TaxTMI 
TaxTMI 
2010 (9) TMI 657
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....roceedings, the Assessing Officer noticed that the assessee has claimed a deduction of Rs 2,66,63,949 , under section 80 HHC, but while computing the profit eligible for the said deduction, the assessee has not set off brought forward losses of earlier years. The Assessing Officer was of the view that this claim is inadmissible in view of the judgment of Hon'ble Supreme Court in the case of IPCA Laboratories Ltd v. DCIT (266 ITR 521). It was in this backdrop, and relying upon the aforesaid decision of Hon'ble Supreme Court, declined deduction of Rs 2,66,63,949 under section 80HHC. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. When the matter finally travelled in appeal before a coordinate bench of this appeal, the assessee conceded that the issue is covered against the assessee by Hon'ble Supreme Court's decision in the case of CIT v. Shirke Construction Equipments Limited (291 ITR 380). The disallowance thus received finality. 4. The matter, however, did not rest with the disallowance of deduction under section 80HHC. The Assessing Officer also initiated the penalty proceedings under section 271(1)(c) of the Act, on the ground that th....
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.... 2004, and if the assessee was indeed acting bona fides, the assessee could have as well revised his income tax return by 31st March 2004 and thus withdraw the claim of deduction. The action of the Assessing Officer was thus confirmed by the CIT(A). The assessee is not satisfied and is in appeal before us. 5. Learned counsel's attack on the impugned order is three fold - first, that since the assessee has made the claim in a transparent manner and with complete disclosure, rejection of such a claim cannot be visited with penalty proceedings at all; second, that the correctness of claim made by the assessee is to be examined in the light of the legal position as it existed at the point of time when income tax return was filed, and it is not even Revenue's case that the claim was inadmissible in the legal position as it prevailed at that point of time; and, third, that, in any event, a mere rejection of legal claim, even if such a claim is wrong, cannot be visited with penalty proceedings under section 271(1)(c). Learned counsel submits that the claim of the assessee was duly supported by the certificate issued by the chartered accountant, who is an independent professional certifyi....
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....urate particulars of income. It is submitted that in the present case, there is nothing more than rejection of a legal claim made by the assessee, and, therefore, it is not a fit case for imposition of penalty. In the light of these submissions, learned counsel urges us to delete the impugned penalty. 6. Learned Departmental Representative, on the other hand, submits that the claim may have been correct vis-à-vis the legal position at the time of filing of income tax return, but then the legal position had since changed and the assessee did nothing to bring the correct legal position to the notice of the Assessing Officer. The certificate issued by the chartered accountant also, in the light of the amended legal position, could have been revised to reflect the correct position. It is submitted that the chartered accountant was obtained by the assessee only, and, therefore, it cannot really be treated as an independent opinion on the issue. It was also pointed out that the Assessing Officer confronted the assessee with the correct legal position and it was not the case that the assessee admitted and accepted the correct legal position. It was also pointed out that the assess....
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....r him. What is to be examined by us is the conduct of the assessee as at the point of time when income tax return was filed and whether the return so filed can be said to have inaccurate particulars of income. The case of the Assessing Officer clearly fails on this test, as the claim was made by the assessee in accordance with the law prevailing as on the point of time when the income tax return was filed. The case made by the Assessing Officer thus does not meet our approval. To that extent, Hon'ble Supreme Court's judgment in the case of Reliance Petroproducts (supra) also supports the case of the assessee. Hon'ble Supreme Court, in the case of Reliance Petroproducts, was a case in which Their Lordships were only concerned with the question whether "in this case, as a matter of fact, the assessee has given inaccurate particulars". Their Lordships noted that "in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false" and add that "such being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act" and that "a mere making of the claim, which is not sustainable in....
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....ent the income in respect of which inaccurate particulars have been furnished, but that the levy of penalty hinges on assessee's substantiating the explanation, proving that it is bonafides and that all the material facts are disclosed. Viewed in this perspective also, however, we find that the Assessing Officer does not have a legally sustainable case. We have noted the assessee has a reasonable explanation for having made this claim in the income tax return, and all the necessary details are filed by the assessee and the claim is made in a fair and transparent manner. As at the point of time when the assessee filed the income tax return, the claim of the assessee, in the light of the legal position then prevailing, was clearly an admissible claim. It is not a case that the assessee has made a claim which is clearly inadmissible a claim or clearly contrary to the prevailing legal position. We have also noted that the conduct of the assessee cannot be said to be lacking bonafides in any manner, and that the assessee had also made the claim in a fair and transparent manner, without withholding any material information . As regards the Commissioner (Appeals)'s observation that the fa....