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 All India Federation of Tax Practitioners vs. ITO (ITAT Mumbai)
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DCIT, Mehsana Circle, Mehsana. V/S M/s. Jyoti Overseas Pvt. Ltd. 604/B Mahalay, Opp. Hotel President, Off. C.G. Road, Ahmedabad
January, 07th 2014

                            I.T. A. No 2888 /AHD/2010
                            (Assessment Year: 2004-05

       DCIT, Mehsana Circle,         V/S M/s. Jyoti Overseas Pvt. Ltd.
       Mehsana.                          604/B Mahalay, Opp. Hotel
                                         President, Off. C.G. Road,

       (Appellant)                           (Respondent)

                             PAN: AAACJ4894 L

         Appellant by        : Shri J.P. Jhangid, Sr. D.R.
         Respondent by       : Shri N.C. Amin

                                 ( )/ORDER

Date of hearing                   : 27-12-2013
Date of Pronouncement             : 03 -01--2014

  1.      This appeal is directed against the penalty order dated 22.02.2009 passed
          under Section 271(1)(c) wherein penalty of Rs. 3,90,100/- was levied by
          the A.O.

  2.      The relevant facts as culled out from the material on record are as under.

  3.      Assessee is a Private Ltd. Company engaged in the business of Isabgol
          and also acting as commission agent. Assessee filed its return of income
                                                     2         ITA No 2888/AHD/2010
.                                                              A.Y. 2004-05

         for A.Y. 04-05 on 29.10.2004 declaring total income of Rs. 4,31,260/-.
         The case was selected for scrutiny and thereafter assessment was framed
         under section 143(3) vide order dated 08.12.2006 and the total income
         was determined at Rs. 15,18,440/- by disallowing the claim of deduction
         under section 80IA(Rs. 4,55,535/-) and u/s. 80HHC (Rs. 6,31,655/-).
         A.O. was of the view that Assessee was not eligible for deduction under
         80IA and also 80HHC. A.O. was of the view that by claiming the
         aforesaid deductions the Assessee had furnished inaccurate particulars to
         evade tax and therefore penalty under section 271(1)(c) was leviable. He
         accordingly levied penalty of Rs. 3,90,100/- vide order dated 22.02.2009.
         Aggrieved by the order of A.O., Assessee carried the matter before
         CIT(A). CIT(A) vide order dated 05.05.2010 deleted the penalty.
         Aggrieved by the aforesaid order of CIT(A), the Revenue is now in
         appeal before us and has raised the following ground:-
         1. The learned CIT(A) has erred in law and on facts in deleting the penalty levied u/s. 271(1)(c) of the
         IT Act, amounting to Rs. 3,90,100/-.

    4.   At the outset the ld. A.R. submitted that the issue in the year under appeal
         is identical to that of A.Y. 03-04. He submitted that on identical facts for
         A.Y. 03-04, the Hon'ble Tribunal vide order dated 16.07.2010 has
         deleted the penalty which was levied by A.O. He therefore submitted
         that since the facts in the year under appeal are identical to that of A.Y.
         03-04, the penalty in the year under appeal be also deleted.

    5.   The ld. D.R. on the other hand submitted that the facts of the case year
         under appeal are different from that of A.Y. 03-04, in view of the fact
         that in the year under appeal deduction under 80HHC was also denied to
                                                     3         ITA No 2888/AHD/2010
.                                                              A.Y. 2004-05

         the Assessee which was not the case in A.Y. 03-04. He therefore
         supported the order of A.O. and submitted that the order of the A.O. be

    6.   We have heard the rival submissions and perused the material on record.
         It is an undisputed fact that during assessment proceedings the claim of
         deduction u/s 80HHC and 80IA was denied and on it the penalty was
         levied by the A.O. We find that the penalty which was levied by the
         A.O. was deleted by CIT(A) by order dated 05.08.2010 by holding as
         6. I have considered the penalty order as well as appellant's contention in this regard. Basically,
         appellant had claimed deduction u/s.80IA of Rs.4,55,535/- which was disallowed by the CIT(A) as well
         as by Hon'ble ITAT based on the decision in the case of CIT V/s. Sterling Foods 237 ITR 579(SC) and
         Pandian Chemicals V/s. CIT 262 ITR 278 (SC), holding that receipts on sale of DEPB license are not
         derived from industrial undertaking. While, the appellant had relied on the decision of Hon'ble
         jurisdictional High Court in the case of CIT v/s. India Gelatine & Chemicals Ltd (2005) 275 ITR 284
         6.1      Similar issue was involved in the earlier year viz. AY 2003-04 which has been decided by my
         predecessor as under:
              8. The matter has been given due consideration and I am afraid the penalty in question cannot be.
              sustained. I agree with the contention of the Authorized Representative that the non-deduction
              u/s.80IA with respect to DEPB license is a matter of difference of opinion. There is nothing which
              the appellant has concealed from 1he Department. The claim and its working, on a particular
              basis, was before the Department. During the course of assessment, the claim was scrutinized and
              not found to be as per the thinking of the Department and hence the disallowance was made. In
              context of unsettled judicial position, clearly it cannot be a case of providing inaccurate
              particulars of income or for computation of income.
              9. The legal position on the issue of Explanation-1 to section 271(1)(c) at present requires the
              Department to at least prima-facie bring out that there has been an act of concealment or holding
              back of information or providing inaccurate particulars. Once that is done, the burden of proof
              will shift on the appellant and the Assessing Officer does not have to prove the mens-rea. In the
              instant case, as discussed in the preceding para, we do not have such a situation either in the
              context of claim U/S.80IA or for the valuation of stock."
         I have no reason to differ from above, as the facts of the case are same so penalty levied on this issue
         is cancelled.
          6.2 As regards penalty on account of disallowance of claim of Rs.6,31,645/- u/s. 80HHC, CIT(A)
         confirmed the order of the AO. The facts reveal that appellant claimed the above deduction without
         netting out the DEPB income. During the assessment proceedings, a revised working was filed on the
         directions of the AO. Then A0 held that appellant had incurred loss in the exports and is not covered
         by the second, third or fourth proviso of section 80 HHC(3), so, the set off under fifth proviso is not
         allowable. The appellant has given the details of revised computation during the course assessment
         proceedings as per which loss has been determined on the exports. This loss has been set off against
         export incentives in the revised computation thereby giving a profit of Rs.12,02,044/-. This
         computation has been filed before the AO himself.
                                                      4         ITA No 2888/AHD/2010
.                                                               A.Y. 2004-05
         6.3 Further, as per notes forming part of 10CCAC certificate filed with the return, it is specifically
         mentioned regarding claim of deduction U/S.80HHC in a loss case as under:
              "The proviso to sub section (3) of Section 80 HHC indicate that negative figure or loss worked out
              under clause (a), (b) and (c) had to be completely ignored and 90% of export incentive had still to
              be taken into consideration for working out the claim of deduction u/s.80HHC.
              Asstt. Commissioner CIT v. Pratibha Syntex Ltd (1999) 10 DTC 330 (AHD-TRIB); (1999) 63 TTJ
              (AHD-TRIB) 409 [52]; A..M. Moosa V. Asstt. CIT (1996) 54 TTJ (Coch-Trib) 193 [53); Avon
              Cycles Ltd v. ACIT (1997) 59 TTJ (CHD-TRIB) 75 [54]; Hindustan Fashions Ltd V. Asstt. CIT
              (1998) 61 TTJ(AHD-TRIB) 734 [55]"
         From the above, it is clear that assessee had claimed deduction u/s.80HHC relying upon the decision
         of jurisdictional tribunal and later had given the computation during the assessment proceedings as
         desired by the AO himself. The appellant had given the explanation that it has claimed the deduction
         substantiated by the decisions of the various judicial authorities at that time and this explanation was
         not found to be mala fide, all the facts relating to such claim and computation thereof was disclosed by
         the assessee. In view of the same, it cannot be said that merely by claiming deduction; the assessee has
         furnished inaccurate particulars of income.
         6.4 In this regard the Hon'ble Supreme Court in it's recent landmark decision in the case of Reliance
         Petroproducts Pvt Ltd reported at (2010) 322 ITR 158 has held as under:
              "A glance at the provisions of section 271(1)(c) of the IT Act, 1961. suggests that in order to be
              covered by it, there has to be concealment of the particulars of the income of the assessee.
              Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of
              the word " particulars" used in section 271(1)(c) would embrace the details of the claim made.
              Where no information given in the return is found to be incorrect or inaccurate, the assessee
              cannot be held guilty of furnishing inaccurate particulars, In order to expose the assessee to
              penalty, unless the case is strictly covered by the provision, the penalty provision cannot be
              invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing
              inaccurate particulars. There can be no dispute that everything would depend upon the return
              filed by the assessee, because that is the only document where the assessee can furnish the
              particulars of his income When such particulars are found to be inaccurate, the liability would
              arise. To attract penalty, the details supplied in the return must not be accurate, not exact or
              correct, not according to the truth or erroneous.
              Where there is no finding that any details supplied by the assessee in its return are found to be
              incorrect or erroneous or false there is no question of inviting the penalty under section 27l(l)(c).
              A mere making of a claim which is not sustainable in law, by itself will not amount to furnishing
              inaccurate particulars regarding the income of the assessee. Such a claim made in the return
              cannot amount to furnishing inaccurate particulars."
         Accordingly, penalty in respect of claim of deduction u/s.80HHC is cancelled.
         6.5 From the facts of the case, submission of the appellant and discussion made as above, it is very
         clear that penalty is not leviable in appellant's case. Therefore, penalty levied u/s. 271(l)(c) of
         Rs.3,90,100/- is hereby cancelled".

    7.   We further find that the Co-ordinate Bench of Tribunal in the Assessee's
         own case for A.Y. 03-04 in ITA No. 605/AHD/2008 and C.O. No.
         81/AHD/2008 order dated 16.07.2010 has deleted the penalty by holding
         as under:-
         4. We have heard the submissions of both the sides. We are of the view that both on factual as well as
         on legal reasons, the penalty was not to be levied considering the facts and circumstances of the case,
         therefore, we uphold the cancellation of the penalty as done by the Learned CIT(Appeals). The
         undisputed fact is that the books of accounts were audited by the Chartered Accountant and in those
         accounts all the relevant material fact was informed to the Revenue Department. It is not the case of
                                                     5        ITA No 2888/AHD/2010
.                                                             A.Y. 2004-05
         the Revenue that certain bogus or wrong information was found detected in the said audited balance-
         sheet. Rather, the contention before us is that the assessment was made on that very basis on which the
         income was offered and, later on, even the penalty was imposed pertaining to those material facts
         which were already either informed by the assessee by filing the return or duly furnished during the
         course of assessment proceedings to the Assessing Officer. Therefore, the vehement argument is that
         the correct particulars of the income and the relevant information were very much in the knowledge of
         the Assessing Officer. Once the assessee has furnished the Income-tax Return and through which all
         the relevant material facts were revealed truly and correctly as well as supported by the audited
         accounts, so there was no concealment of facts on the part of the assessee. On the other hand, this
         argument of the assessee also appears to be reasonable that the impugned addition was contentious in
         nature. In the past as well the issue of profit on DEPB licence income was a subject of controversy,
         therefore, the present case could not be said to be a case of concealment of particulars of income or
         furnishing of inaccurate particulars because merely due to a change in the decisions of the Hon'ble
         Courts this claim remained a subject of controversy. At best it can be said to be a change of opinion,
         hence, ought to be out of the clutches of the penalty provisions.

    8.   Since the facts of the case in the year under appeal are identical to that of
         earlier years, we following the order of Co-ordinate Bench of Tribunal
         find no reason to interfere with the order of CIT(A) and thus delete the
    9.   In the result, the appeal of Revenue is dismissed.

          Order pronounced in Open Court on 03 - 01 - 2014.

           Sd/-                                                                    Sd/-
   (KUL BHARAT)                                                      (ANIL CHATURVEDI)
 JUDICIAL MEMBER                                                  ACCOUNTANT MEMBER
Ahmedabad.                         TRUE COPY

Copy of the Order forwarded to:-
1.    The Appellant.
2.    The Respondent.
3.    The CIT (Appeals) ­
4.    The CIT concerned.
5.    The DR., ITAT, Ahmedabad.
6.    Guard File.
                                                                         By ORDER

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