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TaxTMI 
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2011 (6) TMI 451
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....(Appeals)-II be set aside and that of the Assessing Officer be restored. 3. Both appeals relating to the Revenue on the same issue were heard together and are being disposed of by this consolidated order for the sake of convenience. 4. In both appeals filed by the Revenue the only issue raised is against the deletion of penalty levied under section 271(1)(c) of the Act. Penalty of Rs. 31,97,405 was levied relating to the assessment year 2002-03 and penalty of Rs. 60,76,832 was levied relating to the assessment year 2003-04 under section 271(1)(c) of the Act on account of wrong claim of deduction under section 80-IB of the Act. 5. The brief facts of the case are that the assessee had filed return of income at nil after claiming deduction under section 80-IB of the Act at Rs. 89,56,312 for the assessment year 2002-03. The claim of deduction under section 80-IB of the Act was disallowed by the Assessing Officer, which disallowance was deleted by the Commissioner of Income-tax (Appeals). However, the Tribunal confirmed the disallowance by reversing the order of the Commissioner of Income-tax (Appeals). The Assessing Officer in the penalty proceedings under section 271(1)(c) of the A....
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....nt. The Commissioner of Income-tax (Appeals) during the penalty proceedings vide paragraph 5.4 at page 9 of the appellate order thus observed that the assessee had in view of the same contended that the conditions laid down in section 80-IB of the Act for installation of new machinery being in excess of 80 per cent., was fulfilled for the first time in the financial year 2001-02, i.e., the year under appeal. The claim of the assessee was that in view of the various decisions on the point, it was entitled to claim deduction under section 80-IB of the Act. The Commissioner of Income-tax (Appeals) noted that though the Tribunal had upheld the findings of the Assessing Officer with regard to the disallowance of deduction under section 80-IB of the Act, in view of the acquisition of the new machinery for the proposed industrial undertaking, the appellant was not justified in claiming deduction but however, in view of the ratio laid down by the Hon'ble Kerala High Court in the case of CIT v. Seeyan Plywoods [1991] 190 ITR 564/56 Taxman 296 and by the Madras High Court in CIT v. Gopal Plastics (P.) Ltd. [1995] 215 ITR 136/[1996] 85 Taxman 561 at best was a debatable issue for which penalt....
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....and Haryana High Court in CIT v. Deep Tools (P.) Ltd. [2005] 274 ITR 603 that no penalty is leviable where deduction is claimed on the basis of the chartered accountant's report. Further reliance was placed on the ratio laid down in Telebuild Construction (P.) Ltd. v. Asstt. CIT [2007] 13 SOT 218 (Mum.), Supreme Yarns Ltd. v. Asstt. CIT [I.T. Appeal No. 649 (Chd.) of 2007], CIT v. S. Dhanabal [2009] 309 ITR 268/178 Taxman 242 (Delhi) and Joint CIT v. Arisudana Spg. Mills Ltd. [2007] 11 SOT 756 (Chd.). The learned authorised representative for the assessee also pointed out that the addition in the assessment year 2003-04 was made on different facts, i.e., the computation of deduction under sections 80-IB and 80HHC of the Act. It was pointed out that the Central Board of Direct Taxes vide its circular has directed that no penalty under section 271(1)(c) of the Act is leviable where there is reduction in claim of deduction under section 80-IB/80HHC of the Act in view of the DEPB. 8. The learned Departmental representative for the Revenue in rejoinder pointed out that complete particulars in respect of its claim of deduction under section 80-IB of the Act were not furnished in Form No....
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....was not given and as such no reliance could be placed on the said report. With regard to the second plea of the assessee being debatable, it was observed by the Assessing Officer that the assessee's unit was not a new industrial undertaking and the addition in the machinery being very small, the assessee was not entitled to the said deduction. 10. With regard to the claim of deduction in respect of the export incentive/DEPB the Assessing Officer observed that at the time of filing of the return of income the ratio laid down by the Supreme Court in Sterling Foods' case (supra) was applicable and as such the issue was not debatable. The assessee was held to have furnished inaccurate particulars of income by claiming wrong claim for deduction and penalty was levied. 11. The Commissioner of Income-tax (Appeals) vide paragraph 5 observed as under : "5. I have carefully considered the contention of learned counsel for the appellant and perused the relevant record. As already discussed penalty under section 271(1)(c) of the Act has been levied in this case mainly on account of the fact that deduction of Rs. 89,56,318 claimed by the appellant under section 80-IB of the Act was disallowe....
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....ome-tax (Appeals) that with regard to the claim of deduction on account of export incentive/DEPB under section 80-IB of the Act at the relevant time of making the aforesaid claim, there was diversity of opinion between various Courts and the Tribunal even in view of the ratio laid down by the hon'ble Supreme Court in Sterling Foods' case (supra) and the hon'ble Punjab and Haryana High Court in Liberty India v. CIT [2007] 293 ITR 520/158 Taxman 462 had decided the issue against the assessee. However, there is no merit in holding the assessee to have furnished inaccurate particulars of income in respect of such claim, which was debatable. The assessee has disclosed the material facts relevant for the computation of its income in its return of income and had also furnished a report of the chartered accountant though incomplete. In respect of such a claim, we find no justification in the levy of penalty where the claim of the assessee is being denied being a debatable issue. 13. The other ground on which deduction under section 80-IB was disallowed by the Assessing Officer was non-fulfilment of the conditions prescribed under section 80-IB of the Act. The assessee claims that the comp....
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....rala High Court in the case of CIT v. Seeyan Plywoods [1991] 190 ITR 564 (Ker.); 56 Taxman 296 (Ker.), relied upon by learned counsel is in favour of the appellant as far as this issue is considered. Similarly the case of CIT v. Gopal Plastics P. Ltd. [1995] 215 ITR 136 (Mad.) also covers the case of the appellant in its favour. Therefore, though ultimately the hon'ble Income-tax Appellate Tribunal upheld the findings of the Assessing Officer with regard to the disallowance of deduction under section 80-IB, in view of the ratio of the above decisions, in the facts and circumstances with regard to the acquisition of new machinery for the industrial undertaking of the appellant, the appellant was not unjustified in claiming the deduction. My predecessor accordingly allowed the claim of the appellant. In his order dated February 16, 2006, my learned predecessor has referred to a number of decisions to bring home the point that an assessee could also use the same premises/building for installing the plant and machinery of the new unit. In view of the above factual position and the ratio of the decisions of the hon'ble Kerala High Court and the hon'ble Madras High Court mentioned above,....
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.... 16. We find support from the ratio laid down by the Chandigarh Bench of the Tribunal in Arisudana Spg. Mills Ltd.'s case (supra). The Tribunal vide paragraph 8 of the order held as under : "8. Now, the question is as to whether the denial of the claim made in the return of income can lead to an automatic imposition of penalty under section 271(1)(c) of the Act. It is sufficient to say that the assessment proceedings and the subsequent penalty proceedings are independent proceedings. The findings and conclusions drawn by the authorities in the assessment proceedings are relevant but cannot be construed as conclusive so as to fasten the assessee with the charge of concealment of income and furnishing of inaccurate particulars thereof. A similar situation was before the hon'ble Punjab and Haryana High Court in the case of Deep Tools P. Ltd. [2005] 274 ITR 603 (P&H). In the said case too, the assessee had staked claim for deduction under section 80HHC of the Act, which was declined. The Assessing Officer levied penalty under section 271(1)(c) of the Act. The stand of the assessee was that the claim was mistaken but was based on bona fide considerations. The hon'ble High Court observe....
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....entive and also because of non-fulfilment of conditions prescribed under section 80-IB of the Act. The assessee was held to have concealed the particulars of income to the extent of Rs. 87,89,144. The Assessing Officer accordingly levied penalty under section 271(1)(c) of the Act amounting to Rs. 60,76,832. 19. The learned authorised representative for the assessee placed reliance on Circular No. 2 of 2006, dated January 17, 2006 ([2006] 280 ITR (St.) 39) wherein it has been provided that where the claim of the assessee for deduction under section 80HHC in DEPB credits has not been allowed, penalty relating to such disallowance shall not be initiated, if levied, shall be waived by the Chief Commissioner. 20. On the perusal of the record and the order of the Assessing Officer against the order levying penalty under section 271(1)(c) of the Act, we find no merit in the levy of penalty under section 271(1)(c) of the Act on denial of deduction under section 80-IB of the Act, in view of our observations in paras hereinabove in respect of penalty levied under section 271(1)(c) of the Act relating to the assessment year 2002-03. We uphold the order of the Commissioner of Income-tax (App....