ITO 2(3)(3), MUMBAI vs. TRANSTEC OVERSEAS P.LTD, MUMBAI

We have heard the argument and advanced by the Ld. Representative of the parties and perused the record. There is a delay of 15 day’s in filing the appeal. Since, the period of the delay is not so long, therefore, we condoned the delay in the interest of justice because the case is required to be decided on merits. The Ld. Representative of the Department has argued that the assessee has raised the wrong claimed in view of the provision u/s 10AA of the Act which was declined by the AO, therefore, the AO has rightly levied the penalty in accordance with law but the CIT(A) has wrongly deleted the same. Therefore, the order of the CIT(A) in this regard is liable to be set aside in view of the law settled in the case of CIT Vs. Zoom Communications Pvt. Ltd. 233 CTR 465 (Del). On the other hand, the Ld. Representative of the assessee has refuted the said contention and strongly relied upon the order passed by the CIT(A) in question. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - “7 I have carefully considered the facts of the case and the submission of the AR. I have also gone through the assessment order u/s 143(3) order of the ld. CIT(A) and the penalty order u/s 271(1)(c) passed by the AO. I have also gone through the decisions relied upon by the AO and the Ld. AR. The AO has levied penalty on the ground that assessee had claimed enhanced deduction u/s 10AA amounting to Rs.1,03,20,914/- as against the deduction of A.Y. 2009-10 u/s 10AA amounting to Rs.1,03,20,914/- as against the deduction of Rs.69,31,997/- claimed in the original return. He concluded that with an intention to reduce its profits, the assessee has enhanced the deduction by including the local sales as export sales and tried to justify the same by relying on the amendment in the Rule. However, the basic character for availing the deduction is export out of India which is not the case of the assessee. Since the assessee had not exported but claimed the enhanced deduction with an intention only to educe the profits and taxable income, the provisions of section 271(1)(c) are clearly applicable. He relied on the decision in the case of CIT Vs. Rakesh Suri (2010) 233 CTR (All) 184. CIT Vs. Zoom Communication P. Ltd. (233 CTR 465 (Del), Indian Seafoods 105 ITR 708 and CIT Vs. HCIL Kalindee Aprsspl. 37 taxmann. 347 (Delhi). On the other hand, the Ld. AR has argued that rejection of a legal claim for deduction u/s 10AA does not amount to concealment. He also stated that deemed export were held to be allowable in some cases by the Hon’ble ITAT. Hence the present case is a debatable one. It was further stated that enhanced claim was made on the basis of CA certificate and due to the amendment in the Rules. He stated that all facts material to computation of income was disclosed in the return of income and financial statements. The Ld. AR also stated that facts of the appellant are different from the decisions relied on by the AO. He has relied on a number of decisions which have been detailed in para 6 above.”

On appraisal of the above mentioned order, we noticed that the assessee raised the claim u/s 10AA of the Act on the advice of its CA. The assessee raised the claim the deduction of Rs.69,31,997/- u/s 10AA of the Act in the original return of the income. The said return was supported by auditor’s report in form No. 56F. In both the returns assessee has disclosed the material facts before the Authority. There was no concealment of income nor assessee furnished the inaccurate particular of income. Undoubtedly, the claim of the deduction u/s 10AA was not accepted and the suitable disallowance by itself does A.Y. 2009-10