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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAMIT KOCHAR
This appeal is filed by the Revenue against the order of CIT(A)-29, Mumbai dated 27.6.2011 for Assessment Year 2005-06 in deleting the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’).
When the matter was called for hearing, none appeared on behalf of the assessee nor any adjournment petition is moved. The ld. DR submitted that notice was served on the assessee by affixture. Thus, we proceed to dispose of the appeal after hearing the ld. DR.
The ld. DR submits that the assessee filed a return of income claiming deduction u/s 80IB of the Act on the income earned from industrial undertaking which was set up in Goa. The claim was denied by the Assessing Officer while completing the assessment u/s 143(3) of the Act. On appeal, the CIT(A) partly sustained the disallowance, i.e., he confirmed that no deduction u/s 80IB of the Act was allowable on the job work charges received by the assessee. The CIT(A) was of the view that job work receipts are not income derived from manufacturing activity of the assessee and, therefore, not eligible for deduction u/s 80IB of the Act. He submits that the matter was carried to ITAT.
The ld. DR further submitted that the Assessing Officer levied penalty u/s 271(1)(c) of the Act on the disallowance of deduction u/s 80IB of the Act on job work charges of Rs.30,90,000/- holding that assessee has filed inaccurate particulars of income. He submits that on appeal, CIT(A) deleted the penalty placing reliance on the decision of Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd., 322 ITR 158 (SC). He submits that CIT(A) held that when a bona fide claim is made and such claim is denied, it would not amount to filing of inaccurate particulars of income in view of the Hon'ble Supreme Court decision in the case of Reliance Petroproducts Pvt.Ltd. (supra) and deleted the penalty. He strongly placed reliance on the order of Assessing Officer in imposing the penalty.
We have perused the orders of the authorities below and heard the ld. DR. Here is a case where the penalty is levied on the ground that assessee has filed inaccurate particulars of income in claiming deduction u/s 80IB of the Act on job work charged received by it. According to the Assessing Officer and CIT(A) in the quantum proceedings, the job work charges received by assessee are not income derived from industrial undertaking and, therefore, assessee is not entitled for deduction u/s 80IB of the Act. It is a finding of the Assessing Officer in the penalty order that assessee has preferred an appeal before the ITAT, but we are not able to know the result of the appeal filed by assessee as nobody represented on behalf of the assessee nor has the ld. DR been able to point out the status of the appeal filed by the assessee in the quantum proceedings.
In our considered view, the claim made by the assessee, that it is entitled for deduction u/s 80IB of the Act on job work charges received in the course of manufacturing activity and whether the job work charges form part of income derived from industrial undertaking or not is a highly debatable issue. In fact, in the case of Bangalore Clothing Co., 260 ITR 371 (Bom) the jurisdictional High Court has held that 90% of job work charges cannot be excluded for computing relief u/s 80HHC on job work charges. The finding of the Tribunal that job work charges earned by the assessee is by using the machinery and manufacturing activity and thus they are income derived from industrial undertaking is affirmed. Thus, the claim of assessee that job work charges are income derived from industrial undertaking is a bona fide and genuine claim. Therefore, we do not see that the assessee has concealed any income or furnished inaccurate particulars of such income. It is a mere difference of opinion on a legal issue in respect of claim made by the assessee u/s 80IB of the Act. Thus, we sustain the order of CIT(A) in deleting the penalty levied u/s 271(1)(c) of the Act.
In the result, appeal of Revenue is dismissed.
Order pronounced in the open court on 1st November, 2016.