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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI K.N. CHARY
PER SHRI K.N. CHARY, JUDICIAL MEMBER
This is an appeal by the Revenue challenging the order dated 31.08.2015 in appeal no. 492/14-15 passed by the Ld. Commissioner of Income Tax (Appeals)-6, Delhi (hereinafter for short called as the “Ld. CIT (A)”) on the following grounds:
1. “Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) is justified in not upholding the penalty order passed by the Assessing Officer (the AO) u/s 271(1)(c) of the Income Tax Act, 1961 (the Act)? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is justified in setting aside the penalty order u/s 271(1)(c)
of the Act without considering provisions of Explanation 1 to Section 271(1)(c) of the Act.? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is justified in not upholding the penalty order u/s 271(1)(c) of the Act by ignoring ratio dicidendi as upheld by the Hon’ble Jurisdictional High Court in the case of CIT vs. M/s Zoom Communication Pvt. Ltd. (2010) 327 ITR 510 (Delhi).
That the order of the Ld. CIT (A) is erroneous and is not tenable on facts and in law.
5. That the appellant craves leave to add, alter, amend or forgo any grounds of appeal
either before or at the time of hearing of the appeal.”
2. Briefly stated facts of the case are that the assessment u/s 143(3) of the Income Tax Act, 1961 (for short called as the ‘Act’) for the AY 2011-12 was completed and during the course of assessment it was found that the assessee was claiming deduction u/s 10B of the Act but since the assessee had not obtained any approval from the competent authority and the Software Technology Park of India was not competent to grant approval.
However, assessee filed a revised computation of income withdrawing the claim of deduction u/s 10B but the Assessing Officer found that for non approval by the assessee by the competent authority the assessee is not entitled to seek deduction u/s 10B and for want of meeting this requirement the claim of the assessee becomes a wrong claim, as such, following the decision of the Hon’ble High Court in CIT vs. Zoom Communication P. Ltd. (2010) 327 ITR 510 (Delhi), AO proceeded to levy a penalty of Rs. 11,21,000/- of the Act. However, in appeal Ld. CIT (A) while following the decision of the Hon’ble Apex Court in CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) and also the decision of the Hon’ble Jurisdictional High Court in the case of Energetic Constructions Pvt. Ltd. vs. Department of Income Tax and CIT vs. Jakson Ltd. deleted the same. Hence, the Revenue is in appeal.
It is the argument of the Ld. DR that the Ld. CIT (A) erred in ignoring the ratio of the Hon’ble Jurisdictional High Court in CIT vs. M/s Zoom Communication P. Ltd. (supra) and in not considering the provisions of Explanation 1 to Section 271(1)(c) of the Act. It is further argued that there are no bona fides on the part of the assessee in making a false claim for deduction u/s 10B of the Act knowing it fully well that STPI is not a competent authority u/s 14 of the Industries Development & Regulation Act (IDAR) Act, as such, penalty imposed by the AR is proper and correct. Per contra, it is the submission of the Ld. AR that it is only under the mistaken impression that since the registration was granted by the STPI society to the assessee and in view of the decision reported in Mentor Graphics (Noida) Pvt. Ltd. delivered on 18.01.2015 read with the decision of the Hon’ble Jurisdictional High Court in CIT vs. Technovate E Solutions Pvt. Ltd., approval given by the STPI is valid having authority of Inter Ministerial Standing Committee in respect of the claims u/s 10A, the assessee claimed deduction u/s 10B of the Act since the provisions of Section 10A and 10B are similar. Further he submitted that the moment the assessee realized this, they filed revised return of income withdrawing the claim for deduction u/s 10B of the Act, as such, the deletion of penalty by the Ld.CIT (A) is proper and cannot be interfered with.
4. We have carefully gone through the record. The contention of the assessee is that the provisions of Section 10A & 10B are similar, as such, since the assessee had fulfilled all the conditions are required for deduction u/s 10A of the Income Tax Act under mistake and impression they claim the deduction u/s 10B in respect of the STPI Unit. It is submitted that the Hon’ble Jurisdictional High Court in CIT vs. Technovat E Solutions Pvt. Ltd. held that the approvals given by the Directors of Software Technology Parks of India are valid having the authority of Inter Ministerial Standing Committee. It is also an admitted fact that the moment the notice was issued calling upon the assessee to explain why the deduction u/s 10B should not be disallowed, the assessee filed a return of income withdrawing the claim for deduction u/s 10B of the Act. In the circumstances, we find that the Ld.CIT (A) is justified in his view that the issue whether claimed u/s 10B is a deduction or exemption is a debatable issue and on this aspect the reasoning given by the Ld.CIT (A) in paragraph no. 3 is impacable. Further Ld.CIT (A) based his conclusion on the decision of the Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) that disallowance of a claim for deduction will not automatically lead to the levy of penalty unless there is concealment of income or furnishing of inaccurate particulars. We are agreeing with the findings of the Ld. CIT (A) that by reason a bona fide legal claim in the return of income even if the same is ultimately found to be not acceptable, it would be said that income has been concealed or inaccurate particulars of income were furnished, and consequently, the assessee cannot be penalized. We, therefore, while upholding the order of the Ld. CIT (A) dismiss the grounds of appeal.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 09.10.2017