TaxTMI 
TaxTMI 
2015 (1) TMI 961
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....cessive deduction under Section. 80IB amounting to Rs. 67,82,258/- & Rs. 69,85,466/- 3. Relying on the decision of the Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors 2007 295 ITR 244, Penalty u/s271(1)( c) is leviable in this case. 4. The Common short facts of the case are that the assessee is a Pvt. Ltd Co engaged in manufacture and sale of dry dispersion cellulose ether, film coating material and claimed deduction u/s80IB of the I.T Act of Rs. 26,15,61,571/- & Rs. 9,98,07,749/-. The assessee has included the following items while computing the deduction u/s80IB of the I.T Act and the same was disallowed in the assessment :- A.Y 2007-08 Sr No. Particulars Income Disallowance of deduction under section 80IB 1 Provision for doubtful debts written off 10,32,980 3,09,894 2. Interest Income 62,49,244 18,74,773 3. Income from insurance claim 4,29,167 1,28,750 4. Income from sale of scrap 1,03,847 31,154 Total 78,15,238* 23,44,571 *The assessee has claimed 100% deduction A.Y 2008-09 Sr No. Particulars Income Disallowance of deduction under section 80IB 1 Interest Income 73,....
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....-. This reduction in claim of deduction u/s80IB was done because the assessee had claimed deduction on items like interest, income from insurance claim from sale of scrap and incorrect of allocation of excise duty. During the course of penal proceedings, the assessee stated that deduction u/s80IB on interest, insurance claim and sale of scrap was claimed under bonafide belief that deduction is available on them as they relate to the activities carried on for export and incorrect allocation of excise duty was a genuine bonafide accounting mistake. The AO did not find the explanation of the appellant satisfactory, and levied the penalty. On the other hand, the appellant stated that it had not done any deliberate or willful default and that it had no intentions of evading any payment of tax. To prove his bonafides, the appellant filed a revised computation of income during the course of assessment proceedings itself and withdrew claim of deduction on interest income, insurance claim and sale of scrap. He further stated that once the mistake in incorrect allocation of excise duty was pointed out the assessee did not take objection to the consequent disallowance. To further show its ....
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....h 2003. No deduction under section 80IB was claimed since there were no eligible profits in the said year. (Refer notes to computation of income on page no.71 of the compilation). (b) AY2004-05 No claim for deduction under section 80IB was not made since there were no eligible profits in the said year. (Refer Notes to computation of income on page no.73) (c) AY2005-06 In the return of income for AY2005-06, an amount of Rs. 6,00,65,023/- was claimed as a deduction under section 80IB wherein the aforesaid items of income were included for the purpose of computing the profits of the business(refer compilation page no.74) In the assessment order passed under section 143(3) of the Act, the amount of Rs. 6,00,65,023/- claimed as deduction under section 80IB in the return of income was allowed as a deduction (refer compilation page nos.100-101). (d) AY2006-07 In the return of income for AY 2006-07, an amount of Rs. 1,70,00,617/- was claimed as a deduction under section 80IB wherein the aforesaid items of income were included for the purpose of computing the profits of the business (refer compilation page no.102) In the intimation passed under section 143(1) of the Act....
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....ll be appreciated that the appellant has at no time violated any of the provisions of section 271(1)( c) the act that would lead to imposition of penalty. At no point in time there was an attempt to conceal or furnish inaccurate particulars of income. All the facts which were material to the computation of total income were present on record and were disclosed in the return of income filed for the year and also diligently provided during the course of assessment proceedings. It has been held in various judicial precedents that where claim made by the appellant was bona fide same would not amount to concealment for the purpose of penalty under section 271(1)(c ) of the Income-tax Act, 1961. In this connection, reliance is placed on the following judicial precedents. (a) CIT vs. Reliance Petroproducts P.Ltd (322 ITR 158)(S.C) (b) ACIT vs. Grand Organics P.Ltd (24 Taxmann.com 20)(I.T.A.T. Panaji) (c) CIT vs. Dharampal Premchand Ltd (11 Taxman.com 437)(H.C Del) 2. Penalty is not leviable on bonafide claim made on the basis of CA's Certificate/Auditor's Report The aforesaid claim has been made on the basis of the auditor's report under section 80IB in Form 10CCB. Accor....
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.... is upheld. We further submit that the act of raising a legal contention which according to the assessee is sound and tenable cannot constitute fraud or gross or willful neglect on the part of the assessee. It has been held by the Courts that a legal contention raised bonafide, whether it is ultimately accepted or rejected, will not generally be an act of fraud or gross or willful negligence. In this connection reliance is placed on the following decisions: a) CIT vs. Rel;iance Petroproducts P.Ltd (322 ITR 158)(SC) b) ITO vs Parikh Investments & Developments P.Ltd (43 SOT 537)(I.T.A.T. Mum) 5. Acceptance of addition to avoid litigation does not attract penalty CAPL did not contest the aforesaid issues in the appeal before the Income-tax Appellate Tribunal in view of the decision of the Supreme Court in the case of Liberty India vs. CIT(317 ITR 218) wherein it was held that deduction under section 80IB ought to be allowed only in respect of income having first degree of nexus with the business of the undertaking. Accordingly, in order to avoid litigation and buy peace no appeal was filed before the Income-tax Appellate Tribunal. In this connection, reliance is placed on ....
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.... - The provisions being of a penal nature, some amount of culpable negligence or willful omission on the part of the taxpayer must be established before penalty is imposed. - If the default flows from a bona fide belief and is not the result of a deliberate act of defiance of law, no penalty is leviable. - Penalty cannot be levied merely on the fact that the explanation offered by the assessee is not accepted. - Merely because an addition is confirmed does not automatically attract penalty and the onus to prove that there was concealment of income with a view to evade tax is on the Department. - A difference of opinion existing between the Assessing Officer and the assessee in respect of allowability of a claim cannot be rfegarded as sufficient to subject an assessee to penalty on the ground tha claim made by the assessee is disallowed. In view of the above submissions, the assessee respectfully submits that there was neither any willful act resulting in concealment of income nor were any inaccurate particulars of income furnished by the appellant. The bona fide claim of disallowance made does not tantamount to concealment of income by furnishing inaccurate particula....
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....;ble Delhi High Court in the case of CIT Vs.Dhanbai reported in 178 Taxman 242(Del). The ld.AR submitted that when the assessee has made a bonafide claim, no penalty u/s271(1)( c) of the Act can be levied. The assessee has submitted that in respect of interest income, the same is eligible for deduction u/s80IB as held by the decision in the case of ACIT Vs. Maxcare Labortories Ltd reported in 92 ITD 11 (I.T.A.T. Cuttack). In respect of insurance claim, the same is eligible for deduction u/s80IB of the Act. Insurance claim is derived from manufacturing activities as held by the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Pfizer Ltd reported in (233 CTR 521)(Bom). In respect of sale of scrap the decision of Hon'ble Madras High Court in the case of CIT Vs. TTJ Industries Ltd reported in 209 Taxman 14(Mad), wherein it is held the scrap of sale is eligible for profit u/s80IB of the Act The assessee has made a bonafide claim, which the claim is allowable or not becomes debatable point. We find that the assessee's claim was rejected on the basis of decision of the Hon'ble Supreme Court. We find that after the decision of the Hon'ble Madras High Court i....