The Commissioner Of Income Tax, Karnal v. The Shahabad Coop. Sugar Mills Limited

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITA No.19of 2007(O&M)Date of decision: 12.10.2009 The Commissioner of Income Tax, Karnal Vs. The Shahabad Coop. Sugar Mills Limited. -----Appellant ----Respondent Adarsh Kumar Goel,J. 1.The revenue has preferred this appeal undersection 260-A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal (ChandigarhBench ‘A’) passed in ITA No.1041/Chandi/2005 dated7.6.2006, for the assessment year 1995-96, proposing toraise following substantial questions of law:- “i) Whether on the facts and in the circumstancesof the case, the ld. ITAT was right in law indeleting the penalty of Rs.2,62,41,380/- imposedunder section 271(1)(c ) of the Income Tax Act, totally ignoring the fact that the assessee hadfurnished inaccurate particulars of income byfurnishing inaccurate particulars and makingwrong claim of deduction under section 80(P)(2) (a)(iii)? ii) Whether on the facts and in the circumstancesof the case, the ld. ITAT was right in law indeleting the penalty in respect of wrong claim ofdeduction under section 80(2) (d) and wrongclaim of depreciation on guest house when theld. ITAT in its order has not given any reasonsfor deleting the penalty on these counts?” 2. The assessee is an agricultural society engaged in marketing of sugar by its members. The said claim wasrejected on the ground that the claim was available only onmarketing of agricultural produce and not onmanufactured article. While disallowing the said claim,penalty was also levied for making wrongful claim andthereby avoiding tax. The said view was upheld by the CIT(A) but the Tribunal even while holding that the claim ofthe assessee was not tenable, set aside the levy of penaltyon the ground that there was no conscious breach of lawwhich was required for levy of penalty, as held by the Hon’ble Supreme Court in Hindustan Steel Limited v.State of Orissa (1972) 83 ITR 26. There was noconcealment or deliberate withholding of information orfurnishing of incorrect particulars.3.This appeal was deferred in view of pendency ofquantum appeal filed by the assessee being ITA No.165 of2005 (M/s Shahabad Coop. Sugar Mills Limited,Shahabad v. Deputy Commissioner of Income Tax, Spl.Range, Karnal), which has been allowed by a separateorder passed today, in view of full Bench judgment of thisCourt inBudhewal Coop. Sugar Mills Limited v. CIT, (2009)315 ITR 351, holding that claim of the assessee was valid. Thisbeing the position, there could be no scope for levy of penalty.However, learned counsel for the revenue submits that wrongclaim of the assessee was not only under section 80P of the Act butalso under section 80(2) of the Act, in respect of depreciation onguest house. 4.From the order of the Tribunal, we do not find any suchpoint having been raised by the Revenue. In any case, reasoningwhich has been applied for setting aside penalty in respect ofwrong claim under section 80P of the Act will also apply to wrongclaim under the head of depreciation. Making of wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty under section 271(1) ( c) of the Act. 5.No substantial question of law arises. 6.The appeal is dismissed. (Adarsh Kumar Goel)Judge October 12, 2009‘gs’ (Gurdev Singh)Judge