Following Substantial Question Of Law v. Zoom Communication (P) Limited(2010) 327 Itr 510?”

ITA No.417 of 2015 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.417 of 2015 (O&M)Date of decision: 16.3.2016 The Principal Commissioner of Income [Tax I, Chandigar .-..-- Appe M/s Torque Pharmaceuticals Pvt. Limited ...eSpondent CORAM: HON BLE MR. JUSTICK AJAY KUMAR MITTALHON BLE MRS. JUSTICE RAJ RAHUL GARG 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not?YES 3. Whether the judgment should be reported in the Digest? Present: Ms. Urvashi Dhugga, Advocate for the appellant-revenue. Ajay Kumar Mittal,J, 1.This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act’) against the order dated 19.5.2015, Annexure A.6 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A' (in short, “the GURBAX SINGH2016.05.06 12:13I attest to the accuracy andintegrity of this documentHigh Court Chandigarh ITA No.417 of 2015 (O&M) Tribunal’) in ITA No.972/CHD/2013, for the assessment year 2006-07, claiming following substantial question of law:- “Whether the ITAT was right in law in upholding the decision of theCIT(A) deleting the penalty levied for assessment year 2006-07 who hasrelied upon the decision of [TAT Delhi 1n AT&T Communication ServicesIndiq Pvt. Limited(42 DTR 22) and the decision relied upon by theHon'ble ITAT 1s adequately countered by the judgment of the Hon'bleDelhi High Court 1n the case ofCIT vs. Zoom Communication (P) Limited(2010) 327 ITR 510?” 2 A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee company filed its return of income on 4.12.2006 declaring nil income. The case was selected for scrutiny and assessed under section 143(3) of the Act on 19.12.2008. The Assessing Officer made following additions and initiated the penalty proceedings on all the 1ssues:- 1)Addition ofa26,96,304/- on account of non deduction of TDS on freight inward. 11)Addition ofa63,447/- on account of non deduction of TDS on freight outward. 40(a)(a) amounting tozy1,94,593/-. iv) Addition on account of capitalization of interest amounting toL5,82,625/- plus“a2053/- pluszy8$302/-5,82,625/- plus“a2053/- pluszy8$302/- v) Addition under section 40A(3) amounting to |LT18,297/-. vi) Addition on account of disallowance under section 80IC on reallocation ofexpenses amounting tov28,603,569/-.expenses amounting tov28,603,569/-. vil) Addition amounting to <1,42,520/- on account of interest debited to Dera Bassi unit and treated as relating to Baddi Unit. vil) Addition ofL3,70,836/- on account of claim of expenditure of interest payment which was never paid by the assessee.” The assessee filed appeal before the Commissioner of Income Tax (Appeals) which was partly allowed vide order dated 31.5.2010, Annexure A.2. Still not satisfied, the assessee filed appeal before the Tribunal. Vide order dated 4.7.2011, Annexure A.3, the appeal was partly allowed. Thereafter, the Assessing Officer imposed penalty under Section 271(1)(c) of the Act on all the issues amounting to—L22,88, //0/- vide orde dated 29.3.2012, Annexure A.4. The assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 1.7.2013, Annexure A.5, the CIT(A) cancelled the penalty imposed by the Assessing Officer. The revenue filed appeal before passed by the CIT(A). Hence the instant appeal by the revenue. 3)We have heard learned counsel for the revenue. 4The primary challenge in this appeal is to the cancellation of penalty onaddition made on account of disallowance of expenditure under Section 40(a)(1a) of the Act. The assessee had made a claim of deduction in the return of income. No finding hasbeen recorded by the authorities below that the claim made by the assessee is malafide.It has been categorically recorded by the Tribunal after examining the entire material on dated 29.3.2012, Annexure A.4. The assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 1.7.2013, Annexure A.5, the CIT(A) cancelled the penalty imposed by the Assessing Officer. The revenue filed appeal before passed by the CIT(A). Hence the instant appeal by the revenue. 3)We have heard learned counsel for the revenue. 4The primary challenge in this appeal is to the cancellation of penalty onaddition made on account of disallowance of expenditure under Section 40(a)(1a) of the Act. The assessee had made a claim of deduction in the return of income. No finding hasbeen recorded by the authorities below that the claim made by the assessee is malafide.It has been categorically recorded by the Tribunal after examining the entire material on record that the CIT(A) had rightly cancelled the penalty against the assessee. It wasfurther recorded that the assessee made a bonafide claim of deduction of the expenditureand even though it was not acceptable to the revenue would not lead to the conclusion|that the assessee had concealed the particulars of income or filed inaccurate particularsof income. The relevant findings recorded by the Tribunal read thus:- “8 We have considered the rival submissions and material available on record.The issue involved in the appeal is regarding cancellation of penalty onaddition made on account of disallowance of expenditure under section40(a)(1a) of the Act. The assessee has disclosed the entire facts before theauthorities below without concealing any income. The assessee made a claim of deduction in the return of income and explained the facts but theSame were not accepted by the authorities below and additions have beenconfirmed. Therefore, it 1s a case of mere disallowance of expenditurewithout bringing any adequate material against assessee to prove thatassessee has concealed the particulars of income or has furnished inaccurateparticulars of income. The appeal of the assessee on substantial question oflaw with regard to disallowance under the provision had been admitted byHon'ble Punjab and Haryana High Court. The Hon'ble Punjab andHaryana High Court in the case of CIT vs. Haryana WarehousingCorporation314 [TR 215 held as under:- "Held. Dismissing the appeal that the deduction claimed by theassessee was legitimate and bonafide in terms of the conflictingdetermination of law on the proposition in question. The categoricalfinding at the hands of the Tribunal in its order was that the assesseehad disclosed the entire facts without having concealed any income.There was no allegation against the assessee that it had furnishedinaccurate particulars of its income. The determination of the Tribunalhad not been controverted even in the grounds raised in the appeal. Theassessee was guilty of neither of the two conditions. Therefore, in theabsence of two pre-requisites postulated under section 271(1)(c) 1t wasnot open to the revenue to inflict any penalty on the assessee.” ITA No.417 of 2015 (O&M) 6 9. The learned ClT(Appeals) considering the material on record correctly ITA No.417 of 2015 (O&M) 6 9. The learned ClT(Appeals) considering the material on record correctly followed the decision of the Delhi Bench in the case of AT&TCommunications Services (India) Pvt. Limited (supra) for cancelling thepenalty against the assessee. The assessee made a bonafide claim ofdeduction of the expenditure even though it was not acceptable to therevenue, would not lead to inference that assessee has concealed theparticulars of income or filed inaccurate particulars of income. Nothing 1sbrought on record if claim of assessee was incorrect in law or wasmalatfide. Therefore, decision relied upon by learned DR 1s not applicablto the facts of the case.’Communications Services (India) Pvt. Limited (supra) for cancelling thepenalty against the assessee. The assessee made a bonafide claim ofdeduction of the expenditure even though it was not acceptable to therevenue, would not lead to inference that assessee has concealed theparticulars of income or filed inaccurate particulars of income. Nothing 1sbrought on record if claim of assessee was incorrect in law or wasmalatfide. Therefore, decision relied upon by learned DR 1s not applicablto the facts of the case.’ 5. InCIT ys. Reliance Petroproducts (P) Limited, (2010) 322 ITR 158, the Apex Court was of the view that under section 271(1)(c) of the Act, there has to be concealment of income of the assessee or the assessee must have furnished inaccurate particulars of his income. In the present case, the claim made by the assessee has not been shown to be suffering from any of these conditions. In the absence of any finding recorded by the CIT(A) or the Tribunal with regard to the claim of the assessee that it was malafide, there 1s no error in cancelling the penalty imposed by the Assessing Officer. ITA No.417 of 2015 (O&M) 7 CIT vs. Zoom Communication (P) Limited, (2010) 327 ITR 510 is of no help to themas therein the High Court was considering the question of levy of penalty under Section271(1)(c) of the Act wherein it had concluded to be a case of furnishing of inaccurateparticulars of income with malafide intention which 1s not the case herein.| |.Thus, no substantial question of law arises. The appeal stands dismissed. March 16, 2016gs! (Ajay Kumar Mittal)Judge(Raj Rahul Garg)Judge