2009 (11) TMI 60

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....einafter referred to as `the ITAT') in case of the assessee pertaining to three Assessment Years i.e. 2000-01, 1998-99 and 1997-98, respectively, whereby three appeals preferred by the revenue against the common order of the CIT(A) deleting the levy of penalty imposed upon the assessee under Section 271(1)(c) of the Act, have been dismissed. 2. In the present case, the assessee is engaged in the business of manufacturing of yarn and trading in wool. In its return of income, the assessee claimed deduction under Section 80 IA of the Act in respect of profits derived from trading turnover i.e. trading in the raw wool and knitted cloth. The return of income filed by the assessee was accompanied by Audited Balance Sheet, Profit & Loss Account a....

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....d by the CIT(A). Against the said order, the revenue filed the instant appeals raising the following substantial questions of law:- "(i) Whether on the facts and in law the ITAT was justified in deleting the penalty u/s 271(1(c) amounting to Rs.1.50 lakhs imposed by the Assessing Officer ignoring the fact that the assessee violated the provisions of Section 80 IA of the Income-tax Act, 1961 which attracted penalty under section 271(1)(c) of the Income-tax Act, 1961? (ii) Whether on the facts and in law the ITAT was justified in deleting the penalty u/s 271(1(c) amounting to Rs.5.50 lakhs imposed by the Assessing Officer ignoring the fact that the assessee violated the provisions of Section 80 IA of the Income-tax Act, 1961 which attracted....

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....., (2008) 306 ITR 277. Therefore, the ITA was not justified in confirming the order of payment of penalty imposed under Section 271(1)(c) of the Act. 6. After considering the submissions made by the learned counsel for the appellant, we do not find any merit in these appeals. In our opinion, the ITAT has deleted the penalty imposed under Section 271(1)(c) on the assessee after recording a finding of fact that the assessee in its return of income adequately disclosed all the relevant facts by accompanying the relevant documents. In this regard, the following finding has been recorded by the ITAT:- ".....In this connection, a salient feature which is evident from the record is that the claim of the assessee made in the return of income, tho....

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....e report of the auditor was collusive. 8. The ITAT has further recorded a finding that the assessee bona fidely claimed the deduction under Section 80 IA with regard to the profits from trading in the raw wool and knitted cloth. In this regard, the following finding has been recorded by the ITAT:- "....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 v. Ashok Leyland Ltd., 130 ITR 900 to contend that even with regard to the profit on sale of raw wool and knitted cloth, it was eligible for deduct....