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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. B.R. BASKARAN & SH. N.K.CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR
BEFORE SH. B.R. BASKARAN, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA No.10(Asr)/2019 Assessment Year:2008-09
V.R.A. Cotton Mills Pvt. Ltd. Vs. Dy. CIT Fazilka Road, Vill:- Burjmohar Circle-II, Bathina Abohar [PAN:AABCV 3100A] (Appellant) (Respondent) Appellant by : Sh. P. N. Arora (Ld. Adv.) Respondent by: Sh. Charan Dass (Ld. DR)
Date of hearing: 27.08.2019 Date of pronouncement: 09.10.2019
ORDER PER N.K. CHOUDHRY, JM: The instant appeal has been filed by the Assessee against the order dated 02.11.2018 passed by the Ld. CIT(A), Bathinda u/s. 250(6) of Income Tax Act, 1961 (hereinafter called as ‘the Act’) whereby the Ld. CIT(A) upheld the penalty of Rs.7,20,000/- on account of furnishing of inaccurate particulars of income by claiming expenditure which was not allowable by virtue of provisions contained in Sec.40(a)(ia) of the Act and excessive claim of deduction u/s 80IB of the Act.
The assessee before the authorities below pleaded for bonafide mistake and claimed that the assessee company was all along under the bonafide belief that due compliance of provision of deduction to tax has been made as certified by the Chartered Accountant. No
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doubt the belief has turned out to be erroneous. But the assessee company has not withheld any such information relating to computation of income, so as to attract penalty provision of Sec.271(1)(c) as no claim of expenses has been found to be incorrect. In view of the aforesaid facts and circumstances, it is clear that the assessee company has acted in bonafide manner on the basis of audited accounts certified by Chartered Accountant. The authorities below did not accept the explanation of the assessee and the AO imposed the penalty which has been affirmed by the Ld. CIT(A), against which the assessee is in appeal before us. The Assessing Officer disallowed the amount of Rs.1,42,58,665/- u/s 40(a)(ia) r.w. Sec.194C of the Act, on which no TDS was effected payment amounting to Rs.1,23,96,887/- made to the appellant’s export house contractor M/s. Narendra Logistic Pvt. Ltd.
On the other hand, the Ld. DR relied upon the orders passed by the authorities below and submitted that order impugned herein is based on logical reasoning and does not suffer from any illegality, perversity and impropriety.
Having heard the parties at length and perused the material available on record. In quantum appeal, the Ld. CIT(A) held that payments amounting to Rs.1,24,68,975/- made to M/s. Narendra Logistic Pvt. Ltd. does not come within the purview of the provisions of Sec.40(a)(ia) on account of the fact that the payment is in the nature of reimbursement of expenses as held in the case of CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. [2014] 361 ITR 192 (Guj.). The Ld. CIT(A) further held that no disallowance can be effected in case of payment of Rs.6,59,410/- towards handling
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charges as the same has been included in the operating income of the payee. Ultimately the Ld. CIT(A) disallowed the amount of Rs.4,45,986/- on account of handling charge qua M/s. Narendera Logistic Pvt. Ltd. and Rs.77,731/- on account of Trolly Fright payment made to Sohan Singh, Rs.4,70,136/- on account of Truck Fright payments and Rs.3,78,886/- and in conclusion the Ld. CIT(A) directed the AO to restrict the addition u/s 40A(ia) to Rs.13,72,079/- in place of Rs.1,42,58,665/-.
4.1 In the return of income, the assessee has also claimed deduction u/s 80IB @ 30% of the gross total income of Rs.65,40,056/-. The Assessing Officer reckoned that the gross total income included “other income” at Rs.53,15,330/- which could not be said to be derived from Industrial undertaking and while computing the allowable deduction u/s.80IB, the AO removed the said “other income” from the gross total income for the purpose of reckoning the amount of deduction. The Ld. CIT(A) in quantum appeal, directed the Assessing Officer to re-compute the eligible income after deducting the aforesaid other income and then subject the same to the appropriate % for arriving at the amount of deduction.
4.2 On the aforesaid facts, the question arise as to whether in a situation where the assessee has claimed certain expenses and deduction which have been disallowed by the Revenue Authorities, in that eventuality can the penalty be levied. The Apex Court in the case of Anantharam Veerasingaiah & Co. vs Commissioner Of Income Tax vs. CIT, 123 ITR 457(SC), has held that the assessment proceedings and penalty proceeding are altogether different and
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merely because amount was disallowed does not ipso facto lead to levy of penalty.
4.3 The Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products (Pvt.) Ltd. (2010) 322 ITR 158 (SC) has held that penalty u/s 271(1)(c) is not attracted merely because the assessee has claimed deduction of interest expenditure which has not been accepted by the Revenue and mere making of claim, which is not maintainable by law, by itself will not amount to furnishing of inaccurate particulars of income.
4.4 The Hon’ble Punjab & Haryana High Court in the case of CIT vs. M/s. Raj Overseas ( {2011} 336 ITR 261 {P&H} ) has held that no penalty u/s 271(1) (c) was leviable in respect of the deduction wrongly claimed by the assessee u/s 80IB of the Act in respect of income from Duty Draw Back.
4.5 While coming to the instant case, as the Revenue Department did not find the claim of the Asseeee as maintainable, however mere making claim by the Asseeee which otherwise not accepted by Revenue Department, by itself does not leads to furnishing of inaccurate particulars of income and therefore no base to entail the penalty under section 271(1) © of the Act, in view of Judgments passed by Apex Court in the case of CIT vs. Reliance Petro Products (Pvt.) Ltd. (Supra) and Anantharam Veerasingaiah & Co.(supra) and Punjab and Haryana High Court Judgment, in the case of CIT vs. M/s. Raj Overseas (Supra). On the aforesaid considerations, deliberations and observations, while respectfully following the propositions laid down by the Apex Court and the various High Courts and considering the argument of the Assessee to
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the effect that the assessment proceedings and penalty proceedings are altogether different and merely because amount was disallowed does not ipso facto, lead to levy of penalty, we are of the considered opinion that the penalty levied in the instant case by the Assessing Officer and confirmed by the Ld. CIT(A) does not survive and hence liable to be set aside.
In the result, appeal filed by the assessee stands allowed.
Order pronounced in the open Court on 09/10/2019.
Sd/- Sd/- (B.R.BASKARAN) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 09/10/2019. /PK/ Ps. Copy forwarded to: 1. The Appellant 2. The Respondent 3. The CIT 4. Then CIT(Appeals) 5. SR DR, I.T.A.T. Amritsar 6. Guard File True Copy By Order