The Commissioner Of Income Tax -I,Chandigarh v. M/S Himachal Agro Foods Ltd. Chandigarh

In the High Court for the States of Punjab and Haryana at Chandigarh… ITA No.28 of 2008 Date of decision:3.4.2008 The Commissioner of Income Tax -I,Chandigarh Appellant Versus M/s Himachal Agro Foods Ltd. Chandigarh Respondent Coram: Hon’ble Mr.Justice Satish Kumar MittalHon'ble Mr.Justice Rakesh Kumar Garg Present:Mr.S.K.Garg Narwana,Advocatefor the Revenue-appellant. Rakesh Kumar Garg,J 1.The Revenue has filed the present Appeal under Section260A of the Income Tax Act, 1961(for short ‘the Act’) against theorder of the Income Tax Appellate Tribunal, Chandigarh , Bench ‘B’Chandigarh (for short ‘the Tribunal’), dated 30.7.2007 passed in ITANo.245/CHANDI/2007 for the Assessment Year 2003-04 raising thefollowing substantial question of law: - “Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT is justified in law in deleting thepenalty imposed u/s 271(1)(c) of the Income Tax Act,1961, when the assessee company had deliberately furnished inaccurate particulars of its income in theoriginal return and had admitted the mistake by filing therevised return only after the defect was pointed out bythe department ? The assessee-company filed its return of income for theassessment year 2003-04 on 1.12.2003 declaring NIL income whichwas processed under Section 143(1)(a) of the Act on 11.3.2004.Thereafter, the case was selected for scrutiny. It was found that theassessee had claimed 100 % deduction under Section 80 IB of theAct in the original return, whereas the company was entitled to only30 % deduction as per the said provisions. It was admitted by theassessee that the deduction under Section 80 IB of the Act wasbeing claimed wrongly by mistake. Thereafter, the assessee revisedthe return on 24.3.2005 declaring income of Rs.10,04,200/- andclaimed Rs.4,30,371/- as deduction under Section 80 IB andthereafter the assessment was completed. The Assessing Officeralso initiated penalty proceedings under Section 274 read withSection 271(1)(c) against the assessee. Vide order dated 28.9.2006,the Income Tax Officer, Ward-1(2) Chandigarh imposed the penaltyunder Section 271(1)(c) for furnishing inaccurate and concealingparticulars of income. The said order of penalty was challenged bythe assessee by filing appeal before the Commissioner of IncomeTax (Appeals), Chandigarh(for short the “CIT(A)”) on the ground thatthe mistake committed by the assessee was bonafide and therefore,the assessee cannot be penalized under the provisions of Section271(1)(c) of the Act. The CIT(A) vide his order dated 18.12.2006 accepted the appeal and deleted the penalty. Aggrieved against the said order, the Revenue filed theappeal before the Tribunal raising the plea that the assessee haddeliberately concealed the particulars of income as the assessee hadclaimed wrong deduction and therefore, the penalty proceedingswere rightly initiated against the assessee. However, the appeal ofthe Revenue was dismissed by the Tribunal holding that no definitefinding has been recorded by the Assessing Officer that there is aconcealment of income by the assessee and it was merely a case ofa wrong claim under mistaken belief as to which five years, theassessee was entitled to deduction under Section 80 IB of the Actand it was a debatable issue. We have heard Shri S.K.Garg Narwana, Advocate,learned counsel for the Revenue. accepted the appeal and deleted the penalty. Aggrieved against the said order, the Revenue filed theappeal before the Tribunal raising the plea that the assessee haddeliberately concealed the particulars of income as the assessee hadclaimed wrong deduction and therefore, the penalty proceedingswere rightly initiated against the assessee. However, the appeal ofthe Revenue was dismissed by the Tribunal holding that no definitefinding has been recorded by the Assessing Officer that there is aconcealment of income by the assessee and it was merely a case ofa wrong claim under mistaken belief as to which five years, theassessee was entitled to deduction under Section 80 IB of the Actand it was a debatable issue. We have heard Shri S.K.Garg Narwana, Advocate,learned counsel for the Revenue. The facts of the case are not in dispute. The assesseewas entitled to 100 % deduction under section 80 IB of the Act forfive assessment years beginning with the initial assessment year ofthe profits and gains derived from such an industrial undertaking. Asper certificate No.1978 dated 6.3.2002 issued by the DistrictIndustries Centre, Solan, which was attached with the return ofincome, the unit commenced manufacturing of the goods w.e.f.28.3.1998 i.e., 3 days of the Financial Year 1997-98(AssessmentYear 1998-99) and the assessee has taken deduction under Section80 IB inadvertently taking the first assessment year of exemptionstarting from 1999-2000 and the said mistake was a bonafidemistake committed by the Chartered Accountant of the assessee ITA No.28 of 2008 who has duly audited the return. The scope of reasonablecause/bonafide mistake has been debated upon in a catena ofjudgments. The Hon'ble Apex Court in the case of M/s HindustanSteel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) hascategorically held that penalty is not imposable if there is noconscious breach of law. In the present case, since the main disputewas for calculation of number of years, it cannot be said that theassessee deliberately concealed the particulars of income orfurnished inaccurate particulars of income and even if it is presumedthat the counsel for the assessee made a bonafide mistake incalculation of such assessment years, still it can be said that nopenalty should be imposed upon the assessee for the mistake of hiscounsel. Even otherwise, the Tribunal has given a specific findingthat the Revenue has failed to pin point any specific defect in theconclusions of the CIT(A). Thus, in view of the aforesaid finding of facts given by theTribunal, we are not inclined to interfere in the order of the Tribunal.No question of law arises in the appeal and the same is herebydismissed. (RAKESH KUMAR GARG) JUDGE April 3,2008 nk (SATISH KUMAR MITTAL) JUDGE