Income Tax Appellate Tribunal - Delhi
Carlton Overseas Pvt. Ltd., New Delhi vs Department Of Income Tax on 23 March, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `B': NEW DELHI
BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
I.T. A. No.2646/Del/2011
Assessment Year : 2003-04
Dy. Commissioner of Income-tax, M/s. Carlton Overseas Pvt. Ltd.,
Circle 33(1), New Delhi. Vs. J-5, 3rd Floor, Saket, New Delhi.
PAN: AAACC0482B
(Appellant) (Respondent)
Appellant by: Ms. Surjani Mohanty, Sr. DR.
Respondent by: Shri S.C. Goyal, CA.
ORDER
PER C.L. SETHI, JUDICIAL MEMBER:
The revenue is in appeal against the order dated 23.03.2011 passed by the learned Commissioner of Income-tax (Appeals) in the matter of a penalty order passed under sec. 271(1)(c) of the Income-tax Act, 1961 by the Assessing Officer for the Assessment Year 2003-04.
2. The ground raised by the revenue is as under:-
"The Ld. CIT(A) has erred on facts and in law in deleting penalty amounting to Rs.510000/- imposed u/s 271(1)(c) of the I.T. Act ignoring that as per sub-section 9 of section 80IA once the business profits are considered under this section the profits to the extent which already claimed are not eligible for deduction under any other provisions of Chapter VI-A under the heading deduction in respect of special incomes."2
3. In this case, the assessee filed its return of income declaring total income at Rs.49,94,951/- on 2.12.2003, for the Assessment Year under consideration.
4. The assessee company is engaged in the business of manufacturing and export of leather footwear and components. In the return of income, the assessee claimed deduction under sec. 80HHC at Rs.78,88,535/-. The assessee also claimed deduction u/s 80IB to the extent of rs.29,31,874/- in respect of the profit of industrial undertaking located at Village Khandsa, Gurgaon, Haryana. The assessee computed the deduction u/s 80HHC with reference to the total business profit of the assessee company without reducing therefrom the amount of deduction already claimed under sec. 80IB of the Act. The AO had taken a view that the deduction already claimed under sec. 80IB should be reduced from the profit of business for the purpose of computing the amount of deduction available u/s 80HHC of the Act. The AO therefore, computed deduction u/s 80HHC with reference to the profit of business as reduced by the profit already considered for deduction u/s 80IB of the Act. In this manner, the AO reduced the amount of deduction available u/s 80HHC of the Act and also initiated penalty proceedings on that account. The amount of deduction u/s 80HHC disallowed by the AO to the extent of Rs.13,88,361/- was confirmed by the 3 learned CIT(A) vide order dated 27.12.2007. The AO therefore, fix the penalty proceedings for hearing. In reply thereto, the assessee submitted that the assessee had furnished whole particulars of income truly and fully and has not concealed the particulars of its income. The assessee also submitted that the assessee has claimed deduction u/s 80HHC in the same manner as it was claimed and allowed in the Assessment Years 2001-02 and 2002-03. The assessee therefore, requested to drop the penalty proceedings initiated by the AO u/s 271(1)(c) of the Act.
5. After considering the assessee's submission and in the light of the provisions of sec. 80IA(9), which is analogous to sec. 80IB(13), the AO had taken a view that the assessee could claim deduction u/s 80HHC only on the balance profit of the business after reducing the deduction allowed u/s 80IB of the Act. The AO further stated that merely because similar claim was allowed in the Assessment Years 2001-02 and 2002-03, that is not sufficient to say that the assessee has not furnished inaccurate particulars of income as the principle of res judicata is not applicable to the Income-tax proceedings. The AO further stated that it was not the burden of the department to prove and establish that the assessee had consciously concealed his income. The AO, therefore, levied a penalty of Rs.5,10,222/- u/s 271(1)(c) of the Act. 4
6. Being aggrieved, the assessee preferred an appeal before the learned CIT(A).
7. After considering the AO's order and assessee's submission and the position of law, the learned CIT(A) has taken a view that the issue as to whether the deduction already allowed u/s 80IA/80IB of the Act, should be reduced from the profit and gains of the assessee's business for the purpose of computing deduction u/s 80HHC, was highly debatable issue and, therefore, the AO was not justified in levying penalty u/s 271(1)(c ) of the Act. The learned CIT(A)'s order in this respect runs as under:-
"5. I have carefully considered the submissions of ld. AR and have gone through the penalty order. The penalty is imposed on the addition made on account of disallowance of deduction u/s 80HHC. The assessee had claimed the deduction on total profits of the business before reducing the deduction u/s 80IB claimed by the assessee. The Assessing Officer found it to be in contravention to the provisions of the Act and recomputed the deduction u/s 80HHC at Rs.65,00,174/- as against the claim of the assessee of Rs.78,88,535/-.
I find that the issue `whether relief u/s 80-IA/80-IB should be deducted from profits and gains of the assessee's business before computing relief u/s 80HHC' has been a debatable issue. The issue was also referred to Hon'ble Special Bench of ITAT in the case of ACIT vs. Rogini Garments 108 ITD 49 and again in the case of ACIT vs. Hindustan Mint & Agro Products Pvt. Ltd. 119 ITD 107. Even in assessee's own case, different view was taken by the Assessing Officer in earlier years. In such circumstances, when issue is debatable, it cannot be said that by taking a possible interpretation, the appellant has filed inaccurate particulars of income. Hence, I find that the Assessing Officer was not justified in invoking the 5 provisions of section 271(1)(c ) and the penalty imposed by him is, therefore, deleted."
8. Hence, the department is in appeal before us.
9. We have heard both the parties and perused the orders of the authorities below.
10. In this case, the assessee claimed deduction u/s 80HHC after computing the amount of deduction on the total profit of business without reducing therefrom the amount of profit already allowed as deduction u/s 80- IB of the Act. This return was filed by the assessee on 2.12.203. In the immediate preceding Assessment Years 2001-02 and 2002-03, the assessee also claimed deduction under sec.80HHC, by computing the same with reference to the total profit of the business without reducing therefrom the amount of profit already allowed as deduction u/s 80IB of the Act and the said claim of the assessee was allowed by the department. It is no doubt true that the principle of res judicata is not applicable to the income-tax proceedings but the claim made by the assessee on the basis of earlier Assessment Years cannot be said to be mala fide or dishonest so as to attract penalty leviable u/s 271(1)(c) of the Act. In this situation, the assessee's claim in subsequent year shall be considered to be bona fide based on the assessments of earlier years. Therefore, the AO's contention that mere because the identical claim was allowed in earlier Assessment Years 2001- 6 02 and 2002-03, the assessee's contention that he has not furnished inaccurate particulars of its income, is not acceptable, is not justified.
11. The question as to whether the amount of deduction already allowed u/s 80-IA/80-IB should be reduced from the profit of the business for the purpose of computing deduction u/s 80HHC or it should be reduced only for the purpose of allowing deduction u/s 80HHC was highly debatable at the time when the assessee filed the return of income on 2.12.2003 for the Assessment Year under consideration. To decide this issue, a Special Bench of ITAT was constituted in the case of ACIT vs. Rogini Garments, 108 ITD 49 (SB). In that case, the Hon'ble President of ITAT referred the question for the consideration of the Special Bench that whether relief u/s 80-IA should be deducted from profit and gains of business before computing relief u/s 80HHC of the Act. The Special Bench decided this issue vide order dated April 27, 2007. In that case, the Assessment Years involved were 1999-2000 and 2002-03. The Special Bench has taken a view that relief u/s 80-IA should be reduced from the profit and gains of business before computing relief u/s 80HHC of the Act. Therefore, prior to this decision dated April 27, 2007, the matter was debatable and not settled and there were different views taken by the Division Benches of the ITAT. The Bangalore Bench of the Tribunal in the case of Mittal Clothing Co. vs. DCIT 7 (2005) 4 SOT 626, held that provisions of sec. 80-IA(9) only regulate the deductions allowable under Chapter VI-A and object of said section is not to prevent claim to deduction under more than one section under Chapter VI-A where the assessee satisfies conditions of these sections. Jaipur Bench of the Tribunal rendered decision in the case of Toschica Creation vs. ITO (2006) 150 Taxman 48 held that deduction u/s 80HHC should be allowed on income included in gross total income before making any deduction under Chapter VI-A. However, total deduction u/s 80-IB and 80HHC should be restricted upto gross total income. Thereafter, on this issue a larger Bench of Tribunal was constituted in the case of Hindustan Mint and Agro Products P. Ltd. (2009) 315 ITR (AT) 401 (Del)(SB) and in that case, the view taken by the earlier Special Bench in the case of Rogini Garments (supra) was upheld. The view of the larger Bench of the Tribunal in the case of Hindustan Mint and Agro Products P. Ltd. (supra) has been upheld by the Hon'ble Delhi High Court in the case of Great Eastern Exports vs. CIT (2011) 332 ITR 14 (Del). The same view has also been taken by the Hon'ble Kerala High Court in the case of Olam Exports (India) Ltd. Vs. CIT (2011) 332 ITR 40. However, the Hon'ble Bombay High court in the case of Associated Capsules P. Ltd. Vs. DCIT (2011) 332 ITR 42 (Bom.) has taken a contrary view and dissented from the decision of Hon'ble Delhi High Court and 8 Hon'ble Kerala High Court in the cases of Great Eastern Exports (supra) and Olam Exports (India) Ltd. (supra) respectively. The Hon'ble Bombay High Court in the case of Associated Capsules P. Ltd. (supra) has held that the restriction imposed by sec. 80-IA(9) is not applicable at the stage of computation of deduction u/s 80HHC(3) but is applicable at the stage of allowing deduction u/s 80HHC(1) of the Act. It was further held that sec. 80-IA(9) seeks to restrict allowance of deduction and not the computation of deduction under any other section under heading `C' to Chapter VI-A of the Act. It is, thus, clear that contrary views have been taken by the different High Courts on the issue as to whether the amount of deduction already allowed u/s 80-IA should be reduced from the profit of the business for the purpose of computing deduction u/s 80HHC of the Act or for the purpose of allowing deduction u/s 80HHC of the Act.
12. In the light of the discussions made above, we are, therefore, in full agreement with the view taken by the learned CIT(A) that the issue whether relief u/s 80-IA/80-IB should be deducted from profits and gains of business for the purpose of computing relief u/s 80HHC is a debatable issue and therefore, the AO was not justified in imposing the penalty u/s 271(1)(c ) of the Act on that account. In the present case, the assessee has furnished all the particulars and details of the claim of deduction u/s 80-IB vis-à-vis u/s 9 80HHC of the Act and no particular has been concealed. The assessee's claim of deduction u/s 80HHC after computing the same with reference to the total profit of the business cannot said to be totally untenable in the eyes of law when the assessee filed its return of income on 2.12.2003. The assessee's claim of deduction u/s 80HHC is thus, found to be bona fide. It is also found that the assessee has been able to furnish a bona fide explanation in support of its claim and thus, the assessee has discharged the burden that lay upon it under Explanation 1 to sec. 271(1)(c) of the Act. We, therefore, uphold the order of the learned CIT(A) and reject this appeal filed by the revenue.
13. In the result, the appeal filed by the revenue is dismissed.
14. This decision is pronounced in the Open Court on 27th July, 2011.
Sd/- Sd/-
(B.C. MEENA) (C.L. SETHI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 27th July, 2011.
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR By Order
*mg Deputy Registrar, ITAT.