2016 (7) TMI 1183 - AT - Income Tax

Tribunal cancels penalty under IT Act, finding no deliberate concealment or inaccurate particulars

Shri Manoj Kumar Johari Versus Assistant Commissioner of Income Tax, Circle, Sikar.

The Tribunal allowed the appeal by the assessee, leading to the deletion of the penalty of Rs. 24,20,000/- imposed under Section 271(1)(c) of the IT Act. ... Penalty u/s 271(1)(c) - eligibility of deduction under section 10BA - Held that:- All the material facts were duly disclosed by the assessee in its return of income. The revenue has not disputed this fact. The assessee under the bona fide belief was of the view that it was eligible for deduction under section 10BA of the Act. Under these facts, when revenue has not pointed out the deliberate act on the part of the assessee which demonstrates furnishing of inaccurate particulars or concealment of material facts, we are of the considered view AO was not justified in levying the penalty under section 271(1)(c) of the Act. - Decided in favour of assessee Issues Involved:1. Legitimacy of the penalty imposed under Section 271(1)(c) of the IT Act, 1961.2. Eligibility of deduction under Section 10BA of the IT Act, 1961.3. Interpretation of the Supreme Court's judgment in Liberty India vs. CIT.4. Nature of DEPB and duty drawback receipts as business income.Detailed Analysis:1. Legitimacy of Penalty under Section 271(1)(c) of the IT Act, 1961:The primary issue revolves around whether the penalty of Rs. 24,20,000/- imposed under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars is justified. The assessee contends that the penalty is unwarranted as the claim was made in good faith and supported by statutory auditors. The authorities, however, argue that the claim was made post the Supreme Court's decision in Liberty India vs. CIT, which clearly stated that DEPB and duty drawback receipts are not business income for the purposes of Section 10BA.2. Eligibility of Deduction under Section 10BA of the IT Act, 1961:The assessee claimed a deduction under Section 10BA for DEPB and duty drawback receipts, arguing that the issue was debatable and supported by various court decisions prior to the Supreme Court ruling in Liberty India. The authorities refuted this, stating that the claim was made after the Supreme Court had settled the issue, making the claim invalid.3. Interpretation of the Supreme Court's Judgment in Liberty India vs. CIT:The Supreme Court in Liberty India vs. CIT ruled that DEPB and duty drawback receipts do not constitute business income for the purposes of Sections 80IA, 80IB, and 10BA. The authorities assert that this ruling was clear and binding at the time the assessee filed the return, thus making the claim for deduction under Section 10BA invalid and subject to penalty.4. Nature of DEPB and Duty Drawback Receipts as Business Income:The assessee argued that prior to the Supreme Court's ruling, various courts, including the jurisdictional High Court, had conflicting views on whether DEPB and duty drawback receipts could be considered business income. The authorities maintained that post the Supreme Court decision, there was no ambiguity, and the claim was knowingly incorrect.Judgment Analysis:The Tribunal examined the facts and the arguments presented. It noted that the assessee filed the return after the Supreme Court's decision in Liberty India, which clearly held that DEPB and duty drawback receipts are not part of business income for the purposes of Section 10BA. Despite this, the assessee claimed the deduction, which the authorities deemed as furnishing inaccurate particulars of income.However, the Tribunal also considered the assessee's argument that all material facts were disclosed in the return and that the claim was made in good faith based on prior conflicting judgments. The Tribunal cited several case laws, including CIT vs. Reliance Petroproducts P. Ltd., which held that merely making a claim that is unsustainable does not amount to furnishing inaccurate particulars.The Tribunal concluded that the issue was debatable and that the assessee had disclosed all material facts. It found no deliberate act of concealment or furnishing of inaccurate particulars by the assessee. Therefore, the penalty under Section 271(1)(c) was deemed unjustified, and the Tribunal directed the AO to delete the penalty.Conclusion:The appeal by the assessee was allowed, and the penalty of Rs. 24,20,000/- imposed under Section 271(1)(c) was deleted. The Tribunal emphasized that the issue was debatable, and the assessee had disclosed all material facts, thus not warranting the penalty for concealment or inaccurate particulars.