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Before: Shri Bhavnesh Saini & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the Revenue against the order of the ld. CIT(A), Dehradun dated 01.01.2016 for the assessment year 2012-13 on the following solitary effective ground :
“1. The Ld. CIT(A), Dehradun has erred in law and on the facts in deleting the penalty u/s. 271(1)(c) of the I.T. Act, 1961 ignoring the fact that the assessee had furnished inaccurate particulars of income in spite of being well aware of the fact that deduction u/s. 80IC was patently inadmissible on interest income.”
The brief facts of the case are that the assessee filed return of income on 26.07.2009 declaring total income of Rs.1,52,72,495/- after claiming deduction
ITA No. 2013/Del./2016 2 u/s. 80IC of the IT Act at Rs.18,54,42,574/-. The case was selected for scrutiny and notice u/s. 143(2) was issued on 10.08.2013 which was served upon the assessee through speed post and notice u/s. 142(1) was issued on 30.12.2013 along with questionnaires. After issuing the notice u/s. 143(2), the assessee revised his return of income on 02.09.2013 declaring nil income by claiming deduction u/s. 80IC to the extent of Rs.20,07,15,069/- which includes business income as well as interest received on FDRs of Rs.1,52,72,495/-. The assessee also obtained CA certificate in form No. 10CCB (PB 15 to 19) for claiming deduction u/s. 80IC and in the certificate at Sl. No. 29 & 30, the auditor has also certified that the deduction u/s. 80IC is eligible upto Rs.20,07,15,070/-. The AO did not accept the revised return filed by the assessee claiming deduction u/s. 80IC on interest income and made addition of Rs.1,52,72,495/- on the premise that this interest income was not generated from the manufacturing activities of the assessee’s business so as to claim it eligible for deduction u/s. 80IC of the Act. The assessee did not challenge this addition. Thereafter, penalty proceedings u/s. 271(1)(c) of the Act were initiated by the AO by issuing notice to the assessee and the Assessing Officer imposed penalty of Rs.47,19,203/- based on the above addition. In appeal, the first appellate authority, after considering the submissions of the assessee and the order of the AO, deleted the penalty vide impugned order. It is this order, which has been challenged by the Revenue by way of this appeal before the Tribunal.
ITA No. 2013/Del./2016 3
The learned DR submitted that the AO was justified to impose penalty on the addition made on account of interest income, which was wrongly claimed by the assessee as eligible for deduction u/s. 80IC of the Act. The said interest income was not part of the eligible business income derived from the manufacturing activities of the undertaking as prescribed under the Act. Therefore, the assessee has filed inaccurate particulars of income, for which penalty imposed has wrongly been deleted by the ld. CIT(A).
On the other hand, the ld. AR of the assessee relied on the order of the ld. CIT(A) and submitted that the AO has not spelt out in the notice issued u/s. 274 read with section 271 as to on which charges the impugned penalty has been levied – whether concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, no proper satisfaction has been recorded by the AO for imposition of penalty. Reliance is placed on the decision of Hon’ble Karnataka High Court in CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565(Kar), decision of Hon’ble Supreme Court in CIT vs. SSA’s Emerald Meadows (SLP No. 11485/2016 dated 05.08.2016 and other several decision of various Benches of Tribunal. It was further submitted that mere rejection of claim of deduction would not attract penalty u/s. 271(1)(c) of the Act as also held by ITA No. 2013/Del./2016 4 Hon’ble Supreme Court in CIT vs. Reliance Petroproducts (P) Ltd., 322 ITR 158 and several other decisions of various high courts as relied in the written synopsis. The assessee had obtained CA certificate in prescribed form 10CCB, in which total amount claimed as deduction has been certified by the Chartered Accountant to be eligible for deduction u/s. 80IC of the Act and therefore, bona fide of the claim cannot be doubted and for such an innocent claim, no penalty can be levied.
Reliance is placed on the decision of Hon’ble Supreme Court in Price Waterhouse Coopers (P) Ltd. V. CIT, 348 ITR 306 and various other decisions as relied by assessee in her written synopsis.
After hearing both the parties and perusing the entire material on record, we find that the ld. CIT(A) has made reasoned order and it does not call for any interference. The ld. CIT(A) has deleted the penalty observing as under :
“8. I have duly considered the facts and circumstances of the case. Perusal of the audit report in the Form 10CCB shows that the Auditor in column no. 29 had cited the profits and gains derived by the undertaking/enterprise from the eligible business as Rs. 20,07,15,070/- and in column no. 30 listed the same amount as the amount eligible for deduction u/s 80IC. Thereafter, the assessee had filed a return in which it had excluded the interest income and claimed the deduction of only Rs. 18,54,42,574/-. Subsequently, before the case could be assessed it revised the return and filed a claim for deduction at Rs, 20,07,15,069/- i.e. the amount indicated by the auditor in the audit report in Form 10CCB as the eligible amount for deduction. Thus, the assessee was clearly filing a bonafide claim in view of the treatment of the said interest as deductible by the auditor. However, no part of the income was concealed from the AO and no inaccuracies were observed in any of the heads of income reported by the assessee in its return. The only case is that by claiming deduction which it was not entitled to, the assessee had filed inaccurate particulars of what its taxable income was and therefore, it was liable to penalized. However, the Courts have held otherwise. The case of the assessee appears to be covered by the judgement of Hon'ble Supreme Court in the matter of CIT Vs. Reliance Petro Products (P) Ltd. 322 ITR 158 (2010) in which the Hon'ble Supreme Court had held
ITA No. 2013/Del./2016 5 that "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 inaccurate particulars. The assessee has furnished all the details of its expenditure as well as its income in his return, which details in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It is up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the revenue, that by itself would not attract the penalty it/s 271(1)(c). If the contention of the revenue is accepted then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty u/s 271(i)(c) and it dearly not the intendment of the legislature". In the case of CIT Vs Caplin Point Laboratories Ltd, reported in 293 ITR 524 Madras the assessee company considered interest income as business income and claimed deduction u/s. 80HHC and 801. Claim of assessee was not accepted and addition was made. It was held that, it cannot be said that the assessee concealed particulars of income or furnished inaccurate particulars of income.
To my mind the case of the assessee is covered by the judgements of Hon'ble Supreme Court in the case of Reliance Petro Products (P) Ltd. (supra.) and also supported by the judgement of the Hon'ble Rajasthan High Court in CIT vs Harshvardhan Chemicals & Minerals ltd 259 ITR 212 (2003) and the Madras High Court in CIT vs Caplin Point Laboratories 293 ITR 52(Mad). In the circumstances, the penalty u/s 271(1)(c) is held to be unwarranted given the facts and circumstances of the case. It is therefore deleted.”
A perusal of the notice issued by the AO placed at paper book page 28 shows that it is in a typed format common to all assessees, wherein the name of the assessee is written in the prescribed column and the AO has not struck down even the non- applicable portion of the two charges printed in the said notice, i.e., concealed the particulars of income OR furnished inaccurate particulars of such income.
Therefore, in view of the decision of Karnataka High court in the case of Manjunatha (supra), penalty imposed is not sustainable u/s. 271(1)(c) of the Act.
Besides, the bonafide of assessee’s claim stands proved by the auditor’s certificate in form 10CCB indicating the amount of Rs. 20,07,15,069/- as the eligible amount
ITA No. 2013/Del./2016 6 for deduction u/s. 80IC, which in view of various decisions relied by the ld. AR goes to exonerate the assessee from penal consequences. There is no material on record from the side of Revenue to deviate from the principle of law laid down by Hon’ble Apex Court in the case of Reliance Petroproducts (supra) that 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 for imposition of penalty. In presence of all these facts, we find no substance in the appeal of the Revenue and no material to interfere with the order of the ld. CIT(A) which has been passed after relying upon various judicial pronouncements. Accordingly, the appeal of the Revenue deserves to be dismissed, being bereft of merits.
In the result, the appeal is dismissed.
Order pronounced in the open court on 30.11.2017.