The Commissioner Of Income Tax v. M/S Raj Overseas

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.225 of 2010 Date of decision: 28.7.2010 The Commissioner of Income Tax. Vs. M/s Raj Overseas. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Yogesh Putney, Sr.Standing counselfor the Revenue.for the Revenue. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of ITA Nos.225 and 232 of2010, as both the appeals raised common question of leviabilityof penalty when the assessee had put forward the claim whichwas found not acceptable. In I.T.A. No.225 of 2010, the Revenuehas claimed following substantial questions of law:- “i)Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal was right inlaw in deleting the penalty imposed under Section 271(1)(c) on the amount of deduction claimed underSection 80IB on export incentives by holding thatthere was no deliberate furnishing of inaccurateparticulars by the assessee, given the fact that thedecision of the Hon'ble Supreme Court in Sterlingcase, the Income Tax Appellate Tribunal was right inlaw in deleting the penalty imposed under Section 271(1)(c) on the amount of deduction claimed underSection 80IB on export incentives by holding thatthere was no deliberate furnishing of inaccurateparticulars by the assessee, given the fact that thedecision of the Hon'ble Supreme Court in Sterling Foods Vs. CIT dated 15.4.1999 (237 ITR 579)disallowing claim of deduction under Chapter VIA ofthe Act on export incentives was already available tothe assessee at the time of filing of return of incomefor Assessment Year 2003-04, and therefore, theassessee was evidently filing inaccurate particulars ofincome in claiming deduction under Section 80IB onexport incentives?” ii)“Whether the decision of the Income Tax AppellateTribunal to delete the penalty under Section 271(1)(c)of the Act is justified in the light of the decision of theHon'ble Supreme Court in Liberty India Vs. CIT (317)ITR 218), whereby the non-allowability of 8-0IBdeduction on export incentives has been re-affirmed?”Tribunal to delete the penalty under Section 271(1)(c)of the Act is justified in the light of the decision of theHon'ble Supreme Court in Liberty India Vs. CIT (317)ITR 218), whereby the non-allowability of 8-0IBdeduction on export incentives has been re-affirmed?” iii)“Whether the decision of the Income Tax AppellateTribunal quashing the penalty order under Section271(1)(c) on the ground that there is no deliberateconcealment is justified in the light of the decision ofthe Hon'ble Apex Court in Dharmendra TextileProcessors and others, 306 ITR 277 (SC), which hasheld that mens rea is not an essential ingredient forlevy of penalty under Section 271 (1)(c) of the Act,and that levy of such penalty is mandatory as remedyfor loss to revenue, and given the fact that such lossto revenue has occurred in the instant case due towrong claim by the assessee with respect todeduction under Section 80IB?”Tribunal quashing the penalty order under Section271(1)(c) on the ground that there is no deliberateconcealment is justified in the light of the decision ofthe Hon'ble Apex Court in Dharmendra TextileProcessors and others, 306 ITR 277 (SC), which hasheld that mens rea is not an essential ingredient forlevy of penalty under Section 271 (1)(c) of the Act,and that levy of such penalty is mandatory as remedyfor loss to revenue, and given the fact that such lossto revenue has occurred in the instant case due towrong claim by the assessee with respect todeduction under Section 80IB?” 2. The Assessee is manufacturer and derived incomefrom exports. The Assessee claimed deduction under Section80-IB of the Act in respect of income from duty draw back. The 2. The Assessee is manufacturer and derived incomefrom exports. The Assessee claimed deduction under Section80-IB of the Act in respect of income from duty draw back. The Assessing Officer disallowed the said claim on the ground thatthe income derived from duty draw back was not income derivedfrom industrial undertaking, as held by the Hon’ble SupremeCourt in CITv. Sterling Foods India[1999] 237 ITR 579.Penalty was also levied. The CIT(A) upheld the view of theAssessing Officer but the Tribunal deleted the penalty with thefollowing observations:- “.......Thus, prima facie, it indicates that this issue wasa debatable one. Hon'ble Punjab & Haryana HighCourt in the case of CIT Vs. Budh Well Co-OperativeSugar Mills (supra) has held that if an assessee hasmade a bonafide claim on the basis of law laid downby various Hon'ble High Court then penalty would notbe levied upon such an assessee merely on theground that his claim was disallowed. Similarly, theHon'ble Rajasthan High Court in the case of CIT Vs.Harshvardhan (supra) has held that if as assesseeclaims some deductions which are debatable then itcould not be said that assessee has concealed anyincome or furnished inaccurate particulars of incomewhich exposed him with the penalty proceedingsunder Section 271(1)(c) of the Act.....”a debatable one. Hon'ble Punjab & Haryana HighCourt in the case of CIT Vs. Budh Well Co-OperativeSugar Mills (supra) has held that if an assessee hasmade a bonafide claim on the basis of law laid downby various Hon'ble High Court then penalty would notbe levied upon such an assessee merely on theground that his claim was disallowed. Similarly, theHon'ble Rajasthan High Court in the case of CIT Vs.Harshvardhan (supra) has held that if as assesseeclaims some deductions which are debatable then itcould not be said that assessee has concealed anyincome or furnished inaccurate particulars of incomewhich exposed him with the penalty proceedingsunder Section 271(1)(c) of the Act.....” 3. We have heard learned counsel for the Revenue. 4. In view of factual finding of the Tribunal, it cannot bedisputed that the issue was debatable and deduction claimed bythe Assessee did not lack bonafides. In such a situation, penaltyunder Section 271(c) of the Act was not attracted. In recent judgment of the Hon’ble Supreme Court in CITv. ReliancePetroproducts (P) Ltd.[2010] 230 CTR 320, the legal position tothis effect has been reiterated. If the Assessee has made fulldisclosure in the return, claim for deduction cannot be held to begiving of inaccurate particulars. The view taken by the Tribunalis, thus, a possible view. 5. No substantial question of law arises. The appeals are dismissed. (ADARSH KUMAR GOEL) JUDGE July 28, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE