MIHIR ENGINEERS LTD, MUMBAI v. DCIT RG 1(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B : MUMBAI BEFORE SHRI D. MANMOHAN HONBLE VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA. NO. 614/MUM/2009 ASSESSMENT YEAR 1998-99 MIHIR ENGINEERS LTD. MUMBAI 400 020 PAN AAACM-4978-L VS. DCIT RANGE 1 (2) MUMBAI (APPELLANT) (RESPONDENT) FOR APPELLANT : MR. MADHUR AGRAWAL FOR RESPONDENT : S/SHRI SS.RANA S.M. KESHKUMAR AARSI PRASAD (DRS) ORDER PER D. MANMOHAN V.P. 1. THIS APPEAL FILED AT THE INSTANCE OF THE ASSES SEE-COMPANY IS DIRECTED AGAINST THE ORDER DATED 29-10-2008 PASSED BY THE CIT(A)-I MUMBAI AND IT PERTAINS TO THE ASSESSMENT YEAR 1998- 99. PENALTY OF RS.10 89 600/- IMPOSED BY THE ASSESSING OFFICER UND ER SECTION 271 (1) (C) OF THE ACT HAVING BEEN PARTLY CANCELLED BY THE CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 2. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. ASESSEE IS ENGAGED IN MANUFACTURING OF COOLI NG TOWERS. IT MANUFACTURES THREE VARIETIES OF COOLING TOWERS I.E. CROSS FLOW TYPE COUNTER FLOW TYPE AND ROUND BOTTLE SERIES. WITH REG ARD TO INCOME EARNED FROM MANUFACTURE AND SALE OF THESE COOLING T OWERS ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT WHI CH WAS DENIED BY THE ASSESSING OFFICER ON THE GROUND THAT THE CLAIM IS N OT IN ACCORDANCE WITH LAW. CONSEQUENT THERETO PENALTY WAS LEVIED UNDER SE CTION 271 (1) (C) OF THE ACT. 2 3. THE CASE OF THE ASSESSING OFFICER IS THAT CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT WAS WRONGLY CLAIMED B Y THE ASSESSEE ONLY WITH A VIEW TO REDUCE THE TAXABLE INCOME. IN THE PE NALTY PROCEEDINGS HE OBSERVED THAT THE ITAT HELD THAT MANUFACTURING OF C OMPONENTS FOR ROUND BOTTLE COOLING TOWERS IS AN INDEPENDENT PRO CESS WHICH IS NOT PART AND PARCEL OF THE COLLABORATION WITH GEA POLACEL. THE ASSESSEE HAS ALREADY AVAILED BENEFITS UNDER SECTION 80IA OF THE ACT IN RESPECT OF ITS UNIT MANUFACTURING ROUND BOTTLE COOLING TOWERS AND HENCE THERE IS NO MERIT IN THE CLAIM UNDER SECTION 80IA OF THE ACT. H E HAS ALSO TAKEN NOTE OF THE OBSERVATIONS OF THE LEARNED CIT(A) FOR THE A SSESSMENT YEAR 1997-98 WHICH READS AS FOLLOWS : IT HAS AS EXPLAINED ABOVE CLEARLY CRYSTALLIZED T HAT THE APPELLANT COMPANY TOOK RECOURSE TO SUBTERFUGES/DEVI CE AND HIGHLY CEREBRAL MODE OF INTERPRETATION AND COSME TIC TOUCHES WITH THE SOLE AIM OF CLAIMING DEDUCTION U/S. 80I ON THE ROUND BOTTLE TYPE OF COOLING TOWERS TILL COMING EIGHT YEA RS MORE. AS SUCH I AM OF THE CONSIDERED OPINION THAT THE A.O. HAS RIGHTLY DENIED THE APPELLANT COMPANY THE BENEFIT OF DEDUCTI ON U/S. 80IA OF THE ACT IN RESPECT OF THE SO CALLED WRIT PR ODUCING ROUND BOTTLE COOLING TOWERS. 3.1. UNDER THESE CIRCUMSTANCES THE ASSESSING OFFI CER CONCLUDED THAT BY CLAIMING DEDUCTION WHICH IS KNOWN TO BE A FALSE CLAIM THE ASSESSEE CAN BE SAID TO HAVE CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF ITS INCOME. ACC ORDINGLY PENALTY WAS LEVIED AT 200% OF THE TAX SOUGHT TO BE EVADED WHICH WORKS-OUT TO RS.10 89 600/-. 4. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) OBSERVED THAT THE CLAIM OF DEDUCTION UNDER SECTION 80IA WAS MADE BY MISINTERPRETING THE FACTS IN ORDER TO OBTAIN THE BE NEFIT WHICH IS NOT DUE 3 TO THE ASSESSEE AND THUS IT IS A CLEAR CASE OF FURN ISHING INACCURATE PARTICULARS OF INCOME. FURTHER THE ASSESSING OFFIC ER WAS DIRECTED TO VERIFY AND WORK OUT THE EXACT AMOUNT OF DEDUCTION O F DISALLOWANCE UNDER SECTION 80IA OF THE ACT WHICH REMAINS AFTER GIVING EFFECT TO THE ORDER OF THE ITAT IN THE QUANTUM PROCEEDINGS. PENALTY APPEAL FILED BY THE ASSESSEE WAS PARTLY ALLOWED. 5. FURTHER AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE MADE A BONAFIDE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT EVEN WITH REGARD TO ROUND BOTTLE COOLING TOWERS SINCE THE ENTIRE BUSINESS OF MANUFACTURE OF COOLING TOWERS WAS REVAMPED BY TRANSFERRING CERTAIN PLANT AND MACHINER Y FROM THE OLD UNIT TO THE NEW UNIT AND ALSO BY PURCHASE OF NEW PLANT E TC. IN OTHER WORDS THOUGH THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF ONLY ONE TYPE OF COOLING TOWER I.E. ROUND BOTTLE COOLING TOWER IN ITS UNIT SITUATED AT ODHAV DURING THE FINANCIAL YEAR 1991-92 IT DECIDED TO REVAMP ITS BUSINESS AND FOR THIS PURPOSE IT ENTERED INTO COLLA BORATION AGREEMENT WITH M/S. GEAKUHLTUR MBAU ERNEST KIRCHNER GMBH GE RMANY AND OBTAINED TECHNICAL KNOWHOW REQUIRED FOR MAKING OTHE R VARIETIES OF COOLING TOWER BY ADDING NEW PLANT AND MACHINERY ETC . THE COMPANY WAS UNDER THE IMPRESSION THAT THE NEW UNIT CANNOT BE TR EATED AS A RE- CONSTRUCTION OF THE OLD UNIT. SINCE ALL THE FACTS W ERE PLACED BEFORE THE TAX AUTHORITIES AND A BONAFIDE CLAIM WAS MADE MERELY B ECAUSE A DIFFERENT VIEW WAS TAKEN BY THE TAX AUTHORITIES IT CANNOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME SO A S TO LEVY PENALTY UNDER SECTION 271 (1) (C) OF THE ACT. HE HAS ALSO ADVERT ED OUR ATTENTION TO THE ORDER OF THE ITAT B-BENCH MUMBAI IN ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2001-2002 (ITA. NO. 6816/M/08 DATED 10 TH NOV. 2009) WHEREIN UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNA L OBSERVED AS UNDER : 4 3. . . . . . THE ASSESSEE HAS DISCLOSED ALL RELEVA NT FACTS IN SUPPORT OF ITS CLAIM BEFORE THE A.O. AT THE TIME OF ASSESSMENT ITSELF. THE A.O. HAS ALLOWED RS.3 44 816/- AS DEDUC TION UNDER SECTION 80-IA AND THE CIT(A) IN APPEAL HAS ALLOWED DEDUCTION AT RS.17 45 373/-. THUS THE CIT(A) HAS SUBSTANTIALL Y ALLOWED THE CLAIM OF DEDUCTION OF THE ASSESSEE UNDER SECTIO N 80-IA OF THE ACT. THE ASSESSEE HAS TAKEN THE MATTER BEFORE T HE HONBLE JURISDICTIONAL HIGH COURT WHICH IS PENDING BEFORE THE HONBLE HIGH COURT. IN THESE FACTS OF THE CASE WE HOLD THAT THE DISALLOWANCE OF PART OF THE CLAIM MADE BY THE ASSES SEE UNDER SECTION 80IA OF THE ACT WAS DUE TO HONEST DIFFERENC E OF OPINION BETWEEN THE ASSESSEE AND THE DEPARTMENT FOR WHICH THE ASSESSEE COULD NOT BE PENALIZED UNDER SECTION 271 ( 1) (C) OF THE ACT. THE EXPLANATION FILED BY THE ASSESSEE IN T HIS REGARD COULD NOT BE SAID TO BE NOT BONAFIDE. IN THIS VIEW OF THE MATTER WE HOLD THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY UNDER SECTION 271 (1) (C) OF THE ACT WHICH IS ACCORDINGL Y CANCELLED AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOW ED. 6. FACTS BEING IDENTICAL LEARNED COUNSEL PLEADED T HAT CLAIM OF THE ASSESSEE HAS TO BE TREATED AS A BONAFIDE CLAIM ON WHICH PENALTY IS NOT LEVIABLE. 7. ON THE OTHER HAND LEARNED DR STRONGLY RELIED UP ON THE OBSERVATIONS OF THE ASSESSING OFFICER AS WELL AS CI T(A). 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT UNDER IDENTICAL CIRCUMSTANCES THE ITAT B BENCH MUMBAI (ONE OF U S IS A PARTY) HELD THAT DISALLOWANCE OF PART OF THE CLAIM WAS ONLY DUE TO HONEST DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE DEPARTMENT. SU CH BEING THE CASE CONSISTENT WITH THE VIEW TAKEN THEREIN WE HOLD THAT IT IS NOT A FIT CASE FOR 5 LEVY OF PENALTY AND ACCORDINGLY DIRECT THE ASSESSIN G OFFICER TO CANCEL THE PENALTY LEVIED UNDER SECTION 271 (1) (C) OF THE ACT . 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 1 9 TH DAY OF APRIL 2010. SD/- SD/- (B.RAMAKOTAIAH) ( D MANMOHAN ) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI : DATED: 19 TH APRIL 2010 VBP/- COPY FORWARDED TO: 1 MIHIR ENGINEERS LTD. 4B KAKAD HOUSE A-WING 11 NEW MARINE LINES MUMBAI 400 020 PAN AAACM-4978-L 2 DCIT RANGE 1(2) AAYAKAR BHAVAN M.K. ROAD MUMB AI - 400 020. . 3 CIT (A)-I MUMBAI. 4 CIT MUMBAI. 5 DR B BENCH 6. GUARD FILE /TRUE COPY/ BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI SL. NO. PARTICULARS DATE INITIAL 1. DRAFT DICTATED ON 17-04-2010 SR. P.S. 2. DRAFT PLACED BEFORE THE MEMBER 19-04-2010 SR. P.S. 3 DRAFT APPROVED AND SENT TO SECOND MEMBER V.P. 4. DRAFT APPROVED BY SECOND MEMBER A.M. 5. DRAFT RECEIVED BY SR. P.S. SR. P.S. 6. KEPT FOR PRONOUNCEMENT SR. P.S. 7. SENT TO BENCH CLERK SR. P.S. 8. DATE OF DISPATCH OF THE ORDER 6