Commissioner Of Income-Tax,Chennai v. M/S.caplin Point Laboratories Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.06.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.712 of 2007 Commissioner of Income-tax,Chennai...Appellant/Appellant Vs. M/s.Caplin Point Laboratories Ltd.,86, Bazullah Road, T.Nagar,Chennai-17. ..Respondent/Respondent Appeal under Section 260A of the Income-tax Act, 1961against the order of the Income Tax Appellate Tribunal, Bench'A', Chennai in I.T.A. No.2963/Mds/2004 dated 27.10.2006 forthe assessment year 1995-96 against the order of theCommissioner of Income Tax (Appeals) III Chennai 600 034 forthe Assessment year 1995-96 dated 6.8.2004 in ITA No.368/2002-03/A-III and against the Assessment order of DeputyCommissioner of Income Tax Company Circle I (3) Chennai-34dated 30.3.2002 in PAN/GIR No.CX4-082 respectively. For Appellant :Mr.J.Narayanaswamy, Standing Counsel forIncome-tax Department JUDGMENT(Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) This appeal is filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income TaxAppellate Tribunal, Bench 'A', Chennai in I.T.A.No.2963/Mds/2004 dated 27.10.2006, raising the followingsubstantial question of law:- https://hcservices.ecourts.gov.in/hcservices/ "Whether in the facts and circumstances ofthe case, the Tribunal was right indeleting the penalty under section 271(1)(c) when the assessee had returned theinterest under business income for thepurpose of claiming deduction under section80HHC and 80I?" 2.The facts leading to the above substantial questionof law are as under: The assessee is a company incorporated under the CompaniesAct. The assessee-company is engaged in the manufacture andsale of pharmaceutical products. The relevant assessment yearis 1995-96 and the corresponding accounting year ended on31.03.1995. The assessee-company filed its Return of incomeon 28.11.1995 declaring a total income of Rs.2,57,270/- afterclaiming deduction under Section 80HHC and Section 80I of theIncome-tax Act ("Act" in short) of Rs.1,76,116/- andRs.1,44,463/- respectively. The Return was processed underSection 143(1)(a) of the Act. Later, notice under Section 148was issued on 18.02.2000 for the purpose of reopening theassessment. In response to the notice, the assessee filed aletter dated 29.03.2000 confirming that there was no change inthe income returned and also requesting that the originalReturn filed on 28.11.1995 may be treated as correct and filedin response to the notice issued under Section 148 of the Act.The assessment was completed under Section 147 of the Actdetermining the total income at Rs.66,45,090/-. Aftercompleting the assessment, the Assessing Officer disallowedthe deduction claimed by the assessee, under Section 80HHC andSection 80I of the Act. Also the Assessing Officer initiatedpenalty proceedings on the ground that the assessee hadconcealed particulars of income and also furnished inaccurateparticulars of income, and levied penalty of Rs.30,00,000/-under Section 271(1)(c) of the Act against the minimum penaltyleviable of Rs.29,38,397/-. Aggrieved by the order, theassessee filed an appeal to the Commissioner of Income-tax(Appeals). The C.I.T.(A) held that the Assessing Officer wasnot able to prove that the claim of the assessee for deductionunder Sections 80HHC and 80I of the Act was not bona fide andhence allowed the appeal and deleted the penalty. Aggrieved,the Revenue filed an appeal to the Income-tax AppellateTribunal ("Tribunal" in short). The Tribunal dismissed theRevenue's appeal and confirmed the order of the C.I.T.(A).Hence the present tax case by the Revenue. 3.Learned Standing Counsel appearing for the Revenuesubmitted that the assessee had furnished inaccurateparticulars of income and it had lead to undue claim ofhttps://hcservices.ecourts.gov.in/hcservices/ deduction under Sections 80HHC and 80I of the Act. It is alsosubmitted that the assessee-company had received a totalinterest income of Rs.1,20,56,800/-. Further it is contendedthat the assessee had not returned the entire interest incomeand also claimed wrongly the deductions under Sections 80HHCand 80I of the Act. It is also further submitted that theassessee had wrongly categorised the interest income under thehead "business" for the purpose of claiming deduction underSections 80HHC and 80I of the Act and the assessee ought tohave shown the interest income under "income from othersources". Hence, the levy of penalty by the Assessing Officeris justified and is in confirmity with law. 4.Heard the counsel. The authorities have given aconcurrent finding that there was no concealment ofparticulars of income or furnishing inaccurate particulars ofincome, by the assessee. The C.I.T.(A), in its order, held asfollows:- "6. I have carefully considered the argument putforward by the Assessing Officer in his penalty orderand the submissions made by the appellant. I findthat the appellant company in its Fifth Annual Reportfor FY 1994-95 has mentioned in Schedule 'O' (norforming part of accounts) as under:"During the year the Company has earned interest frompublic issue amounting to Rs.120,56,799.96 out ofwhich an amount of Rs.59,89,546.46 has been taken asincome which is an extraordinary item.In Schedule 'L' (other income) the appellant companyhas shown an amount of Rs.59,89,546.46 as interest onapplication money."" ".... The Assessing Officer has not brought on recordany fact leading to conclusion that this informationwas received by him from a source other than thatfurnished by the appellant company itself. In thesecircumstances it cannot be said that the appellanthad concealed its income. 8. Similarly the claim for deduction u/s.80HHC andsec.80I cannot be equated with furnishing ofinaccurate particulars of its income by the appellantCompany. In fact the appellant Company has relied onthe judgment of Bombay High Court in CIT vs NagourEngineering Co. Ltd. (245 ITR 806) wherein it hasbeen held that the bank interests are eligible fordeduction u/s.804. It has also placed reliance onthe case of CIT vs Punit Chemicals Ltd. (245 ITR 550(Bom) and Pondicherry Distilleries Ltd Vs ITO (8 ITD39)(Mad) where the similar principles were applied tothe facts of these cases. The fact that theappellant Company was not allowed deduction u/s.80HHC and 80I does not ipso facto lead to a conclusion thatthe appellant had furnished inaccurate particulars ofits income or it had concealed its income. 9. In CIT vs Devi Deyal Aluminium Industries P. Ltd(171 ITR 683) the Allahabad High Court has held asunder:'Rejection of the explanation does notrender it false so as to attract sec.271(1)(c). The assessee failed to substantiatemelting loss or wastage but so long as theclaim was bonafide, it could not be held tobe false'.10. In the present case also the Assessing Officerhas not been able to prove that the claim of theappellant Company for deduction u/s.80HHC & 80I wasnot bonafide. In view of these facts and abovereferred decisions, I hold that the facts andcircumstances of the present case do not justifyapplication of provisions of sec.271(1)(c).Accordingly the penalty of Rs.30,00,000/- imposed bythe Assessing Officer is hereby deleted. Theappellant succeeds on this ground." The order of C.I.T.(A) was confirmed by the Tribunal and itwas found by the Tribunal that when disallowances are made onthe basis of different interpretations, it cannot be said thatparticulars of income have been concealed. In this case, theassessee had adopted a particular view on the basis of certaincase law or some bona fide relief and a mere rejection of theclaim of the assessee by relying on different interpretationsdoes not amount to concealment of the particulars of income orfurnishing inaccurate particulars of income, by the assessee.In the case of Dilip N.Shroff Vs. Joint Commissioner ofIncome-tax and Another, [2007] 291 ITR 519 (SC), the SupremeCourt considered the scope of levying of penalty under Section271(1)(c) of the Act and held as follows:- "The legal history of section 271(1)(c) ofthe Act traced from the 1922 Act primafacie shows that the Explanations wereapplicable to both the parts. However,each case must be considered on its ownfacts. The role of the Explanation havingregard to the principle of statutoryinterpretation must be borne in mindbefore interpreting the aforementionedprovisions. Clause (c) of sub-section (1)of section 271 categorically states thatthe penalty would be leviable if theassessee conceals the particulars of hisincome or furnishes inaccurate particulars thereof. By reason of such concealment orfurnishing of inaccurate particularsalone, the assessee does not ipso factobecome liable for penalty. Imposition ofpenalty is not automatic. Levy of penaltyis not only discretionary in nature butsuch discretion is required to beexercised on the part of the AssessingOfficer keeping the relevant factors inmind. Some of those factors apart frombeing inherent in the nature of penaltyproceedings as has been noticed in some ofthe decisions of this court, inheres onthe face of the statutory provisions.Penalty proceedings are not to beinitiated, as has been noticed by theWanchoo Committee, only to harass theassessee. The approach of the AssessingOfficer in this behalf must be fair andobjective.""....The term "inaccurate particulars" isnot defined. Furnishing of an assessmentof value of the property may not by itselfbe furnishing of inaccurate particulars.Even if theExplanationsare takenrecourse to, a finding has to be arrivedat having regard to clause (A) ofExplanation 1 that the Assessing Officeris required to arrive at a finding thatthe explanation offered by an assessee, inthe event he offers one, was false. Hemust be found to have failed to prove thatsuch explanation is not only not bona fidebut all the facts relating to the same andmaterial to the income were not disclosedby him. Thus, apart from his explanationbeing not bona fide, it should have beenfound as of fact that he has not disclosedall the facts which was material to thecomputation of his income." "...."Concealmentofincome"and"furnishing of inaccurate particulars" aredifferent.Bothconcealmentandfurnishing inaccurate particulars refer todeliberate act on the part of theassessee. A mere omission or negligencewould not constitute a deliberate act ofsuppressio veriorsuggestio falsi.Although it may not be very accurate or apt but suppressio veri would amount toconcealment, suggestio falsi would amountto furnishing of inaccurate particulars." apt but suppressio veri would amount toconcealment, suggestio falsi would amountto furnishing of inaccurate particulars." In the present case, the Tribunal followed the aboveprinciples and held that it is not a fit case for levyingpenalty. The concurrent findings given by both the authoritiesbelow are based on valid materials and evidence. In the caseof Commissioner of Income-tax Vs. P.Mohanakala, [2007] 291 ITR278 (SC), the Supreme Court held that whenever there is aconcurrent finding by the authorities below, no interferenceshould be called for by the High Court. Under thesecircumstances, we do not find any error or legal infirmity inthe order of the Tribunal so as to warrant interference.Hence, no substantial question of law arises for considerationof this Court and accordingly the tax case is dismissed. Nocosts. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarkmTo 1. The Assistant Registrar, Income-tax Appellate Tribunal, Bench "A", Chennai. 2. The Secretary, Central Board of Direct Taxes, New Delhi. 3. The Commissioner of Income-tax (Appeals) III, Chennai-34. 4. The Deputy Commissioner of Income-tax, Company Circle I(3), Chennai-34. +1cc to M/s.Pushya Sitaraman,Advocate Sr 36064 NSM (CO)km/9.7. T.C.(A) No.712 of 2007