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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI G. MANJUNATHA
Date of Hearing – 09.11.2017 Date of Order – 23.11.2017
O R D E R PER SAKTIJIT DEY, J.M.
This is an appeal by the Department against the order dated 26th September 2016, passed by the learned Commissioner (Appeals)–8, Mumbai, deleting the penalty amounting to ` 10,10,471, for the assessment year 2010–11.
Brief facts are, the assessee a company is engaged in the business of generation of electricity. That besides, the assessee also engaged itself in investment activities by investing the surplus funds in 2 Mansukhlal Investment Pvt. Ltd.
shares and mutual funds. For the assessment year under dispute, the assessee filed its return of income on 28th September 2010, declaring income of ` 39,62,303 under normal provisions and book profit of ` 89,14,820 under section 115JB of the Act. During the assessment proceedings, the Assessing Officer while verifying assessee’s claim of deduction under section 80IA of the Act in respect of the power generation unit found that the assessee has treated the income of ` 32,70,135 from sale of carbon credit as profit from the power generation business and has claimed deduction under section 80IA of the Act. The Assessing Officer being of the view that income received from sale of carbon credit is not eligible for deduction under section 80IA called upon the assessee to justify its claim. Through an elaborate written submission filed before the Assessing Officer the assessee stated that the income received from sale of carbon credit is in the nature of capital receipt, hence, not taxable. Further, the assessee submitted, in case it is held as income of the assessee, then it should be considered as arising out of the business of generation of power, hence, eligible for deduction under section 80IA of the Act. The Assessing Officer accepted neither of the contentions raised by the assessee and held that the income received from sale of carbon credit though is to be treated as income of the assessee, however, no deduction under section 80IA of the Act is allowable. On the basis of 3 Mansukhlal Investment Pvt. Ltd. such disallowance, the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) of the Act and ultimately passed an order imposing penalty of ` 10,10,471 under section 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income. Against the penalty order passed by the Assessing Officer assessee went in appeal before the first appellate authority.
The learned Commissioner (Appeals) after considering the submissions of the assessee in the light of the decisions relied upon found that in the tax audit report as well as other accompanying document filed along with return of income the assessee has furnished full particulars of the income derived from sale of carbon credit and deduction claimed under section 80IA of the Act. He, therefore, held that the allegation of the Assessing Officer that the assessee has furnished inaccurate particulars of income is unsubstantiated. The learned Commissioner (Appeals) observed that the assessee has merely claimed a deduction which after verification by the Assessing Officer was not found to be allowable. Therefore, he held that making a claim which was rejected by the Assessing Officer cannot amount to furnishing of inaccurate particulars of income. Accordingly, he deleted the penalty imposed.
4 Mansukhlal Investment Pvt. Ltd.
When the appeal was called for hearing none appeared on behalf of the assessee in spite of issuance of notice of hearing through RPAD. Therefore, we proceed to dispose of the appeal ex–parte qua the assessee after hearing the Learned Departmental Representative and on the basis of material available on record.
We have heard the Learned Departmental Representative and perused the material on record. Undisputed facts are, the income received from sale of carbon credit amounting to ` 32,70,135 was treated as part of the profit from power generation unit and assessee claimed deduction under section 80IA of the Act. The Assessing Officer disallowed assessee’s claim of deduction on the reasoning that the income from sale of carbon credit cannot be considered as profit derived from power generation activity. As rightly observed by the learned Commissioner (Appeals), the assessee has furnished full particulars of the income derived from sale of carbon credit as well as deduction claimed under section 80IA of the Act in the tax audit report. Therefore, the allegation of the Assessing Officer that assessee has furnished inaccurate particulars of income is unacceptable. Further, claim of the assessee that the income from sale of carbon credit is not taxable as it is in the nature of capital receipt is debatable issue on which divergent view have been expressed by different benches of the Tribunal. Therefore, considered in the aforesaid
5 Mansukhlal Investment Pvt. Ltd. perspective, the claim of deduction by the assessee does not tantamount to furnishing of inaccurate particulars of income. The assessee has merely claimed a deduction which was not found acceptable by the Assessing Officer. Therefore, applying the ratio laid down by the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), no penalty under section 271(1)(c) of the Act can be imposed. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised.
In the result, Revenue’s appeal is dismissed. Order pronounced in the open Court on 23.11.2017