PR. COMM. OF INCOME TAX-3 LUDHIANA vs. M/S S.S FOOD INDUSTRIES

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ITA/222/2015HC Punjab & HaryanaPHHC01109855201511 January 2016Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE RAMESHWAR SINGH MALIK8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT's view was plausible and based on appreciation of material on record, warranting no interference. The Court noted that the ITAT had found that the Supreme Court decision in Liberty India was rendered on August 31, 2009, and published on September 17, 2009, leaving a very small gap between its publication and the assessee's return filing on September 30, 2009. The ITAT concluded that at the time of filing the return, the issue was debatable, and penalty could not be levied. Furthermore, the ITAT relied on the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Limited, holding that penalty under Section 271(1)(c) is not attracted if the assessee has disclosed all particulars of income and has not concealed anything. The ITAT also considered that the return was filed based on a Chartered Accountant's certificate, and even if there was a mistake, the assessee could claim the benefit of a bonafide belief. The High Court found no illegality or perversity in the ITAT's order and concluded that no substantial question of law arose. The appeal was dismissed.

What were the facts?

The Principal Commissioner of Income Tax (Revenue) appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated December 23, 2014, for Assessment Year 2009-10. The ITAT had cancelled a penalty of ₹51,01,720 imposed under Section 271(1)(c) of the Income Tax Act, 1961, on M/s S.S. Food Industries (assessee). The penalty was levied after the Assessing Officer disallowed a deduction of ₹1,50,09,481 claimed by the assessee under Section 80IC. The Commissioner of Income Tax (Appeals) had upheld the penalty. The assessee had filed its return of income declaring nil income on September 30, 2009, after claiming the deduction. The penalty was imposed for filing inaccurate particulars of income.

What were the issues?

1. Whether the ITAT was correct in cancelling the penalty under Section 271(1)(c) when the assessee claimed deduction under Section 80IC without following the jurisdictional High Court's decision in Liberty India (2009) 317 ITR 218 (SC) and accepted its applicability? (Question of law turning on Section 271(1)(c) and Section 80IC). 2. Whether the ITAT was correct in holding that the assessee could claim deduction until the Supreme Court's decision, despite a jurisdictional High Court decision favouring the revenue? (Question of law turning on Section 271(1)(c)). 3. Whether the ITAT failed to appreciate the Full Bench decision in Smt. Aruna Luthra (2002) 252 ITR 76 (P&H) that non-following of a jurisdictional High Court decision amounts to a mistake apparent from record? (Question of law turning on Section 271(1)(c)). 4. Whether the ITAT was correct in not appreciating decisions in CIT vs. Ram Lal Baba Lal (1998) 234 ITR 776 (P&H) and CIT vs. Guru Lal Bal Chand (1978) 111 ITR 134 (P&H) which held that authorities cannot rely on another High Court's opinion to claim a point is debatable? (Question of law turning on Section 271(1)(c)). 5. Whether the ITAT failed to consider the detailed findings of the CIT(A) in paragraphs 3.14 to 3.26 of its order dated August 1, 2013? (Question of fact and law turning on Section 271(1)(c)). Assessee's Contentions (as inferred from the ITAT's reasoning): The assessee argued that at the time of filing the return, the issue was debatable due to conflicting High Court decisions (Delhi High Court in favour, Punjab & Haryana High Court against). The Supreme Court decision in Liberty India was published very close to the return filing date, leaving little time to be aware of it. The assessee made full disclosures and acted on a Chartered Accountant's certificate, believing the deduction was allowable in good faith. Reliance was placed on CIT vs. Reliance Petroproducts Pvt. Limited (2010) 322 ITR 158 (SC) for the proposition that mere disallowance does not attract penalty if there is no concealment or inaccurate particulars. Revenue's Contentions (as inferred from the grounds of appeal): The revenue contended that the assessee failed to follow the jurisdictional High Court's decision in Liberty India, which amounts to a mistake apparent from the record. The revenue argued that the assessee could not claim deduction until the Supreme Court's decision when a jurisdictional High Court decision was against it. Reliance was placed on CIT vs. Zoom Communication (P) Limited (2010) 233 CTR 465.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 80IC,Section 260A,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision:January 11, 2016 The Pr. Commissioner of Income Tax 3, Ludhiana ........ Appellant M/s S.S.Food Industries …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MRS. JUSTICE RAJ RAHUL GARG

1.

Whether Reporters of local papers may be allowed to see the judgment?

2.

To be referred to the Reporters or not? YES

3.

Whether the judgment should be reported in the Digest? Present: Mr. Rajesh Katoch, Advocate for the appellant. Mr. B.M.Monga, Advocate and Mr. Rohit Kaura, Advocate for the respondent. Ajay Kumar Mittal,J.

1.

This appeal has been filed by the appellant-revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 23.12.2014, Annexure-4 passed by the Income Tax Appellate Tribunal, Chandigarh Bench, 'B', Chandigarh (in short, “the GURBAX SINGH 2016.02.12 14:54 integrity of this document High Court Chandigarh Tribunal”) in ITA No.925/CHD/2013 for the assessment year 2009-10, claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the ITAT is right in law in cancelling the penalty under section 271(1)(c) even though the assessee has claimed deduction under section 80IC by not following the decision dated 17.8.2006 of Hon'ble Jurisdictional High court in the case of Liberty India 293 ITR 520 (P&H) and the assessee accepts that the decision of Liberty India dated 17.8.2006 is applicable in his case? ii) Whether on the facts and in the circumstances of the case, ITAT is right in law in giving a finding that the assessee can claim deduction till the decision of Hon'ble Supreme Court even though there is a decision of jurisdictional High Court in favour of the revenue? iii) Whether on the facts and in the circumstances of the case, the ITAT has not appreciated the Full Bench decision of Hon'ble Punjab and Haryana High Court in the case of Smt. Aruna Luthra 252 ITR 76 wherein it was held that non following of jurisdictional High Court decision amounts to mistake apparent from record? iv) Whether on the facts and in the circumstances of the case, the ITAT is right in law in not appreciating the decision of jurisdictional High Court in the case of CIT vs. Ram Lal Baba Lal, 234 ITR 776 (P&H) and also the case of CIT vs. Guru Lal Bal Chand 111 ITR 134 (P&H) wherein it was held that the authorities by reference to the opinion of another High Court cannot say that the point is debatable? v) Whether on the facts and in the circumstances of the case, the ITAT is right in law in not considering detailed GURBAX SINGH 2016.02.12 14:54 integrity of this document High Court Chandigarh findings given by CIT(A) in his order dated 1.8.2013 in paras 3.14 to 3.26?”

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 firm which is engaged in the business of manufacturing of biscuits/cookies and other bakery products. It filed its return of income on 30.9.2009 at total income of ` nil for the assessment year 2009-10. The case was selected for scrutiny and notices under various sections of the Act were issued to the assessee. The Assessing Officer completed assessment proceedings under Section 143(3) of the Act vide order dated 29.11.2011, Annexure 1 and disallowed deduction under Section 80IC of the Act amounting to ` 1,50,09,481/-. Penalty proceedings under Section 271(1)(c) of the Act were also initiated for filing inaccurate particulars of income. Order imposing penalty of ` 51,01,720/- was passed on 29.5.2012, Annexure 2. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 1.8.2013, Annexure 3, the CIT (A) dismissed the appeal. Not satisfied with the order, the assessee filed appeal before the Tribunal. Vide order dated 23.12.2014, Annexure 4, the Tribunal allowed the appeal and set aside the order passed by the CIT(A) by deleting the penalty. Hence the instant appeal by the revenue.

3.

We have heard learned counsel for the parties.

4.

Admittedly, the assessee had filed return of income GURBAX SINGH 2016.02.12 14:54 integrity of this document High Court Chandigarh declaring nil income on 30.9.2009 after claiming deduction under Section 80IC of the Act amounting to ` 1,97,78,564/-. The judgment of the Apex Court in the case of M/s Liberty India vs. CIT, (2009) 317 ITR 218 was rendered on 31.8.2009 but was published for the first time only on 17.9.2009. It has been categorically recorded by the Tribunal that there was very little gap between the publication of the decision of the Apex Court in M/s Liberty India's case (supra) and the filing of the findings recorded by the Tribunal read thus:- “12. We have considered the rival submissions carefully and find force in the submission of the learned counsel for the assessee. No doubt the Hon'ble Jurisdictional High Court had decided this issue against the assessee which is reported in 293 ITR 520 and decision of Hon'ble Punjab and Haryana time the decision of Hon'ble Delhi High Court in case of 2016.02.12 14:54 integrity of this document High Court Chandigarh assessee had the right to make claim of deduction. It is not always necessary that everybody would become aware of the decision. Ultimately when the same issue was decided by the Hon'ble Supreme Court on 31.8.2009 which is said to be published for the first time on 17.9.2009 and therefore there was very little gap between publication of the decision and filing of the return. It is also possible that return may have been finalized before publication of the decision, therefore at the time of making return the issue was debatable and penalty could not have been levied.

13.

In any case assessee disclosed all the particulars of the income and it cannot be stated that assessee has concealed any particulars and furnished incorrect particulars. Once proper disclosures have been made then penalty is not attracted in view of the decision of Hon'ble Supreme Court penalty.”

5.

In Reliance Petroproducts (P) Limited's case (supra), (2010) 189 Taxman 322 (SC), the Apex Court held that merely because the assessee had claimed expenditure which claim was not accepted or was not acceptable to the revenue, that by itself would not attract penalty under section 271(1)(c) of the Act. It was recorded thus:- GURBAX SINGH 2016.02.12 14:54 integrity of this document High Court Chandigarh “7. As against this, Learned Counsel appearing on behalf of the respondent pointed out that the language of Section 271(1)(c) had to be strictly construed, this being a taxing statute and more particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act. It was pointed out that there was no concealment or any inaccurate particulars regarding the income were submitted in the Return. Section 271(1)(c) is as under:- "271(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income."

8.

A glance at this provision would suggest that in order to be covered, 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. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the Learned Counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in the Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The Learned Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would GURBAX SINGH 2016.02.12 14:54 integrity of this document High Court Chandigarh amount to giving inaccurate particulars of such income". We do [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in Union of India Vs. Dharamendra Textile Processors [2008(13) SCC 369], as also, the decision in Union of India Vs.Rajasthan Spg. & Wvg. Mills [2009(13) SCC 448] and reiterated in para 13 that:- "

13.

It goes without saying that for applicability of Section 271(1)(c), conditions stated therein must exist." Knitting Works (P) Limited, (2014) 43 Taxman.com 28 (P&H) following the judgment of the Apex Court in Reliance Petroproducts (P) Limited's 465 relied upon by the learned counsel for the appellant-revenue being based on individual fact situation involved therein does not come to the rescue of the revenue.

6.

In the present case, the view adopted by the Tribunal is a plausible view based on appreciation of material on record and, therefore, does not warrant any interference by this Court. Learned counsel for the GURBAX SINGH 2016.02.12 14:54 integrity of this document High Court Chandigarh appellant-revenue has not been able to show any illegality or perversity in the impugned order. Thus, no substantial question of law arises. Consequently, the appeal stands dismissed. (Ajay Kumar Mittal)

Judge January 11, 2016 (Raj Rahul Garg) ‘gs’ Judge GURBAX SINGH 2016.02.12 14:54 integrity of this document High Court Chandigarh

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