Income Tax Appellate Tribunal - Ahmedabad
Shree Ram Food Industries, Bhavnagar vs Assessee on 19 January, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " D "
Before Shri BHAVNESH SAINI, JUDICIAL MEMBER and
Shri A.N. PAHUJA, ACCOUNTANT MEMBER
DaDate of hearing : 19/01/2010 Drafted on: 19/01/2010
ITA Nos.2395, 2396 & 2397/AHD/2009
Assessment Years : 1998-99, 1999-2000 &
2000-01 respectively
M/s.Shree Ram Food Vs. The Asst.CIT
Industries Circle-2
Victor by Pass Road Bhavnagar
Mahuva - 364 290
PAN/GIR No. : AACFR 5176 J
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri Mehul K.Patel, A.R.
Respondent by: Shri C.K. Mishra, Sr.D.R.
ORDER
PER BENCH:
All the appeals by Assessee are directed against the common order of the Learned CIT(Appeals)-XX, Ahmedabad dated 29/06/2009 passed for Assessment Years 1998-99, 1999-2000 & 2000-01, challenging the levy of penalty u/s.271(1)(c) of the I.T. Act, 1961.
2. Briefly, the facts of the case noted in the impugned order are that the assessee had claimed deduction u/s.80-IA of the I.T. Act, 1961 at the rate of 25% on gross total income, i.e. before allowing deduction u/s.80-HHC of the I.T. Act, 1961. However, the Assessing Officer ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -2- worked out deduction u/s.80-IA of the I.T. Act, 1961 after allowing the deduction u/s.80-HHC of the I.T. Act, 1961. Thus, the admissible deduction u/s.80-IA of the I.T. Act, 1961 was worked out as against that claim by the assessee. The Assessing Officer took the view that deduction u/s.80-IA of the I.T. Act, 1961 should be restricted to 25% of the balance amount of the profit as reduced by deduction u/s.80-HHC of the I.T. Act, 1961. The assessee challenged the order of the Assessing Officer before the Learned CIT(Appeals), who directed the Assessing Officer to allow deduction u/s.80-IA of the I.T. Act, 1961 on the gross total income. The Department preferred appeal before the Tribunal and it was contended on behalf of the Department that the issue stands covered in favour of the Revenue and against the assessee by the decision of ITAT Chennai Bench (Special Bench) in the case of ACIT vs. Rogini Garments (2007) 108 ITD 49 (Chennai)[SB], wherein the Tribunal while considering deduction u/s.80-IA and deduction u/s.80-HHC of the I.T. Act, 1961 has held that, in view of the restriction placed on claim of repetitive reduction in section 80-IA(9) of the I.T. Act, 1961 which is made applicable in respect of all deductions under Chapter VI-A, relief u/s.80-IA of the I.T. Act, 1961 should be deducted from the profits and gains of the assessee's ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -3- business before computing relief u/s.80-HHC of the I.T. Act, 1961. Following this order, the Tribunal vide order dated 31/01/2008 had directed to first allow the deduction u/s.80-IA of the I.T. Act, 1961 out of the gross total income and thereafter the deduction u/s.80-HHC of the I.T. Act, 1961 is to be allowed out of the balance income. The ITAT set aside the orders of the authorities below and directed the Assessing Officer to grant deduction as per decision of Special Bench in the case of Rogini Garments(supra). The Assessing Officer considering the order of the Special Bench in the case of Rogini Garments(supra) came to the conclusion that the assessee had furnished inaccurate particulars of income and thereby concealed the income and levied the penalty u/s.271(1)(c) of the I.T. Act, 1961.
3. The penalty orders were challenged before the Learned CIT(Appeals) and the submissions of the assessee read as under:-
"(1) That the above appeals are filed against levy of penalty under section 271(1)(c) of the Act for A.Ys 1998-99 to 200-01 for Rs.1,53,678/-, Rs.10,13,952/-
and Rs.4,84,727/- respectively. It is respectfully submitted that the returns for the above assessment years were furnished on 09.10.1998, 30.11.1999 and 25.10.2000 respectively wherein the assessee claimed deductions under sections 80HHC and 80IA of the Act on the gross Total Income without reducing the claim made under one section for the purpose of computing the deduction under other section. However, the Assessing Officer allowed the deduction under section 80 HHC of the Act from the gross total income as claimed by the assesses but for computing the deduction under section 801 A of the Act, he allowed the deduction ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -4- at 25% of the gross total income as reduced by the deduction under section 80HHC of the Act and thereby assessee's claim for deduction under section 80IA of the Act was reduced to that extent. The assessee's appeal before the Commissioner of Income-tax (Appeals) was fully allowed and the addition made by the Assessing Officer was deleted by the CIT (Appeals) by following a number of decisions of Income--tax Appellate Tribunal which were at the relevant point of time in favour of the assessee.
(2) However, the Department's second appeal before Income-tax Appellate Tribunal were allowed and decided in favour of the Department by virtue of decision of Income-tax Appellate Tribunal, Chennai Special Bench in the case of ACIT Vs Rogini Garments reported in 108 ITD 49 (Chennai Special Bench) which is dated 27.04.2007.
(3) It is respectfully submitted that at the time of filing of returns for the above assessment years there were a number of judgments in favour of the assessee including Income-tax Appellate Tribunal, Ahmedabad Bench in the case of M/s. Atul Intermediates and other Tribunals of Sang/ore and Jaipur Bench which supports the cases of the assessee. Copies of said orders are placed at pages 8 to 49 of the Paper Book. Moreover, the deductions were claimed in the statement of income itself and also supported by Auditor's Certificate and Reports attached with the returns as is evident from the statements of income placed at pages 1 to 7 of the Paper Book. Further, the Income-tax Appellate Tribunal, Ahmedabad Bench in assessee's own case for the AY 2000-01 has quashed the order under section 263 of the Act which was sought to be revised for similar claims made by the assessee (pages 50 to 58 of Paper Book). Hence, it is humbly submitted that all the facts relating to the said deductions were already fully disclosed by the assessee and also fully supported by the case law in favour of the assessee at the relevant point of time and hence the deductions were claimed under a bonafide belief as per the position of law prevailing at the •ffiley&nt .time which does not tantamount to concealment of income or furnishing of inaccurate particulars of income. "
The assessee relied on the following judgments:-
(1) Kanbay Software India Pvt Ltd vs DCIT -ITAT Pune (2009) 22 DTR (Pune)(Trib) 481 (2) ACIT vs VIP Industries Ltd- ITAT Mumbai (2009) 21 DTR (Mum) (Trib) 153 (3) Gem Granites (Karnataka ) Vs DCIT ITAT, Chennai (2009) 18 DTR 358 (4) Union of India vs Rajasthan Spinning & Weaving Mills (SC) 23 DTR 158 Further, the appellant submitted as under:-
(5) Moreover, it is respectfully submitted that as far as AY 2000-01 is concerned the penalty is initiated and levied from the order under section 143(3) nvs 263 of the Act. However, the order under section 263 of the Act itself was challenged before the Income-tax Appellate Tribunal and the ITAT has quashed the proceedings under section 263 of the Act itself. Copy of the said order is ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -5- placed at pages 50 to 58 of the Paper Book. Hence, the order passed under section 143(3) rws 263 of the Act itself. Copy of the said order is placed at pages 50 to 58 of the Paper Book. Hence, the order passed under section 143(3) rws 263 of the Act becomes a nullity and void ab-initio. The assessee had preferred a Misc. Application before the Income-tax Appellate Tribunal which has been allowed and the department's quantum appeal for the AY 2000-01 has already been dismissed in view of the fact that the order under section 263 itself is quashed by the ITAT. Copy of the order in Misc. Application No. 59/2009 and quantum appeal in ITA No. 2872/2006 are also enclosed.
In view of the above facts it is respectfully submitted that the penalties levied for all the three assessment years deserves to be quashed and the appeals of the assessee be allowed in full as prayed for and oblige."
4. The Learned CIT(Appeals) considering the submissions of the assessee, confirmed the penalty and dismissed the appeals of the assessee. Findings of the Learned CIT(Appeals) are reproduced as under:-
"6. I have considered the facts of the case, the submission made by the Ld. A.R. and also the case laws relied upon. However I am not inclined to agree with the views submitted by the appellant in view of the decision of the ITAT Chennai Bench 'D' (SB) in the case of ACIT vs Rogini Garments reported at (2007) 108 ITD 49 , wherein the Tribunal while considering the deduction u/s. 80IA and deduction u/s. 80HHC has held that in view of restriction placed on claim of repetitive deduction in section 80IA(9), which is made applicable in respect of all deductions under Chapter VIA, relief u/s.80IA of the Act should be deducted from the profits and gains of assessee's business before computing the relief u/s. 80HHC of the Act. The Tribunal has held that deduction cannot be allowed ignoring the restrictive clause contained in section 80IA (9) of the Act. Therefore, the restrictive clause in Section 801A makes it clear that wherever deduction under any other section of chapter VI-A(C) is claimed, the computation will be subject to the restrictions laid down in section 80lA(9) of the Act. The provisions contained in section 80IA(9) are very specific and clear so far as restriction on allowability of deduction is concerned. The reading of the provisions reveals well that by no stretch of imagination, claim of excess deduction is justified. In view of clear provisions as per directions given by the Hon'ble ITAT, the excess deduction claimed by the appellant in different assessment years u/s. 80HHC is as under:
A.Y. -1998-99 Rs. 4,39,979/-
A.Y.-1999-2000 Rs.28,97,005/-
A.Y.-2000-01 Rs.12.59.032/-
ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -6- Thus, as against the clear scheme envisaged in the Act u/s. 8Q1A(9), the appellant has claimed excess deduction which confirms that the deduction has been claimed willingly only to reduce tax liability. The concealment comes by two ways either by way of suppression of income or by way of excess deduction of expenditure claimed. In this case, a very considerable amount has been claimed in excess of what is due as deduction by the appellant. Besides, in the case of the appellant, in the light of these facts, the Assessing Officer has imposed the penalty only at 100% of tax sought to be evaded and not 300% and which I hold to be justified considering the full facts of the case. In view of the above facts and circumstances of the case the action of the AO in levying penalty u/s. 271(1)(c) of the Act for all the 3 years under consideration is hereby confirmed. The appeals of the appellant for all the above three years are therefore rejected."
5. The ld. counsel for the assessee reiterated the submissions as were made before the authorities below. He has submitted that assessee made a bona fide claim for deductions under sections 80-IB and 80-HHC of the I.T. Act, 1961 on the gross total income as per several decisions of different Benches of Income Tax Appellate Tribunal. Copies of the same are filed in the paper-book from pages 8 to 49. He has further submitted that ITAT Ahmedabad Bench in the case of assessee itself for Assessment Year 2000-01 while considering the similar issue u/s.263 of the I.T. Act, 1961, by following the same orders of the Tribunal, set aside the order u/s.263 of the I.T. Act, 1961 and restored the order of the Assessing Officer vide order dated 11/11/2006. The ld. counsel for the assessee further submitted that in this case even the CIT(Appeals) allowed the claim of the assessee for deduction by following the orders of different ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -7- Benches of the Tribunal. The ld. counsel for the assessee further submitted that the decision in the case of Rogini Garments(supra) was delivered on 27/04/2007, therefore, there was no question of making any wrong claim of deduction u/s.80-IB or 80-HHC of the I.T. Act, 1961. The ld. counsel for the assessee submitted that since the decision of the Special Bench in the case of Rogini Garments(supra), was delivered later on after filing of the return of the assessee, therefore, difference of opinion arrived at the later stage of the penalty proceedings, penalty would not be justifiable in the matter. He has further submitted that even the case of Rogini Garments(supra) was re-considered by larger Special Bench of the ITAT Delhi Bench in the case of ACIT vs. Hindustan Mint & Agro Products vide order dated 23/06/2009 reported in 315 /(AT) page 401 (Delhi). The ld. counsel for the assessee, therefore, submitted that these are not fit cases for levy of penalty u/s.271(1)(c) of the I.T. Act, 1961.
6. On the other hand, Learned Departmental Representative relied upon the orders of the authorities below and submitted that assessee has made excess claim of deduction u/s.80-IB of the I.T. Act, 1961 in the return of income which is ultimately rejected by the Tribunal by allowing ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -8- the Departmental appeal, therefore, authorities below were justified in levying the penalty u/s.271(1)(c) of the I.T. Act, 1961.
7. We have considered the rival submissions and perused the material available on record. It is not in dispute that the assessee for all the assessment years under consideration filed return(s) of income for all the respective assessment years, prior to the delivery of the judgement in the case of Rogini Garments(supra). The assessee made claim of deduction u/s.80-IB of the I.T. Act, 1961 on the gross total income on the basis of several decisions delivered by different Benches of the Tribunal including ITAT Ahmedabad Bench. Copies of the decisions of the Tribunal are filed in the paper-book from pages 8 to 49. These decisions are delivered prior to delivery of the judgment in the case of Rogini Garments(supra). The assessee also filed copy of order of the Tribunal (in assessee's own case) dated 10/11/2006 for Assessment Year 2000-01 in ITA No.705/RJT/2005 in which the subject matter was the order passed u/s.263 of the I.T. Act, 1961 in which the ld.Commissioner directed the Assessing Officer to withdraw the claim u/s.80-IB of the I.T. Act, 1961 on the same proposition on which the penalty has been imposed. The Tribunal, ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01 -9- however, considering other decision of ITAT Ahmedabad set aside the order u/s.263 of the I.T. Act, 1961 and allowed appeal of the assessee. It would, therefore, prove on record that prior to delivery of the judgement in the case of Rogini Garments(supra), the different Benches of the Tribunal including Ahmedabad Bench was taking a consistent view in favour of the assessee allowing deduction u/s.80-IB of the I.T. Act, 1961 on the gross total income.
8. Hon'ble Rajasthan High Court in the case of CIT vs. Harshvardhan Chemicals and Mineral Ltd. (2003)259 ITR 212 (Raj.) held as under:
"For the assessment year 1988-89, the assessee had filed an original return claiming deductions under sections 80HH and 80-1 of the Income-tax Ac:
1961, and declaring a loss, as well as a revised return declaring total income at nil as there was addition in the original return on account of wrong claim to deductions. A penalty was imposed on the assessee under section 271(1)(c). which the Appellate Tribunal deleted holding that : (i) where an arguable, controversial or debatable deduction is claimed, the claim could not be said to be false, otherwise it would become impossible for any assessee to raise any claims or deductions which might be debatable, and it was not the intention of the Legislature to make punishable-such claims, if they were not accepted; (ii) the total income according to the original and revised computations of the assessee remained the same, viz., Rs. 13,07,646 and the income as computed on final assessment was Rs. 6,86,519; (iii) no further tax was payable and since the assessee had paid tax amounting to Rs. 6,90,000 a refund became payable to it as a result of the final assessment; (iv) as against deduction of Rs. 6,73,298 claimed by the assessee the total deduction allowed in the final assessment was more, viz., Rs. 10,17,306; and, therefore, the assessee could be said to have discharged its burden under the Explanation to section 271(l)(c). On a reference:
ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01
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Held, affirming the decision of the Appellate Tribunal, that no penalty was leviable in view of the finding of the Tribunal that when the assessee had claimed deduction of an amount that was debatable it could not be said that the assessee had concealed any income or furnished inaccurate particulars for evasion of tax, and, in view of the findings of the Tribunal, no case was made out for interference."
8.1. Hon'ble Delhi High Court in the case of CIT vs. Nath Bros. Exim International Ltd. (2007) 288 ITR 670(Delhi) held as under:-
"The assessee had claimed dividend income as his business income and according to the assessee it was entitled to a deduction under clause (baa) of the Explanation to section 80HHC(4C) of the Income-tax Act, 1961. The Assessing Officer disallowed the claim and imposed penalty. The Tribunal came to the conclusion that the assessee had disclosed all the facts, and therefore, even though it had made an erroneous claim which could not be justified in law, that by itself did not attract the penal provisions of the Act. On appeal to the High Court :
Held, dismissing the appeal, that there was full disclosure of all relevant material. It could not be said that the conduct of the assessee attracted the provisions of section 271(l)(c). The cancellation of penalty was justified."
8.2. Hon'ble ITAT Chennai Bench "B" in the case of Southern Gas Fittings (P.) Ltd. vs. Dy. CIT (2002) 80 ITD 202 (Chennai) in paragraph No.20 held as under:-
"20. At the cost of repetition, we may mention here that form all the facts and circumstances of the case, it seems that it is a case of difference of opinion, as the claim for depreciation etc., was made by the assessee on the basis of trial production which was supported by record, but the stand of the Department was that since no commercial production was there, the assessee is not entitled for such claim. All the facts of the case were before the Assessing Officer and as such, it cannot be said to be a case of filing inaccurate particulars or making any concealment before the Assessing Officer. Even if the assessee ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01
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would claim this depreciation etc., on merits and rejected by the Assessing Officer, still law is clear that even if the explanation of the assessee is rejected, no case for imposition of penalty would be made out."
9. Hon'ble Punjab & Haryana High Court in the case of CIT vs. Premdas 248 ITR 237(P&H) dismissed the Departmental appeal in which the Tribunal cancelled the penalty on the ground that difference between the returned income and the assessed income was due to difference of opinion about estimated rates of income and expenditure. The Hon'ble Calcutta High Court in the case of Durga Kamal Rice Mills vs. CIT 265 ITR 25 (Cal.) held that when two views are possible and when no clear and definite inference can be drawn in a penalty proceedings, penalty cannot be imposed.
10. Hon'ble Supreme Court in the case of CIT vs. Munim reported in 313/(Statute) 30 (SC) confirmed the view of the High Court in which it was held that when assessee does not include particular item in the turnover under bona fide belief that he is not liable to do so, it would not be right to treat the return as a false return inviting the imposition of penalty.
ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01
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11. Hon'ble Supreme Court in the recent decision in the case of M/s.Rajasthan Spinning and Weaving Mills 2009-TIOL-63 held that on every demand penalty is not automatic. The Explanation-1 to section 271(1)(c) of the I.T. Act, 1961 provides for deemed concealment of income if the assessee fails to offer an explanation or assessee fails to prove that such explanation is bona fide. However, considering the facts and circumstances of the case, it is clear that the assessee disclosed all the relevant facts in the return(s) of income and made a claim of deduction u/s.80-IB of the I.T. Act, 1961 on the gross total income on the basis of several decisions in favour of the assessee delivered by various Benches of the Tribunal. Even ITAT Ahmedabad Bench considering the identical issue in one of the assessment years under appeal against the order u/s.263 of the I.T. Act, 1961, set aside the order of the ld.Commissioner and restored the order of the Assessing Officer confirming the deduction claimed by the assessee prior to the decision in the case of Rogini Garment(supra). The above facts, therefore, proved on record that the assessee offered explanation before the Assessing Officer and also proved on record that explanation of the assessee was bona fide in making a claim ITA Nos.2395,2396 & 2397/Ahd/2009 M/s.Shree Ram Food Industries vs. ACIT Asst.Years - 1998-99, 1999-2000 & 2000-01
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u/s.80-IB of the I.T. Act, 1961 on the gross total income as per prevalent decision available on the issue. Therefore, it could not be held that assessee has failed to offer any explanation at the penalty stage and also failed to prove that the claim of the assessee was bona fide. Considering the facts and circumstances noted above in the light of the decisions referred to above, we are of the view that these are not fit cases for levy of penalty u/s.271(1)(c) of the I.T. Act, 1961. We accordingly set aside the orders of the authorities below and cancelled the penalty u/s.271(1)(c) of the I.T. Act, 1961.
12. In the result, all the appeals of the Assessee are allowed. Order signed, dated and pronounced in the Court on 22 /01 /2010 Sd/- Sd/-
( A.N. PAHUJA ) ( BHAVNESH SAINI )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 22/ 01 /2010
T.C. NAIR
Copy of the Order forwarded to :
1. The Appellant. 2. The Respondent
3. The CIT Concerned. 4. The ld. CIT(Appeals)-XX, Ahmedabad
5. The DR, Ahmedabad Bench .6. The Guard File.
BY ORDER,
स×याǒपत ूित //rue Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad