DCIT, CHENNAI v. M/s. Pentamedia Graphics Ltd., CHENNAI

ITA 817/CHNY/2011 | 2003-2004
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 81721714 RSA 2011
Assessee PAN AAACP1895R
Bench Chennai
Appeal Number ITA 817/CHNY/2011
Duration Of Justice 6 month(s) 23 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. Pentamedia Graphics Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 25-11-2011
Date Of Final Hearing 21-11-2011
Next Hearing Date 21-11-2011
Assessment Year 2003-2004
Appeal Filed On 02-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NOS. 809 & 810/MDS/2011 (ASSESSMENT YEAR : 2003-04) THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE V(2) CHENNAI 600 034. (APPELLANT) V. M/S PENTASOFT TECHNOLOGIES LTD. TAURUS NO.25 1 ST MAIN ROAD UNITED INDIA COLONY KODAMBAKKAM CHENNAI 600 034. PAN : AAACP1895R (RESPONDENT) I.T.A. NOS. 816 & 817MDS/2011 (ASSESSMENT YEARS : 2002-03 & 2003-04) THE DEPUTY COMMISSIONER OF INCOME TAX MEDIA CIRCLE I CHENNAI 600 034. (APPELLANT) V. M/S PENTAMEDIA GRAPHICS LTD. NO.1 FIRST MAIN ROAD UNITED INDIA COLONY KODAMBAKKAM CHENNAI 600 034. PAN : AAACP1647B (RESPONDENT) APPELLANTS BY : SHRI P. MADHANA SEKARAN JCIT RESPONDENT BY : SMT. PUSHYA SITARA MAN ADVOCATE DATE OF HEARING : 21.11.2011 DATE OF PRONOUNCEMENT : 25.11.2011 I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 2 O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : THESE ARE ALL APPEALS OF THE REVENUE IN RESPECT O F TWO ASSESSEES. WHILE THE FIRST TWO APPEALS FOR ASSESSM ENT YEAR 2003-04 ARE IN RESPECT OF M/S PENTASOFT TECHNOLOGIES LTD. THE OTHER TWO APPEALS FOR ASSESSMENT YEARS 2002-03 AND 2003-04 AR E IN RESPECT OF M/S PENTAMEDIA GRAPHICS LTD. THROUGH THESE APPEALS REVENUE ASSAILS ORDERS OF LD. CIT(APPEALS) DELETING PENALTI ES LEVIED ON THE ASSESSEES UNDER SECTION 271(1)(C) OF INCOME-TAX ACT 1961 (IN SHORT THE ACT) AND UNDER SECTION 271AA OF THE ACT. 2. LET US FIRST TAKE UP THE REVENUES APPEALS IN TH E CASE OF M/S PENTASOFT TECHNOLOGIES LTD. FOR ASSESSMENT YEAR 200 3-04. 3. PENALTY LEVIED ON THE ASSESSEE UNDER SECTION 271 (1)(C) OF THE ACT WAS DELETED BY LD. CIT(APPEALS) HOLDING THAT TH ERE WAS NO WRONG OR INCORRECT CLAIM FOR DEPRECIATION ON NON-COMPETE FEES AND DIFFERENCE IN THE CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT AROSE OUT OF EXCLUSION OF FOREIGN EXCHANGE EXPENDIT URE FROM TOTAL TURNOVER AS WELL AS EXPORT TURNOVER. I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 3 4. WHEN THE MATTER WAS TAKEN UP LEARNED D.R. ASSAI LING THE ORDER OF LD. CIT(APPEALS) SUBMITTED THAT NON-COMPETE FEE WAS NOT AN INTANGIBLE ASSET AS PER SECTION 32(1)(II) OF THE AC T AND THE CLAIM OF THE ASSESSEE WAS TOTALLY BASELESS. IN SO FAR AS EXCLUS ION OF FOREIGN EXCHANGE EXPENDITURE WAS CONCERNED LEARNED D.R. SU BMITTED THAT ASSESSEE HAD INITIALLY INCLUDED IT AS A PART OF ITS EXPORT TURNOVER OVERLOOKING THE DEFINITION OF EXPORT TURNOVER. THE REFORE ACCORDING TO HIM ASSESSEE WAS LIABLE FOR PENALTY FOR RAISING TH E CLAIMS WHICH WERE NOT AT ALL ACCEPTABLE IN LAW. 5. LEARNED A.R. OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT IN SO FAR EXCLUSION OF FOREIGN EXCHANGE EXPEND ITURE FROM EXPORT TURNOVER AS WELL AS TOTAL TURNOVER WHILE WORKING OU T DEDUCTION UNDER SECTION 10A OF THE ACT WAS CONCERNED ASSESSEE WAS SUCCESSFUL IN ITS APPEAL BEFORE CIT(APPEALS) IN QUANTUM PROCEEDIN GS AND FURTHER APPEAL OF THE REVENUE WAS DISMISSED BY THE TRIBUNAL IN I.T.A. NO. 2148/MDS/2007. IN SO FAR AS THE CLAIM OF DEPRECIAT ION ON NON- COMPETE FEE WAS CONCERNED LEARNED A.R. SUBMITTED T HAT THE TRIBUNAL DECISION THOUGH IT WENT AGAINST ASSESSEE WAS NOT FREE FROM DOUBT I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 4 SINCE THERE WERE OTHER DECISIONS OF CO-ORDINATE BEN CHES OF THIS TRIBUNAL WHICH HAD HELD THAT SUCH CLAIM WAS ALLOWAB LE. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. HON'BLE APEX COURT IN THE CASE OF CIT V. RELIANCE P ETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) HAS CLEARLY HELD THAT FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT THERE HAS TO BE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME BY THE ASSESSEE. PENALTY LEVIED HERE ON THE ASSESSEE WAS ON TWO COUNTS. ONE WAS FOR THE REASON THAT ASSESSEES CLAIM FOR DE DUCTION UNDER SECTION 10A WAS NOT CORRECTLY WORKED OUT SINCE FORE IGN EXCHANGE EXPENDITURE WAS NOT DEDUCTED BY THE ASSESSEE FROM E XPORT TURNOVER. AS PER THE A.O. IT WAS REQUIRED TO BE DEDUCTED ONL Y FROM EXPORT TURNOVER AND NOT FROM TOTAL TURNOVER. THE SECOND I SSUE ON WHICH PENALTY LEVIED WAS FOR A CLAIM OF DEPRECIATION ON N ON-COMPETE FEE WHICH AS PER THE REVENUE WAS NOT ALLOWABLE. IN S O FAR AS THE FIRST ISSUE WAS CONCERNED TRIBUNAL ITSELF FOR THE SAME A SSESSMENT YEAR HAD VIDE ITS ORDER DATED 24 TH MARCH 2008 IN I.T.A. NO.2148/MDS/2007 HELD IN FAVOUR OF ASSESSEE AND RUL ED THAT WHATEVER WAS EXCLUDED FROM THE EXPORT TURNOVER WAS ALSO REQUIRED TO I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 5 BE EXCLUDED FROM TOTAL TURNOVER. IN SO FAR AS THE SECOND ISSUE WAS CONCERNED THE QUESTION IS WHETHER NON-COMPETE FEE WOULD FALL WITHIN THE DEFINITION OF INTANGIBLE ASSETS GIVEN UNDER SEC TION 32(1)(II) OF THE ACT AND WHETHER SUCH A CLAIM IS TOTALLY UNTENABLE I N LAW. NO DOUBT THE TRIBUNAL HAD HELD AGAINST ASSESSEE BY RELYING O N THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF A.B. MAURIA INDIA PVT. LTD. V. ACIT IN I.T.A. NO.1293/MDS/2006 DATED 23.11.2007. NEVER THELESS THE SAID DECISION OF THE TRIBUNAL WAS IN RELATION TO AN ISSUE WHETHER REVISION UNDER SECTION 263 WAS JUSTIFIED OR NOT AND NOT DIRECTLY ON THE ISSUE REGARDING DEPRECIATION ON NON-COMPETE FEE. T HE QUESTION WHETHER NON-COMPETE FEE IS AN INTANGIBLE ASSET FALL ING WITHIN SECTION 32(1)(II) OF THE ACT IS NOT WITHOUT DOUBT. MERELY BECAUSE ASSESSEE HAD MADE A CLAIM IN THIS REGARD IT COULD NOT BE CO NSIDERED EQUIVALENT TO A CONCEALMENT. ASSESSEE ALSO CANNOT BE HELD GUI LTY OF FURNISHING INACCURATE PARTICULARS. AS HELD BY HONBLE APEX CO URT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) MAKING AN INCORRECT CLAIM IN LAW WOULD NOT TANTAMOUNT TO FURNISHING OF INACCURAT E PARTICULARS. JUST BECAUSE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 10A WAS NOT ACCEPTED BY THE REVENUE WOULD NOT BE SUFFICIENT TO LEVY A PENALTY I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 6 UNDER SECTION 271(1)(C) OF THE ACT. WE THEREFORE FIND THAT LD. CIT(APPEALS) WAS JUSTIFIED IN DELETING THE PENALTY. NO INTERFERENCE IS CALLED FOR. 7. SECOND APPEAL OF THE REVENUE IS REGARDING DELETI ON OF PENALTY LEVIED ON THE ASSESSEE UNDER SECTION 271AA OF THE A CT. 8. SHORT FACTS APROPOS ARE THAT A REFERENCE UNDER S ECTION 92CA(1) OF THE ACT WAS MADE BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OFFICER (TPO) WITH REFERENCE TO TRANSACTIONS REPORT ED BY THE ASSESSEE IN FORM NO.3CEB. IN THE PROCEEDINGS BEFORE THE TPO ASSESSEE HAD SUBMITTED THE DETAILS CALLED FOR BY THE TPO THROUGH A QUESTIONNAIRE ISSUED ON 19.8.2005. LD. TPO CAME TO A CONCLUSION THAT ASSESSEE HAD NOT GATHERED AND MAINTAINED SUFFICIENT INFORMAT ION AS ENVISAGED UNDER RULE 10D OF INCOME-TAX RULES 1962 (IN SHORT THE RULES) FOR ITS CLAIM THAT COST PLUS METHOD ADOPTED BY IT FOR D ETERMINING THE ARMS LENGTH PRICE WAS MOST APPROPRIATE ONE. AS PER THE TPO TRANSACTION NET MARGIN METHOD (IN SHORT TNMM METHOD ) WAS THE IDEAL ONE. NEVERTHELESS HE CAME TO A CONCLUSION T HAT NO ADJUSTMENT WAS NECESSARY ON THE VALUE OF INTERNATIONAL TRANSAC TION ENTERED BY I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 7 THE ASSESSEE. HOWEVER HE RECOMMENDED THE ASSESSI NG OFFICER TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271AA OF THE ACT. THE A.O. THEREAFTER LEVIED PENALTY UNDER SECTION 271AA OF THE ACT CITING THE SAME REASONS AS MENTIONED BY THE TPO. ACCORDIN G TO HIM ASSESSEE WAS NOT ABLE TO SHOW A REASONABLE CAUSE FO R NOT KEEPING AND MAINTAINING SUCH INFORMATION AND DOCUMENTS AS R EQUIRED UNDER SUB-SECTION (1) OF SECTION 92D OF THE ACT IN RESPEC T OF INTERNATIONAL TRANSACTIONS ENTERED BY IT. 9. IN ITS APPEAL BEFORE LD. CIT(APPEALS) ARGUMENT OF THE ASSESSEE WAS THAT THERE WAS NO REVISION OF THE ARMS LENGTH P RICE AND THERE WAS NO FAILURE OF MAINTAINING RECORDS MENTIONED IN RULE 10D OF THE RULES. SUBMISSION OF THE ASSESSEE WAS THAT ALL THE RECORDS AS REQUIRED UNDER RULE 10D WERE AVAILABLE AND PRODUCED BY THE ASSESSEE. LD. CIT(APPEALS) WAS APPRECIATIVE OF THE SE CONTENTIONS. ACCORDING TO HIM IN THE FIRST PLACE THERE WAS NO CHANGE IN THE ALP ON ACCOUNT OF REFERENCE MADE TO TPO. IN THE SECOND PLACE ASSESSING OFFICER HAD NOT REACHED ANY SUBJECTIVE SA TISFACTION OF HIS OWN BUT HAD MERELY FOLLOWED THE RECOMMENDATION OF T PO. I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 8 10. NOW BEFORE US LEARNED D.R. SUBMITTED THAT ASSE SSEE HAD FAILED TO MAINTAIN RECORDS AS MENTIONED IN RULE 10D OF THE RULES AND SUCH FAILURE WARRANTED PENALTY UNDER SECTION 271AA OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF HYDERABAD BE NCH OF THIS TRIBUNAL IN THE CASE OF G.I. SYSTEMS ORG. INDIA (P. ) LTD. V. ITO [2011] 11 TAXMANN.COM 99. 11. PER CONTRA LEARNED A.R. SUPPORTING THE ORDER OF LD. CIT(APPEALS) SUBMITTED THAT THERE WAS NO FAILURE W HICH COULD BE POINTED OUT BY THE REVENUE THAT WOULD WARRANT LEVY OF PENALTY UNDER SECTION 271AA OF THE ACT. 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. A CURSORY GLANCE OF THE ORDER PASSED BY TPO PLACED AT PAPER-BOOK PAGES 45 AND 46 WOULD CLEARLY SHOW THAT THE REASON FOR INITIATION OF PENALTY WAS NON-MAINTENANCE OF INFORMATION AS ENVIS AGED UNDER RULE 10D OF THE RULES. RELEVANT PARAS OF THE ORDER OF TPO ARE REPRODUCED HEREUNDER:- 4. THOUGH THE ASSESSEE HAD MENTIONED COST PLUS METH OD AS THE MOST APPROPRIATE METHOD HE HAS NOT GATHERED AN D MAINTAINED INFORMATION AS ENVISAGED UNDER RULE 10D. AT THE LAST I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 9 STAGE OF THE TRANSFER PRICING PROCEEDINGS TNMM MET HOD WAS ADOPTED TO DETERMINE THE ARMS LENGTH PRICE. HENCE THE ASSESSEE BECOMES LIABLE FOR PENALTY FOR NON-MAINTENA NCE OF THE REQUIRED DOCUMENTATION. THE ASSESSING OFFICER MAY I NITIATE PENALTY PROCEEDINGS U/S 271AA OF THE I.T. ACT 1961. 5. THE CASE WAS DISCUSSED WITH THE ASSESSEES REPRE SENTATIVE. AFTER EXAMINING OF INTERNATIONAL TRANSACTIONS AS RE QUIRED NO ADJUSTMENT IS CONSIDERED NECESSARY TO THE VALUE OF I NTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. ACCORDIN GLY THE INTERNATIONAL TRANSACTIONS REFERRED ARE ACCEPTED T O BE AT ARMS LENGTH PRICE. IT IS HEREBY CLARIFIED THAT THE FINDI NGS AND DISCUSSIONS MADE IN THIS ORDER ARE APPLICABLE ONLY IN RESPECT OF REFERENCE RECEIVED FOR ASSESSMENT YEAR 2003-04 AND N OT FOR SUBSEQUENT ASSESSMENT YEARS. 13. SUBMISSION OF THE ASSESSEE IS THAT IT HAD MAIN TAINED ALL RECORDS WHICH WERE REQUIRED UNDER RULE 10D OF THE RULES. W HAT COMES OUT OF THE PROCEEDINGS BEFORE THE TPO AND THE ASSESSING OFFICER ARE THAT THEY HAD NOT COME TO ANY FINDINGS REGARDING THE SPE CIFIC FAILURE IF ANY OF THE ASSESSEE. IF WE HAVE A LOOK AT RULE 10 D VARIOUS TYPES OF RECORDS ARE REQUIRED TO BE MAINTAINED AND THESE ARE ENUMERATED UNDER CLAUSES (A) TO (M) THEREUNDER. IF THE REVENU E ALLEGES THAT THERE HAS BEEN A FAILURE OF THE ASSESSEE WITH REGAR D TO PRODUCTION OF ANY OF THESE RECORDS IT IS REQUIRED TO POINT OUT S PECIFICALLY WHERE SUCH FAILURE OCCURS. IT CANNOT GO BY A GENERAL STATEMEN T THAT ASSESSEE HAD NOT MAINTAINED INFORMATION AS ENVISAGED UNDER RULE 10D. THE I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 10 SPECIFIC RECORD WHICH ASSESSEE WAS REQUIRED TO MAIN TAIN AND WHICH WAS NOT MAINTAINED HAS TO BE POINTED OUT. THIS HAS NOT BEEN DONE. IN OTHER WORDS ASSESSEES CONTENTION THAT IT HAD A LL SUCH RECORDS WAS NOT EFFECTIVELY REBUTTED BY THE REVENUE AT ANY POIN T OF TIME. IN ANY CASE ASSESSEE HAD FOLLOWED COST PLUS METHOD WHERE AS A.O. HAD FOLLOWED TNMM METHOD BUT BOTH THE METHODS FINALLY GAVE THE SAME VALUE FOR THE INTERNATIONAL TRANSACTIONS. IN OTHER WORDS NO CHANGE WAS CONSIDERED NECESSARY TO THE ARMS LENGTH PRICE. THIS BEING THE CASE EVEN IF THERE WAS A FAILURE IT WAS ONLY A BE NIGN ONE WHICH HAD NO EFFECT WHATSOEVER ON THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE. IN SO FAR AS THE CAS E OF G.I. SYSTEMS ORG. INDIA (P.) LTD. (SUPRA) RELIED ON BY THE LEAR NED D.R. IS CONCERNED THERE ASSESSEE HAD NOT FILED AUDIT REPOR TS IN PRESCRIBED FORM NO.3CEB FOR THE INTERNATIONAL TRANSACTION ENTE RED INTO BY IT. AS AGAINST THIS HERE PARA 1 OF THE ORDER OF TPO DATE D 16 TH MARCH 2006 (PAPER-BOOK PAGE 45) CLEARLY SHOWS THAT FORM NO.3CE B WAS FILED BY THE ASSESSEE. HENCE WE ARE OF THE OPINION THAT TH E DECISION OF HYDERABAD BENCH WOULD NOT HAVE ANY APPLICATION IN T HE GIVEN CASE. I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 11 WE FIND THAT LD. CIT(APPEALS) WAS JUSTIFIED IN DELE TING THE PENALTY LEVIED UNDER SECTION 271AA OF THE ACT. NO INTERFER ENCE IS CALLED FOR. 14. APPEALS OF THE REVENUE FOR ASSESSMENT YEAR 2003 -04 IN THE CASE OF M/S PENTASOFT TECHNOLOGIES LTD. STAND DISMI SSED. 15. NOW LET US TAKE APPEALS OF THE REVENUE FOR ASSE SSMENT YEARS 2002-03 AND 2003-04 IN THE CASE OF M/S PENTAMEDIA G RAPHICS LTD. FIRST APPEAL IS AGAINST DELETION OF PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 16. SHORT FACTS APROPOS ARE THAT ASSESSEES CLAIM F OR DEDUCTION UNDER SECTION 10B OF THE ACT CAME TO BE REDUCED SUB STANTIALLY IN THE ASSESSMENT ON ACCOUNT OF THREE REASONS. FIRST WAS WITH REGARD TO TREATMENT OF INTEREST INCOME OF ` 10 34 39 000/-. ASSESSEE HAD CLAIMED IT TO BE A PART OF THE PROFITS DERIVED FROM EXPORTS FOR A REASON THAT THE DEPOSITS FROM WHICH SUCH INTEREST WAS EARN ED WAS KEPT AS MARGIN MONEY WITH BANKS FOR GETTING LETTER OF CREDI T AND BANK GUARANTEE ETC. HOWEVER THIS CLAIM WAS NOT ACCEPT ED IN THE ASSESSMENT PROCEEDINGS BY THE A.O. WHO TREATED IT A S INCOME I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 12 FROM OTHER SOURCES. SUCH TREATMENT WAS CONFIRMED B Y THE CIT(APPEALS) ON AN APPEAL FILED BY THE ASSESSEE. S ECOND ITEM WAS A SUM OF ` 14 22 000/- COMING UNDER THE HEAD MISCELLANEOUS I NCOME WHICH WAS AGAIN TREATED BY THE ASSESSEE AS A BUSINE SS INCOME ON WHICH ALSO DEDUCTION WAS CLAIMED UNDER SECTION 10B OF THE ACT. A.O. WAS OF THE OPINION THAT SUCH MISCELLANEOUS INC OME COULD NOT BE TREATED AS BUSINESS INCOME BUT HAD TO BE CONSIDERED AS INCOME FROM OTHER SOURCES. SO THIS WAS ALSO EXCLUDED FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT. THIS WAS ALSO CONFIRMED BY LD. CIT(APPEALS) ON ASSESSEES APPEAL. THE THIRD ITEM WAS WITH REGARD TO THE MODE OF COMPUTATION OF DEDUC TION UNDER SECTION 10B OF THE ACT WHERE ASSESSEE HAD NOT DEDUC TED FOREIGN EXCHANGE EXPENDITURE FROM ITS EXPORT TURNOVER. A.O . HELD THAT THIS WAS TO BE EXCLUDED FROM EXPORT TURNOVER BUT NEVERT HELESS DID NOT MAKE ANY CORRESPONDING DEDUCTION IN THE TOTAL TURNO VER. ON ASSESSEES APPEAL LD. CIT(APPEALS) HELD THAT SUCH AMOUNT EXCLUDED FROM EXPORT TURNOVER WAS ALSO TO BE EXCLUDED FROM T OTAL TURNOVER FOR CALCULATION OF DEDUCTION UNDER SECTION 10B OF THE A CT. I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 13 17. IN PROCEEDINGS INITIATED UNDER SECTION 271(1)(C ) OF THE ACT PENALTY WAS LEVIED ON DIFFERENCE IN CLAIM UNDER SEC TION 10B OF THE ACT ON ACCOUNT OF INTEREST INCOME AND MISCELLANEOUS INCOME MENTIONED SUPRA AS ALSO ON ACCOUNT OF DIFFERENCE IN TURNOVER. AS PER THE A.O. ASSESSEE HAD FURNISHED INACCURATE PARTICU LARS WHILE COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT. 18. IN ITS APPEAL BEFORE LD. CIT(APPEALS) ARGUMENT OF THE ASSESSEE WAS THAT THE DIFFERENCE AROSE ONLY ON ACCOUNT OF CO NSIDERATION OF CERTAIN ITEMS AS INCOME FROM OTHER SOURCES WHILE CO MPUTING DEDUCTION UNDER SECTION 10B OF THE ACT AND ALSO WIT H REGARD TO INTERPRETATION OF TOTAL TURNOVER. LD. CIT(APPEALS) WAS APPRECIATIVE OF THIS CONTENTION AND RELYING ON DECISION OF HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) D ELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 19. NOW BEFORE US LEARNED D.R. ASSAILING THE ORDE R OF LD. CIT(APPEALS) SUBMITTED THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS AND MADE A FALSE CLAIM AND THEREFORE D ECISION OF HON'BLE I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 14 APEX COURT WOULD NOT HAVE ANY RELEVANCE. ACCORDING TO HIM PENALTY WAS RIGHTLY LEVIED ON THE ASSESSEE. 20. PER CONTRA LEARNED A.R. SUPPORTING THE ORDER O F LD. CIT(APPEALS) SUBMITTED THAT THERE WAS NO CASE FOR LEVYING OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT SINCE THERE WAS NO INACCURATE PARTICULARS FURNISHED BY THE ASSESSEE. 21. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IN SO FAR AS EXCLUSION OF FOREIGN EXCHANGE EXPENDITURE FROM EXPORT TURNOVER LD. CIT(APPEALS) HAD RULED IN FAVOUR OF A SSESSEE WHILE HOLDING THAT SUCH AMOUNT HAD TO BE EXCLUDED ALSO FR OM TOTAL TURNOVER FOR WORKING OUT DEDUCTION UNDER SECTION 10B OF THE ACT. ONCE IT IS EXCLUDED FROM TOTAL TURNOVER AND EXPORT TURNOVER T HE EFFECT ON DEDUCTION UNDER SECTION 10B OF THE ACT WOULD BE NEG LIGIBLE. IN SO FAR AS OTHER TWO ITEMS VIZ. THE INTEREST INCOME AND MI SCELLANEOUS INCOME ARE CONCERNED ASSESSEE WAS AN UNDERTAKING E NGAGED IN 100% EXPORTS. THEREFORE IF IT HAD MADE A CLAIM TH AT INTEREST INCOME WHICH AROSE OUT OF DEPOSITS OF MARGIN MONEY WITH BA NKS WAS A PART OF THE PROFITS DERIVED FROM EXPORTS WE CANNOT SAY THA T SUCH A CLAIM WAS I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 15 NOT A BONAFIDE ONE. OF COURSE NOW IT IS SETTLED T HAT SUCH INTEREST INCOME HAS TO BE CONSIDERED AS INCOME FROM OTHER SO URCES ONLY. BUT NEVERTHELESS WE CANNOT SAY THAT THE ASSESSEE HAD MADE A FALSE CLAIM OR FURNISHED INACCURATE PARTICULARS. SIMILAR IS THE CLAIM WITH REGARD TO MISCELLANEOUS RECEIPTS ALSO. THERE WAS N O FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE AND THE LD. CIT(APPEALS) CORRECTLY RELIED ON THE DECISION OF APEX COURT IN T HE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) FOR DELETING THE PE NALTY LEVIED ON THE ASSESSEE. NO INTERFERENCE IS CALLED FOR. 22. SECOND APPEAL OF THE REVENUE FOR ASSESSMENT YEA R 2003-04 IN THE CASE OF M/S PENTAMEDIA GRAPHICS LTD. IS AGAINS T DELETION OF PENALTY LEVIED UNDER SECTION 271AA OF THE ACT. FAC T SITUATION HERE IS SIMILAR TO THE REVENUES APPEAL FOR THE SAME ASSESS MENT YEAR IN THE CASE OF M/S PENTASOFT TECHNOLOGIES LTD. THE OTHER ASSESSEE. WE ALSO FIND FROM THE ORDER OF THE TPO PLACED AT PAPER -BOOK PAGES 35 AND 36 THAT THERE WAS NO RECOMMENDATION FOR INITIAT ING ANY PENALTY PROCEEDINGS UNDER SECTION 271AA OF THE ACT NOR ANY FINDING BY THE LD. TPO THAT ASSESSEE HAD FAILED TO MAINTAIN RECORDS PR ESCRIBED UNDER I.T.A. NOS. 809 & 810/MDS/11 I.T.A. NOS. 816 & 817/MDS/11 16 RULE 10D OF THE RULES. WE THUS FIND NO REASON TO I NTERFERE IN THE ORDER OF LD. CIT(APPEALS) DELETING PENALTY. 23. IN THE RESULT APPEALS OF THE REVENUE IN THE CA SE OF BOTH THE ASSESSEES FOR ALL THE YEARS STAND DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25 TH NOVEMBER 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 25 TH NOVEMBER 2011. KRI. COPY TO: (1) APPELLANTS (2) RESPONDENT (3) CIT(A)-V CHENNAI-34 (4) CIT CHENNAI-III CHENNAI (5) D.R. (6) GUARD FILE