High Court Of Punjab & Haryana
CIT vs. Arisudana Spinning Mills Ltd
Section 271(1)(c)
Asst. Year 1997-98, 1998-99, 2000-01
Satish Kumar Mittal & Mehinder Singh Sullar, JJ.
IT Appeal Nos. 410 to 412 of 2009
19th November, 2009
Counsel appeared :
Rajesh Sethi, for the Appellant
JUDGMENT
SATISH KUMAR MITTAL, J. :
This order shall dispose of three appeals bearing IT Appeal Nos. 410, 411 and 412 of 2009, filed by the Revenue under s. 260A of the IT Act, 1961 (hereinafter referred to as ‘the Act’), which are arising from the common order dt. 28th Nov., 2008 passed by the Income-tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’) in case of the assessee pertaining to three assessment years i.e. 2000-01, 1998-99 and 1997-98, respectively, whereby three appeals preferred by the Revenue against the common order of the CIT(A) deleting the levy of penalty imposed upon the assessee under s. 271(1)(c) of the Act, have been dismissed. In the present case, the assessee is engaged in the business of manufacturing of yarn and trading in wool. In its return of income, the assessee claimed deduction under s. 80-IA of the Act in respect of profits derived from trading turnover i.e. trading in the raw wool and knitted cloth. The return of income filed by the assessee was accompanied by audited balance sheet, P&L a/c and an audit report in Form No. 10CCB relating to the claim of deduction under s. 80-IA of the Act. The AO denied the said deduction to the assessee while coming to the conclusion that deduction under s. 80-IA was allowable only in respect of income derived from manufacturing of goods and not from trading in the raw wool and knitted cloth. The AO also initiated the penalty proceedings under s. 271(1)(c) of the Act for furnishing inaccurate particulars of income in its return with an intention to evade tax.
The order of the AO for not allowing the aforesaid deduction was set aside by the CIT(A), but the Tribunal while setting aside the order of the CIT(A) confirmed the order of the AO by relying upon the decision dt. 17th Aug., 2006 given by this Court in Liberty India vs. CIT (2007) 207 CTR (P&H) 243 : (2007) 293 ITR 520 (P&H). After the decision of the Tribunal, the penalty proceedings were finalized and penalties (Rs. 1,50,000, Rs. 5,50,000 and Rs. 8,00,000) under s. 271(1)(c) of the Act were imposed upon the assessee. Aggrieved against the orders of penalties, the assessee preferred appeals before the CIT(A), who vide consolidated order dt. 3rd April, 2008 deleted the penalties imposed under s. 271(1)(c) of the Act. Against the orders of the CIT(A), the Revenue preferred appeals, which have been dismissed by the Tribunal by a common order dt. 28th Nov., 2008 while confirming the order of deletion of penalty passed by the CIT(A). Against the said order, the Revenue filed the instant appeals raising the following substantial questions of law :
“(i) Whether on the facts and in law the Tribunal was justified in deleting the penalty under s. 271 (1)(c) amounting to Rs 1.50 lakhs imposed by the AO ignoring the fact that the assessee violated the provisions of s. 80-IA of the IT Act, 1961 which attracted penalty under s. 271(1)(c) of the IT Act, 1961 ?
(ii) Whether on the facts and in law the Tribunal was justified in deleting the penalty under s. 271 (1)(c) amounting to Rs. 5.50 lakhs imposed by the AO ignoring the fact that the assessee violated the provisions of s. 80-IA of the IT Act, 1961 which attracted penalty under s. 271(1)(c) of the IT Act, 1961 ?
(iii) Whether on the facts and in law the Tribunal was justified in deleting the penalty under s. 271 (1)(c) amounting to Rs. 8 lakhs imposed by the AO ignoring the fact that the assessee violated the provisions of s. 80-IA of the IT Act, 1961 which attracted penalty under s. 271(1)(c) of the IT Act, 1961 ? We have heard the counsel for the appellant and gone through the orders of the Tribunal.
Learned counsel for the appellant argued that the assessee patently made a wrong claim of deduction of profits earned from trading activities under s. 80-IA of the Act, whereas it was not entitled for the said benefit as per the law laid down by this Court in Liberty India’s case (supra) which has been upheld by the Supreme Court in Liberty India vs. CIT (2009) 225 CTR (SC) 233 : (2009) 28 DTR (SC) 73 : (2009) 317 ITR 218 (SC). In these facts, the assessee could not justify the bona-fideness of the claim of deduction under s. 80-IA in its return of income. Learned counsel further argued that the burden was on the assessee to prove that failure to return the correct income was for bona fide consideration, but the said burden was not discharged by the assessee. Learned counsel argued that the observations made by the CIT(A) that mens rea is required to be proved for levy of such penalty, is contrary to the recent decision of the Supreme Court in Union of India & Ors. vs. Dharamendra Textile Processors & Ors. (2008) 219 CTR (SC) 617 : (2008) 14 DTR (SC) 114 : (2008) 306 ITR 277 (SC). Therefore, the income-tax appeal was not justified in confirming the order of payment of penalty imposed under s. 271(1)(c) of the Act. After considering the submissions made by the learned counsel for the appellant, we do not find any merit in these appeals. In our opinion, the Tribunal has deleted the penalty imposed under s. 271(1)(c) on the assessee after recording a finding of fact that the assessee in its return of income adequately disclosed all the relevant facts by accompanying the relevant documents. In this regard, the following finding has been recorded by the Tribunal : “…..In this connection, a salient feature which is evident from the record is that the claim of the assessee made in the return of income, though not found acceptable, did not suffer from the vice of non disclosure. We find that the return of income filed by the assessee was accompanied by audited Balance-sheet, P&L a/c and also an audit report in Form No.10CCB relating to the claim of deduction under s. 80-IA of the Act. Though the AO has noted in the assessment order that the assessee had not filed separate trading, P&L a/c for the manufacturing and trading activities, yet the factum of the assessee having claimed deduction under s. 80-IA was evident from the audit report in Form No. 10CCB filed along with the return of income. In the assessment order there is no charge against the assessee that it had not disclosed any information or material required to compute the income for the year under consideration. Therefore, it would not be wrong to deduce that so far as the claim of the assessee for deduction under s. 80-IA was concerned, the same was adequately disclosed in the return of income and the accompanying documents.”
7. In view of the aforesaid finding, the Tribunal while relying upon the decision of the Supreme Court in T. Ashok Pai vs. CIT (2007) 210 CTR (SC) 259 : (2007) 292 ITR 11 (SC), held that the penalty under s. 271(1)(c) was not allowable where the claim of the assessee was based on the report of the expert. Since the return of income was accompanied by the duly audit report required under s. 80-IA, the penalty cannot be imposed, particularly when there is nothing on record to suggest that the report of the auditor was collusive.
8. The Tribunal has further recorded a finding that the assessee bona fidely claimed the deduction under s. 80-IA with regard to the profits from trading in the raw wool and knitted cloth. In this regard, the following finding has been recorded by the Tribunal : “….Firstly, as noticed earlier, the claim of the assessee was adequately disclosed in the return of income and the accompanying documents. Secondly, the assessee when called upon to justify the claim during the assessment proceedings, referred to the judgment of Madras High Court in the case of CIT vs. Ashok Leyland Ltd. (1981) 130 ITR 900 (Mad) to contend that even with regard to the profit on sale of raw wool and knitted cloth, it was eligible for deduction under s. 80-IA. In the case before the Hon’ble Madras High Court, the issue related to an assessee which was manufacturing automobile trucks, the profits from sale of imported spare parts to the purchasers of trucks for servicing the vehicles was sought to be claimed as eligible for 80-I benefits. The Hon’ble High Court accepted the stand of the assessee in that case. On the strength of the reasoning adopted by the Hon’ble Madras High Court as above, the assessee canvassed before the AO that the profits in question were eligible for 80-IA benefits. Though the subsequent development in the case of the assessee show that the said view has not found favour with the IT authorities. However, to say that the claim of the assessee made in the return of income was fanciful or was completely untenable, would be a misnomer. Therefore, in our considered opinion, the claim of the assessee made in the return of income could be said to have rested on a bona fide consideration.”
9. The aforesaid finding of fact arrived at by the Tribunal cannot be said to be perverse or against the material available on the record. When the returns of income were filed, the issue with regard to entitlement of deduction under s. 80-IA on the profits derived from trading turnover i.e. trading in the raw wool and knitted cloth, was debatable, and this issue was settled with the judgment of this Court in Liberty India Ltd. (supra) which has been upheld by the Supreme Court in Liberty India (supra). Therefore, the Tribunal has rightly come to the conclusion that the assessee did not deliberately or consciously concealed the true particulars of income or furnished inaccurate particulars of income. The judgment cited by the counsel for the appellant is not applicable in the facts and circumstances of the case, where the penalty has been deleted on the basis of aforesaid finding of fact.
10. In view of the aforesaid finding of fact, in our opinion, no substantial question of law is arising out of the order of the Tribunal. Hence, these appeals are dismissed.
[Citation : 326 ITR 429]
