The Commissioner Of Income-Tax-Ii, Chandigarh v. M/S Punjab State Cooperative Federation Of Housing Buildingsocieties, Chandigarh

Income Tax Appeal No.152 of 2013 1 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income Tax Appeal No.152 of 2013Date of Decision: 23.8.2013 The Commissioner of Income-tax-II, Chandigarh ..Appellant Versus M/s Punjab State Cooperative Federation of Housing BuildingSocieties, Chandigarh ..Respondent CORAM:HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOONPresent:Mrs. Urvashi Dhugga, Advocate, for the appellant.RAJIVE BHALLA,J. The revenue impugns orders dated 28.7.2012 and 18.12.2012passed by the Commissioner of Income Tax (Appeals), and the IncomeTax Appellate Tribunal, Chandigarh Benches `A' Chandigarh, respectively. Counsel for the revenue submits that disallowance of theassessee's claim for exemption under Section 80 (P) of the Income TaxAct, 1961 (hereinafter referred to as the “Act”) was affirmed up to the HighCourt. The Assessing Officer, therefore, rightly imposed penalty ofRs.12,03,242/- under Section 271(1)(c) of the Act. The appeal filed by theassessee before the CIT (Appeals) was wrongly allowed by holding that asdisallowance was claimed on a debatable issue, penalty is not warranted.The appeal filed by the revenue was wrongly dismissed by relying upon ajudgment of the Punjab and Haryana High Court in CIT versus BuddhewalCooperative Sugar Mills– 312 ITR 92 (PH) Counsel for the revenue further submits that as there was nodebatable issue as the assessee could not claim exemption of interest Income Tax Appeal No.152 of 2013 2 derived from deposits with Cooperative Banks. The claim for exemptionwas raised, is a mala fide attempt to evade tax. It is further submitted thatas an attempt to conceal income by furnishing inaccurate particulars,stands proved, the order imposing penalty, should not have been set asideby the Income Tax Appellate Tribunal or by the Commissioner of IncomeTax (Appeals). Counsel for the revenue places reliance upon a Delhi HighCourt judgment in Commissioner of Income Tax versus ZoomCommunication Private Limited,2010 327 ITR 510 (Delhi), We have heard counsel for the parties, perused the impugnedorders. The questions of law framed by the revenue read as follows:- “(i) Whether on the facts and circumstances of the case, theHon'ble ITAT is right in confirming the order of the ld. CIT(A)deleting the penalty on the ground that the addition made isdebatable because it was first confirmed by the ld. CIT(A) thendeleted by the Hon'ble Tribunal and finally restored by theHon'ble High Court? (ii) Whether on the facts and circumstances of the case, theHon'ble tribunal is right in confirming the order of the ld. CIT(A)deleting the penalty on the ground that the assessee hasdisclosed the particulars of the income on which deduction hasbeen claimed while ignoring the fact that the claim itself iswrong and deliberate specifically in view of the fact that thesame was not claimed by the assessee in the earlier years? The Assessing Officer levied penalty under Section 271(1)(c)of the Act, but this order was set aside by the CIT (Appeals) by holding asfollows:- “ The appellant had treated the interest received from banks asbusiness income and had given reasons for doing so in the Income Tax Appeal No.152 of 2013 3 (ii) Whether on the facts and circumstances of the case, theHon'ble tribunal is right in confirming the order of the ld. CIT(A)deleting the penalty on the ground that the assessee hasdisclosed the particulars of the income on which deduction hasbeen claimed while ignoring the fact that the claim itself iswrong and deliberate specifically in view of the fact that thesame was not claimed by the assessee in the earlier years? The Assessing Officer levied penalty under Section 271(1)(c)of the Act, but this order was set aside by the CIT (Appeals) by holding asfollows:- “ The appellant had treated the interest received from banks asbusiness income and had given reasons for doing so in the Income Tax Appeal No.152 of 2013 3 computation sheet and so it cannot be said that the appellanthad furnished inaccurate particulars of its income or had notdisclosed complete facts regarding this issue, on whichconcealment penalty has been levied. In fact, allowability ofdeduction u/s 80P(2)(d) on the impugned interest is adebatable issue, as is evident from the fact that thedisallowance made on this account was confirmed by CIT (A),deleted by Hon'ble ITAT, Chandigarh and has been confirmedby the Hon'ble Punjab and Haryana High Court. Thedisallowance being itself debatable, it was not appropriate tolevy concealment penalty in this case, particularly when theappellant had mentioned very clearly in the computation sheetas to why it was treating impugned interest as businessincome. Hence, the concealment penalty levied in this case iscancelled. Ground of appeal No.3 is allowed.” Aggrieved by this order, the revenue filed an appeal whichwas dismissed by holding as follows:- “We have heard the rival submissions carefully and findthat it is not disputed that originally the disallowance wasdeleted by the Tribunal and the deduction was allowed. Thisitself shows that the claim was of debatable nature. Further wefind that in case of CIT V. Buddhewal Coop Sugar Mills (supra)the Hon'ble Punjab & Haryana High Court has deleted thepenalty. In that case it was held as under: “ Held, dismissing the appeal, that the society had paidadvance tax as well as self-assessment tax not taking intoaccount the deduction claimed u/s 80P(2)(a)(iii) of the Act. Itwas evident from the facts that the assessee's claim was bona Income Tax Appeal No.152 of 2013 4 fide and that all the particulars relating to the computation ofincome had been disclosed. Thus, the Tribunal rightlycancelled the penalty levied.” A perusal of these orders reveal that the Commissioner ofIncome Tax (Appeals) and the Income Tax Appellate Tribunal have heldthat as the assessee's claim for exemption was debatable and was raisedin a bona fide exercise of an assessee's right to claim deduction, penalty isnot warranted. Reliance by the revenue upon a judgment of the Delhi HighCourt in Commissioner of Income Tax versus Zoom CommunicationPrivate Limited,2010 327 ITR 510 (Delhi), is entirely misplaced asobservations in this judgment are in the context of its facts as the assesseehad claimed deductions with the mala fide object of evading tax. Thesituation, in the present case, cannot, by any stretch of imagination, besaid to be akin to the factual position in Zoom Communication PrivateLimited's case (supra). The assessee cannot be accused of concealmentof income or an intentional attempt to evade tax. The bona fide claim fordeduction was finally settled by the High Court in Buddhewal CooperativeSugar Mills' case(supra), thereby establishing that claim raised by theassessee was debatable and, therefore, could not invite penalty, underSection 271(1)(c) of the Act. In view of what has been stated herein above, as no questionof law, much less, the questions of law framed, arise for adjudication, theappeal is dismissed. ( RAJIVE BHALLA )JUDGE ( DR. BHARAT BHUSHAN PARSOON) JUDGE