CIT KARNAL vs. M/S ORIENTAL RUGS CO.

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ITA/227/2010HC Punjab & HaryanaPHHC01093139201020 September 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court noted that an identical appeal by the Revenue, CIT v. M/s Raj Overseas (I.T.A. No.225 of 2010), had already been dismissed by the High Court on July 28, 2010. Therefore, following its own previous decision on a similar matter, the High Court found no reason to deviate and accordingly dismissed the present appeal. The judgment does not provide a detailed reasoning on the merits of the penalty deletion by the ITAT, but rather relies on the precedent set by its prior dismissal of an identical appeal. The operative direction was the dismissal of the appeal. No issues were expressly left undecided.

What were the facts?

The Revenue, the Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated April 2, 2009, passed by the Income Tax Appellate Tribunal (ITAT). The ITAT had deleted a penalty imposed under Section 271(1)(c) of the Act. The penalty was levied on the amount of deduction claimed by the assessee, M/s Oriental Rugs Co., under Section 80IB on export incentives for the assessment year 2002-03. The Revenue contended that the assessee had deliberately furnished inaccurate particulars by claiming this deduction, as a Supreme Court decision disallowing such claims was already available. The High Court noted that an identical appeal by the Revenue in CIT v. M/s Raj Overseas (I.T.A. No.225 of 2010) had been dismissed by it on July 28, 2010.

What were the issues?

1. Whether the ITAT was correct in law in deleting the penalty imposed under Section 271(1)(c) for claiming deduction under Section 80IB on export incentives, considering the Supreme Court decision in Sterling Foods v. CIT which disallowed such claims, implying the assessee furnished inaccurate particulars? 2. Whether the ITAT's decision to delete the penalty under Section 271(1)(c) is justified in light of the Supreme Court's decision in Liberty India v. CIT, which reaffirmed the non-allowability of Section 80IB deduction on export incentives? 3. Whether the ITAT's decision to quash the penalty under Section 271(1)(c) on the ground of no deliberate concealment is justified, given the Supreme Court's ruling in Dharmendra Textile Processors that mens rea is not essential for levying penalty under Section 271(1)(c) and that it is mandatory for revenue loss, which occurred due to the assessee's wrong claim? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee before the High Court. Revenue's Contentions: The revenue argued that the ITAT was wrong in deleting the penalty. It contended that the assessee had deliberately furnished inaccurate particulars by claiming deduction under Section 80IB on export incentives, especially since the Supreme Court decision in Sterling Foods v. CIT was available at the time of filing the return. The revenue further argued that the decision in Liberty India v. CIT reaffirmed the non-allowability of such deductions. Finally, the revenue submitted that mens rea is not an essential ingredient for penalty under Section 271(1)(c) as per Dharmendra Textile Processors, and the penalty is mandatory when revenue loss occurs due to a wrong claim.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 271(1)(c),Section 80IB

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 20.9.2010 The Commissioner of Income Tax. -----Appellant. Vs. M/s Oriental Rugs Co. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Yogesh Putney, Sr. Standing Counsel for the appellant. --- ADARSH KUMAR GOEL, J. This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order dated 2.4.2009 of the Income Tax Appellate Tribunal, New Delhi in I.T.A. No.3629/Del)/08 for the assessment year 2002-03 proposing to raise following substantial questions of law:- “i) Whether on the facts, and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in deleting the penalty imposed u/s 271(1)(c) on the amount of deduction claimed u/s 80IB on export incentives by holding that there was no deliberate furnishing of inaccurate particulars by the assessee, given the fact that the decision of the Hon’ble Year 2002-03, and therefore, the assessee was evidently filing inaccurate particulars of income in claiming deduction u/s 80IB on export incentives? ii) Whether the decision of the Income Tax Appellate Tribunal to delete the penalty u/s 281(1)(c) of the Act is justified in the light of the decision of the Hon’ble 218), whereby the non-allowability of 80IB deduction on export incentives has been re-affirmed? iii) Whether the decision of the Income Tax Appellate Tribunal quashing the penalty order u/s 271(1)(c) on the ground that there is no deliberate concealment is justified in the light of the decision of the Hon’ble Apex Court in Dharmendra Textile Processors and others 306 ITR 277 (SC) which has held that mens rea is not an essential ingredient for levy of penalty u/s 271(1)(c) of the Act, and that levy of such penalty is mandatory as remedy for loss to revenue, and given the fact that such loss to revenue has occurred in the instant case due to wrong claim by the assessee with respect to deduction u/s 80IB?” It is not disputed that identical appeal of the revenue being I.T.A. No.225 of 2010 CIT v. M/s Raj Overseas has been dismissed by this Court vide order dated 28.7.2010. Accordingly, this appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE September 20, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 2

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