CIT-I, LUDHIANA vs. M/S ABHISHEK INDUSTRIES

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ITA/378/2010HC Punjab & HaryanaPHHC01093305201004 May 2017Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE RAMENDRA JAIN7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in deleting the penalty under Section 271(1)(c) of the Income Tax Act, 1961. The Court agreed with the Tribunal's reasoning that for a penalty to be levied, two conditions must be met: furnishing of inaccurate particulars and concealment of income. The Tribunal had noted that the assessee claimed the deduction on the advice of a Chartered Accountant, and even if this advice led to a wrong claim, it did not automatically constitute furnishing inaccurate particulars with the intention to conceal income. The Court referred to the Supreme Court's decision in Commissioner of Income Tax Vs. Reliance Petro Products Private Limited, which held that a mere unsustainable claim in the return does not by itself amount to furnishing inaccurate particulars. The Tribunal's finding that the assessee did not furnish inaccurate particulars with the intention to conceal income was upheld. The appeal by the revenue was dismissed as no substantial question of law arose.

What were the facts?

The Revenue (Commissioner of Income Tax-I, Ludhiana) appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated July 24, 2009, which deleted a penalty of ₹47,77,500 imposed on the assessee, M/s Abhishek Industries Limited, Ludhiana, for the assessment year 2003-04. The penalty was levied under Section 271(1)(c) of the Income Tax Act, 1961, for allegedly furnishing inaccurate particulars of income by claiming a wrong deduction under Section 80IA on interest income of ₹65,00,000. The Assessing Officer disallowed the deduction, and the assessee's appeal on this ground was not pressed before the CIT(A) and Tribunal. The Assessing Officer then initiated penalty proceedings, which were deleted by the CIT(A), and the Tribunal upheld the CIT(A)'s decision.

What were the issues?

1. Whether on the facts and in law, the Hon'ble ITAT is justified in deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, amounting to ₹47,77,500, ignoring the fact that the assessee had furnished inaccurate particulars of its income by claiming wrong deduction under Section 80IA of the Income Tax Act, 1961, on interest income? Assessee's contentions: The assessee contended that the claim for deduction under Section 80IA on interest income was made on the advice of a Chartered Accountant. Even if the claim was wrong, it was not a sufficient ground for imposing penalty under Section 271(1)(c) as it required both furnishing of inaccurate particulars and concealment of income. The assessee argued that a wrong claim could be denied by the Assessing Officer and might be a case for addition but not for penalty. The assessee relied on the decision in CIT Vs. Amarnath (2008) 16 DTR (P&H) 326, which held that claiming deduction on the advice of counsel justified deletion of penalty. The assessee also cited Commissioner of Income Tax Vs. Reliance Petro Products Private Limited (2010) 322 ITR 158, stating that a mere unsustainable claim does not amount to furnishing inaccurate particulars. Revenue's contentions: The revenue argued that the assessee had furnished inaccurate particulars of income by claiming a wrong deduction under Section 80IA on interest income, which was income from other sources and not derived from an industrial undertaking.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 80IA,Section 143(1),Section 143(2),Section 143(3),Section 115JB,Section 260A

AI-generated summary — verify with the full judgment below

ITA No. 378 of 2010 1

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 378 of 2010

Date of decision: 4.5.2017

Commissioner of Income Tax-I, Ludhiana

……Appellant

Vs.

M/s Abhishek Industries Limited, Ludhiana

…..Respondent

CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

HON’BLE MR. JUSTICE RAMENDRA JAIN

Present: Mr. Rajesh Katoch, Senior Standing counsel for the appellant.

Mr. Manpreet Singh Kanda, Advocate for the respondent

Ajay Kumar Mittal,J.

1.

The appellant-revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 24.07.2009, Annexure A.VI, passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘A’, Chandigarh (in short, “the Tribunal”) in I.T.A. No.485/Chd/2009 for the assessment year 2003-04, claiming following substantial question of law:- “Whether on the facts and in law, the Hon’ble ITAT is justified in deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 amounting to ` 47,77,500 /- ignoring the fact that the assessee had furnished inaccurate particulars of its income by claiming wrong Gurbax Singh 2017.05.15 16:35

ITA No. 378 of 2010 2

deduction under Section 80IA of the Income Tax Act, 1961 on interest income?

2.

A few facts relevant for the decision of the controversy involved, as narrated in the appeal, may be noticed. The respondent- assessee is a company. It filed its return of income for the assessment year 2003-04 on 29.11.2003 declaring an income of ` 10,93,766/-. The assessee computed the profit under Section 115JB of the Act at ` 9,43,53,675 /-. The return was processed under Section 143(1) of the Act on 31.03.2004. Subsequently, the case was selected for scrutiny and notice under Section 143(2) of the Act was issued and served upon the assessee on 7.7.2004. The assessee revised its return of income on 01.11.2004 showing the same income as per original return. However, an amount of ` 5,50,74,289/- on account of sales tax subsidy, shown as revenue receipt in the original return was reflected as capital receipt in the revised return and consequently the profit under Section 115JB of the Act was recomputed and revised to ` 12,17,38,567/- During the course of assessment proceedings, it was inter alia noticed by the Assessing Officer that the assessee had shown ` 65,00,000 /- as other income in the profit and loss account of the power co-generation division of the company. This other income was nothing but interest income received by the assessee. The assessee claimed deduction under Section 80IA of the Act on this interest income. As the interest income was ‘income from other sources’ and not profit ‘derived from’ an individual industrial undertaking, deduction under Section 80IA of the Act was wrongly claimed by the assessee on this income. The Assessing Officer disallowed the claim of deduction under Section 80IA of the Act on interest income treating it as ‘income from other sources’ and not ITA No. 378 of 2010 3

business income. The assessment was finalized on 07.02.2006 at total income of ` 4,66,85,460/- as against the returned income of ` 10,93,764/- vide order passed under Section 143(3) of the Act. Penalty proceedings under Section 271(1)(c) of the Act were also initiated. The assessee preferred an appeal against the assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 4.12.2006, Annexure A.III, the CIT(A) and the Tribunal vide Annexure A.IV dismissed the ground relating to claim of deduction under Section 80IA of the Act on interest income of ` 65,00,000/- as not pressed. Thus, it was held by the Assessing Officer that the assessee intentionally and deliberately furnished inaccurate particulars of income on interest income by claiming the same as deduction under Section 80IA of the Act. Vide order dated 18.09.2008, Annexure A.II, the Assessing Officer levied a penalty of ` 47,77,500/- @ 200 per cent of the tax sought to be evaded under Section 271(1) (c) of the Act on this income. Aggrieved by the order passed under Section 271(1) (c) of the Act, the assessee filed an appeal before the CIT(A). Vide order dated 27.02.2009, Annexure A.V, the CIT(A) deleted the penalty. Not satisfied with the order, the revenue filed an appeal before the Tribunal. Vide order dated 24.07.2009, Annexure A.VI, the Tribunal affirmed the decision of CIT(A) in deleting the penalty and dismissed the appeal filed by the revenue. Hence, the instant appeal by the appellant-revenue.

3.

We have heard learned counsel for the parties.

4.

Admittedly, the assessee company declared income of ` 10,93,764/- in its return filed on 29.11.2003. It computed the profit under Section 115JB of the Act at ` 9,43,53,675/- which was processed under Section 143(1) of the Act on 31.03.2004. On scrutiny of the case, notice

ITA No. 378 of 2010 4

under Section 143(2) of the Act was served upon the assessee on 7.07.2004. The assessee inter alia claimed deduction under Section 80IA of the Act on interest income. The Assessing Officer was of the view that interest income was from other sources and not profit derived from an industrial undertaking. In appeal before the CIT(A) and the Tribunal, this ground was not pressed by the assessee and accordingly was held against the assessee. Ultimately, it was held by the Assessing Officer that the assessee intentionally furnished inaccurate particulars of income on interest income by claiming the same as deduction under Section 80IA of the Act. Case of the assessee was that on the advise of the Chartered Accountant, the claim was made by revising the return. It has been categorically recorded by the Tribunal that even if it is assumed that the claim made by the assessee on the advise of Chartered Accountant was wrong, still it was not a good ground for imposing penalty under Section 271(1)(c) of the Act, as two conditions are required to be satisfied i.e. firstly there should be furnishing of inaccurate particulars and secondly, there must be concealment of income. Even if there was wrong claim, it could be denied by the Assessing Officer. It could be a good case for addition but not for penalty. It was concluded by the Tribunal that the assessee did not furnish inaccurate particulars with the intention to conceal income and rather it made a claim on the advise of the chartered accountant which was found to be not correct. Thus, the Tribunal rightly concurred with the findings recorded by the CIT(A) and dismissed the appeal filed by the revenue. The relevant findings recorded by the Tribunal read thus:- “The stand of the assessee is that on the advise of the Chartered Accountant it was claimed by revising the return.

ITA No. 378 of 2010 5

There is no dispute to the fact that interest income is not an allowable deduction under Section 80IA of the Act. Even if it is presumed that the claim made by the assessee on the advise of the Chartered Accountant was wrong, still is not a good ground for imposing penalty under Section 271(1)(c) of the Act because firstly there should be furnishing of inaccurate particulars and secondly there must be concealment of income. Even if there is a wrong claim, it can de denied by Assessing Officer. It may be a good case for addition but not for penalty. As far as the argument of the learned DR that this ground was not pressed before the Tribunal, again cannot be a good ground for imposing penalty, because the assessee filed the certificate during assessment proceedings not after getting the order of the Tribunal. The decision from the Hon’ble Jurisdictional High (P&H) 326, wherein the Tribunal was held to be justified in deleting the penalty under Section 271(1)(c), further fortifies the case of the assessee. Even otherwise, no such deduction was claimed in the original return and it was only claimed during assessment proceedings under Section 143(3) on the advice of the Chartered Accountant. It is not the case that the assessee furnished inaccurate particulars with the intention to conceal income rather it made a claim on the advise of the Chartered Accountant, which was found to be wrong. In view of these facts and judicial pronouncements, we have not found any infirmity in the impugned order, the same is upheld.”

5.

21.08.2013 relied upon by the learned counsel for the respondent- assessee while dealing with similar issue, it has been recorded by this Court as under:- “It was specifically held by the Tribunal that prior to 2003, before the Hon’ble Apex Court in the case of Pandian Chemical’s Vs. CIT, (2003) 262 ITR 278 and CIT Vs. Sterling Foods, (1999) 237 ITR 579, the issue was a debatable one and the assessee had in its return of Income made a mention by giving a note to the computation of income which was filed alongwith the return of income. It was concluded that in such circumstances, there was no concealment or furnishing of inaccurate particulars.

6.

Furthermore, the Hon’ble Apex Court in Commissioner of regarding the income. It was recorded as under:- “We have already seen the meaning of the word “particulars” in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. 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.”

ITA No. 378 of 2010 7

7.

Learned counsel for the appellant-revenue has not been able to produce any material on record to controvert the findings recorded by the Tribunal. Thus, no substantial question of law arises and the appeal stands dismissed.

(Ajay Kumar Mittal)

Judge

May 04, 2017

(Ramendra Jain)

‘gs’

Judge Whether speaking/reasoned

Yes

Whether reportable

Yes

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