TaxTMI 
TaxTMI 
2009 (2) TMI 241
X X X X Extracts X X X X
X X X X Extracts X X X X
....of income in the present case was filed at an income of Rs. 3,03,451 on 1st Nov., 2004. Assessment proceedings were started by issue of notice under s. 143(2) of IT Act, 1961 (the Act) dt. 5th Jan., 2005 and assessment was completed vide assessment order dt. 22nd Dec., 2006 passed under s. 143(3) of the Act. Copy of assessment order has been filed along with present appeal. The AO has discussed this issue in para 3 of the impugned assessment order. It has been mentioned in para 3 that assessee has claimed deduction under s. 10B of the Act amounting to Rs. 3,54,25,995. In order to probe into the veracity of the said claim the assessee was required to furnish details of sale realized in the convertible foreign exchange duly supported by the certificate from the concerned banks. In pursuance of that requirement assessee filed the details. From the said details, the AO noticed that out of total sales of Rs. 7,70,00,620 sales proceeds belonging to two parties, namely M/s APC, Bangalore and M/s ASCOM, Gurgaon were to the tune of Rs. 25,09,574 and Rs. 12,47,457 respectively. Sales to these parties were shown under the category "deemed export" and these were not supported by bank certifica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....spectfully submit that an amount of Rs. 30,34,251 has been added to the declared income of the assessee on account of excess deduction claimed under s. 10B on account of deemed exports. It is submitted that the assessee has maintained proper books of accounts which were produced before your goodself at the time of assessment proceedings. It is further submitted that there is no concealment of particulars of income or furnishing of inaccurate particulars of income. Merely because certain amount has been disallowed with the consent of the assessee or the assessee has not preferred any appeal against such addition, such income will not amount to concealed income attracting penalty under s. 271(1)(c). Our above view is duly supported by the following case laws." 6. Apart from above explanation the assessee placed reliance on certain decisions. The first decision relied upon by assessee was the decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Ajaib Singh & Co. (2001) 170 CTR (P&H) 489 : (2002) 253 ITR 630 (P&H). This decision was relied upon by the assessee to contend that disallowance of expenses per se does not amount to furnishing inaccurate particulars of in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uted to him. It is observed by the AO that addition in the assessee's case is not merely on account of routine disallowance and on the contrary, it was noticed during the course of assessment proceedings from the details of realization of export proceeds that this included sale to above-mentioned two parties which were situated in India and which, according to the facts beyond doubt are not supported by sale proceeds realized from these parties in convertible foreign exchange. The assessee with a view to conceal this default had shown sale proceeds realized from these parties under the category of a "deemed export", a term nowhere referred in s. 10B of the Act and, thus, the word "deemed export" has been coined by the assessee to cover up his attempt to furnish inaccurate particulars of income. The said conduct of the assessee leaves no scope for the doubt about his mala fide intention to deprive the Revenue of its due by furnishing inaccurate details of the export sales. 10. The AO further observed that keeping in view the facts of the assessee's case the decision of Hon'ble Supreme Court in the case of K.C. Builders is not applicable and, thus, the AO arrived at a conclusion t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid contention of the assessee has not been substantiated and is not material for deciding the appeal. The learned CIT(A) concluded that the AO was justified in coming to the conclusion that assessee has furnished inaccurate particulars of his income by claiming excess deduction under s. 10B and, thus, she confirmed the addition. 12. The assessee is aggrieved, hence, in appeal. 13. After narrating the facts which was vehemently pleaded by the learned Authorised Representative that prior to omission of second proviso to sub-s. (1) of s. 10B by the Finance Act, 2001 w.e.f. 1st April, 2002 the law as it stood on the statute was that in the case where eligible units falling within the provisions of s. 10B the profit and gains derived from domestic sales of eligible goods do not exceed 25 per cent of the total sales, shall be deemed to be profit and gains derived from the export of eligible goods and, thus, the entire profits of the said unit will be eligible for exemption under s. 10B. He contended that the domestic sale of the assessee in the present year does not exceed 25 per cent of the total sales and, thus, the assessee was under bona fide impression that he is eligible for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as been held that assessee having claimed some deductions which are debatable, it could not be said that as it has concealed any income or furnished inaccurate particulars of income and penalty under s. 271(1)(c) could not be levied. (iv) CIT vs. Tek Ram (HUF) (2008) 14 DTR (P&H) 65 : (2008) 220 CTR (P&H) 396 : (2008) 300 ITR 354 (P&H) wherein it has been held that when the matter relating to enhanced compensation receivable by the assessee was still in dispute and assessee did not offer the amount of enhanced compensation and interest thereon for tax claiming that it was not taxable in the relevant assessment year, the claim was bona fide and based on one possible view and, therefore, levy of penalty under s. 271(1)(c) was not justified. (v) ITO vs. Burmah Shell Oil Storage & Distributing Co. of India Ltd. (1987) 163 ITR 496 (Cal) wherein it has been held that assessee having disclosed all necessary materials, papers and documents before the assessing authority and raising legal issues in support of the claim for devaluation loss, development rebate and depreciation at enhanced rate; rejection of such claim of the assessee cannot amount to concealment for the purpose of s. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to sales made by the assessee to aforementioned two concerns on which sales the assessee has claimed exemption under s. 10B. The assessee has to satisfy the conditions laid down in s. 10B(3) which reads as under: Sec. 10B(3): This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. 21. Thus, according to s. 10B(3) the assessee is entitled to claim deduction under s. 10B, if the payments are received by the assessee in convertible foreign exchange in the manner specified in that sub-section. In the present case assessee has sold the goods to the local parties and there was no question of assessee of receiving payments in convertible foreign exchange. 22. Explanation 1 to s. 271(1)(c) reads as under: "Explanation 1: Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 264 where the substantial amount of addition will be reduced. 25. Gathered from above explanations, the only explanation of the assessee is that it is maintaining proper books of account which was produced before the AO at the time of assessment proceedings and there is no concealment of particulars of income or furnishing of inaccurate particulars of income. On these facts, we have to examine that whether assessee's case falls within Expln. 1 or not. 26. According to Expln. 1(B) of s. 271(1)(c) if assessee offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to the same and material to the computation of total income have been disclosed, then the amount added or disallowed shall be deemed to have been concealed. To claim exemption under s. 10B, it was a condition precedent that payments should be received in convertible foreign exchange in the manner specified in sub-s. (3) of that section. The second and foremost requirement of the section as it was existing for the relevant assessment year was that the profits which are claimed to be exempt under s. 10B should be derived by a 100 per c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... period of six months from the end of the previous year Yes (ii) If not, whether it was brought into India within such further period in the previous year as allowed by the competent authority NA (iii) Specify the amount and the relevant previous year in case such amount is brought into India in convertible foreign exchange beyond the period of the six months from the end of the relevant previous year and with the approval of the competent authority, where such amount relates to any other previous year. Also specify the authority and the period upto which the approval ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....form in column No. 16 to state that whether full consideration is received by the assessee in foreign convertible exchange within six months. The remark's by the auditor is "yes". It cannot be presumed that before furnishing such certificate the auditor has not verified this fact from the assessee. It has not been explained by the assessee that in what circumstances these remarks were given by the auditors which could not be supported by the assessee during the course of assessment. If the assessee is contending his bona fide then it is for the assessee to show that why the facts were not correctly stated by the assessee in the Form No. 56-G submitted in support of the claim under s. 10B. Thus, assessee has not established that his claim is bona fide. The material facts are also not disclosed. Therefore, Expln. 1 is squarely applicable to the case. It is not a case where the disallowance has been made only on the basis of difference of opinion or different view taken by the AO. There was only one view that assessee could claim deduction under s. 10B on fulfilling both the two most essential conditions to make entitle the assessee to claim exemption under s. 10B. It has also been no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of penalty under s. 271(1)(c). 30. So far as it relates to decision relied upon by learned Authorised Representative, it may be mentioned that those have no application to the facts of the assessee's case. In the case of CIT vs. International Audio Visual a finding was arrived at that there was no concealment of primary facts so as it relates to claim made by the assessee under s. 80HHC. Here, in the present case there is concealment of primary fact of not having received payments in convertible foreign exchange. Therefore, the decision in that case has no applicability to the present case. 31. CIT vs. P.H.I. Seeds India Ltd.: In that case also all the transactions relating to disallowance were disclosed by the assessee in the return of income itself and, thus, it was held that penalty under s. 271(1)(c) could not be levied on the assessee for incorrectly claiming the deduction of interest paid on overdraft of income by way of interest on FDRs. 32. CIT vs. Harshvardhan Chemicals & Mineral Ltd.: In that case the issue was regarding claiming of deductions which were debatable in nature. Here, in the present case the disallowance deduction is not debatable at all. Therefore, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....produce these observations of their Lordships from the said decision: "24. It is of significance to note that the conceptual and contextual difference between s. 271(1)(c) and s. 276C of the IT Act was lost sight of in Dilip N. Shroff's case. 25. The Explanations appended to s. 271(1)(c) of the IT Act entirely indicates the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The judgment in Dilip N. Shroff's case has not considered the effect and relevance of s. 276C of the IT Act. Object behind enactment of s. 271(1)(c) read with Explanation indicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under s. 276C of the IT Act." 36. It may be mentioned here that the Division Bench of the Hon'ble Supreme Court had referred the question to a Larger Bench vide decision in the case of Union of India vs. Dharamendra Textile Processors & Ors. (2007) 212 CTR (SC) 432 : (2007) 295 ITR 244 (SC) wherein th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubsequent decision alters the earlier one, it (the latter decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. To support this, it will be relevant to reproduce the following 9bservations of their Lordships of Hon'ble Supreme Court from the decision in the case of Asstt. CIT vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 219 CTR (SC) 90 : (2008) 305 ITR 227 (SC): "42. In our judgment, it is also well settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectiv....