CIT vs SARLA FABRICS PVT LTD

ITA-788/2011 Page 1

$~7 * IN THE HIGH COURT OF DELHI AT NEW DELHI

DECIDED ON: 20.07.2012

ITA 788/2011

CIT

..... Appellant Through: Mr. Deepak Chopra, Sr. Standing Counsel with Mr. Harpreet Singh Ajmani, Advocate.

versus

SARLA FABRICS PVT LTD ..... Respondent

Through: Mr. M.P. Rustogi with Mr. Deepak Malik and Mr. K.N. Ahuja, Advocates.

CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR

MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT) %

The Revenue claims to be aggrieved by the order of the ITAT in ITA No.3735/DEL/2010 dated 22.10.2010. 2. The facts in this case are not in dispute. The assessment in the case was completed on 23.12.2005 when a loss of Rs.2,30,53,433/- was claimed. The assessee had claimed deduction under Section 80HHC to the extent of Rs.1,32,88,262/-. This amount was disallowed 2012:DHC:4457-DB

ITA-788/2011 Page 2

and the assessee lost its case on merit before the CIT (A) as well as Tribunal. In this backdrop, the Revenue initiated proceedings under Section 271 (1) (c) contending that penalty was justifiably leviable. The CIT (A) allowed the assessee’s appeal against the order of AO. The Revenue’s appeal was rejected by the impugned order where it was held that: - “The discussions in the impugned order show that the assessee maintained separate books of accounts for different units and, therefore, the claim in respect of deduction u/s 80HHC is allowable, without offsetting the loss from other unit. The CIT (Appeals) while dealing with the quantum addition, as well as the ITAT denied the claim of the assessee. When it came to the imposition of penalty, it was contended by the assessee that all particulars of the income have been disclosed and, therefore, there was bonafide claim of deduction u/s 80HHC. There were several orders of the Tribunal 2012:DHC:4457-DB

ITA-788/2011 Page 3

between the different Benches of the Tribunal or the High Courts, which is finally settled by the pending judgment of the Supreme Court and all the necessary facts have been disclosed by the assessee in its return, proceedings under Section-271D would not be warranted. This was so held in Commissioner of Income Tax, Delhi-IV v. I.P. India (P.) Ltd. [2012] 204 TAXMAN 368 in the following terms: - “8. On a careful consideration of the matter, we find that the AO has relied on the judgment of the Jharkhand High Court (supra) and referred the issue of levying penalty to the Additional CIT. He did not examine whether the share application monies can be treated as “loan” or “deposit” within the meaning of Section 269SS. The Additional CIT has merely endorsed the view of the AO in passing the penalty order. The CIT(A) has found as a fact that the shares were subsequently allotted to the applicant companies as shown by the form filed before the

CIT vs. SARLA FABRICS PVT LTD