TaxTMI 
TaxTMI 
2014 (3) TMI 1037
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....Disallowance of set off of brought forward losses and depreciation amounting to Rs. 22,45,85,291/-; b) Disallowance of prior period expenses amounting to Rs. 45,44,691/-; c) Disallowance of depreciation on generator amounting to Rs. 5,54,391/-; d) Restricting the claim of deduction u/s 80IA by Rs. 2,69,96,242/-; e) Disallowance of claim of deductions u/s 80HHC amounting to Rs. 1,33,19,595/-. 4. The Revenue has raised the following ground of appeal : "1. That the Ld.CIT(A) erred in law and on facts in deleting the penalty levied u/s 271 (1) (c) of the IT Act, 1961 by AO on account of treatment of sales tax subsidy and interest free advances to sister concern by holding that since the appeal of the assessee has been admitted by Hon'ble Supreme Court the issue is debatable without appreciating the fact that the Hon'ble jurisdictional High Court has already decided the issue in favour of the revenue in the assessee's own case for AY 1993-94 in 286 ITR 1 and without appreciating that the Hon'ble High Court in the same case had also held the order of ITAT to be perverse it was made without application of judicial mind." 5. Th....
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....er of the CIT (Appeals) in deleting the penalty on account of two issues. 9. The learned A.R. for the assessee pointed out that first addition made in the hands of the assessee was on account of non adjustment of brought forward losses and depreciation. It was pointed out by the learned A.R. for the assessee that the said losses were worked out by treating the subsidy receipt by the assessee as capital receipt, whereas the Revenue treated the same as revenue receipt and consequently there was reduction in the brought forward losses. It was submitted by the learned A.R. for the assessee that no facts were concealed as is evident from the note No.3 and 5 in the computation of income placed at page 17 of the Paper Book and consequently no inaccurate particulars were furnished by the assessee in this regard. The learned A.R. for the assessee placed reliance in the case of ACIT Vs. A.H.Wheelers & Co.(P)Ltd. [132 ITD 34 (Trib)(All)] and CIT & Anr. Vs. Makino Asia (P) Ltd. (2013) 95 DTR (Kar) 9]. 10. The second disallowance was made on account of prior period expenses and it was pointed out by the learned A.R. for the assessee that a note to the effect of claim was appended as note ....
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....13 held that the said insurance claim of Rs. 2.00 crores could not be held to be income derived from industrial undertaking to qualify for deduction under section 80IA of the Act and hence the same had to be excluded from the profits of business. The learned A.R. for the assessee pointed out that the above said claim was made on the basis of the report of the Chartered Accountant and non allowance of such claim could not be held to be furnishing of inaccurate particulars of income. 13. The next disallowance on which penalty under section 271(1)(c) of the Act was levied was the recomputation of deduction under section 80HHC of the Act under which the assessee had claimed deduction of Rs. 5.70 crores and was allowed deduction of Rs. 2.42 crores. The first item of recomputation of deduction under section 80HHC of the Act was the scrap sale which issue was not pressed before the Tribunal in the quantum proceedings. The second aspect was the sales tax subsidy received by the assessee which has been decided in favour of the assessee vide para 24 of the order of the Tribunal. The next claim was misc. income being excluded from the profits of business eligible for deduction under sectio....
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....appeal filed by the Revenue, the learned D.R. for the Revenue pointed out that two items on which the penalty under section 271 (1) (c) of the Act has been deleted by the CIT (Appeals) are the claim of sales tax subsidy, whether capital or revenue and disallowance of interest attributable to interest free advance made to the sister concern. The learned D.R. for the Revenue pointed out that both the issues were covered against the assessee by the ratio laid down by the Hon'ble Punjab & Haryana High Court in assessee's own case reported in CIT Vs. Abhishek Industries [286 ITR 1(P&H)]. 17. The learned A.R. for the assessee pointed out that SLP was admitted and was pending before the Hon'ble Supreme Court. It was further pointed out that once SLP has been admitted in the case, the issue being debatable no penalty was leviable under section 271 (1) (c) of the Act. Reliance was placed on the decision of Ahmedabad Bench of the Tribunal in the case of Rupam Mercantiles Ltd. Vs DCIT 91 ITD 237 (TM)(Ahd). Further it was pointed out by the learned A.R. for the assessee that similar issue of penalty under section 271 (1) (c) of the Act on additions made on account of sales tax subsi....
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....as hereinabove the Tribunal had adjudicated the issues raised before it for the captioned assessment years and consequently the same needs to be considered while adjudicating the issue of levy of penalty under section 271 (1) (c) of the Act on various accounts. We proceed to dispose of the present appeal raised by the assessee and also by the Revenue by addressing the issue of additions made in the hands of the assessee. 21. Penalty for concealment is leviable under section 271 (1)(c) of the Act in case any one of the two pre-conditions are satisfied. The pre- conditions for levy of penalty are either the assessee had concealed the particulars of its income or in the alternative, the assessee had furnished inaccurate particulars of income. Either of the two conditions needs to be fulfilled before levy of penalty under section 271 (1)(c) of the Act. The provisions of the Act envisages an opportunity of hearing to be afforded to the assessee to prove its bonafides and where the assessee is able to prove the bonafides of his claim, with regard to the particulars of income furnished in the return of income, in such circumstances no penalty is leviable for concealment of income or fo....
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....that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to inaccurate particulars. (underlined supplied by us) 23. The Hon'ble Supreme Court in CIT, Ahemdabad Vs. Reliance Petroproducts Pvt Ltd (supra) further noted that in the facts of the case before it, there were no findings that any details supplied by the assessee in its return of income were not incorrect or erroneous or false nor any statement made or any details supplied was found to be factually incorrect. The Court thus held that merely because the assessee had claimed the expenditure, which was not accepted or was not acceptable to the Revenue, that by itself would not, attract penalty under section 271 (1)(c) of the Act. It was also laid down by the Court that the intendment of the Legislature is not to levy penalty under section 271 (1)(c) of the Act....
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....n'ble Punjab & Haryana High Court vide para 4 are as under : 4. The assessee has disclosed the nature of transactions in its return. It was on the basis of interpretation of the provisions of the Statute, the Assessing Officer found that such expenditure claimed by the assessee is not the revenue expenditure but the capital expenses. There is fine distinction as to when an expenditure can be treated as a revenue or a capital expenditure. Therefore, merely for the reason that the assessee has claimed the expenditure to be revenue will not render the assessee liable to penalty proceedings. The order passed by the Tribunal does not give rise to the questions of law sought by the revenue. 26. Similar ratio has been laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs. Shahbad Cooperative Sugar Mills Ltd [322 ITR 73 (P&H)], wherein it has been observed that making wrong claim for deduction, does not amount to concealment or giving of inaccurate particulars within the meaning of section 271 (1)(c) of the Act. 27. The Hon'ble Punjab & Haryana High Court in CIT Vs. Sidhartha Enterprises [(2010) 228 CTR (P&H) 579 ] held that "the judgment of the Hon'....
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.... is not sustainable in law, will not amount to furnishing inaccurate particulars regarding the income of the assessee. In the present case, as pointed out above, the assessee was deducting the amount of Rs. 2,12,18,295 on account of deterioration of old stock. This was being done on estimation on the basis of the reports made by various officers of the Corporation. This estimation was not accepted mainly on the ground that the reports were made and resolution passed by the board after the assessment year was over and therefore they could not be given retrospective benefit. It has not been found that the claim of the assessee that the wood had rotted and deteriorated is false. It is nobody's case that the assessee fudged the amounts, the books of accounts or tried to create false evidence. The claim made by the assessee may not have been accepted by the Revenue but it cannot be said that the assessee furnished inaccurate particulars to such an extent that penalty should be imposed upon it. There does not appear to be falsehood in the accounts though the system of calculating the depreciation may have been improper. We also cannot lose sight of the fact that assessee is a Governm....
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....ntial question of law arises. 32. In cases where two views are possible then the issue being debatable and claim of the assessee having been based on one of the possible views, the disallowance in the hands of the assessee by the Assessing Officer in adopting the other view does not justify levy of penalty for concealment under section 271 (1) (c) of the Act in the hands of the assessee as the claim of the assessee was on the basis of one possible view. 33. The Hon'ble Punjab & Haryana High Court in CIT Vs. Tek Ram (HUF) 300 ITR 354 (P&H) had held that where the issue is highly debatable in as much as two views were possible on the said issue and where the claim of the assessee on the issue was based on one possible view, the making of such bonafide claim on the basis of a possible view could not be treated as concealment of its income by the assessee or furnishing of inaccurate particulars of income so as to attract the penal provisions of section 271 (1)(c) of the Income Tax Act. 34. Further, the Hon'ble Punjab & Haryana High Court in CIT Vs Raj Overseas (2011) 306 ITR 261 (P&H) also adjudicating the issue of levy of penalty under section 271(1)(c) of the Act on ....
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....cer, however, was of the view that on correct interpretation under section 80-O, deduction is restricted to the net income and, therefore, expenditure incurred in India for earning the foreign exchange had to be deducted. The Assessing Officer, therefore, wanted the assessee to furnish the details of expenses. As the assessee failed to do the needful in respect of various particulars demanded, the Assessing Officer was left with no alternative but to estimate such expenditure in the ratio of proportion of foreign income to the total income." 4. In the present case, there is no dispute about the quantum of receipt of grant- in-aid from the State Government. The assessee reflected the same as capital receipt, whereas it has been treated as to be revenue receipt. The issue whether the amount of grant-in-aid is capital receipt or a revenue receipt, is a debatable issue. The findings returned in the judgment relied upon is on feet of non-furnishing of details of expenses. The issue was not debatable as in the present case. Therefore, the reliance on the Division Bench judgment is misconceived. 5. In view of the above, we do not find any error in the findings recorded b....
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....owever, held the assessee to have furnished inaccurate particulars of income to the extent of Rs. 11.89 crores, which was upheld by the CIT (Appeals). 39. The plea of the assessee vis-à-vis its claim on brought forward losses and their non allowance was that the said losses were revised because of the additions made in the earlier years i.e. because of the treatment of subsidy received by the assessee as revenue receipt as against the claim of the assessee that the same was capital receipt. The assessee had furnished a note No.3 in the computation of income placed at pages 16 to 18 of the Paper Book under which it was reported that: "3. The figure of brought forward loss/depreciation amounting to Rs. 22,45,85,291 has been worked out after taking into account the claim of Sales Tax Subsidy in earlier years on the basis of ITAT's orders in its own case for the assessment year 1993-94." 40. The issue arising before us is whether in the above said facts and circumstances, the assessee could be said to have furnished inaccurate particulars of income making it exigible to the levy of penalty under section 271 (1) (c) of the Act. Penalty for concealment under section....
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.... section 271 (1) (c) of the Act on the said non allowance of set off of brought forward losses/depreciation in the hands of the assessee. 41. We find support from the ratio laid down by the Hon'ble Karnataka High Court in CIT & Anr. Vs. Makino Asia (P) Ltd. (supra) wherein identical claim of set off of brought forward losses was before the Hon'ble Court and it was held as under: "There cannot be any dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In the present case, it cannot be said that the assessee furnished any inaccurate particulars of his income in the return and hence the liability would not arise. It is true, the propriety demands that an assessee who is otherwise not entitled to claim set off of the loss carried forward of the business, should avoid making such claim. But such claim would not attract levy of penalty." 42. Similar view has been laid down by Allahabad Bench of the Tribunal in ACIT Vs. A.H.Wheelers & Co.(P) Ltd. (supra). Following the abo....
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....CIT Vs. M/s Bhushan Power & Steel Ltd. (supra) and the Tribunal vide order dated 25.9.2013 on similar issue of levy of penalty under section 271 (1) (c) of the Act on issue of holding the sales tax subsidy as capital in nature held as under: "18. The issue arising vide present appeal is in relation to levy of penalty u/s 271 (1) (c) of the Act on such debatable issue. The plea of the assessee in the present case was admitted for adjudication before the Higher Forums, makes the issue debatable issue. The addition in the present case has been made on the basis of such debatable issue that whether the sales tax subsidy received by the assessee was capital in nature or not. We further find that similar issue of receipt of subsidy under the West Bengal Incentive Scheme has been held to be capital receipt in the case of CIT Vs. Rasoi Ltd.(supra) by the Hon'ble Calcutta High Court. The unit of the assessee had been established in the State of West Bengal and the case of the assessee is that it is governed by the said scheme as before the Hon'ble Calcutta High Court. In view thereof, the issue raised before us is where addition has been made in relation to such debatable i....
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....hat the order of the Tribunal gives rise to any substantial question of law for the opinion of this court." 20. Similar proposition has also been laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs. Tek Ram (HUF) (supra). 21, The Hon'ble Supreme Court in CIT, Ahemdabad Vs. Reliance Petroproducts Pvt. Ltd (supra) have laid down the proposition that "A mere making of the claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee". 22. In the totality of the above said facts and following the ratio laid down by the Hon'ble Supreme Court in CIT, Ahemdabad Vs. Reliance Petroproducts Pvt. Ltd (supra) and the Hon'ble Punjab & Haryana High Court in CIT Vs. M/s Gurdaspur Cooperative Sugar Mills (supra) and CIT Vs. Tek Ram (HUF) (supra) we hold that in view of the debatable issue raised, the assessee is not exigible to levy of penalty u/s 271 (1) (c) of the Act in the facts of the present case where the claim of the assessee that the receipts were capital in nature was rejected and the receipts were held to be revenue in nature and hence taxable. Upholding he....
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....tled by the recent judgment of the Hon'ble Allahabad High Court (supra). In view thereof, where there is variance in the rates of depreciation to be allowed on the asset, the issue at best is debatable and such disallowance does not warrant levy of penalty under section 271 (1) (c) of the Act. However, the claim of the additional depreciation on the said asset by the assessee was both incorrect and misconceived, as there is no provisions of allowance of additional depreciation on such asset during the period under consideration. The assessee has made a false claim of additional depreciation and the assessee is exigible to levy of penalty under section 271 (1) (c) of the Act on such wrong claim of depreciation. 49. The next addition made in the hands of the assessee was on account of recomputation of deduction under section 80IA of the Act. The assessee was held to be eligible for the aforesaid addition. However, certain items of income on which deduction under section 80IA of the Act was claimed by the assessee was found to be incorrect. The first such item of income was the misc. income of Rs. 2,32,124/-. In the quantum appeal filed by the assessee, the Tribunal (supra) vid....
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....laim of the assessee was held to be a bonafide claim on the basis of law prevailing at that time. Further in the facts of the present case as pointed out in paras hereinabove, the claim of the assessee cannot be said to be bonafide once the issue had been settled by the Hon'ble Supreme Court in Pandian Chemicals Ltd. (supra). Thus the assessee is liable to levy of penalty under section 271(1)(c) of the Act on such reworking of deduction under section 80IA of the Act on interest income. Accordingly, we uphold the order of the CIT (Appeals) in this regard. 51. The third item of income included by the assessee as being derived from the industrial undertaking was the insurance claim amounting to Rs. 2,00,61,091/- received by the assessee being eligible for the deduction under section 80IA of the Act. The Tribunal vide para 18 at page 11 of the order have applied the ratio laid down by the Hon'ble Jurisdictional High Court in CIT Vs. Khemka Containers (P) Ltd. [275 ITR 559 (P&H)] in holding that the insurance claim is to be excluded from the eligible profits of business for computing deduction under section 80IA of the Act. However, the Tribunal has also noted the fact that t....
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....he assessee itself reported in 286 ITR 1 (P&H) held that the sales tax subsidy amounting to Rs. 6.81 crores was to be treated as revenue income and 90% of the said receipts were not to be excluded while computing eligible profits of business under section 80HHC of the Act as the same does not fall within parameters of clause (baa) to section 80HHC of the Act. The third issue was exclusion of 90% misc. income of Rs. 1.27 crores from the profits of business. The learned A.R. for the assessee did not press the said grounds of appeal before the Tribunal in the quantum proceedings and hence the same was dismissed. As regards insurance claim of Rs. 2.00 crores the Tribunal held that the same could not be considered as profits of the business and hence such receipts had to be excluded from the profits of business while computing deduction under section 80HHC of the Act. 53. Further the amount of DEPB receipt was also held to be not eligible for deduction under section 80HHC of the Act in view of the decision of Hon'ble Bombay High Court in CIT Vs. Kalapatru Chemicals [328 ITR 451 (Bom)]. Accordingly deduction @ 90% on such receipts was denied to the assessee. 54. From the perusa....
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....15.In view of the above facts where the assessee had disclosed complete particulars vis-à-vis its claim of deduction under section 80IB of the Act in the return of income filed by it, which was accompanied by audited balance sheet, Profit & Loss Account and also audit report in Form No.10CCB, though incomplete as per the Assessing Officer, there is no merit in levy of penalty u/s 271(1)(c) of the Act, where claim of assessee is rejected. In the assessment order also there is no charge against the assessee not to have disclosed complete particulars or information required to compute the income for the year under consideration. The question which arises in the present case was whether the claim made by the assessee for deduction under section 80IB of the Act in the above said facts and circumstances was a bonafide claim and whether the rejection of such a claim would attract penalty leviable u/s 271 (1) (c) of the Act. We find that the assessee had discharged its onus in respect of its claim of deduction under section 80IB of the Act. Firstly by making such a claim vide disclosure in its return of income and accompanying documents and also its bonafides of claiming such deduct....