Income Tax Appellate Tribunal - Mumbai
Arya Offshore Services P. Ltd, Mumbai vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "D", MUMBAI
BEFORE SHRI N.V. VASUDEVAN, J.M. AND SHRI A.L. GEHLOT, A.M.
ITA No. 5471/M/2009
Assessment Year: 1995-96
Dy. Commissioner of Income-tax, ... Appellant
Central Circle - 39,
R.No. 32(1), Ground Floor,
Aayakar Bhavan, Mumbai.
Vs.
M/s Arya Offshore Services Pvt. Ltd., ...Respondent
29, Bank Street, Fort,
Mumbai - 400 001.
(PAN - AAACA1034D)
Appellant by : Mr. Jitendra Yadav
Respondent by : Mr. Nitesh Joshi &
Mr. Hitesh Trivedi
ORDER
PER A.L. GEHLOT, A.M.:
This appeal filed by the Revenue is directed against the order of CIT(A)- Central-VIII, Mumbai, passed on 13/07/2009 for the assessment year 1995-96 wherein the revenue has raised the following ground of appeal:-
"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not correct in canceling the penalty levied u/s 271(1)(c) of Rs. 12,20,000/- without considering the fact, that the claim of the assessee u/s 80-O was established to be wrong, thus suppressing the income and consequently tax liability."
2. The AO levied penalty u/s 271(1)(c) of the Act on account of disallowance made in assessment u/s 80-O by allowing deduction on net amount instead of gross amount. The assessee filed quantum appeal before the CIT(A) and the CIT(A) allowed deduction u/s 80-O on gross receipts without taking any expenditure relatable to earning foreign exchange vide his order dated 21 s t March, 2003. The Revenue filed appeal before the ITAT and the ITAT vide ITA No. 4377/Mum/03 dated 10.10.06 remitted the 2 ITA NO. 5471/M/09 M/s Arya Offshore Services Pvt. Ltd.
matter back to the file of the AO with a direction decide the issue in the light of decision of jurisdictional High Court in the case of CIT Vs. Cable Corporation Ltd., 262 ITR 537 wherein it has been held that gross receipt cannot constitute the basis of deduction u/s 80-O of the I.T. Act. The AO, accordingly, levied penalty u/s 271(1)(c) of the Act. The CIT(A) in the impugned order cancelled the penalty on the ground that the claim of deduction u/s 80-O of the assessee was based on the bonafide belief that the deduction is allowable on the gross receipt of foreign exchange. The assessee has disclosed the entire facts in the return of income; therefore, there is no concealment of income or filing of inaccurate particulars of income.
3. The learned DR has relied upon the order of AO whereas the learned AR has relied upon the order of CIT(A) and submitted that claim of deduction u/s 80-O on net or gross amount was highly debatable issue at the relevant point of time when the assessee filed return of income. The learned Departmental Representative has relied on various decisions including the decision of ITAT Bangalore Bench in the case of M.N. Dastur & Co. Ltd., Vs. DcIT, [1997] 62 ITR 113 ITAT Bombay in the case of M/s J.B. Boda & Co.P. Ltd. in ITA Nos. 1850 & 1851 (Bom) of 91 vide order dated June, 1994. The learned AR in support of his contention that in case of bonafide claim of the assessee penalty u/s 271(1)(c) is not leviable, relied upon the judgment of the Apex Court in the case of Reliance Petroproducts Ltd.
4. We have heard the learned representatives of the parties and perused the record. We find that the case of the assessee is squarely covered by the judgment of Apex court in the case of Reliance Petroproducts Ltd. (322 ITR 158), the court observed as under:- (Page No: 0164 165) "In Dilip N. Shroff v. Jt. CIT [2007] 6 SCC 329, this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The Court went on to hold therein that in order to attract the penalty under section 271(1)( c), mens rea 3 ITA NO. 5471/M/09 M/s Arya Offshore Services Pvt. Ltd.
was necessary, as according to the Court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that Clause (iii) of section 271(1) provided for a discretionary jurisdiction upon the Assessing Authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing accurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff's case (supra) was upset. In Dharamendra Textile Processors' case (supra), after quoting from section 271 extensively and also considering section 271(1)( c), the Court came to the conclusion that since section 271(1)( c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of section 271(1)( c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision in Dilip N. Shroff's case (supra) was overruled by this Court in Dharamendra Textile Processors' case (supra), was that ccording to this Court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in case of Dilip N.Shroff (supra). However, it must be pointed out that in DharamendraTextile Processors' case (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff's case (supra), where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimateinference in Dilip N. Shroff's case (supra) to the effect that mens rea wasan essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff's case (supra) was overruled".
Page No: 0166 "We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim 4 ITA NO. 5471/M/09 M/s Arya Offshore Services Pvt. Ltd.
was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature."
5. After considering the facts of the case, we find that whether deduction u/s 80-O is allowable on gross amount or net amount was highly debatable issue when the assessee filed return of income. The claim of the assessee was a bonafide claim. We respectfully follow the above judgment of the Apex Court in the light of that we confirm the order of the CIT (A) wherein he has rightly cancelled the penalty.
6. In the result, the appeal of the revenue is dismissed.
Pronounced in the open court on this 20 T H day of August, 2010.
Sd/- Sd/-
(N.V. VASUDEVAN) (A.L. GEHLOT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 20 t h August, 2010
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) concerned.
4) The CIT concerned.
5) The Departmental Representative, "D" Bench, I.T.A.T.,
Mumbai.
By Order
//true copy//
Asst. Registrar,
I.T.A.T., Mumbai.
Kv
5 ITA NO. 5471/M/09
M/s Arya Offshore Services Pvt. Ltd.
S.No. Description Date Intls
1. Draft dictated on 16.8.10 Sr.P.S./P.S
2. Draft placed before author 17.8.10 Sr.P.S/PS
3 Draft proposed & placed before JM/AM
the second Member
4 Draft discussed/approved by JM/AM
second Member
5 Approved Draft comes to the Sr.P.S./P.S
Sr.P.S./PS
6. Kept for pronouncement on Sr.
P.S./P.S.
7. File sent to the Bench Clerk Sr.P.S./P.S
8 Date on which file goes to the
Head Clerk
9 Date of Dispatch of order