made a claim which is not permissible as per the Act. In the case of Reliance Petroproducts Pvt. Ltd. (supra), the issue was the disallowance of expenditure u/s. 14A on the basis of estimates and it was estimate of department versus estimate by appellant. In the present case, appellant has made a claim which is not permissible as per section 112(2) of the I.T. Act, 1961 at all. In view of the above, AO was perfectly justified to levy penalty U/s. 271(1 )(c) of the I. T. Act, 1961 for furnishing inaccurate particulars of income." The learned Counsel for the assessee, therefore, contended that being a debatable issue the assessee c ..... 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