UNI DESIGN JEWELLERY PVT.LTD., MUMBAI v. ITO 8(3)(4), MUMBAI

ITA 1372/MUM/2009 | 2003-2004
Pronouncement Date: 02-02-2010 | Result: Allowed

Appeal Details

RSA Number 137219914 RSA 2009
Bench Mumbai
Appeal Number ITA 1372/MUM/2009
Duration Of Justice 11 month(s)
Appellant UNI DESIGN JEWELLERY PVT.LTD., MUMBAI
Respondent ITO 8(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 02-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 02-02-2010
Date Of Final Hearing 04-01-2010
Next Hearing Date 04-01-2010
Assessment Year 2003-2004
Appeal Filed On 02-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO.1372/MUM/2009 ASSESSMENT YEAR : 2003-04 UNI DESIGN JEWELLERY PVT. LTD. PLOT NO.4 5 & 6(PART) SEEPZ ANDHERI (E) MUMBAI-400 093. ..( APPELLANT ) P.A. NO. (AAACU 0572 G) VS. DY. COMMISSIONER OF INCOME TAX RANGE-8(3) AAYAKAR BHAVAN MUMBAI. ..( RESPONDENT ) APPELLANT BY : MS. ARATI VISSANJI RESPONDENT BY : MS. S. PAL O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 14.1.2009 PASSED BY THE LD. CITA) FOR THE ASSESSMENT YEAR 2003-04 SUSTAINING PENALTY OF RS.4 40 750/- IMPOSE D BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME TAX ACT 196 1(THE ACT). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS IN THE BUSINESS OF MANUFACTURING ACTIVITY OF JEWELLER Y AND EXPORT OF THE ITA NO.1372/M/09 A.Y: 03-04 2 SAME. IT FILED RETURN DECLARING NIL INCOME AFTER CLAIM ING DEDUCTION U/S.10A OF THE ACT AMOUNTING TO RS.3 42 92 692/-. HOWEV ER THE ASSESSING OFFICER WHILE PARTLY DISALLOWING THE DEDUCTION U /S.10A ON INTEREST INCOME SALE OF RESIDUE AND MISCELLANEOUS INCOME A ND GAIN ON ACCOUNT OF EXCHANGE RATE FLUCTUATION RESTRICTED THE DEDU CTION U/S.10A RS.3 21 11 123/-. THE ASSESSING OFFICER AFTER MAKING SOME OTHER DISALLOWANCES COMPLETED THE ASSESSMENT AT AN INCOME OF RS.59 91 870/- VIDE ORDER DATED 24.3.2006 PASSED U/S.1 43(3) OF THE ACT. ON APPEAL THE LD. CIT(A) ALLOWED PART RELIEF TO THE ASSESSEE IN ALLOWING DEDUCTION U/S.10A RS.3 30 93 368/-. WHILE M AKING THE ASSESSMENT THE ASSESSING OFFICER ALSO INITIATED PENALTY PR OCEEDING U/S.271(1)(C) OF THE ACT. ACCORDINGLY THE ASSESSEE WAS ASKE D TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPOSED U/S.271(1)( C) OF THE ACT. IN RESPONSE IT WAS INTERALIA SUBMITTED BY THE ASSES SEE THAT THE DIFFERENCE IN ASSESSED INCOME AND RETURNED INCOME IS MAIN LY ON ACCOUNT OF DEDUCTION U/S.10A OF THE ACT AGAINST WHICH A SSESSEES APPEAL IS PENDING. IT WAS FURTHER SUBMITTED THAT NO INACCURATE PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE INASMUCH AS T HE PARTICULARS REGARDING DEDUCTION U/S.10A WITH COMPUTAT ION HAVE ALREADY BEEN DISCLOSED IN THE AUDITED ACCOUNTS FILED ALON GWITH THE RETURN OF INCOME. IT WAS THEREFORE SUBMITTED THAT THE RE WERE NO INACCURATE PARTICULARS FILED BY THE ASSESSEE. HOWEVER THE ASSESSING ITA NO.1372/M/09 A.Y: 03-04 3 OFFICER DID NOT ACCEPT THE ASSESSEES EXPLANATION . THE ASSESSING OFFICER WHILE RELYING ON CERTAIN JUDICIAL PRONOUNCEMENT S WHEREIN ACCORDING TO THE ASSESSING OFFICER IT HAS BEEN HELD THAT CL AIMING EXCESSIVE DEDUCTION ALSO AMOUNTS TO CONCEALMENT OF INCOME EI THER SUPPRESSION OF RECEIPTS OR EXAGGERATION OF EXPENDITURE. BOTH ARE ATTEMPT TO REDUCE THE TAXABLE INCOME AND PENALTY U/S.2 71(1)(C) MAY BE IMPOSED FOR EITHER OR BOTH SUCH ATTEMPTS IMPOSED THE PENALTY ON THE AMOUNT OF RS.11 99 324/- BEING THE DIFFERENCE BET WEEN THE DEDUCTION CLAIMED AND ALLOWED U/S.10A AMOUNTING TO RS.4 40 750/- VIDE ORDER DT.25.3.08 PASSED U/S.271(1)(C) OF THE ACT. ON APPEAL THE LD. CIT(A)WHILE RELYING ON THE DECISION OF HONBLE SU PREME COURT IN UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) UPHELD THE ORDER OF THE ASSESSING OFFICER AND D ISMISSED THE APPEAL FILED BY THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWING SOLE GROUND OF APPE AL: THE LD. CIT(A) HAS ERRED IN CONFIRMING LEVY OF PENALTY U/S.271(1)(C) AMOUNTING TO RS.4 40 750/-. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE AT THE OUTSET SUBMITS THAT THE TRIBUNAL IN THE QUANTUM APPEA L WITH REGARD TO THE DEDUCTION U/S.10A VIDE CONSOLIDATED ORDER IN ASSESSEE S OWN ITA NO.1372/M/09 A.Y: 03-04 4 CASES IN M/S. UNI-DESIGN JEWELLERY PVT. LTD. VS. ITO IN ITA NO.ITA NO.69/MUM/07 FOR ASSESSMENT YEAR 2003-04 ORDER DATED 30 TH OCT. 2009 HAS OBSERVED AND HELD VIDE PARA-20 TO 31 APPEARI NG AT PAGE 9 TO 13 OF ITS ORDER AS UNDER : 20. GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE READS AS UNDER:- 1. F.D. INTEREST OF RS.3 33 418/- RECEIVED ON AMOUNT KEPT AS MARGIN MONEY IN BANK BE TREATED AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER SOURCES AND NETTING BE ALLOWED AGAINST INTEREST PAYMENT AND THUS DEDUCTION U/S.10A BE ALLOWED AS CLAIMED BY THE APPELLANT. 21. AFTER HEARING BOTH SIDES WE FIND THAT THIS GRO UND IS IDENTICAL TO THE GROUND OF APPEAL NO.1 RAISED BY TH E ASSESSEE IN ITA NO.9042/MUM/2004. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSE SSEE HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFI CER FOR FRESH ADJUDICATION. FOLLOWING THE SAME RATIO THIS GROUND RAISED BY THE ASSESSEE IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIG HT OF THE DIRECTIONS GIVEN THEREIN. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PU RPOSES. 22. GROUND OF APPEAL NO.2(A) RAISED BY THE ASSESSE E READS AS UNDER:- 2. (A) SALE PROCEEDS OF RS.4 05 130/- FROM RESIDUE BEING DUST COLLECTED CONTAINING PRECIOUS METALS LIKE GOLD ETC. BE CONSIDERED AS INCOME FROM BUSINESS AND THUS PART OF TOTAL TURNOVER INSTEAD OF INCOME FROM OTHER SOURCES AND DEDUCTION UNDER SECTION 10A BE ALLOWED THEREON. 23. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE IN ITS RETURN OF INCOME HAS SHOWN TO HAVE RECEIVED OTHER INCOME OF RS.9 18 088/ - WHICH IS ON ACCOUNT OF SALE OF RESIDUE AND MISCELL ANEOUS INCOME. ON BEING QUESTIONED BY THE ASSESSING OFFICE R IT WAS SUBMITTED THAT THESE INCOME ARE NECESSARILY FOR MING PART OF THE BUSINESS INCOME. HOWEVER THE ASSESSING OFFICER WAS OF THE OPINION THAT THIS INCOME FROM RE SIDUE CANNOT BE SAID TO BE DERIVED FROM THE EXPORT ACTIVI TY OF THE ASSESSEE FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER ITA NO.1372/M/09 A.Y: 03-04 5 SECTION 10A OF THE ACT AND TREATED THE SAME AS INC OME FROM OTHER SOURCES. IN APPEAL THE CIT(A) UPHELD T HE ACTION OF THE ASSESSING OFFICER. AGGRIEVED WITH SUC H ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 24. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SALE OF DUST IS AT PAR WITH THE SALE OF SCRAP . RELYING ON A COUPLE OF DECISIONS SHE SUBMITTED THAT SALE PROCEEDS OF RS.4 05 130/- FROM RESIDUE BEING DUST COLLECTED WHICH CONTAINS PRECIOUS METALS LIKE GOLD ETC. SHOULD BE CONSIDERED AS INCOME FROM BUSINESS AND ACCORDINGLY SHOULD BE TREATED AS PART OF THE TOTAL TURNOVER INSTEAD OF INCOME FROM OTHER SOURCES. THE ASSESSEE ACCORDINGLY BE ALLOWED THE BENEFIT OF DEDUCTION UND ER SECTION 10A OF THE I.T.ACT. 25. THE LEARNED D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A). 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED BY THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECIS IONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT T HAT THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAS RECEIVED AN AMOUNT OF RS.4 05 130/- ON ACCOUNT OF S ALE PROCEEDS FROM THE DUST COLLECTED WHICH CONTAINED PRECIOUS METALS LIKE GOLD ETC. IT IS THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IT CONTAINS A CHARACTER OF SALE OF SCRAP AND IT SHOULD BE CONSIDE RED AS A BUSINESS INCOME AND SHOULD BE TREATED AS PART OF TH E TOTAL TURNOVER FOR AVAILING THE BENEFIT OF DEDUCTION UNDE R SECTION 10A OF THE I.T.ACT. HOWEVER ACCORDING TO TH E REVENUE THE SAID INCOME IS TO BE TREATED AS INCOM E FROM OTHER SOURCES. IN OUR OPINION THE INCOME FROM SALE OF RESIDUE AMOUNTING TO RS.4 05 130/- HAS TO BE CONSIDERED AT PAR WITH SALE OF SCRAP IN OTHER MANUFACTURING INDUSTRIES AND ACCORDINGLY BE TREATE D AS A PART OF THE TOTAL TURNOVER. HOWEVER AS REGARDS THE CLAIM OF THE ASSESSEE FOR BENEFIT OF DEDUCTION U/S.10A T HE ASSESSEE HAS TO FULFIL THE CONDITIONS OF SECTION 10 A I.E. EXPORT OF SUCH THINGS OR ARTICLES. IT IS NOT KNOWN WHETHER SUCH DUST CONTAINING PRECIOUS METAL WERE SOLD IN LO CAL MARKET OR EXPORTED. WE THEREFORE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFI CER TO VERIFY AS TO WHETHER THE ASSESSEE FULFILS THE CONDI TIONS PRESCRIBED IN SECTION 10A AND THEN DECIDE THE ISSU E AS PER LAW. WE HOLD THE DIRECT ACCORDINGLY. THIS GROUN D BY ITA NO.1372/M/09 A.Y: 03-04 6 THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 27. GROUND NO.2(B) RAISED BY THE ASSESSEE READS AS UNDER:- 2 (B) GAIN OF RS.5 75 958/- ON ACCOUNT OF CANCELLATIO N OF FOREIGN EXCHANGE CONTRACT IN THE COURSE OF BUSINESS TREATED AS INCOME FROM OTHER SOURCES BE TREATED AS INCOME FROM BUSINESS AND DEDUCTION U/S.10A BE ALLO WED THEREON. 28. THE FACTS OF THE CASE IN BRIEF ARE THAT MISCELL ANEOUS INCOME OF RS.9 18 088/- CONTAINED AN AMOUNT OF RS.5 75 958/- WHICH WAS RECEIVED ON ACCOUNT OF CANCELLATION OF FOREIGN EXCHANGE CONTRACT. THE ASS ESSING OFFICER TREATED THE SAME AS INCOME FROM OTHER SOUR CES AND DID NOT ALLOW BENEFIT OF DEDUCTION UNDER SECT ION 10A OF THE I.T.ACT. IN APPEAL THE CIT(A) UPHELD THE AC TION OF THE ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 29. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IN ORDER TO HEDGE AGAINST ANY LO SSES ENTERED INTO THESE TRANSACTIONS AND THEREFORE IT C ANNOT BE TREATED AS SPECULATION TRANSACTION. REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. MA HENDRA BROTHERS IN ITA NOS.1880/MUM/05 & 948/MUM/06 VIDE ORDER DATED 29.4.2009 FOR THE ASSESSMENT YEARS 2001 -02 & 2003-04 RESPECTIVELY SHE SUBMITTED THAT THE TRIB UNAL IN THE SAID DECISION FOLLOWING THE DECISION OF THE HONBLE HIGH COURT OF KOLKATA IN THE CASE OF CIT VS. SOORAJ MULL NAGARMULL REPORTED IN 129 ITR 169(BOM) AND THE DECI SION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BADRIDAS GAURIDU (I) LTD. 261 ITR 256 (BOM) HAD DISMISSED THE APPEALS FILED BY THE REVENUE WHERE I T WAS HELD BY THE CIT(A) THAT EXCHANGE LOSS ON ACCOUNT O F CANCELLATION OF FORWARD CONTRACT AMOUNTS TO BUSINE SS LOSS. SHE ACCORDINGLY SUBMITTED THAT THE ISSUE STAN DS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE CO-ORDINATE BENCH OF THE TRIBUNAL. 30. THE LEARNED D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A). 31. AFTER HEARING BOTH THE SIDES WE FIND THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DE CISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL WHERE ONE OF US WAS A PARTY. IN THE SAID DECISION THE LOSS ON ACCOU NT OF ITA NO.1372/M/09 A.Y: 03-04 7 CANCELLATION OF FOREIGN EXCHANGE CONTRACT WAS HELD AS BUSINESS LOSS BY THE CIT(A) AS AGAINST SPECULATION LOSS AS TREATED BY THE ASSESSING OFFICER. WHEN THE MATTER CAME UP BEFORE THE TRIBUNAL THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE KOLKATA HIGH COURT AND HONBLE BOMBAY HIGH COURT CITED ABOVE DISMISSED THE GROUND RAISE D BY THE REVENUE. FOLLOWING THE SAME LOGIC AS HELD BY T HE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL WE HOLD THAT RS.5 75 958/- ON ACCOUNT OF CANCELLATION OF FO REIGN EXCHANGE CONTRACT IN THE COURSE OF BUSINESS HAS TO BE TREATED AS INCOME FROM BUSINESS AND CONSEQUENTLY THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10A OF THE ACT. IN THIS VIEW OF THE MATTER THE ORDER OF THE CIT(A) IS SET ASIDE AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. SHE FURTHER SUBMITS THAT THERE IS NO DISPUTE THAT THE A SSESSEE HAS DISCLOSED ALL THE PARTICULARS OF ITS INCOME INCLUDING CLAIM OF DEDUCTION U/S.10A OF THE ACT. THE DIFFERENCE IN ALLOWING THE DE DUCTION U/S.10A IS ON ACCOUNT OF DIFFERENCE OF OPINION AND THE MATTER IS ST ILL PENDING BEFORE THE ASSESSING OFFICER AND HENCE THERE IS NO CONCE ALMENT ON THE PART OF THE ASSESSEE. THE HONBLE HIGH COURT AND TH E TRIBUNAL IN MANY CASES HAVE HELD THAT ON ACCOUNT OF DIFFERENCE OF OPI NION THE PENALTY IS NOT LEVIABLE. THE RELIANCE WAS ALSO PLACED O N THE FOLLOWING DECISIONS; 1. CIT VS. HARYANA WAREHOUSING CORPORATION (2009) 25 DTR 194 (P&H); 2. KANBAY SOFTWARE INDIA (P) LTD. VS. DY.CIT (2009) 31 SOT 153(PUNE); ITA NO.1372/M/09 A.Y: 03-04 8 3. TWIN STAR JUPITER CO-OPERATIVE HSG. SOC. LTD. VS. IT O (2009) 31 SOT 474 (MUM.) AND 4. ACIT VS. MAHINDRA SHUBHLAB SERVICES LTD. (2009) 31 SOT 361(MUM.) SHE THEREFORE SUBMITS THAT THE PENALTY IMPOSED BY TH E ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) BE DELETED. 5. ON THE OTHER HAND THE LD. DR WHILE RELYING ON TH E ORDER OF THE ASSESSING OFFICER THE ORDER OF THE CIT(A) ALSO RELIED ON THE DECISION CITED IN THE ORDER OF THE ASSESSING OFFICER NAMELY CIT V S. INDIA SEA FOODS (1976)105 ITR 708(KER.) NAGIN CHAND SHIV SAH AI VS. CIT 61 ITR 534 CIT VS. GATES FOAM AND RUBBER COMPANY (1973) 91 ITR 467(KER.) AND UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS(2008) 306 ITR 277(SC). SHE THEREFORE SUBMI TS THAT THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. PENALT Y UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY AND THE REVENUE IS NOT R EQUIRED TO PROVE WILLFUL CONCEALMENT AS HELD BY THE HONBLE SUPREME COUR T IN CASE THE OF UNION OF INDIA VS. DHARMENDRA TEXTILES AND PROCESSORS (2008) 306 ITR 277(SC). HOWEVER EACH AND EVERY ADDITION MADE I N THE ITA NO.1372/M/09 A.Y: 03-04 9 ASSESSMENT CANNOT AUTOMATICALLY LEAD TO LEVY OF PENALTY F OR CONCEALMENT OF INCOME. A CASE FOR IMPOSITION OF PENALTY HAS TO BE EXAMINED IN TERMS OF THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C). SECONDLY IT IS A SETTLED LEGAL POSITION THA T PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS. THE FINDING GIVEN IN THE ASSESSMENT THOUGH IS A GOOD EVIDENCE BUT TH E SAME IS NOT CONCLUSIVE IN PENALTY PROCEEDINGS AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERASINGHAIAH & CO. VS. CIT ((1980) 123 ITR 457 (SC). IN THE INSTANT CASE WE FIND THAT T HERE IS NO DISPUTE THAT THE ASSESSEE HAS FILED ALL THE DETAILS INCLUDING THE DETAIL OF CLAIM OF DEDUCTION U/S.10A OF THE ACT. THE PENALTY U/S.271 (1)(C) WAS IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD . CIT(A) ON THE AMOUNT OF RS.11 99 324/- BEING THE DIFFERENCE BET WEEN THE CLAIM OF DEDUCTION U/S.10A CLAIMED BY THE ASSESSEE AND ALLOWED BY THE REVENUE . WE FURTHER FIND THAT THE TRIBUNAL (SUPRA) HAS RESTORED BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH CERTAI N DIRECTIONS TO RECONSIDER THE ISSUE RELATING TO DEDUCTION U/S.10A ON F DR INTEREST OF RS.3 33 418/ AND SALE PROCEEDS OF DUST CONTAINING PRECI OUS METALS LIKE GOLD ETC. RS.4 05 130/- AND DIRECTED THE ASSESSING OFFICER TO TREAT THE GAIN OF RS.5 75 958/- ON ACCOUNT OF CANCELLATION O F FOREIGN EXCHANGE CONTACT AS INCOME FROM BUSINESS. ITA NO.1372/M/09 A.Y: 03-04 10 7. THUS IT IS CLEAR THAT THE DIFFERENCE BETWEEN THE CLA IM MADE U/S.10A AND ALLOWED BY THE REVENUE IS ON ACCOUNT OF DIF FERENCE OF OPINION AND THE SAME IS STILL PENDING BEFORE THE ASSESSIN G OFFICER. IT IS NOT THE CASE OF THE REVENUE THAT THE CLAIM OF DEDUCT ION MADE BY THE ASSESSEE IS FOUND TO BE FALSE OR UNTRUE OR THE ASSESSEE IS NOT ENTITLED TO CLAIM SUCH DEDUCTION. IT IS REPEATEDLY HELD BY THE COURTS THAT WHEN THE FACTS ARE CLEARLY DISCLOSED IN THE RETURN OF INCO ME PENALTY CANNOT BE LEVIED AND MERELY BECAUSE AN AMOUNT IS NOT AL LOWED OR TAXED TO INCOME IT CANNOT BE SAID THAT THE ASSESSEE HAD F ILED INACCURATE PARTICULARS OR CONCEALED ANY INCOME CHARGEABLE TO TAX. FURTHER CONSCIOUS CONCEALMENT IS NECESSARY. EVEN IF SOME DE DUCTION OR BENEFIT IS CLAIMED BY THE ASSESSEE WRONGLY BUT BONAFI DE AND NO MALAFIDE CAN BE ATTRIBUTED THE PENALTY WOULD NOT BE LEVIED. 8. IN CIT VS. INDIA SEA FOODS (SUPRA) THE FACTS OF THE CASE ARE THAT THE ASSESSEE DECLARED A NET LOSS OF RS.3 29 304/- IN THE RE TURN FILED BY IT. AFTER DISCUSSION WITH THE DEPARTMENT AND UNDER THE SETTLEMENT THE PARTNERS OF THE FIRM AGREED THAT A SUM OF RS.7.00 LACS MAY BE ADDED AS INCOME DERIVED FROM THEM FROM UNDISCLOSED SOURCES SUBJECT TO SPREAD OVER BETWEEN THE ASSESSMENT YEARS 1964-65 TO 196 8-69 IN PROPORTIONATE TO THE TURNOVER. THE ASSESSEE ALSO AGREED UNDER THAT SETTLEMENT THAT MINIMUM PENALTY PRESCRIBED UNDER THE A CT MAY BE LEVIED AGAINST IT FOR ALL THOSE YEARS. PURSUANT TO THE SAID SETTLEMENT ITA NO.1372/M/09 A.Y: 03-04 11 THE ASSESSING OFFICER FINALISED THE ASSESSMENT AFTER ADDING A PROPORTIONATE AMOUNT OF RS.2 84 727/- AND DISALLOWAN CE OF CERTAIN EXPENSES. THE NET RESULT OF THESE ADDITIONS WAS THAT IN THE PLACE OF LOSS OF RS.3 29 304/- SHOWN IN THE RETURN THE ASSESSEE WAS F OUND TO HAVE MADE A PROFIT OF RS.18 460/-. ON PENALTY PROCEE DING INSPECTING ASTT. COMMISSIONER (THE IAC) AFTER OVER-RULING THE OBJ ECTIONS OF THE ASSESSEE HELD THAT THE MINIMUM PENALTY LEVIABLE WAS RS.2 84 727/- WHICH AMOUNT IN HIS VIEW REPRESENTED THE CONCEALED INCOM E AND ACCORDINGLY IMPOSED THE SAID PENALTY. ON APPEAL THE TRIBUNAL SET ASIDE THE ORDER OF THE IAC IMPOSING PENALTY. ON REFE RENCE FOLLOWING QUESTIONS WERE REFERRED TO THE HONBLE HIGH COURT: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE INCOME TAX APPELLATE TRIBUNAL IS JUSTIFIE D IN LAW IN HOLDING (I) THAT THE WORD INCOME OBTAINING IN SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 SHOULD REFER TO A POSITIVE FIGURE ONLY AND NOT A LOSS; (II) THAT THE TOTAL INCOME COMPUTATION CIRCUMSCRIBES THE QUANTUM OF CONCEALMENT IN PENALTY PROCEEDINGS ? IT WAS HELD THAT THE FIRST QUESTION CANNOT BE SAID TO BE A QUESTION OF LAW ARISING OUT OF THE ORDER OF THE TRIBUNAL AND HEN CE IT WAS DECLINED TO ANSWER THE SAME. WITH REGARD TO THE SECOND QUESTION IT WAS HELD THAT ON THE FACTS OF THE CASE THE MINIMUM PENALTY IM POSSIBLE AGAINST THE ASSESSEE ON THE BASIS OF A CORRECT APPLICATION OF SUB-CLA USE (III) OF SECTION 271(1)(C) WAS RS.2 84 727/-. THE ORDER PASSED BY THE IAC ITA NO.1372/M/09 A.Y: 03-04 12 IMPOSING THE SAID PENALTY WAS VALID AND INTERFERENCE WITH THE SAID ORDER BY THE TRIBUNAL WAS ILLEGAL AND UNWARRANTED. WHEREAS IN THE CASE BEFORE US THERE WAS NEITHER THE SURRE NDER OF INCOME BY THE ASSESSEE NOR ANY SUCH AGREEMENT THAT MINIMU M PENALTY MAY BE LEVIED PRESCRIBED UNDER THE ACT AND QU ANTUM OF COMPUTATION OF DEDUCTION U/S.10A IS STILL TO BE DETERMI NED BY THE ASSESSING OFFICER THEREFORE THE DECISION RELIED ON BY TH E LD. DR IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE P RESENT CASE. 9. IN NAGIN CHAND SHIV SAHAI VS. CIT (1938) 6 IT R 534(LAH.) ( WRONGLY CITED BY THE REVENUE AS 61 ITR 534) THE QUE STION THAT FELL TO BE CONSIDERED BY THE HONBLE LAHORE HIGH COURT IN THAT CASE WAS WHETHER U/S.28 OF THE INDIAN INCOME TAX ACT 1922 A PE NALTY COULD BE IMPOSED AGAINST AN ASSESSEE WHO HAD DELIBERATELY PUT FORW ARD CERTAIN FALSE CLAIMS FOR DEDUCTIONS. WHEREAS IN THE CASE BEFORE US IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS MADE FALSE CLAIM OF DEDUCTION U/S.10A OF TH E ACT AND THE ISSUE UNDER CONSIDERATION IS PENALTY IMPOSED U/S.271(1 )(C) OF THE IT ACT 1961 AND NOT UNDER THE OLD ACT THEREFORE THE DECISION RELIED ON BY THE LD. DR IS DISTINGUISHABLE AND NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE. ITA NO.1372/M/09 A.Y: 03-04 13 10. IN CIT VS. GATES FOAM AND RUBBER COMPANY (SUPRA) IT HAS BEEN HELD (PAGE 468 HEADNOTE) THAT THE PLACING OF THE BOG US DEBIT AS GENUINE CONSTITUTED FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT HAD BEEN PROVED THAT THE AGENT-FIRM WAS A BOGUS CONCERN SET UP FOR THE PURPOSE OF DIVERTING A LARGE PORTION OF THE INCOM E OF THE ASSESSEE. THE PRESUMPTION PROVIDED FOR IN SECTION 271(1)(C) APPLI ED TO THE FACTS OF THE CASE AND PENALTY HAD TO BE IMPOSED. WHEREAS IN THE CASE BEFORE US IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE IS A BOGUS CONCERN OR THE CLAIM OF DEDUCTION U/ S.10A MADE BY ASSESSEE WAS FOUND TO BE FALSE OR UNTRUE OR THE A SSESSEE IS NOT ENTITLED TO SUCH DEDUCTION THEREFORE THE DECISI ON RELIED ON BY THE LD. DR IS DISTINGUISHABLE AND NOT APPLICABLE TO THE F ACTS OF THE PRESENT CASE. 11. IN CIT VS. HARYANA WAREHOUSING CORPORATION (2009) 25 DTR 194 (P&H) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSE E IT HAS BEEN HELD THAT REVENUE HAVING ALL ALONG ACCEPTED ASSESSEES CLAI M OF EXEMPTION UNDER SECTION 10(29) IN RESPECT OF ITS ENTIRE INCOME SIMILAR CLAIM FOR EXEMPTION MADE BY THE ASSESSEE WAS LEGITIMATE AND BONA FIDE AND THEREFORE PENALTY UNDER SECTION 271(1)(C) CA NNOT BE LEVIED SIMPLY BECAUSE THE CLAIM FOR EXEMPTION UNDER SECTION 10(2 9) HAS BEEN DISALLOWED IN THE RELEVANT YEAR ON THE INCOME EARNED BY THE ASSESSEE ITA NO.1372/M/09 A.Y: 03-04 14 FROM OTHER SOURCES EXCEPT INCOME DERIVED BY LETTING OUT OF GODOWNS AND WAREHOUSES MORE SO WHEN LEGAL POSITION AT THAT TIM E WAS STILL IN FLUX AND CLEAR FINDING HAS BEEN RECORDED BY THE TRIBU NAL THAT THE ASSESSEE HAS DISCLOSED THE ENTIRE FACTS AND HAS NOT CONCEALED ANY INCOME. 12. IN THE CASE OF KANBAY SOFTWARE INDIA (P) LTD. VS. DY.CIT (2009) 31 SOT 153(PUNE) RELIED ON BY THE LD. COUNSEL FOR T HE ASSESSEE THE PENALTY U/S.271(1)(C) WAS IMPOSED IN CONNECTION WITH A C LAIM MADE BY WAY OF A REVISED RETURN CLAIMING A CARRY FORWARD O F LOSS OF RS.5 36 27 048/- IN RESPECT OF LOSS INCURRED BY ONE OF T HE UNITS AND NOT CLAIMING DEDUCTION U/S.10A ON THE AGGREGATE OF PR OFITS/LOSSES OF BOTH THE UNITS THAT THE ASSESSEE COMPANY HAS BUT INDIVI DUALLY FOR THE UNIT IN WHICH PROFIT WAS EARNED. THE ASSESSING OFFICER R EJECTED THIS CLAIM WHICH WAS MADE BY THE ASSESSEE BY WAY OF FILING THE REVISED RETURN AND HE ALSO PROCEEDED TO IMPOSE PENALTY ON THE ASSESSEE FOR ASSESSEES HAVING FURNISHED INACCURATE PARTICULARS OF INCOME . IT HAS BEEN HELD THAT THE ASSESSEES EXPLANATION REGARDING BONA FIDES OF THE CLAIM DOES NOT SUFFER FROM ANY APPARENT CONSISTENCIES OR F ACTUAL ERRORS AND IT IS QUITE IN TUNE WITH THE HUMAN PROBABILITIES. THERE IS NO GOOD REASON TO REJECT THE SAME AS UNACCEPTABLE FOR THE PURPOSE OF MAKING ITA NO.1372/M/09 A.Y: 03-04 15 OF THE CLAIM OF DEDUCTION BEING COVERED BY THE DEEMING FICTION UNDER EXPLANATION 1 TO SECTION 271(1)(C) AND ACCORDINGLY THE A SSESSING OFFICER WAS DIRECTED TO DELETE THE IMPUGNED PENALTY OF RS.2.00 CRORES. 13. IN TWIN STAR JUPITER CO-OPERATIVE HSG. SOC. LTD. VS. ITO (2009) 31 SOT 474 (MUM.) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE THE FACTS ARE THAT THE ASSESSEE COMPANY WAS A CO-OPERATIVE HOUSIN G SOCIETY. THE ASSESSING OFFICER MADE CERTAIN ADDITIONS TO TH E TOTAL INCOME OF THE ASSESSEE IN RESPECT OF 3 ITEMS. ON APPEAL TH E COMMISSIONER(APPEALS) DISMISSED THE ASSESSEES APPEAL. THERE AFTER THE ASSESSING OFFICER LEVIED PENALTY UPON THE ASSESSEE UNDE R SECTION 271(1)(C). ON APPEAL AGAINST PENALTY ORDER THE COMMISSIONER(APPEALS) CANCELLED THE PENALTY IN RESPECT OF ONLY ONE ITEM AND CONFIRMED THE PENALTY IN RESPECT OF REMAINING TWO ITEMS. IT HAS BEEN HELD THAT WHEN THE ASSESSEE HAD FILED ALL THE P ARTICULARS OF INCOME THE CORRECT ASSESSMENT AND CALCULATION OF TOTAL INCO ME HAD TO BE DONE BY THE ASSESSING OFFICER. IF IN SUCH PROCESS THE A SSESSING OFFICER FOUND DIFFERENT TOTAL INCOME TO BE ASSESSED THAN THE INCOME OFFERED BY THE ASSESSEE IN SUCH CASE IT WAS NOT AUTOMATICALL Y A CASE WHERE PENALTY UNDER SECTION 271(1)(C) WAS LEVIABLE. ITA NO.1372/M/09 A.Y: 03-04 16 14. IN ACIT VS. MAHINDRA SHUBHLAB SERVICES LTD. (2009) 31 SOT 361(MUM.) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED EXPENDITURES ON ACCOUN T OF PROJECT FEASIBILITY REPORT AND ON ACCOUNT OF MARKET RES EARCH. THE ASSESSING OFFICER WHILE MAKING ASSESSMENT ALLOWED 1/10 TH OF SUCH EXPENSES BY INVOKING SECTION 35D AS THOSE EXPENSES WERE ALL OWABLE IN 10 YEARS. THEREAFTER THE ASSESSING OFFICER LEVIED PENAL TY ON BOTH OF THE SAID ITEMS ON GROUND THAT THE ASSESSEE HAD FILED INACC URATE PARTICULARS OF ITS INCOME AND CONCEALED THE INCOME. THE COMMISSIONER (APPEALS) CANCELLED THE PENALTY HOLDING THAT THE ISSUE W AS HIGHLY DEBATABLE AND THE ASSESSEE HAD FURNISHED ALL THE RELEVAN T PARTICULARS OF INCOME. IT HAS BEEN HELD THAT MERELY ON THAT BASIS OR QUARREL IT CANNOT BE HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PA RTICULARS OR HAS CONCEALED PARTICULARS OF INCOME OR EXPLANATION FU RNISHED BY THE ASSESSEE IS FALSE. UNDER THE CIRCUMSTANCES THE COMMISSIONER(APPEALS) HAD RIGHTLY CANCELLED THE PENALTY UNDER SECTION 271(1)(C). THE ORDER OF THE COMMISSIONER (APPEALS) WAS T O BE CONFIRMED. 15. IN THIS VIEW OF THE MATTER WE RESPECTFULLY FOLLOWI NG THE RATIO OF THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSE E HOLD THAT THERE IS NO CONCEALMENT ON PART OF THE ASSESSEE THEREFORE THE PENALTY ITA NO.1372/M/09 A.Y: 03-04 17 IMPOSED BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS N OT SUSTAINABLE IN LAW AND ACCORDINGLY THE SAME IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 16. IN THE RESULT ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.02.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED:02.02.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR F BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. ITA NO.1372/M/09 A.Y: 03-04 18 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 4.1.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 4.1.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 02-02-10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 03-02-10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER