TaxTMI 
TaxTMI 
2008 (11) TMI 664
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....emo of appeal by the Revenue reads as under : The learned CIT(A)-II, Ludhiana, has erred both in law and on facts, in deleting the penalty imposed under s. 271(1)(c) by the AO although the additions made under s. 80-IA of the Act stand confirmed by the Hon'ble Tribunal relying upon the judgment of Hon'ble Punjab & Haryana RHigh Court delivered in the case of Liberty Shoes Ltd. vs. CIT in IT Appeal No. 140 of 2005 [reported at (2007) 207 CTR (P&H) 181'Ed.]. 3. The assessee is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of manufacturing of yarn and trading in wool. For the asst. yr. 1997-98 the assessee filed its return of income declaring taxable income of Rs. 43,40,960. The return of income was accompanied by audited balance sheet, P&L a/c along with relevant schedules and annexures and the tax audit report under s. 44AB of the Act. The assessee company had claimed deduction under s. 80-IA of the Act amounting to Rs. 18,60,412 and the audit report in Form No. 10CCB was also filed along with the return of income in this regard. The AO has observed that the assessee was engaged in manufacture of yarn as well as t....
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....consciously conceal any particulars of income or furnish inaccurate particulars of such income. The CIT(A) has deleted the levy of penalty, for he did not find any justification for the same, having regard to the facts and circumstances of the case. The CIT(A) has made the following discussion in his order to delete the levy of penalty : ".......Whether profits earned on the sale of such raw material could be said to be the eligible income for deduction under s. 80-IB or not, was the main question in this case. Though the AO did consider such income to be eligible for deduction under s. 80-IB, the learned CIT(A) did not agree with such findings of the AO. While deleting the addition in question the learned CIT(A) considered that deduction under s. 80-IB was available on the income derived by an assessee from 'any business of the industrial undertaking' of the appellant. Therefore, once income from sale of raw wool was held to be the income from business, as per the above observations of the CIT(A), it was eligible for deduction under s. 80-IB. In the appeal for asst. yr. 2000-01, the learned CIT(A) even referred to the decision of the Hon'ble Supreme Court in the case....
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....f income. Means rea is required to be proved for levy of such penalty. However, in the facts and circumstances of appellant's case which have been discussed above, the deduction was claimed on the basis of a bona fide belief and also the ratio of decision of the Hon'ble Supreme Court in the case of Ashok Leyland Ltd. (supra). Though the stand of the appellant was not correct, in view of the decision of the Hon'ble Punjab & Haryana High Court in the case of Liberty Shoes Ltd. (supra), yet the fact that the learned CIT(A) agreed with the legal stand of the appellant shows that the appellant did not deliberately and consciously conceal any particulars of income or furnishing inaccurate particulars of income. From these facts it is also revealed that there was no means rea in making the claim of deduction which was ultimately negated by the Hon'ble Tribunal." 4. Against the aforesaid deletion, the Revenue is in appeal before us. The learned Departmental Representative, appearing for the Revenue has assailed the order of the CIT(A). According to the learned Departmental Representative, the claim in question was patently wrong inasmuch as s. 80-IA does not allow the bene....
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....e or furnishing of inaccurate particulars of income. It was also reiterated that the claim of the assessee was on the basis of a report issued by the auditor and therefore it was under a bona fide belief. In this regard, reliance was placed on the fact position which was similar to that which was before the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Deep Tools (P) Ltd. (2004) 191 CTR (P&H) 257: (2005) 274 ITR 603(P&H). In this manner, the action of the CIT(A) in deleting the penalty in question was defended. Reliance was placed on the following decisions : (1) Asstt. CIT vs. Vijay Kiran Hotels (P) Ltd. (2008) 10 DTR (Chd)(Trib) 225; (2) CIT vs. Budhewal Co-operative Sugar Mills Ltd. (2008) 6 DTR (P&H) 31; (3) CIT vs. Shahbad Co-op. Sugar Mills Ltd. (2008) 6 DTR (P&H) 31. 7. We have considered the rival submissions carefully. The factual background leading upto the present proceedings has already been noted by us in some detail in the earlier part of this order and thus, for the sake of brevity, the same is not repeated. It would be sufficient to observe that in the return of income filed, the assessee claimed deduction under s. 80-IA amounting to Rs. 18,60,4....
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....n of the Tribunal in the case of Jasubhai Business Service (P) Ltd. (supra), that the burden was on the assessee to establish that there was bona fide reason to claim such a deduction. We have no quarrel with the said proposition advanced by the learned Departmental Representative. The point to be examined is as to whether or not such burden has been discharged by the assessee in the present case. Firstly, as noticed earlier, the claim of the assessee was adequately disclosed in the return of income and the accompanying documents. Secondly, the assessee when called upon to justify the claim during the assessment proceedings, referred to the judgment of Madras High Court in the case of CIT vs. Ashok Leyland Ltd. (supra) to contend that even with regard to the profit on sale of raw wool and knitted cloth, it was eligible for deduction under s. 80-IA. In the case before the Hon'ble Madras High Court, the issue related to an assessee which was manufacturing automobile trucks, the profits from sale of imported spare parts to the purchasers of trucks for servicing the vehicles were sought to be claimed as eligible for s. 80-I benefits. The Hon'ble High Court accepted the stand of....