EXCEL BEARINGS P.LTD,MUMBAI vs. ITO WD 6(2)(3) ( NOW ITO WD 3(1)(3), MUMBAI

The above titled two appeals have been preferred by the assessee against the orders both dated 24.02.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2001-02 & 2003-04, agitating the levy of penalty in both the appeals under section 271(1)(c) of the Income Tax Act. Since the facts and issues involved in both the appeals are identical, hence, they are taken together and are being disposed of with this common order. For the sake of convenience, facts have been taken from for A.Y. 2001-02.

The facts in brief are that the assessee had filed its return of income of Rs.9,02,124/- and claimed the deduction under section 80HHC & 80I of Rs.33,90,542/- and Rs.11,53,613/- respectively. The assessee had submitted

The Ld. CIT(A) deleted most of the additions made by the Assessing Officer (hereinafter referred to as the AO). However, sustained part of the addition made on disallowance of deduction under section 80IB. The Revenue went in appeal before the ITAT against the decision of the Ld. CIT(A).

The ITAT restored the matter to the file of the AO. Accordingly the assessment was completed under section 143(3) of the Act read with section 147 & 254 of the Act determining the total income at Rs.9,16,090/-. Against the said order the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) had given no more relief to the assessee. However, the assessee went in appeal before the ITAT. The ITAT vide order dated 31.03.11 confirmed the order of CIT(A) in respect of deduction under section 80IB of the Act. Accordingly, assessment was completed under section 143(3) read with section 254 of the Act, dated 09.11.2012 determined the total income of Rs.1,74,905/- after allowing the deduction under section 80IB of Rs.8,64,953/- as against the claim by assessee in original return of income amounting to Rs.11,32,520/- and accordingly penalty under section 271(1)(c) was initiated. In penalty proceedings, the AO observed that the assessee had included the amount of Rs.10,91,133/- by way of sale of DEPB license for the purpose of deduction under section 80IB of the Act. He was of the view that the assessee filed inaccurate particulars of income under section 80IB and the assessee’s claim was disallowed to the extent of Rs.2,88,660/-. He, therefore, held that the assessee had inaccurately calculated the claim of deduction under section 80IB. He accordingly imposed penalty of Rs.1,14,165/- being 100% of the tax sought to be evaded under section 271(1)(c) of the Act. Thus, the assessee preferred appeal before the Ld. CIT(A).

We have heard the Ld. D.R. and have also gone through the records. From the facts on the file and the impugned order of the Ld. CIT(A) as well as of the AO, we find that the issue relating to the quantum of deduction under section 80IB was a debatable issue. The matter travelled to the Tribunal two times. The assessee also got relief relating to various issues including the deduction claimed by the assessee under section 80HHC of the Act which was originally disallowed by the AO. Even claim of the assessee under section 80IB has also been allowed to a large extent. The issue relating to the disallowance, thus, was a debatable issue which the assessee agitated up to the level of Tribunal in two rounds of litigation. Under such circumstances, it cannot be said that the assessee had intentionally furnished any inaccurate particulars of income or had concealed its income. It was a case of claim of deductions under the provisions of Act and the assessee as observed above, has also succeeded in his claim to a large extent before the appellate authorities. Merely because the assessee’s claim to some extent has not been allowed, that does not mean that the assessee had furnished inaccurate particulars of income or had concealed its income. The Hon’ble Supreme Court in the case of “CIT vs. Reliance Petro Products” (2010) 322 ITR 158 (SC) has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Under such circumstances, no case of levy of penalty under section 271(1)(c) is made out.

In view of this, penalty levied by the lower authorities under section 271(1)(c) is hereby deleted. for A.Y. 2003-04 8. Since the facts and issues involved in this case are identical to the assessee’s case for A.Y. 2001-02, hence, in view of our findings given above

In the result, both the appeals of the assessee are hereby allowed.