Commissioner Of Income Tax - Ltu v. M/S. Man Industries Ltd

Sharayu Khot. IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 898 OF 2015 Commissioner of Income Tax - LTU …Appellant Versus M/s. Man Industries Ltd. …Respondent ---------- Mr. Tejveer Singh, for the Appellant. Mr. Bharat Damodar, i/by Kanga & Co., for the Respondent.---------- CORAM :M.S. SANKLECHA &RIYAZ I. CHAGLA, JJ. DATE : 7 February 2018 ORDER : 1.This Appeal under Section 260A of the Income TaxAct, 1961 (“The Act” for short), challenges the order dated 22December 2014 passed by the Income Tax Appellate Tribunal(“The Tribunal” for short). The impugned order dated 22 1/7 December 2014 is in respect of Assessment Year 2004-05. 2.The Revenue urges the following question of law forour consideration:- Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified indeleting the penalty ignoring the provisions ofSection 271(1)(c) of the Act? 3.For the assessment year 2004-05, a notice underSection 148 was issued to the Respondent seeking reopening theassessment, completed under Section 143(3) of the Act. 4.The Respondent-Assessee had filed its return ofincome for the subject assessment year which was assessed toRs. 54.52 Crores on 19 December 2008 as a consequence ofgiving effect to the order of the Commissioner of Income Tax(Appeal) (CIT(A)). Thereafter, the assessment was reopenedunder Section 148 of the Act, on the ground that the deduction 2/7 12-ITXA-898-15.doc claimed under Section 35(1) of the Act to the extent of Rs. 1.00Crore given to M/s. Indian Medical Scientific ResearchFoundation, Agra was found by the Central Bureau ofInvestigation (C.B.I.) to be bogus. The return of income filedconsequent to the notice, did not claim the benefit of deductionof Rs. 1.00 Crore under Section 35(1) of the Act and assessmentwas made under Section 143(3) read with Section 147 of theAct. 5.Thereafter, proceedings for penalty under Section271(1)(c) of the Act were commenced. The Respondent pointedout that during the regular assessment proceedings, during thecourse of assessment proceedings, the Respondent-Assessee haditself informed the Assessing Officer about the investigationbeing conducted by the C.B.I. in respect of one M/s. IndianMedical Scientific Research Foundation, Agra to whom theRespondent No. 1 given a donation of Rs. 1.00 Crore andoffered to withdraw its claim and deduction under Section35(1) of the Act, if the same is not allowable in law. However, 3/7 12-ITXA-898-15.doc the assessment proceedings were completed on 22 December2006 under Section 143(3) of the Act without disturbing theclaim for donation of Rs. 1.00 Crore. It was only thereafter, on12 October 2007, the Assessing Officer sought to reopen theassessment for assessment year 2004-05. The reason recordedfor reopening of the assessment was the claim for donationunder Section 35(1) of the Act of Rs. 1.00 Crore to M/s. IndianMedical Scientific Research Foundation, Agra was found to bebogus institution consequent to the enquiries conducted by theC.B.I. The Respondent filed its return of income on 12 February2008 consequent to the reopening notice and in that return, theRespondent did not claim deduction of Rs. 1.00 Crore donationto M/s. Indian Medical Scientific Research Foundation, Agra,which is now found to be bogus. The assessment proceedingswere thereafter, completed under Section 143(3) read withSection 147 of the Act was completed on 22 December 2008. Inthe above circumstances, it was submitted that no penalty isimposable under Section 271(1)(c) of the Act. However, theAssessing Officer was not satisfied and by an order dated 24 4/7 12-ITXA-898-15.doc June 2009 imposed a penalty of Rs. 89.68 Lakhs under Section271(1)(c) of the Act i.e. 200 percent of the tax sought to beevaded. 4/7 12-ITXA-898-15.doc June 2009 imposed a penalty of Rs. 89.68 Lakhs under Section271(1)(c) of the Act i.e. 200 percent of the tax sought to beevaded. 6.On appeal of CIT(A) by an order dated 24 March2011 set aside the penalty. This inter alia after holding that atthe time that the Respondent made the original claim fordonation under Section 35(1) of the Act it was misled intobelieving that M/s. Indian Medical Scientific ResearchFoundation, Agra was a genuine institution. In fact allproceeded on the above basis and it was only now, onconclusion of enquiry by the C.B.I. that it was found to be abogus institution. 7.The Tribunal by the impugned order dated 22December 2014 dismissed the Appeal of the Revenue byrecording the fact that M/s. Indian Medical Scientific ResearchFoundation, Agra was in fact, approved by the CentralGovernment for the purpose of deduction under Section 35(1)of the Act with effect from 1 April 2000. It further records that itwas an undisputed position that on the basis of the approval by 5/7 12-ITXA-898-15.doc the Central Government that the Respondent made a donationof Rs. 1.00 Crore to M/s. Indian Medical Scientific ResearchFoundation, Agra. Thus, on the above facts complied with itupholding the finding of CIT(A) to the effect that theRespondent-Assessee withdrew its claim on realizing that theM/s. Indian Medical Scientific Research Foundation, Agra is abogus institution as found by the C.B.I. dismissed the Revenue'sAppeal. 8.We find that it is undisputed that when filing ofreturn of income on 12 February 2008, consequent toreopening notice, the Respondent had not made a claimdeduction of Rs. 1.00 Crore for donation, inspite of donationmade to M/s. Indian Medical Scientific Research Foundation,Agra. The said Research Foundation was not known to be abogus institution both at the time the donation and claim wasmade in the return of income filed in regular assessmentproceedings under Section 143(3) of the Act. The foundationcarried out its activities under a notification issued by theCentral Government which entitled donations made to it, 6/7 12-ITXA-898-15.doc the benefit of Section 35(1) of the Act. We further find thatduring the course of regular proceedings itself the Respondent-Assessee brought it to the notice of Assessing Officer that thereis a C.B.I. enquiry proceedings against the M/s. Indian MedicalScientific Research Foundation, Agra and offered to withdrawthe claim for donation. Thus, there was a complete disclosure onthe part of the Respondent-Assessee. In fact, on appreciation offacts, both the CIT(A) and the Tribunal have held that theRespondent was misled into believing that M/s. Indian MedicalScientific Research Foundation, Agra was a genuine institution. 9.On the facts, the view taken by both the CIT(A) andthe Tribunal is a possible view and therefore, the question asproposed does not give rise to any substantial question of law.Thus, not entertained. 10.Accordingly, the Appeal is dismissed, with noorder as to costs. [RIYAZ I. CHAGLA J.] [M.S. SANKLECHA, J.] 7/7