Income Tax Appellate Tribunal - Amritsar
Ocm India Ltd,, Amritsar. vs Department Of Income Tax on 7 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER
AND SH. B.P.JAIN, ACCOUNTANT MEMBER
I.T.A. No. 128(Asr)/2011
Assessment year:2005-06
PAN :AATFS9584Q
M/s. Sun Pharmaceuticals Industries, Vs. The Income Tax Officer,
Bari Barhamana, Jammu. Ward 1(3), Jammu.
(Appellant) (Respondent)
I.T.A. No. 341(Asr)/2011
Assessment year:2005-06
PAN :AATFS9584Q
The Income Tax Officer, Vs. M/s. Sun Pharmaceuticals Industries,
Ward 1(3), Jammu. Jammu.
(Appellant) (Respondent)
Appellant by:Sh. Subhash Jalan, CA
Respondent by:Sh. R.L. Chhanalia, DR
Date of hearing:07/06/2012
Date of pronouncement: 12/06/2012s
ORDER
PER BENCH ;
These cross appeals - one by the assessee and another by the Revenue arise from order of the CIT(A), Jammu, dated 24.03.2011 for the assessment year 2005-06.
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2. In ITA No.128(Asr)/2011, the assessee has raised following grounds of appeal:
"1. On the facts and circumstances of the case and in law, the learned CIT(A) , erred in confirming the levy of penalty u/s 271(1)(c) of the Act in respect of Rs.28,37,619/- being the amount of disallowance on account of alleged price difference in the purchases u/s 80IB(13) read with section 80IA(10). 1.1 The Ld. CIT(A) erred in not appreciating the detailed facts and various case laws submitted/relied upon by the appellant during the course of appeal hearing and thereby erred in not concluding that there is neither any concealment nor furnishing of inaccurate particulars on the facts and circumstances of the case and therefore penalty needs to be deleted.
2. On the facts and circumstances of the case and in law, the learned CIT(A) , erred in confirming the levy of penalty u/s 271(1)(c) of the Act in respect of Rs.1,62,598/- being the amount of interest on Fixed Deposit with electricity board, sales tax department & staff loans, non considered while computing deduction u/s 80IB(4) in respect of appellant's industrial undertakings by considering the same as not 'derived from' the business of industrial undertaking.
2.1. The said disallowance being on account of legal interpretation and debatable issue, the levy of penalty, holding that the appellant file inaccurate particulars of income, is bad in law and the same needs to be deleted.
3. In ITA No.341(Asr)/2011, the Revenue has raised following grounds of appeal:
"a) On the facts and circumstances whether the Ld. CIT(A) was right in allowing relief on account of deduction u/s 80IB on Central Excise Duty refund by relying upon orders of Hon'ble High Court if J&K, Jammu which has been delivered not on merits of the issue but holding the receipt to be a capital receipt only because the policy under which the same was paid envisaged tackling the unemployment in the State which cannot 3 be said to be a good test for deciding whether a receipt is a trading receipt or a capital receipt.
b) On the facts and circumstances whether the Ld. CIT(A) was right in facts and circumstances and in law in not appreciating the judgments of Hon'ble Supreme Court of India in the case of Ponni Sugar & Sawhney Steel and press works Ltd, wherein the Hon'ble Supreme Court had held such receipts to be the revenue receipts in as much as in that case payments were made only after the industries had been set up and payments were not made for purpose of setting up of industries.
c) On the facts and circumstances whether the Ld. CIT(A) was right in facts and circumstances and in law in not considering the decision in the case of Seaham Harbour Dock Company which lays down two important tests for determining whether receipts is a trading receipt or a capital receipt.
d) On the facts and circumstances whether the Ld. CIT(A) was right in facts and circumstances and in law in not appreciating and applied the purpose test as laid down by the judgments of the Hon'ble Supreme Court. In the case of assessee, the money received by the assessee on account of refund of Central Excise was not supposed to be spent in a particular manner for purpose of substantial expansion of the industry.
The appellant craves to amend or add any one or more grounds of appeal."
4. The brief facts in the present appeals are that the assessee filed Nil return after claiming deduction under section 80IB of the Act amounting to Rs.152,24,19,667/- from its Dadra Unit and Rs.62,93,38,706/- from its Jammu unit. The assessment was completed at Rs.191,58,16,807/- after making the following additions:
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i) Disallowance of deduction under Rs.152,24,19,667/-
section 80IB for Dadra Unit ii Disallowance of deduction u/s 80IB for Jammu unit:
a) Disallowance u/s 80IB(13) r.w.s
80IA(10) of the Act. Rs.22,94,54,269/-
b) Disallowance u/s 80IB(4) in r/o
Central Excise Duty Refund Rs.13,53,46,672/-
c) Disallowance u/s 80IB(4) in r/o
interest income Rs. 2,81,12,598/-
d) Disallowance u/s 80IB(4) in r/o
disallowance u/s 43B Rs. 3,41,270/-
e) Disallowance u/s 80IB(4) in r/o
disallowance u/s 40a(ia) Rs. 1,42,331/-
Rs.39,33,97,140/-
Grand total: Rs.191,58,16,807/-
5. The Ld. CIT(A) upheld the quantum appeal.
6. The I.T.A.T. Amritsar Bench, in ITA No.184(Asr)/2009 vide its order dated 11.06.2011 has sustained the following disallowances:
i) Disallowance u/s 80IB(4) in respect Rs.13,53,46,672/-
of profit attributable to Central Excise Duty Refund.
ii) Disallowance u/s 80IB(13) r.w.s.80IA(10) Rs. 28,37,619/-
for the purchase of raw material from SPIL
iii) Disallowance u/s 80IB(4) in r/o Rs. 1,62,598/-
Interest income.
6. The A.O. initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. The explanation was given by the assessee, which was not accepted by the AO and he levied the penalty under section 271(1)(c) of the Act, with respect to the additions confirmed by the I.T.A.T. 5 Amritsar Bench, Amritsar, vide its order dated 11.06.2010 as mentioned hereinabove.
7. The Ld. CIT(A) deleted the penalty with respect to the additions of Central Excise Duty Refund by relying upon the decision of the Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys and others reported in 333 ITR 335. However, he upheld the penalty in respect of other disallowances.
8. Ld. counsel for the assessee, Sh. S.C. Jalan, CA argued and submitted that entire factual position right from assessment stage was disclosed. Neither any income was concealed nor inaccurate particulars of income were furnished. These are very much evident from the assessment order as well as order under section 271(1)(c) of the Act and is also evident from the order of the ld. CIT(A).
9. As regards two disallowances confirmed by the ITAT, the Ld. counsel for the assessee drew our attention to pages 54 to 72 of the paper book and page Nos. 73 to 78 of the paper book. He submitted that six pages statement in respect of purchase of raw material from SPIL and from others were submitted and the amount of Rs.28,37,619/- was computed without any prejudice. He also referred to the explanation of price difference in raw material purchased from SPIL and others at pages 65 to 72 of the paper book 6 which contain elaborate explanation for purchases of Dadra as well as Jammu units, separately. Similarly, the details of interest amounting to Rs.1,62,558/- were submitted to AO as appearing at page PB-75. The Ld. counsel for the assessee finally argued that Explanation 1 to section 271(1)(c) of the Act , is not attracted because proper explanation in respect of above two conditions were furnished and has been substantiated, especially when the factual position has not been disputed by the Revenue. No fact has been found inaccurate. He also relied upon decisions of various courts of law in support of his claim before us.
i) CIT vs. Reliance Petroproducts (P) Ltd (2010) 322 ITR 158
ii) Dy. C.I.T vs. Pathankot Primary Co-operative Development Bank Ltd. (2011) 142 TTJ (Asr) 401(Asr)
iii) Income Tax Officer vs. Ajay Kapoor (2011) 142 TTJ (Asr) 269
iv) ACIT vs. Perfect Forgings (2012) 143 TTJ (Chd) 117 9.1 Accordingly, he argued by relying upon his arguments and decisions relied upon hereinabove that no penalty under section 271(1)(c) can be levied and prayed to reverse the order of the Ld. CIT(A).
10. The Ld. DR Sh. R.L. Chhanalia, on the other hand, relied upon the order of the ld. CIT(A) and argued that the assessee himself has computed the amount of price differential of Rs.28,37,619/- and the assessee was aware of the fact that the said amount was not eligible for deduction under section 80-IB(4) of the Act. As regards the interest income of Rs.1,62,598/-, 7 he stated that it is a well settled position that interest income is not 'derived from' but 'attributable to' the business of industrial undertaking and hence, not eligible for deduction u/s 80IB of the Act. Hence, levy of penalty in respect of above two disallowances is justified. He further submitted that inference may be drawn from the fact of designing the transaction by the assessee with SPIL in such a way that the assessee derives undue benefit by purchasing the raw material from SPIL at lower price as compared to the purchase of similar items from other suppliers. This is done in order to enhance the profit, which is eligible for deduction under section 80IB of the Act.
11. In the rejoinder, it was submitted by the ld. counsel for the assessee that explanations/reasons of price difference between the raw material purchased from SPIL and other concerns were elaborated as stated at PB 65 to 72 and further emphasized that SPIL sold the same at cost i.e. without incurring any loss. Some of the raw material were imported by SPIL, which was sold to the assessee and therefore price of imported material was not comparable with the price of domestic purchases from other concerns. In any case, the ld. counsel for the assessee argued that since all the facts were disclosed fully and truly and nothing was concealed & no fact was found to be false, the provisions of section 271(1)(c) of the Act are not attracted. 8
12. We have heard the rival contentions and perused the facts of the case. As per argument made by both the parties and on perusal of the record, we find that the ITAT, Amritsar Bench in its order dated 11.06.2010 in ITA No.184(Asr)/2009, had in fact, deleted the whole addition made under section 80IB(13) read with section 80IA(10) of the Act, except Rs.28,37,619/- by referring to assessee's letters dated 24.12.2007 & 10.12.2007 at PB-II (pages 292 to 304) which are in the present paper book at pages 54 to 72. From these letters, we find that the assessee had furnished detailed explanation with respect to 72 instances of price difference of Rs.28,37,619/- unit -wise charts are available at PB 57 to 62 and the explanation of price difference of such raw material is available at PB 65 to
72. All these details were furnished to the AO during the course of assessment proceedings by the assessee. We find no comments of the AO and the Ld. CIT(A) for their inaccuracy. In this regard para-33 of ITAT order at pages 64 & 65dated 11.06.2010 passed in ITA No.189(Asr)/2009 is relevant which is available at PB 150 and 151 and is read as under:
"33. We have given careful consideration to this issue. In our opinion, when the appellant has given detailed explanation item-wise to substantiate its contention that there has been no statement of the purchase and when the Revenue has not disputed this explanation nor has placed any other explanation so as to disbelieve the appellant's case, it would not be correct to assume that there is any such understatement of price. As to whether the goods are sold at a price below the market price or not is only a question of fact. If the 9 Revenue chooses not to give any factual reply to the appellant's contention either in the body of the assessment order or during the remand report or even in the body of the CIT(A)'s order, we see no reason not to accept the appellant's plea. Accordingly, the findings of the CIT(A) that profit in relation of Dadra new unit and in relation to Jammu unit was overstated on account of purchase of raw material from SPIL, at price lower than the market price is affected is incorrect and to that extent, the profits would be eligible for deduction under section 80IB of the Act."
12.1. As regards disallowance of Rs.1,62,578/- the undisputed fact is that the appellant has furnished the details of interest as appearing at PB- 75, which has not been found to be false or inaccurate. 12.2 Therefore, we are of the view that the above situation do not fall under Explanation 1 to section 271(1)(c) as the assessee has not only furnished complete explanation but has also been able to substantiate the same.. It is a well settled legal position that penalty proceedings are independent proceedings of assessment proceedings. According to the decisions relied upon by the ld. counsel for the assessee, as mentioned hereinabove and other decisions of various courts of law, the penalty under section 271(1)(c) is not leviable because the disallowance is confirmed in the quantum appeals. Keeping in view the facts and circumstances of the present case and the decisions mentioned hereinabove i.e. (i) CIT vs. Reliance Petroproducts (P) Ltd (2010) 322 ITR 158, (ii)Dy. C.I.T vs. Pathankot Primary Co-operative Development 10 Bank Ltd. (2011) 142 TTJ (Asr) 401, (iii)Income Tax Officer vs. Ajay Kapoor (2011) 142 TTJ (Asr) 269 and ACIT vs. Perfect Forgings (2012) 143 TTJ (Chd) 117, we are of the view that 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. Therefore, penalty under section 271(1)(c) of the Act in respect of above two disallowances is not justified and AO is directed to delete the same and the order of the ld. CIT(A) is reversed o the issue accordingly. Thus, all the grounds of appeal of the assessee in ITA No.128(Asr)/2011 are allowed.
13 Now we take up appeal of the Revenue in ITA No.341Asr)/2011 for the assessment year 2005-06. The facts as mentioned, hereinabove in respect of Central Excise Duty Refund which was disallowed by the AO and the Ld. CIT(A) in quantum appeal while computing deduction under section 80-IB of the Act, the ITAT, Amritsar Bench, Amritsar, vide its order dated 11.06.2010 confirmed the disallowance by following the decision of the co-ordinate Bench in the case of M/s. Shree Balaji Alloys, Kathua Vs. Income Tax Officer, Kathua, in ITA No.255(Asr)/2009 for the assessment year 2005-06. However, the ITAT vide its order dated 23.05.2012 passed in M.A. 11 No.08(Asr)/2011 has recalled its order dated 11.06.2010 on this very issue. Again when the case came up for hearing before the ITAT Bench on 07.06.2012, the ITAT Amritsar Bench, vide its order dated 07.06.2012 allowed the claim of the assessee by following the decision of the Hon'ble High Court of Jammu & Kashmir, in the case of M/s. Shree Balaji alloys, Kathua, reported in 333 ITR 335, on this very issue. Therefore, in view of our order dated 07.06.2012 mentioned hereinabove, we are of the view that when the disallowance on this issue has been deleted then penalty under section 271(1)(c) of the Act, on the same issue does not survive. Thus, all the ground of the Revenue are dismissed.
14. In the result, the appeal of the assessee in ITA No. 128(Asr)/2011 is allowed and that of the Revenue in ITA No.3419Asr)/2011 is dismissed.
Order pronounced in the open court on 12th June, 2012
Sd/- Sd/-
(H.S. SIDHU) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 12th June, 2012
/SKR/
Copy of the order forwarded to:
1. The Assessee:M/s. Sun Pharmaceuticals Industries,Jammu.
2. The ITO Ward 1(3), Jammu.
3. The CIT(A), Jammu.
4. The CIT, Jammu. 5.The SR DR, ITAT, Amritsar.