ITO, WD-2(1), KOLKATA, KOLKATA vs. M/S PECON SOFTWARE PVT. LTD., KOLKATA

- This Revenue’s appeal for assessment year 2011-12 challenges correctness of Commissioner of Income Tax (Appeals)-1, Kolkata’s order dated 11.03.2016, passed in case No.734/CIT(A)-1/W-2(1)/2014-15, reversing the Assessing Officer’s action imposing penalty of ₹22,06,701/- levied in his order dated 31.07.2014, involving proceedings u/s.271(1)(c) of the Income Tax Act, 1961; in short ‘the Act’.

Learned Departmental Representative first of all takes us to CIT(A)’s following findings under challenge deleting the impugned penalty as under:- “The submissions and material on record was carefully considered. The finding of the AO was that claim of deduction u/s. 10A of the IT Act can be taken only after getting renewal letter of permission from the appropriate authority, for STP and the appellant company filed its income tax return without getting LOP from the appropriate authority, holding that the intention was to reduce its total income after getting wrong deduction u/s 10A of the IT Act. A.Y.2011-12 ITO Ward-2(1), Kol. Vs. M/s Pecon Software Pvt. Ltd. Page 2 It is observed that the allowability of exemption u/s. 10A was a debatable issue as due application was filed before the STPI au9thority for renewal of eligibility of exemption available for SEZ/STDPI u/s/a 10A and the certificate in form no. 56F was admittedly filed along with the return of income under a bona fide belief that the claim for exemption would be available to the appellant as the company was registered under STPI in earlier years and it was a simple renewal for the succeeding years. Further, the AR of the appellant has submitted that when it came to the knowledge of the appellant company that the deficiency of the claim of exemption u/s. 10A, a revised computation of income was filed voluntarily and paid the I. Tax accordingly and accepted the position as per law. It is inferred from the above discussion it was established that the intention of the appellant company was not to conceal the income or inaccurate particulars of income in order to evade the tax. The appellant company has disclosed all the material facts and paid the due tax on the disallowance made u/s. 10A of the IT Act. The assessee has disclosed all material facts in respect of its total income and has also offered plausible explanations on all the issues and the assessee had neither concealed any particulars of income nor furnished inaccurate particulars of income as all details and evidences in respect of the queries raised at the time of assessment were submitted and all the details and evidences were on records and there was no information which came in possession from any external source by the Assessing Officer, which can be termed as conscious and deliberate intention not to disclose any income. Moreover, the making of a wrong claim, can in no way fall within the mischief of consciously and deliberately concealing the particulars of income or submission of inaccurate particulars of income. The hon'ble jurisdictional High Court of Calcutta has held in the case of CIT vs. Calcutta Credit Corporation 166 ITR 29 (Cal) as follows:- ‘It is settled law that mere addition to taxable income does not automatically lead to an order of penalty. Further investigations and findings is necessary before penalty can be imposed. In the instant case, the case of the assessee that he had not deliberately concealed his income or deliberately furnished inaccurate particulars or that he is guilty of fraud or willful neglect supported by evidenced adduced has been accepted by the Tribunal on facts found by the Tribunal which remain unchallenged.’ In view of the above discussion, it is held that the penalty imposed by the AO of Rs.22,06,701/- is not justified. Hence, I direct the AO to delete the penalty imposed by the AO of Rs.22,06,701/-. This ground is allowed.” The Revenue’s vehemently contends during the course of hearing that Assessing Officer had rightly imposed the impugned penalty since the assessee raised its claim of section 10A deduction without getting the requisite approval from Software Technology Part of India “STPI”. Its case therefore is that CIT(A) has erred in law as well as on facts in reversing the impugned penalty. We see no substance in Revenue’s instant argument. There is no dispute that assessee had indeed claimed section 10A deduction qua its STPI undertaking without getting the requisite approval. The fact however remains that it had very well filed all the required documents before the competent authority to this effect during the relevant previous year. It