Pr. Commissioner Of Income Tax, Panchkula v. M/S Virgo Industries, 129, Sector-10, Panchkula

IN THE HIGH COURT OF PUNJAB AND HARYANA AT | CHANDIGARH. ITA No. 242 of 2018Date of decision: 29.01.2019. Pr. Commissioner of Income Tax, Panchkula Vs. M/s Virgo Industries, 129, Sector-10, Panchkula .---- Appella ..-.Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL, |HON’BLE MR. JUSTICK HARNARESH SINGH GILLHON’BLE MR. JUSTICK HARNARESH SINGH GILL Present: Mr. Yogesh Putney, Senior Standing Counsel for the appellant-revenue. | Ajay Kumar Mittal,(J). 1)This order shall dispose of ITA Nos. 225 & 242 of 2018 asaccording to learned counsel for the revenue, they involve identical issues. Thefacts are being extracted from ITA No. 242 of 2018. 2 The appellant-revenue has filed ITA No. 242 of 2018 underSection 260A of the Income Tax Act, 1961 (in short, “the Act”) against theorder dated 12.02.2018, Annexure A.3, passed by the Income Tax AppellateTribunal, Chandigarh Benches ‘B’, Chandigarh (in short, “the Tribunal”) inL.T.A. No.1498/CHD/2017, claiming following substantial questions of law:-| “(1)Whether on the facts and in the circumstance of the case, the Ld.ITAT is right in law in holding that the claim made by theAssessee for deduction under Section 80IC of the Income TaxAct, 1961 @ 100% instead of 25% for the year underconsideration i.e. &[th]year on account of substantial expansion to |ITAT is right in law in holding that the claim made by theAssessee for deduction under Section 80IC of the Income TaxAct, 1961 @ 100% instead of 25% for the year underconsideration i.e. &[th]year on account of substantial expansion to | the undertaking is bonatfide and does not tantamount to furnishingof inaccurate particulars of income in respect of claim ofdeduction under Section 80IC of the Income Tax Act, 1961 withinthe meaning of Section 271(1)(c) of the Income Tax Act, 1961?of inaccurate particulars of income in respect of claim ofdeduction under Section 80IC of the Income Tax Act, 1961 withinthe meaning of Section 271(1)(c) of the Income Tax Act, 1961?11)Whether on the facts and in the circumstance of the case, the Ld.ITAT is right in law in deleting the penalty under Section271(1)(c) of the Income Tax Act, 1961 by holding that bonatideclaim does not amount to furnishing of inaccurate particulars ofincome ignoring the aspect that the plea of bonafide is notavailable to the Assessee who is a firm and represented by a teamof professionals at every stage of the proceedings? ITAT is right in law in deleting the penalty under Section271(1)(c) of the Income Tax Act, 1961 by holding that bonatideclaim does not amount to furnishing of inaccurate particulars ofincome ignoring the aspect that the plea of bonafide is notavailable to the Assessee who is a firm and represented by a teamof professionals at every stage of the proceedings? ill)Whether on the facts and in the circumstance of the case, the Ld.ITAT is right in law in holding that explanation furnished by theAssessee was bonatide within the ambit of Explanation-I tosection 271(1)(c) of the Income Tax Act, 1961?ITAT is right in law in holding that explanation furnished by theAssessee was bonatide within the ambit of Explanation-I tosection 271(1)(c) of the Income Tax Act, 1961? iv)Whether on the facts and in the circumstance of the case, the Ld.ITAT misdirected itself in misconstruing the provisions of thesection 271(1)(C) of the Income Tax Act, 1961 and grosslyoverlooked the material available on record resulting intodelivering a perverse order contrary to the material on record?ITAT misdirected itself in misconstruing the provisions of thesection 271(1)(C) of the Income Tax Act, 1961 and grosslyoverlooked the material available on record resulting intodelivering a perverse order contrary to the material on record? iv)Whether on the facts and in the circumstance of the case, the Ld.ITAT misdirected itself in misconstruing the provisions of thesection 271(1)(C) of the Income Tax Act, 1961 and grosslyoverlooked the material available on record resulting intodelivering a perverse order contrary to the material on record?ITAT misdirected itself in misconstruing the provisions of thesection 271(1)(C) of the Income Tax Act, 1961 and grosslyoverlooked the material available on record resulting intodelivering a perverse order contrary to the material on record? Vv)Whether on the facts and in the circumstance of the case, the Ld.ITAT is right in law in confirming the order of the Commissionerof Income Tax (Appeals), Panchkula in cancelling the penalty onthe ground that the disclosures of false claim not admissible underthe law does not amount to either furnishing of inaccurateparticulars of income or concealment of income within themeaning of Section 271 (1) (c) of the Income Tax Act, 1961?ITAT is right in law in confirming the order of the Commissionerof Income Tax (Appeals), Panchkula in cancelling the penalty onthe ground that the disclosures of false claim not admissible underthe law does not amount to either furnishing of inaccurateparticulars of income or concealment of income within themeaning of Section 271 (1) (c) of the Income Tax Act, 1961? v1)Whether on the facts and in the circumstance of the case, the Ld.ITAT is right in law in holding that penalty under Section 271 (1)(c) of the Income Tax Act, 1961 was not exigible ignoring that theAssessee concealed the particulars of income by furnishinginaccurate particulars of income by claiming the deduction at100% instead of 25% which is allowable to him in-spite ofknowing the fact that this is not allowable to him?ITAT is right in law in holding that penalty under Section 271 (1)(c) of the Income Tax Act, 1961 was not exigible ignoring that theAssessee concealed the particulars of income by furnishinginaccurate particulars of income by claiming the deduction at100% instead of 25% which is allowable to him in-spite ofknowing the fact that this is not allowable to him? vil) Whether on the facts and in the circumstance of the case, the Ld.ITAT is right in law in recording perverse findings contrary tomaterial available on record in holding that the penalty underSection 271 (1) (c) of the Income Tax Act, 1961 was not leviableignoring that the levy of penalty is a civil liability and providesremedy against loss of revenue that the Assessee concealed theparticulars of income by furnishing inaccurate particulars ofincome?”ITAT is right in law in recording perverse findings contrary tomaterial available on record in holding that the penalty underSection 271 (1) (c) of the Income Tax Act, 1961 was not leviableignoring that the levy of penalty is a civil liability and providesremedy against loss of revenue that the Assessee concealed theparticulars of income by furnishing inaccurate particulars ofincome?” 3A few facts relevant for the decision of the controversy involvedas narrated in the appeal may be noticed. The respondent-assessee is a firmengaged in the business of Manufacturing of Laminates and Pre- LaminatedBoards at Kalam Amb, District Sirmour, Himachal Pradesh. It filed its returnof income on 30.09.2013 by declaring an income ofzy10,12,840/-. The case ofrespondent-assessee was selected for scrutiny. The statutory notice underSection 143(2) of the Act was issued on 01.09.2014. The case was transferredfrom the office of Income Tax Officer, Ward 1, Panchkula to the AssistantCommissioner of Income Tax, Panchkula Circle, Panchkula. Notice undersection 143(2) and 142(1) of the Act was issued on 27.05.2015 which wasserved upon the respondent-assessee on 03.06.2015. The Assessing Officerduring the year under consideration noticed that the respondent-assessee hadclaimed deduction under Section 80IC of the Act @ 100% for the year underconsideration which was 8[th]year. The claim of deduction at the rate of 100%was based on substantial expansion carried out by respondent-assessee duringthe financial year 2010-11 relevant to the assessment year 2011-12. TheAssessing Officer issued detailed questionnaire on 19.06.2015 which wasserved on the assessee on 23.06.2015. In response thereto, the respondent-assessee furnished photocopy of bills for purchase of machinery during thefinancial year 2010-11 amounting toL3,22,16,771/- which was more thanGURBAX SINGH2019.03.05 10:05 50% of total book value of Plant & Machinery betore taking depreciation as on01.04.2011. The Assessing Officer afforded adequate opportunity to theassessee to substantiate its claim for 100% deduction under Section SOIC of theAct for the year under consideration being 3[th]year. The assessee except thebills/vouchers etc did not submit anything to substantiate its claim fordeduction under Section SOIC of the Act at the rate of 100% in the 8[th]yal.The Assessing Officer after examining the record noticed that the assesseeinitially commenced its commercial production in July, 2005 during thefinancial year 2005-06 relevant to the assessment year 2006-07 and had beenclaiming deduction under Section 80IC of the Act from the assessment year2006-07 being first year of its operation at the rate of 100% of eligible profitfor 5 years period up to assessment year 2010-11. The assessee submitted thatafter carrying out substantial expansion in the year under consideration byinvesting in Plant and Machinery more than 50% of gross block of Plant andMachinery as on 31.03.2010, the firm was eligible for deduction at the rate of100% under Section 80IC of the Act in this year as well. The Assessing Officerexamined the claim of assessee under Section 8OIC of the Act and disallowedthe same by restricting to 25% against the claim made at the rate of 100% andframed the assessment vide order dated 10.12.2015 passed under Section143(3) of the Act. The Assessing Officer also initiated penalty proceedingsunder Section 271(1)(c) of the Act for wilfully furnishing inaccurateparticulars of income under Section 80IC of the Act. The assessee carried theorder dated 10.12.2015 betore the Commissioner of Income Tax (Appeals)|CIT(A)]| by filing an appeal. Vide order dated 29.07.2016, Annexure A.2, theCIT(A) dismissed the appeal and confirmed the disallowance. The assessee challenged the order dated 20.12.2016 passed by the Tribunal before this Courtby filing appeal under Section 260A of the Act bearing No. ITA No. 253 of2017. The Assessing Officer imposed the penalty amounting to)LC3,96,41,212/-upon the respondent-assessee under Section 271(1)(c) of the Act for furnishinginaccurate particulars of income as the respondent-assessee failed to furnishany explanation with regard to concealment of income and furnishing ofinaccurate particulars of income. The assessee filed an appeal before theCIT(A). Vide order dated 29.08.2017, Annexure A.5, the appeal was allowedand penalty was deleted holding that a mere claim of deduction which was notaccepted or acceptable to the revenue by itself would not attract the penaltyunder Section 271(1)(c) of the Act. The revenue challenged the order passedby CIT(A) before the Tribunal. Vide order dated 12.02.2018, Annexure A.6passed by the Tribunal, the appeal filed by the revenue was dismissed holdingthat the assessee was under bonafide belief and claimed deduction undersection 80IC of the Act. Reliance was placed by the Tribunal on the decisionrendered by Himachal Pradesh High Court in the case of M/s Stovekraft India|Vs. CIT [2018] 400 ITR 225 (HP), wherein it was held that deduction under|section 80IC of the Act was allowable on account of substantial expansion ofthe unit. Hence the instant appeals by revenue. 4AWe have heard the learned counsel for the parties. 5.Admittedly, the assessee claimed deduction under Section 80IC ofthe Act at the rate of 100% on account of substantial expansion of the unit. TheAssessing Officer denied the claim observing that the assessee had onceavailed the deduction under Section 80OIC. of the Act at the time oestablishment of the unit and, thus, was not entitled to 100% deductionsubsequently on account of substantial expansion. The Assessing Officer alsoGURBAX SINGH2019.03.05 10:05 initiated penalty proceedings and levied penalty under Section 271(1)(c) of theAct on account of wrongful claim of deduction on this issue. The CIT(A) onappeal by the assessee deleted the penalty holding that it was not a case offurnishing of inaccurate particulars of income or concealment of income whichwas the pre-condition for levy of penalty under Section 271(1)(c) of the Act.Aggrieved by the order, the revenue went in appeal before the Tribunal.Relying upon the decision rendered by the High Court of Himachal Pradesh inM/s Stovekraft India’scase (supra), it was recorded by the Tribunal that under|the provisions of the Act, the assessee was entitled to claim deduction undersection 80IC of the Act on account of substantial expansion of the unit. Evenotherwise, this was not a case of furnishing of inaccurate particulars of incomeor concealment of income. Further, it was recorded that the assessee under thebonafide belief had claimed the deduction under Section SOIC. of the Act.Thus, no infirmity was found in the order passed by the CIT(A) in deleting thepenalty. The relevant findings recorded by the Tribunal in this regard readthus:- “We have considered the rival submissions. At the outset, Shri.Manoj Kumar Ld. Representatives of the assessee has submittedthat even the issue on merits regarding allowability of claim ofdeduction under Section SOIC. of the Act at the rate 100% onaccount of substantial expansion of the unit, has been settled bythe Hon’ble Jurisdictional High Court of Himachal Pradesh videtheir order dated 28.11.2017 in the group of cases with the headcase titled as)M/s Stovekraft India Vs. CIT, ITA No. 20 of 2015)wherein the Hon’ble High Court has held that the assessee as perthe provisions of the Act is entitled to claim deduction underSection 8OIC of the Act on account of substantial expansion of theunit. Even otherwise, we do not find that this is a case offurnishing of inaccurate particulars of income or concealment ofincome. The assessee under the bonafide belief claimed the deduction under Section 8OI[IC. of the Act and even such claim deduction under Section SOIC has been found to be correct in theease of other assessee by jurisdictional high Court of HimachalPradesh, as observed above. 5. In view of this, we do not find any infirmity in the order of theLd. CIT(A) in deleting the aforesaid penalty in both the appeals.There is no merit in the appeals of the revenue and the same arehereby dismissed.” 6_Learned counsel for the appellant-revenue has not been able topoint out any error or illegality in the findings recorded by the Tribunal that theclaim of deduction @ 100% for the year under consideration by the assesseeewas on account of bonatide belief of the assessee and not on account offurnishing of any inaccurate particular or concealment of income, thus,watranting interference by this Court. No substantial question of law arises.Consequently, both the appeals are hereby dismissed. | January 29, 2019 Whether speaking/reasoned Whether reportable (Ajay Kumar Mittal) Judge (Harnaresh Singh Gill) Judge YesYes