Income Tax Appellate Tribunal - Delhi
Regal Carpets Pvt. Ltd., Haryana vs Assessee on 18 March, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH "F" NEW DELHI)
BEFORE SHRI R. P. TOLANI : JUDICIAL MEMBER
And
SHRI T.S. KAPOOR : ACCOUNTANT MEMBER
ITA No. 3288 /Del/ 2011
(Assessment Year: 2004-05
Regal Carpets Pvt. Ltd. Vs. Income-tax Officer,
283, Subhash Nagar, Tehsil Town, Ward-1, Panipat.
Panipat, Haryana.
PAN: AAACR 9866 L
(Appellant ) (Respondent)
Appellant By : Shri Ved Jain CA
Respondent By : Shri Bhim Singh Sr. DR
ORDER
PER R. P. TOLANI, J.M:
This is assessee's appeal against CIT(A)'s order dated 18-03-2011 challenging sustenance of penalty of Rs. 3,29,520/- imposed u/s 271(1)(c) of the Income-tax Act, 1961 relating to assessment year 2004-05 qua the calculation of deduction u/s 80-HHC.
2. The assessee is a company, engaged in 100% export. Its entire sales are export sales as is evident from its Profit and Account. A survey was conducted at the business premises on 11.12.2003 where assessee made a surrender of Rs 30 lac. The assessee included this surrendered income as business income from exports in its profit and loss account. Since assessee 2 was engaged in 100% export business it computed deduction under Section 80 HHC including this surrendered income of Rs 30 lacs in calculation. The assessee got its accounts audited and also obtained report from the Chartered Accountant as prescribed in law which certified the deduction under section 80 HHC including this income of Rs 30 lacs. The assessee filed its return with computation of income. In this computation of income he disclosed this fact of claiming deduction under section 80 HHC on this income of Rs 30 lacs. During the course of assessment the AO raised this issue and asked for the justification of Rs. 30 lacs u/s 80-HHC calculation provided by the assessee in form 10CCAC. The assessee submitted the justification, not satisfied, assessing officer disallowed the same. CIT (A) and ITAT confirmed the order of the AO on this issue. Penalty proceedings u/s 271(1)(c) were initiated by assessing officer.
2.1. In the penalty proceedings the assessee pleaded that no penalty is leviable as there was neither concealment nor inaccurate particulars were furnished inasmuch as:
(i) There was a complete disclosure. (ii) There is no concealment of income. (iii) There is no furnishing of inaccurate particulars are furnished. (iv) The issue is of denial of a deduction qua business income declared
during survey, which is an issue of debate and interpretation.
(v) The issue is debatable and hence no penalty is leviable.
2.2. The AO rejected assessee's explanation and levied penalty, holding that it is a case of deliberate default and relied on Hon'ble Punjab & Haryana High Court decision in the case of National Legguard Works 288 ITR 18, 3 holding that surrendered income is to be treated as income from other sources and not business income from export.
2.3. Aggrieved, assessee preferred first appeal, where the CIT(A) confirmed the action of assessing officer, levying penalty.
2.4. Aggrieved, assessee is before us.
2.5. Ld. Counsel for the assessee reiterated the facts and contends that:
(i) Action of assessing officer in relying upon Punjab & Haryana High Court's decision in the case of National Legguard Works (supra) to the facts of assessee's case is not correct inasmuch as the assessee's financial year is 2002-03 whereas upon Punjab & Haryana High Court's decision came to be delivered on 22-9-2006. Therefore, the clear position of law was not available on the issue that in the case of exporter consequent to survey income surrendered cannot be treated as "business income" but as income from other sources. The fact that issue reached up to Hon'ble High court itself indicates that the issue was debatable which supports the contention of the assessee.
(ii) The assessee disclosed the income as surrendered business income from exports in its P&L A/c. The assessee disclosed all the facts in the computation of income and the assessee's claim was supported by a statutory audit report in which auditor also certified that assessee was eligible to deduction u/s 80-HHC on the surrendered amount also. In these circumstances there is neither concealment of income nor furnishing of inaccurate particulars of such income, furnished by the assessee along with the return. The issue in this 4 behalf was clearly debatable as is further evident from the ratio of decision of Hon'ble Rajasthan High court rendered on 29-1-2013 in the case of CIT Vs M/s Haswani Arts (ITA no. 100/2007), in which assessee's claim u/s 80-HHC on excess stock valuation found during the course of survey and surrendered as business income during assessment year was held to be relatable to business profit, eligible for deduction u/s 80-HHC. This was a case of quantum addition and not penalty. Thus, in quantum addition there exists two different views between Punjab & Haryana High Court and Rajasthan High Court and both judgments are rendered much after the financial year and thus it cannot be implied that assessee acted in deliberate defiance of these judgments. Rather it indicates the fact that there was waging dispute between assessee and tax authorities in respect of head of such income. Similarly, Hon'ble Calcutta High Court in the case of CIT Vs. Margarel's Hope Tea Co. 201 ITR 747 (Cal.) has held that addition on account of cash credit u/s 68 will amount to addition to "business income"
(iii) Further reliance is placed on the ratio of decision of Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Ltd. (2010) 322 ITR 158 (SC) for the proposition that when assessee has furnished all the details along with return of income, variation or negation of claim of the assessee or change in head will not amount to either concealment of income or furnishing of inaccurate particulars of income.
(iv) Further reliance is placed on:5
- CIT Vs. Amit Jain - ITA no. 683/2012, dated 21-12-2012 (Del.);
- CIT Vs. Madhushree Gupta ITA no. 47/2013 dated 27-2-2013 (Del);
4. Ld. DR, on the other hand, placed reliance on Hon'ble Delhi High Court judgment in the case of CIT Vs. Zoom Communication Pvt. Ltd. 327 ITR 510 and contends that the assessee deliberately made a wrong claim of deduction of income which was not offered by it in the earlier year or current year. It has not been demonstrated by the assessee that the surrendered income had the attributes of profits from exports as it was 100% exporter. The belief that because assessee is a 100% exporter, therefore, what ever income is surrendered will be relatable to exports and eligible for deduction u/s 80-HHC. The presumption is totally untenable and the claim is palpably wrong. Order of lower authorities is relied upon.
5. Ld. Counsel for the assessee, in rejoinder, contends that ratio of decision in the case of Zoom Communication Pvt. Ltd. (supra) is not applicable to assessee's case and clearly distinguishable. Further Zoom Communication Pvt. Ltd.'s case has been dealt with by the Hon'ble Delhi High court in the case of CIT Vs. Mahanagar Telephone Nigam Ltd. ITA no. 626/2011 dated 10-10-2011, wherein the Hon'ble High Court rejected the revenue's arguments for imposition of penalty based on Zoom Communication Pvt. Ltd.'s case and relied on Hon'ble Supreme Court's judgment in the case of Reliance Petroproducts Ltd. (supra). It was held that if all the relevant facts are disclosed in the return of income and claims are made under bona fide belief, they cannot be subjected to penalty. In Mahanagar Telephone Nigam Ltd.'s case (supra), even though Special Auditor had indicated that the claim was not maintainable, still the assessee deferred with the statutory auditor and that claim was ultimately disallowed.
6Under these facts also the penalty u/s 271(1)(c) was not imposed as all the relevant facts were disclosed in the return of income to which Hon'ble Supreme Court judgment in Reliance Petroproducts Ltd. (supra) does not warrant levy of penalty.
5.1. In the instant case also the assessee was under bona fide belief that the income has been generated only from 100% export business and the disclosure was accordingly made as "business income" and claim u/s 80HHC accordingly calculated. The assessing officer took a different view relying on Punjab & Haryana High Court judgment which is rendered much after the assessee put up a claim. The assessee's claim is supported by Hon'ble Rajasthan High Court on quantum which takes a contrary view. In these circumstances, penalty is not justified and leviable in assessee's case.
6. We have heard rival contentions and perused the material available on record. As the facts emerge all the relevant facts relating to assessee's claim u/s 80-HHC are disclosed in the return of income. The assessee's CA certified the amount of allowability of deduction u/s 80-HHC including the said sum of Rs. 95 lacs which was treated to be earned from 100% export business. The fact that assessee is a 100% exporter and has no domestic business, has not been disputed. The Punjab & Haryana High Court's decision in the case of National Legguard Works (supra), relied upon by the assessing officer came much after the assessee's filing of the return and as on today there are two divergent opinion on the issue of allowability of deduction u/s 80-HHC qua the surrendered income from 100% export business.
6.1. In view of the foregoings we are of the view that issue was debatable besides Hon'ble Supreme Court judgment in the case of Reliance 7 Petroproducts Ltd. (supra) is squarely applicable to the assessee's case. In view thereof, we delete the penalty levied u/s 271(1)(c) of the Act.
7. In the result, assessee's appeal is allowed.
Order pronounced in open court on 24-05-2013.
Sd/- Sd/-
(T.S. KAPOOR ) (R.P. TOLANI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 24th day of May, 2013
*MP*
Copy forwarded to
1. APPELLANT
2. RESPONDENT
3. CIT
4. CIT (A)
5. CIT (ITAT), New Delhi.
AR,ITAT
NEW DELHI.