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August, 13th 2013

+                                 ITA 480/2012

%                                      Date of Decision: 29th July, 2013

      CIT                                               ..... Appellant
                             Through   Mr. Rohit Madan, Advocate.


      HCIL KALINDEE ARSSPL                              ..... Respondent
                   Through             None.

+                                 ITA 481/2012

      CIT                                               ..... Appellant
                             Through   Mr. Rohit Madan, Advocate.


      HCIL ARSSPL TRIVENI (JV)                      ..... Respondent
                    Through    None.


      SANJIV KHANNA, J. (Oral)

      1.       These two appeals by the Revenue arise out of a common

      order of Income Tax Appellate Tribunal dated 25.11.2011 in the

      case of M/s. HCIL ARSSPL TRIVENI (JV) vs. ACIT and M/s.

      HCIL KALINDEE ARSSPAL (JV) vs. ACIT.                  The appeals

ITA 480/2012                                          Page 1 of 11
      relate to Assessment Year 2007-2008.

      2.       By order dated 30.10.2012, the following substantial

      question of law was framed in these two appeals.

                      "Whether the ITAT erred in law and on
                      merits in deleting the penalty levied u/s 271
                      (1) (c) of the Income Tax Act, 1961?

      3.       The respondent assessees had claimed deduction under

      Section 80IA of the Act. They had also filed a copy of Form

      No.3CB and 3CD and Form No.10CCB in support.                    In the

      regular assessment proceedings, the Assessing Officer collected

      details from M/s. Rail Vikas Nigam Ltd and M/s. Rites Ltd. and

      came to the conclusion that HCIL ARSSPL TRIVENI (JV) had

      not executed the work but had given sub-contract to M/s. HCIL.

      Respondent assessee M/s. HCIL Kalindee ARSSPL similarly

      had not done any work but sub-contracted the work to M/s HCIL

      and M/s Kalindee Rail Nirman Project Ltd.

      4.       The aforesaid factual position was put to the respondent

      assessees and they were asked to reply and explain. Reply

      furnished was not accepted by the Assessing Officer, who also

      relied on Explanation to sub-Section 13 of Section 80IA of the

      Act which stipulates that the Section 80IA is not applicable to an

      assessee engaged in the execution of works contract.

ITA 480/2012                                           Page 2 of 11
      Deduction under Section 80IA was denied and an addition of

      Rs.70,07,615/- and Rs.41,83,622 was made in the case of M/s.

      HCIL Kalindee ARSSPL (JV) and HCIL ARSSPL Triveni (JV)

      respectively. The assessees accepted the quantum order and did

      not file any appeal. Additions made attained finality.

      5.       Concealment penalty proceedings under Section 271(1)(c)

      were initiated and penalty of Rs.23,02,665/- imposed on M/s.

      HCIL Kalindee ARSSPL (JV) and Rs.13,52,107 on M/s. HCIL

      ARSSPL Triveni (JV), were upheld by the CIT (Appeals).

      They specifically rejected the contention that the assessees had

      acted bonafidely and were not liable as they had relied upon

      opinion in view of the forms which had been filled up by the

      Chartered Accountant.

      6.       The Tribunal in the impugned order dated 25.11.2011

      while deleting the penalty has held:-

                     "7.4 In the light of aforesaid observations of
               the Hon'ble Apex Court, what is to be seen in the
               instant case, is whether the claim for deduction u/s
               801A of the Act, on the basis of certificate of the
               accountant, made by the assessee was bona-fide and
               whether all the material facts relevant thereto have
               been furnished and once it is so established, the
               assessee cannot be held liable for concealment
               penalty u/s 271 (i) (c) of the Act. The Assessing
               Officer has not been able to establish that the claim

ITA 480/2012                                           Page 3 of 11
               of the assessee for deduction under section 801A of
               the Act was not bona fide. A mere rejection of the
               claim of the assessee by relying on difference
               interpretations does not amount to concealment of
               the particulars of income of furnishing inaccurate
               particulars thereof by the assessee. Hon'ble Apex
               Court in CIT V. Reliance Petroproducts (P) Ltd.
               [2010] 322 ITR 158/189 Taxman 322, after
               considering various decisions including Dilip N.
               Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman
               218 (SC) and Union of India V. Dharmendra Textile
               Processors [2008] 306 ITR 277/174 Taxman 571
               (SC) concluded that 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. Following this decision,
               Hon'ble jurisdictional High Court in M/S Dharpal
               Premchand (Supra) upheld the cancellation of
               penalty levied in relation to incorrect claim of
               deduction u/s 801A & 801B of the Act. Mere
               disallowance of a claim will not amount to filing of
               inaccurate particulars of income. It can at best be a
               "wrong calim"not a "false claim". In such
               circumstances, Hon'ble Delhi High Court held in the
               case of Commissioner of Income-Tax vs Bacardi
               Martini India Limited, 288 ITR 585 (Del) that no
               penalty was leviable.         In the case under
               consideration, there is nothing to suggest that the
               assessee furnished any inaccurate particulars or
               concealed the particulars. Admittedly, the claim for
               deduction u/s 801A was duly supported by the
               certificate of the chartered accountant in the
               prescribed form. In these circumstances no fault can
               be found with the claim of the assessee that it had
               claimed the deduction in a bona fide manner. In
               somewhat similar circumstances. Hon'ble Punjab
               and Haryana High Court cancelled the penalty levied
               in respect of disallowance of deduction u/s. 801 in
               the case of CIT Vs SD Rice Mills, 275 ITR 206 (P &
               H). Similar view was taken in ACIT Vs. Arisudana
               Spinning Mills Ltd., 19 DTR.1 (Chd) and Model
ITA 480/2012                                           Page 4 of 11
               Footwear P Ltd. Vs. ITO, 124 ITD 353(Del.).
               Moreover, mere fact that the report prepared by the
               CA in the form 10 CCB was not in accordance with
               the provisions of section 801A(7) of the Act, was
               not enought to hold that the mistake was not bona
               fide. This view is supported by the decision in the
               case of CIT Vs. Deep Tools Pvt. Ltd., 274 ITR 603
               (P&H), where in also levy of penalty was held to be
               unjustified. In CIT Vs. Caplin Point Laboratories
               Ltd., 298 ITR 524 (Mad) Hon''ble High Court while
               adjudicating the levy of penalty in relation to
               incorrect claim for deduction u/s 80 HHC & 801 of
               the Act held in the light of aforesaid decision of the
               Hon'ble Apex Court in Dilip N. Shroff (supra) that a
               mere rejection of the claim of the assessee by relying
               on different interpretations does not amount to
               concealment of the particulars of income furnishing
               inaccurate particulars of income by the assessee."
      7.       Penalty provisions are not criminal and do not require

      culpable mens rea.        Whether or not the assessee had acted

      malafidely is not the relevant question to be asked and answered.

      The relevant question to be asked and answered is whether the

      assessee has discharged the onus and satisfied the conditions

      mentioned in Explanation 1 to Section 271(1)(c) of the Act.

               The said explanation reads as :

               "Explanation 1- Where in respect of any facts
               material to the computation of the total income
               of any person under this Act:-

               (A) Such person falls to offer an explanation or
               offers an explanation which is found by the
               Assessing Officer or the Commissioner
               (Appeals) or the Commissioner to be false, or

               (B)Such person offers an explanation which he is

ITA 480/2012                                             Page 5 of 11
               not able to substantiate and fails to prove that
               such explanation is bone fide and that all the
               facts relating to the same and material to the
               computation of his total income have been
               disclosed by him, Then, the amount added or
               disallowed in computing the total income of such
               person as a result thereof shall, for the purposes
               of clause (c) of this sub-section, be deemed to
               represent the income in respect of which
               particulars have been concealed."

      8.       Penalty under Section 271(1)(c) of the Act is imposed

      when an assessee has concealed his income or furnished

      inaccurate particulars. In terms of the explanation quoted above,

      we have to examine whether the case falls within sub-clause (A)

      or (B) and the effect thereof. Sub-clause (A) applies when the

      assessee fails to furnish any explanation or when an explanation

      is found to be false. In the present case, sub-clause (A) would

      not be applicable as assessee has furnished an explanation, and

      the explanation has not been found to be "factually" false. The

      assessee had made a wrong claim for deduction under Section

      80IA and, therefore, had furnished inaccurate particulars as the

      claim was not admissible. Sub-clause (B) of the explanation is,

      therefore, applicable and we have to examine the two conditions

      whether: (1) The assessee has been able to show that the

      explanation was bonafide; and (2) Facts and material relating to

      computation of his income had been disclosed.

ITA 480/2012                                               Page 6 of 11
      9.       Onus of establishing that the assessee satisfied the two

      conditions is on him i.e. the assessee. We shall examine the first

      condition i.e. whether the explanation of the assessee was

      bonafide. The second condition is satisfied.

      10.      In the present case, we note that Tribunal has proceeded

      on the premise that the claim for deduction under Section 80IA

      of the Act was duly supported by the Chartered Accountant 's

      Certificate and prescribed forms signed by the Chartered

      Accountant. For claiming deduction under Section 80IA of the

      Act, filing of certificate and forms signed by the Chartered

      Accountant is mandatory and a requirement of law. All returns,

      where deduction under Section 80IA is claimed, must have such

      certificates and forms. Mere filing of the said forms/certificate

      cannot absolve and protect an assessee who furnishes in-accurate

      particulars. If the explanation and the reasoning of the Tribunal

      is accepted, then in all cases where a form/certificate is furnished

      by the Chartered Accountant but a wrong claim of deduction is

      made, no penalty under Section 271(1)(c) can be imposed.

      Merely because the assessee complies with the statutory

      procedural requirement of filing the prescribed form and

      certificate of the Chartered Accountant, cannot absolve the

      assessee of its liability if the act or attempt in claiming the
ITA 480/2012                                           Page 7 of 11
      deduction was not bonafide.

      11.      Two reasons were given by the Assessing Officer why the

      claim for deduction under Section 80IA of the Act was rejected

      and should be denied. The first reason was that the respondent

      assessees were involved in works contracts and Explanation to

      Section 80IA (13) stipulates that benefit under the said Section

      was/is not available to a contractor carrying on works contract.

      The said "clarificatory" explanation was inserted by the Finance

      Act, 2007 with retrospective effect from 01.04.2000. The CIT

      (Appeals) in the first appellate order has specifically mentioned

      that the Finance Act, 2007 received the Presidential assent on

      11.05.2007 [(2007) 291 ITR (St.) 1]. The returns of income were

      filed by M/s. HCIL Kalindee ARSSPL (JV) and M/s. HCIL

      ARSSPL Triveni (JV) on 01.11.2007. An amendment of this

      nature invariably attracts attention and is seldom missed. Such

      amendments become topic of discussion and conversation in the

      professional circles.     To show and establish bonafides, the

      assessees had to show some more "tangible material" or basis as

      to why a clear statutory provision which excludes works

      contracts was ignored.

      12.      We are not stating or holding that penalty for concealment

ITA 480/2012                                           Page 8 of 11
      can be imposed and is justified merely because interpretation or

      claim of the assessee is rejected.       For interpretation and

      understanding tax laws assessees necessarily and do rely on

      professional or expert opinion and they cannot be subjected to

      penalty when the assessee discharges the onus that the claim was

      bonafide [see Devsons Logistics Pvt. Ltd. vs. CIT (2010)329

      ITR 483 (Del.) and decision of this court dated 28th May, 2013

      in ITA 804/2011 titled Shervani Hospitalities Ltd. vs. CIT].

      The Act i.e. the Income Tax Act, 1961 is one of most vexed and

      complicated legislation.   It has been subjected to numerous

      amendments from time to time. It requires highest degree of

      interpretative skills and divergent views on interpretation of tax

      provisions have been subject matter of plethora of judgments. It

      is not necessary that there should be uniformity or consistency of

      opinion on aspects of law.     Law does not postulate that an

      assessee must accept an interpretation against him, even when a

      favourable view is credible and tenable. Penalty of concealment

      cannot be imposed because the assessee has taken a particular

      stand or had preferred an interpretation which was plausible and

      reasonable, but has not been accepted, unless the assessee had

      not disclosed facts before the authorities. Such cases have to be

      distinguished from cases where the claim of the assessee is
ITA 480/2012                                         Page 9 of 11
      farcical or farfetched. Dubious and fanciful claims under the

      garb of interpretation, are a mere pretence and not bonafide.

      13.       It is not the case of the respondent assessee that there

      were conflicting decisions of High Court or there was a recent

      decision of the Supreme Court which had escaped attention or

      was not understood or an appeal or review etc. was pending

      before the Supreme Court. The explanation added was clear and

      categorical. The Tribunal has not referred to the Explanation to

      Section 80IA as to why and on what basis divergent

      interpretations were possible. Absurd or illogical interpretations

      cannot be pleaded and become pretence and excuses to escape

      penalty. "Bonafides" have to be shown and cannot be assumed.

      In the present case, the respondents have not been able to

      discharge the said onus and establish that they had acted


      14.      We also notice that the Tribunal has not dealt with the

      second reasoning given by the Assessing Officer to make the

      said addition; that the assessees had not carried out the work but

      had sub-contracted the same to a third party/parties.

      15.      In view of the aforesaid position, we answer the question

      of law in affirmative i.e. in favour of the Revenue and against

ITA 480/2012                                          Page 10 of 11
      the respondent assessees. Order of the Tribunal deleting penalty

      is held to be contrary to law. Penalty imposed is upheld.

               The appeals are disposed of. No costs.

                                           (SANJIV KHANNA)

                                        (SANJEEV SACHDEVA)
      JULY 29, 2013

ITA 480/2012                                            Page 11 of 11
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