The Commissioner Of Income-Tax – 8 Mumbai v. M/S Patcos Cosmetics (India) Pvt Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL No. 6083 of 2010. The Commissioner of Income-tax – 8 Mumbai ... Appellant. Versus M/s Patcos Cosmetics (India) Pvt Ltd. ... Respondent. Mr Suresh Kumar for the appellant. Mr J. G. Arora with Mr V.S.Hadade for the respondent. CORAM : J.P. Devadhar & A.R. Joshi, JJ. DATE : 17[th] November,2011. P.C. :- 1.Whether the ITAT was justified in directing the Assessing Officer to delete the penalty levied under Section 271 (1)(c) of Income-tax Act, 1961 is a question raised in this appeal. The assessment year involved herein is AY-2001-2002. 2.In the return of income filed for the assessment year in question the assessee had disclosed receipt of Rs.4.56 Crores as compensation received from Colgate Palmolive (India) Ltd for whom the assessee was manufacturing tooth paste. The 2itxa-6083-10 assessee claimed deduction under Section 80-IB in respect of the said amount of Rs.4.56 Crores by treating the same as business income. 3.The assessing officer denied the claim of the assessee on the ground that during the assessment year in question, the assessee had not carried out any industrial activity and, therefore, the assessee was not entitled to deduction under Section 80IB of the Act as the amount of Rs.4.56 Crores was received as compensation for loss of business and not earned as business income. The assessing officer, thereafter, initiated penalty proceeding under Section 271 (1)(c) of the Income-tax Act, 1961 and imposed penalty by recording a finding that wherever there is a difference between the returned income and the assessed income, the inference to be drawn is that there is concealment. 4.Challenging the aforesaid order, the assessee filed an appeal before the CIT (A) who upheld the order of the assessing officer by recording a finding that it is next to impossible to comprehend a situation where the assessee though not manufacturing or producing any article or thing can make a claim, a bona fide claim, for claiming a deduction under Section 80IB of the Income-tax Act,1961. 5.Challenging the aforesaid order, the assessee filed an appeal before the ITAT and by the impugned order dated 10[th] April, 2008 the Tribunal following the decision of the Apex Court in the case of T. Ashok Pai vs. CIT [2007] 292 ITR 11 (SC) and Shri Dilip N. Shroff vs. JCIT reported in (291 ITR 519) set aside the order of CIT (A) on the ground that merely because the claim of the assessee for deduction under section 80IB was rejected penalty under section 271 (1) (c) of the Income-tax Act was not imposable. 6.In our opinion, when the CIT (A) had recorded a finding that the claim made by the assessee seeking deduction under Section 80IB of the Act was not bona fide, the Tribunal ought to have either agreed or disagreed with that finding recorded by the CIT (A). Even in the case of Ashok Pai (supra) the Apex Court has held that bonafides of the claim made by the assessee have to be considered. Moreover, the Tribunal has relied upon the judgment of the Apex Court in the case of Dilip Shroff (supra) which is over ruled by the Apex court subsequently in the case of the Union of India vs. Dharmendra Textile Processors reported in 306 ITR 277. Since the Tribunal has not considered the specific finding recorded by the CIT (A) that the claim made by the assessee under Section 80IB of the Act was not bona fide, we set aside the order of the ITAT and restore the matter to the file of the ITAT for fresh consideration in accordance with law. All contentions of both sides are kept open. Appeal is disposed off accordingly with no order as to costs. (A.R.Joshi,J) (J.P.Devadhar,J.)