Ita/223/2015 Of Commissioner Of Income Tax Gurgaon v. M/S Parabolic Drugs Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No. 223 of 2015Date of decision: 26.8.2015 Commissioner of Income Tax (Central), Gurgaon ..-.-- Appe M/s Parabolic Drugs Limited ..-.-Responde CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICEK RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?3. Whether the judgment should be reported 1n the Digest? Present: Mr. Rajesh Sethi, Advocate for the appellant, Ajay Kumar Mittal,J. 1,The revenue has preferred this appeal under Section 260A ofthe Income Tax Act, 1961 (in short, “the Act”) against the order dated18.11.2014, Annexure A.3 passed by the Income Tax Appellate Tribunal,Chandigarh Bench 'A’ in ITA No.1091/Chd/2013 for the assessment year2005-06, claiming following substantial questions of law”’ “1. Whether, in the facts and circumstances of the case, theHon'ble ITAT was legally justified in deleting the penalty ofLy10,84,050/- imposed under Section 271(1)(c) of the Actwithout appreciating that the disallowance under SectionSOIB was made by the Assessing Officer not because of anydifference of opinion but because such deduction was not available to the assessee by virtue of specific provision oflaw and therefore the claim of deduction made by theassessee amounted to furnishing inaccurate particulars ofincome attracting penal provisions under section 271(1)(c)?2. Whether or not the findings have been recorded by ITATon misreading and misinterpretation of facts and evidenceemanating on record? 3. Whether the ITAT did not commit grave error in arrivingat such conclusion after adopting erroneous criteria and byimporting such facts and circumstances which are contrary torecord ?DA few facts relevant for the decision of the controversyinvolved as narrated in the appeal may be noticed The assessee was in thebusiness of manufacturing of bulk drugs and fine chemicals. During the yearunder consideration, the assessee had claimed deduction under sectionSOIB of the Act ofL29,62,491/-. It was found that the assessee had claimedits unit as small scale industry. However, investment in plant and machineryWasTL351.59 lacs. The assessee was asked to explain how its unit was smallscale industry. Not satisfied with the reply, the Assessing Officer held thatthe assessee did not fulfil the condition as given under section 80IB(3) ofthe Act. Therefore, deduction of|<a29,62,491/- claimed by the assesseeunder Section SOIB of the Act was disallowed and added back to its income.Aggrieved by the order, the assessee filed appeal before the Commissionerof Income Tax (Appeals) [CIT(A)], who vide order dated 19.11.2000dismissed the appeal. Since the assessee had furnished inaccurate particularsof its income, penalty proceedings under section 271(1)(c) of the Act hadalso been initiated. During the course of penalty proceedings, the AssessingOfficer after considering the facts of the case as well as legal position ITA No.223 of J2O1 tune ofLV29,62,491/-. Therefore, the Assessing Officer imposed penaltyunder Section 271(1)(c) of the Act at the rate of 100% of the tax sought tobe evaded which came to410,84,050/-. Aggrieved by the order, theassessee filed appeal before the CIT(A). Vide order dated 25.9.2013,Annexure A.2, the appeal was allowed on the ground that it was bonafidebelief of the assessee that it was a small scale industry in view of variousnotifications of the Ministry of Industry. It was further held that theassessee had stated all the particulars of plant and machinery as well ascalculation of deduction under Section S8OIB of the Act in the return oincome and thus it could not be said to be concealment of income orfurnishing of inaccurate particulars. Not satistied with the order, the revenuefiled appeal before the Tribunal. Vide order dated 18.11.2014, AnnexureA.3, the appeal was dismissed. Hence the instant appeal. 3,We have heard learned counsel for the appellant-revenue.4Learned counsel for the revenue submitted that vide OrderF.No.10/6/97/1P dated 10.12.1997, the Ministry of Industry fixed theinvestment limit in fixed assets in plant and machinery atLv3 crores inrespect of a unit to be eligible as small scale industry which was amendedvide order F.No.10(6)/97-1P dated 24.12.1999 and the limit of investmentin fixed asset in plant and machinery thereunder was reduced fromLv3crores TOanone crore. In such a situation, it was urged that the assesseewhose investment in plant and machinery was more thanan3,51,59,225/-had fraudulently claimed deduction under Section 80IB of the Act whichhad been upheld in appeal by the CIT(A). It was further contended that insuch circumstances, levy of penalty under section 271(1)(c) of the Act onaccount of concealment of income had been rightly imposed by the ITA No.223 of J2O1 Assessing Officer. However, CIT(A) as well as the Tribunal haderroneously recorded a finding that the assessee had bonatide claimed thesaid deduction and deleted the penalty. 5After hearing learned counsel for the revenue, we do not find any merit in the appeal. onThe CIT(A) while accepting the appeal of the assessee hadnoticed as under:- “A3 [ have considered the submission of the assessee as wellas the impugned order. I have also gone through the plethoraof cases relied upon by the assessee. The learned AssessingOfficer had initiated the penalty proceedings under section2/1(1)(c) as it has been held that the assessee has filedinaccurate particulars and so concealed his income to theextent of =a29,62,491/- in as much as the claim for deductionunder Section 80IB(3) on the ground of it being a small scaleundertaking was false. As per section 271(1)(c), penalty is tobe levied if the assessee has concealed particulars of incomeor has furnished inaccurate particulars of such income,Assessee has contended that the penalty was not sustainableas the charge contemplated under section 271(1)(c) is notclear. Be that as it is, it is a fact that deduction has beenclaimed under Section 80IB(3) in the status of a small scaleindustry. This was found to be incorrect as per the notificationof the Ministry of Industry for small scale units. Theinvestment in plant and machinery was found to be exceedingthe prescribed limit. It is the assessee's contention that it wasunder bonafide belief that it was a small scale industry inview of the various confusing notifications of the Ministrywhich changed from time and again. It was also emphasizedthat the books were duly audited and that Form IOCCB wasquantified after looking into the conditions for claiming thededuction. Furthermore, assessee stated that as all particulars of its plant and machinery as well as the calculation ofdeduction under Section SO[B was furnished in the return ofincome, so it could not be said that particulars of income wereconcealed or filed inaccurately, Here a claim has been made which was found to belincorrect. This claim was on the basis of certificate issued bythe auditor in the requisite form 1OCCB. The violation is theinvestment in plant and machinery exceeded the limitprescribed by the Ministry of industries. Notification as to thelimit of investment has been modified in 1997 and 2009 as 1sevident trom the impugned order. All material facts as regardsits investment cannot be said to have been withheld by theassessee as the return filed was accompanied by auditedaccounts and Form 1OCCB. Consequently considering thefacts of the case, I am inclined to hold that the assessee hadfully disclosed all material facts and so it is apparent thatthere is neither any concealment of income nor furnishing ofinaccurate particulars of its income. The penalty levied istherefore directed to be deleted.’ |.The said findings were affirmed by the Tribunal vide order dated18.11.2014, Annexure A.3 as under- |.The said findings were affirmed by the Tribunal vide order dated18.11.2014, Annexure A.3 as under- “Q We have considered rival submissions and materialavailable on record and do not find any justification tointerfere with the order of the learned ClIT(Appeals) incancelling the penalty under Section 271(1(c) of the Act. Theassessee while making claim of deduction under Section 80IBof the Act in computation of income disclosed complete factsand claimed to have permanent registration as small scale unitissued by District industries Centre, Patiala. The claim ofassessee was qualified by the auditor as well. The assesseereferred to various notifications issued by the concerneddepartment through which time to time, the monetary limitswere varying and ultimately the last notification was alsofavourable to the assessee. In the case of the assessee, the value of exclusive plant and machinery as on |.4.2004 was 4293 crores and because ot the addition made in theassessment year under appeal of |an58.33 lacs, the totalinvestment comes to|a351 crores. It 1s therefore clear thatthe assessee was small scale industrial unit and was entitledfor deduction under section 80IB earlier and it is only becauseof some additions made in year under consideration, theassessee would not have qualified for deduction underSection SOIB of the Act. The assessee therefore made |bonafide claim of deduction under section 80IB as per thenotification issued lastly which covered such unit upto—<a5crores though there may be some restriction thereon. It istherefore not a case of filing of inaccurate particulars ofincome or concealing the particulars of income. The decisioncited clearly support the finding of the learned CIT(Appeals)for cancelling the penalty under Section 271(1)(c) of the Act.” 8.The CIT(A) as well as the Tribunal had concurrently concludedthat the assessee in the computation of income while claiming deductionunder Section 80IB of the Act had disclosed complete tacts. The assesseehad claimed permanent registration as small scale unit by District IndustriesCentre, Patiala. The books of account of the assessee were duly audited. Theclaim made by the assessee was under bonafide belief that it was a smallscale industry. The error on the part of the assessee had occurred due tovarious notifications issued by the concerned Ministry from time to timefixing the limit of investment to qualify for being small scale industry. Thevalue of exclusive plant and machinery as on 1.4.2004 wasv2 O93 croreand because of the addition made in the assessment year under appeal of=58.33 lacs, the total investment came to-3.51 crores. In suchcircumstances, it could not be said that the assessee had not made abonafide claim of deduction under Section 8O0IB of the Act. Therefore, th ITA No.223 of J2O1 penalty was rightly deleted by CIT(A) and upheld by the Tribunal. We donot find any error in the approach adopted by the CIT(A) as well as theTribunal. No substantial question of law arises. Consequently, the appeal is dismissed. August 26, 2015:.!: (Ajay Kumar Mittal)Judge(Ramendra Jain)Judge