The ITO, Ward 4(1), Ahmedabad v. Electrotherm (I) Ltd, Ahmedabad

ITA 972/AHD/2009 | 2003-2004
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 97220514 RSA 2009
Assessee PAN AAACE2669L
Bench Ahmedabad
Appeal Number ITA 972/AHD/2009
Duration Of Justice 2 year(s) 3 month(s) 27 day(s)
Appellant The ITO, Ward 4(1), Ahmedabad
Respondent Electrotherm (I) Ltd, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 29-07-2011
Date Of Final Hearing 27-07-2011
Next Hearing Date 27-07-2011
Assessment Year 2003-2004
Appeal Filed On 01-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI BHAVNESH SAINI JM & SHRI A N PAHUJA AM ITA NO.972/AHD/2009 (ASSESSMENT YEAR:-2003-04) INCOME-TAX OFFICER WARD- 4(1) ROOM NO.105 1 ST FLOOR NAVJIVAN TRUST BUILDING NAVJIVAN P.O. AHMEDABAD V/S ELECTROTHERM (I) LTD. A-1 SKYLARK APARTMENT SATELLITE ROAD AHMEDABAD PAN: AAACE 2669 L [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI S K MEENA DR ASSESSEE BY:- SHRI M G PATEL AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 31- 12-2008 OF THE LD. CIT(APPEALS)-VIII AHMEDABAD FOR THE ASSESSMENT YEAR 2003-04 RAISES THE FOLLOWING GROUNDS:- [1] THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN DELETING IN PENALTY OF RS.6 47 011/- LEVIED BY THE AO. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE L D. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. [3] IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED TO THE ABOVE E XTENT. 2 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.33 08 380/- FILED ON 30-11-2003 BY THE ASSESSEE MANUFACTURING INDUCTION FURNACE D.C. ARC FURNACE ETC. AFTER BEING PROCESSED ON 05-03-2004 U/S 143(1) OF THE INCOME-TA X ACT 1961 [HEREINAFTER REFERRED TO AS THE ACT] WAS SELECTE D FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 29 -11-2004.DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT THE ASSESSEE CLAIMED DEDUCTI ON U/S 80HHC AND 80IB OF THE ACT TO THE EXTENT OF RS.3 41 628/- AND 2 ITA NO.972/AHD/200 9 RS.14 18 948/- RESPECTIVELY. HOWEVER THE AO DID NO T ALLOW THE CLAIM FOR DEDUCTION U/S 80HHC ON THE GROUND THAT 90% OF T HE INTEREST INCOME MISCELLANEOUS INCOME AND SERVICE INCOME WER E REQUIRED TO BE REDUCED WHILE COMPUTING PROFITS OF THE BUSINESS IN TERMS OF EXPLANATION (BAA) OF SECTION 80HHC OF THE ACT. LIKE WISE THE CLAIM FOR DEDUCTION U/S 80IB WAS NOT ALLOWED ON INTEREST INCOME MISCELLANEOUS INCOME AND SERVICE INCOME THESE BEIN G NOT DERIVED FROM THE ACTIVITIES OF THE INDUSTRIAL UNDERTAKING. INTER ALIA PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE ALSO INIT IATED. 3. ON APPEAL THE LEARNED CIT(A) DISMISSED THE A PPEAL WHILE THE TRIBUNAL VIDE THEIR ORDER DATED 17-06-2008 IN ITA N O.1363/AHD/2007 PARTLY SET ASIDE THE ISSUE RELATING TO CLAIM FOR DE DUCTION U/S 80HHC AND 80IB OF THE ACT IN RELATION TO INTEREST INCOME AND INCOME FROM SCRAP SALE. HOWEVER THE DISALLOWANCE OF DEDUCTION U/S 80HHC AND 80IB IN RELATION TO SERVICE CHARGES OF RS.45 26 936 /- WAS UPHELD IN THE LIGHT OF THEIR FINDINGS IN THE AY 1995-96. 4. MEANWHILE THE AO IMPOSED A PENALTY OF RS.6 47 011/- U/S 271(1)(C) OF THE ACT @ 100% OF THE TAX SOUGHT TO BE EVADED IN RELATION TO THE AFORESAID AMOUNT OF RS.3 41 628/- O N ACCOUNT OF CLAIM FOR DEDUCTION U/S 80HHC OF THE ACT AND RS.14 18 948 /- ON ACCOUNT OF CLAIM FOR DEDUCTION U/S 80IB OF THE ACT. 5. ON APPEAL THE LEARNED CIT(A) CANCELLED THE PENA LTY IN THE FOLLOWING TERMS:- 4.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBM ISSIONS OF THE LD. A.R. CAREFULLY. I HAVE ALSO GONE THROUGH THE DECISIO N OF THE HON'BLE I.T.A.T. THE COPY OF WHICH HAS BEEN FILED DURING THE A PPELLATE PROCEEDINGS BY THE LD. A.R. OF THE APPELLANT. IT IS SEEN THAT THE A.O. HAS LEVIED THE PENALTY IN RESPECT OF THE DISALLOWANCE OF CLAIM U/S.80HHC AND 80IB OF THE ACT. THESE DISALLOWANCES WERE MADE KEEPING IN VIEW THE RE JECTION OF APPELLANT'S CLAIM WITH REGARD TO INTEREST INCOME AMOUN TING TO RS.18 71 471/- MISCELLANEOUS INCOME AMOUNTING TO RS.70 6 4 759/- AND SERVICE INCOME AMOUNTING TO RS.45 26 936/- HOLDING THEM NOT ELIGIBLE FOR DEDUCTION U/S.80HHC AND 80IB OF THE ACT. THE HON'BLE I .T.A.T. VIDE ITS 3 ITA NO.972/AHD/200 9 ORDER DATED 17.6.2008 REFERRED TO ABOVE HAS SET ASIDE T HE ISSUES REGARDING ELIGIBILITY OF CLAIM OF INTEREST INCOME AMOUN TING TO RS.18 71 471/- AND INCOME FROM SCRAP SALES OF RS.39 13 840/- FOR DECIDIN G THEIR ELIGIBILITY FOR DEDUCTION U/S.80HHC AND 80IB BY THE A.O. AFRESH AFT ER EXAMINING THE FACTS IN THIS REGARD. THEREFORE THE LEVY OF PENALTY ON SU CH DISALLOWANCE DOES NOT SURVIVE AFTER THE DECISION OF HON'BLE I.T.A.T. I N VIEW OF THIS THE PENALTY ATTRIBUTABLE TO SUCH DISALLOWANCE IS HEREBY DELETE D. HOWEVER THE A.O. IS FREE TO TAKE APPROPRIATE ACTION REGARDING INIT IATION OF PENALTY PROCEEDINGS IF DEEMED FIT WHILE PASSING THE ORDER IN PURSUANCE OF THE DIRECTIONS OF THE HON'BLE I.T.A.T. 4.5 THE HON'BLE I.T.A.T. HAS DISMISSED THE APPELLANT'S APPEAL AGAINST CONFIRMATION OF DISALLOWANCE OF CLAIM FOR DEDU CTION U/S.80HHC AND 80IA ON THE SERVICE INCOME AMOUNTING TO RS.45 26 936/-. HOWEVER THE LEVY OF PENALTY IN RESPECT OF SUCH DISALLOWANCES IS TO BE ANA LYSED IN LIGHT OF THE FACTS OF THE CASE AND THE VARIOUS DECISIONS AS CITED BY TH E LD. A.R. IN HIS SUBMISSION. 4.6 IT IS SEEN THAT THE A.O. HAS LEVIED THE PENALTY U/S. 271(1)(C) OF THE ACT IN RESPECT OF THE DISALLOWANCE OF CLAIM OF THE APPELL ANT UNDER THE PROVISIONS OF SEC.80.HHC AND 80IA OF THE ACT ON THE SERVICE INCOME DISCLOSED AT RS.45 26 936/-. THE A.O. WHILE ARRIVING AT THE CONCLUSION THAT THE APPELLANT FILED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF DEDUCTION CLAIMED U/S.80HHC AND 80IA HAS NOT HELD THAT SAME WAS CLAIMED BY THE APPELLANT BY FRAUD. IT IS ALSO NOT THE CAS E OF THE A.O. THAT THE APPELLANT FAILED TO DISCLOSE RELEVANT FACTS AND MATE RIAL BEFORE THE HIM REGARDING THE CLAIM MADE FOR DEDUCTION U/S. 80HHC AND 80IA OF THE ACT ON THE IMPUGNED AMOUNT. THE A.O. ALSO HAS NOT HELD THAT THE EXPLANATION OFFERED BY THE APPELLANT LACKED HIS BONAFIDES. 4.7 HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. A . SREENIVASA PAI 242 ITR 29 HAS HELD THAT: 'IN ESSENCE AN EXPLANATION (BOTH AFTER 1964 AND 197 6) IS A RULE OF EVIDENCE. PRESUMPTIONS WHICH ARE REBUTTABLE IN NATU RE ARE AVAILABLE TO BE DRAWN. THE INITIAL BURDEN OF DISCHARGING THE ONUS O F REBUTTAL IS ON THE ASSESSEE. THE RATIONALE BEHIND THIS VIEW IS THAT TH E BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF THE INDIAN EVIDENCE ACT 1872 GIVES STATUTORY RECOGNITION TO THIS UNIVE RSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION CONFERRED ON THE A SSESSING OFFICER AS TO WHETHER HE CAN INVOKE THE EXPLANATION OR NOT. EX PLANATION 1 WHICH PRIMARILY CONCERNS THE CASE AT HAND AUTOMATICALLY C OMES INTO OPERATION WHEN IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUT ATION OF THE TOTAL INCOME OF ANY PERSON THERE IS FAILURE TO OFFER AN EXPLANATION OR AN EXPLANATION IS OFFERED WHICH IS FOUND TO BE FALSE B Y THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY OR AN EXPLANATION IS OFFERED WHICH IS NOT SUBSTANTIATED. IN SUCH A CASE THE AMOUNT ADDED OR D ISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT T HE INCOME IN RESPECT 4 ITA NO.972/AHD/200 9 OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. AS PE R THE PROVISO TO EXPLANATION 1 THE ONUS TO ESTABLISH THAT THE EXPLAN ATION OFFERED WAS BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HI M WILL BE ON THE PERSON CHARGED WITH CONCEALMENT. MERE FAILURE TO SU BSTANTIATE THE EXPLANATION IS NOT ENOUGH TO WARRANT PENALTY. THE REVENUE HAS TO ESTABLISH THAT THE EXPLANATION OFFERED WAS NOT SUBS TANTIATED. THE PROVISO TO EXPLANATION 1 IS CONCERNED ONLY WITH CASES COMIN G UNDER CLAUSE (B) OF THE EXPLANATION WHERE THE ASSESSEE OFFERED AN EXPLA NATION WHICH HE WAS NOT ABLE TO SUBSTANTIATE. THE EXPLANATION OF THE AS SESSEE FOR PURPOSES OF AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANAT ION; IT SHOULD NOT BE A FANTASTIC OR FANCIFUL ONE. AS INDICATED ABOVE CON SEQUENCE FOLLOWS AS A MATTER OF LAW. THE BURDEN IS ON THE ASSESSEE. IF HE FAILS TO DISCHARGE THAT BURDEN THE PRESUMPTION THAT HE HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF IS AVAILABLE TO BE D RAWN. THE PRINCIPAL LOGICAL IMPORT OF THE EXPLANATION IS TO SHIFT THE BURDEN OF PROOF FROM THE REVENUE ON TO THE ASSESSEE. REBUTTAL MUST BE ON MATERIALS RELEVANT AND COGENT. IT IS FOR THE FACT-FINDING BOD Y TO JUDGE THE RELEVANCY AND SUFFICIENCY OF THE MATERIALS. IF SUCH A FACT-FI NDING BODY BEARING THE AFORESAID PRINCIPLES IN MIND COMES TO A CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE ONUS IT BECOMES A CONCLUSION OF FAC T AND NO QUESTION OF LAW ARISES. AS OBSERVED EARLIER THE INITIAL BURDEN IS ON THE ASSESSEE. ONCE THE INITIAL BURDEN IS DISCHARGED THE ASSESSEE WOULD BE OUT OF MISCHIEF UNLESS FURTHER EVIDENCE IS ADDUCED. IT IS PLAIN ON PRINCIPLE THAT IT IS NOT THE LAW THAT THE MOMENT ANY FANTASTIC OR UNACCEPTABLE E XPLANATION IS OFFERED THE BURDEN PLACED WOULD BE DISCHARGED AND THE PRESU MPTION REBUTTED. AS POINTED OUT BY THE APEX COURT IN CIT V. MUSSADILAL RAM BHAROSE [1987] 165 ITR 14 THE BURDEN PLACED UPON THE ASSESSEE IS NOT DISCHARGED BY ANY FANTASTIC EXPLANATION. IT MUST BE AN EXPLANATION AC CEPTABLE TO THE FACT- FINDING BODY.' 4.8 IT IS CLEAR FROM THE FACTS OF THE CASE THAT THE APPEL LANT HAS DISCHARGED THE BURDEN CAST UPON HIM EXPLANATION 1 TO SEC.2 71(1)(C) OF THE ACT. FURTHER THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SHIVLAL TAK VS. CIT 251 ITR 373 HAS HELD THAT: 'THOUGH THE EXPRESSION 'FAILURE TO RETURN THE TOTAL A SSESSED INCOME AS NOT ARISING ON ACCOUNT OF ANY FRAUD OR WILLFUL NEGLIG ENCE ON THE PART OF THE ASSESSEE' DOES NOT FIND PLACE IN THE EXPLA NATION 1 TO SECTION 271(1) OF THE INCOME-TAX ACT 1961 YET CLAUSE (B) READ WITH THE PROVISO (II) TO SECTION 271(1) MAKES IT CLEAR TH AT WHERE THE DIFFERENCE BETWEEN THE ASSESSED INCOME AND THE RETURNE D INCOME DOES NOT ARISE ON ACCOUNT OF ANY GROSS OR WILLFUL NEGLIGE NCE ON THE PART OF THE ASSESSEE NO PENALTY IS LEVIABLE. THE STATUTE HAS CLEARLY DRAWN DISTINCTION BETWEEN A DELIBERATE FALSE EXPLANATI ON FURNISHED BY THE ASSESSEE AND AN EXPLANATION WHICH MAY NOT BE FALSE BUT IS 5 ITA NO.972/AHD/200 9 NOT ACCEPTED BECAUSE THE ASSESSEE WAS NOT ABLE TO SUBSTANT IATE IT. WHILE THERE IS NO RELAXATION IN THE RIGOUR OF THE EXPL ANATION IN RAISING A PRESUMPTION AGAINST THE ASSESSEE IN THE FORME R CASE IN THE LATTER CLASS OF CASES THE STATUTE ITSELF RELAXES ITS R IGOUR BY DIRECTING THAT WHERE IN RESPECT OF ANY AMOUNT ADDED OR DISALLOWED AND ANY EXPLANATION IS OFFERED BY SUCH PERSON WHICH IS NO T ACCEPTED BECAUSE THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE SAME BUT SUCH EXPLANATION IS BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THE EXPLANATION SHALL NOT APPLY.' 4.9 THEREFORE KEEPING IN VIEW THE AFORESAID DISCUSSION THE PENALTY LEVIED BY THE A.O. CAN NOT BE SUSTAINED. HENCE THE PE NALTY ATTRIBUTABLE TO THE AMOUNT OF DISALLOWANCE OF CLAIM U/S 80HHC AND 80 IA ON THE SERVICE INCOME AMOUNTING TO RS.45 26 936/- IS HEREBY DELETED. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPP ORTED THE FINDINGS OF THE AO LEVYING PENALTY WHILE THE LEARN ED AR ON BEHALF OF THE ASSESSEE RELIED UPON THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC) AND CONTENDED THAT THE LEARNED CIT (A) WAS JUSTIFIED IN CANCELLING THE PENALTY. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS WELL AS THE AFORESAID DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. L TD.(SUPRA). WE FIND THAT THE TRIBUNAL VIDE THEIR AFORESAID ORDER D ATED 17-06-2008 IN ITA NO.1363/AHD/2008 SET ASIDE THE ISSUE RELATING T O THE CLAIM FOR DEDUCTION U/S 80HHC AND 80IB IN RELATION TO INTERES T INCOME AND INCOME FROM SCRAP SALE TO THE FILE OF THE AO. HONB LE SUPREME COURT IN THE CASE OF K.C.BUILDERS VS. ACIT 265 ITR 562(SC) HELD THAT ORDINARILY PENALTY CANNOT STAND IF THE ASSESS MENT ITSELF IS SET ASIDE. WHERE AN ORDER OF ASSESSMENT OR REASSESSMENT ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSEE H AS ITSELF BEEN FINALLY SET ASIDE OR CANCELLED BY THE TRIBUNAL OR O THERWISE THE PENALTY CANNOT STAND BY ITSELF AND THE SAME IS LIAB LE TO BE CANCELLED. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. R.D ALMIA (1992)107 6 ITA NO.972/AHD/200 9 TAXATION 107 HELD THAT NO PENALTY SURVIVES AFTER D ELETION OF ADDITIONS FORMING THE BASIS FOR THE LEVY OF PENALT Y. SIMILAR VIEW WAS TAKEN IN ADDL. COMMISSIONER OF INCOME-TAX V. BADRI KASHI PRASAD (1993] 200 ITR 206 (ALL) AND PRABHAT OIL TRADERS V. INCOME-TAX OFFICER (NO. 3) (1996) 218 ITR (A.T.) 39 (ITAT AHM EDABAD) CITY DRY FISH COMPANY V. COMMISSIONER OF INCOME-TAX (1999) 2 38 ITR 63 (A.P.) CIT VS. MOHD. BUX SOKAT ALI (2004) 265 ITR 326 (RAJ)AND ACIT VS. VIP INDUSTRIES (2009) 122 TTJ 289 (MUM). 6.1 SINCE THE VERY BASIS UPON WHICH THE PENALTY HAS BEEN IMPOSED ON THE AMOUNT RELATING TO CLAIM FOR DEDUCTION OF 80 HHC AND 80IB IN RELATION TO INTEREST INCOME AND INCOME FROM SALE OF SCRAP DOES NOT EXIST IN VIEW OF THE AFORESAID ORDER DATED 17-06-2 008 OF THE ITAT IN QUANTUM APPEAL IN ITA NO. 1363/AHD/2008 WE ARE OF THE OPINION THAT PENALTY LEVIED IN RELATION TO THE THESE TWO AM OUNTS HAS RIGHTLY BEEN CANCELLED BY THE LD. CIT(A). HOWEVER THE AO IS FREE TO INITIATE THE PENALTY PROCEEDINGS IN ACCORDANCE WITH LAW WHIL E COMPLETING THE ASSESSMENT IN PURSUANCE TO THE AFORESAID DIRECTIONS OF THE ITAT IN QUANTUM APPEAL. 7. AS REGARDS PENALTY LEVIED IN RESPECT OF AMO UNT PERTAINING TO DEDUCTION U/S 80HHC AND 80IB ON SERVICE CHARGES AS IS APPARENT FROM THE AFORESAID FACTS THE ASSESSEE CLAIMED DEDU CTION U/S 80HHC OF THE ACT ON THE BASIS OF REPORT OF THE CA IN FO RM NO. 10CCAC. LIKEWISE DEDUCTION U/S 80IB WAS CLAIMED ON THE BASI S OF AUDIT REPORT IN FORM NO. 10CCB. THE LD. CIT(A) IN THE IMPUGN ED ORDER CONCLUDED THAT IT IS NOT A CASE WHERE THE ASSESSEE HAS NOT D ISCLOSED FULL DETAILS AT THE TIME OF ASSESSMENT. IN TERMS OF PROV ISIONS OF SEC. 80HHC(4) AND 80IB(13) READ WITH SEC. 80IA(7) OF TH E ACT THE DEDUCTION UNDER THESE SECTIONS IS NOT ADMISSIBLE UNLESS THE ASSESSEE FURNISHES IN THE PRESCRIBED FORM ALONG WI TH THE RETURN OF INCOME THE REPORT OF AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 CERTIFYING TH AT THE DEDUCTION 7 ITA NO.972/AHD/200 9 HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE P ROVISIONS OF THESE SECTIONS. THE ASSESSEE IN THE INSTANT CASE MERELY MADE A BONAFIDE CLAIM FOR THE DEDUCTION IN TERMS OF THE SA ID CERTIFICATE. IF IN THE PROCESS SERVICE CHARGES WERE NOT EXCLUDED FR OM THE PROFITS OF THE BUSINESS NOR CONSIDERED BY THE CHARTERED ACCOUN TANT THE ASSESSEE COULD NOT BE FAULTED.. NOT EVEN A WHISPER HAS BEEN MADE IN THE PENALTY ORDER AS TO WHICH SPECIFIC PARTICULA RS WERE FURNISHED INACCURATE OR WERE CONCEALED. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURAT E PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271 OR ELSEWHERE IN THE ACT. HOWEVER NOTWITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTANCES IT IS NOW WELL ESTABLISHED THAT THEY LEAD TO THE SAME EFFECT NAMELY KEEPING OFF A CERTAIN PORTION OF THE INCOME FROM THE RETURN. ACCORDING TO LAW LEXICON THE WORD 'CONCEAL ' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS CO N+CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVEN T THE DISCOVERY OF ; TO WITHHOLD KNOWLEDGE OF. THE OFFENC E OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN I TEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF T HE INCOME- TAX AUTHORITIES.' IN WEBSTER'S DICTIONARY 'INACCURATE' HAS BEEN DEFI NED AS : 'NOT ACCURATE NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT COPY OR TRA NSCRIPT.'. 7.1. THE PENALTY U/S 271(1)(C) OF THE ACT IS LE VIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS WELL S ETTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND AS HELD BY HON'BLE SUPREME COURT IN TH E CASE OF ANANTHRAMAN VEERASINGHAIAH & CO. VS. CIT 123 ITR 4 57 THE FINDINGS IN THE ASSESSMENT PROCEEDINGS CANNOT BE RE GARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENALTY PROCEEDI NGS. IT IS ALSO 8 ITA NO.972/AHD/200 9 WELL SETTLED THAT THE CRITERION AND YARDSTICKS FOR THE PURPOSE OF IMPOSING PENALTY U/S 271(1)(C) OF THE ACT ARE DIFF ERENT THAN THOSE APPLIED FOR MAKING OR CONFIRMING THE ADDITIONS. IT IS THEREFORE NECESSARY TO REAPPRECIATE AND RECONSIDER THE MATTER SO AS TO FIND OUT AS TO WHETHER THE ADDITION OR DISALLOWANCE MADE IN THE QUANTUM PROCEEDINGS ACTUALLY REPRESENTS THE CONCEALMENT ON THE PART OF THE ASSESSEE AS ENVISAGED IN SEC. 271(1 )(C) OF THE ACT AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SA ID PROVISIONS. THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT STIPULA TE THAT IF THE ASSESSING OFFICER OR THE CIT(APPEALS) OR THE COMMIS SIONER IN THE COURSE OF PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURN ISHED INACCURATE PARTICULARS THEREOF HE MAY DIRECT THAT SUCH PERS ON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED BY A REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INC OME. EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT MENTIONS THAT WHE RE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THE ACT SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO OR T HE CIT (APPEALS) OR THE COMMISSIONER TO BE FALSE OR SUCH PERSON OFF ERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE A ND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM THEN THE AMOUNT ADDED OR DIS ALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESU LT THEREOF SHALL FOR THE PURPOSE OF CLAUSE (C) OF SECTION 271(1) B E DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. IN OTHER WORDS THE NECESSARY INGREDIEN TS FOR ATTRACTING EXPLANATION 1 TO SECTION 271(1)(C) ARE THAT (I) THE PERSON FAILS TO OFFER THE EXPLANATION OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY TH E AO OR THE CIT (APPEALS) OR THE COMMISSIONER TO BE FALSE OR 9 ITA NO.972/AHD/200 9 (III) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE A ND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. 7.2 IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIES THEN THE DEEMING PROVISION PROVIDED IN EXPLANATION 1 TO SECTION 271(1)(C) COME INTO PLAY AND THE AMOUNT AD DED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL BE C ONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED FOR THE PURPOSES OF CLAUSE (C) OF SECTION 271(1) AND THE P ENALTY FOLLOWS. ON THE OTHER HAND IF THE ASSESSEE IS ABLE TO OFFER A N EXPLANATION WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BONA FI DE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY H IM THE ASSESSEE SHALL BE OUT OF THE CLUTCHES OF EXPLANATION 1 TO SE CTION 271(1)(C) OF THE ACT AND IN THAT CASE THE PENALTY SHALL NOT BE IMPOSED. IN THE INSTANT CASE THE LD. CIT(A) CONCLUDED THAT THE ASS ESSEE DISCHARGED THE ONUS CAST ON IT IN TERMS OF EXPLANATION 1 TO SE C. 271(1)9C) OF THE ACT. HONBLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF V. JT. CIT [2007] 210 CTR (SC) 228 : [2007] 291 ITR 519 (SC) W HILE CONSIDERING THE SCOPE OF THESE PROVISIONS U/S 271 (1)( C) OF THE ACT OBSERVED IN THE FOLLOWING TERMS: THE LEGAL HISTORY OF SECTION 271(1)(C) OF THE ACT TRACED FROM THE 1922 ACT PRIMA FACIE SHOWS THAT THE EXPLAN ATIONS WERE APPLICABLE TO BOTH THE PARTS. HOWEVER EACH CA SE MUST BE CONSIDERED ON ITS OWN FACTS. THE ROLE OF THE EXPLAN ATION HAVING REGARD TO THE PRINCIPLE OF STATUTORY INTERPRETATION MUST BE BORNE IN MIND BEFORE INTERPRETING THE AFOREMENTIONED PROV ISIONS. CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 CATEGO RICALLY STATES THAT THE PENALTY WOULD BE LEVIABLE IF THE AS SESSEE CONCEALS THE PARTICULARS OF HIS INCOME OR FURNISHES INACCURATE PARTICULARS THEREOF. BY REASON OF SUCH CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS ALONE THE ASS ESSEE DOES NOT IPSO FACTO BECOME LIABLE FOR PENALTY. IMPOSITIO N OF PENALTY IS NOT AUTOMATIC. LEVY OF PENALTY IS NOT ONLY DISCR ETIONARY IN NATURE BUT SUCH DISCRETION IS REQUIRED TO BE EXERCI SED ON THE 10 ITA NO.972/AHD/200 9 PART OF THE ASSESSING OFFICER KEEPING THE RELEVANT FACTORS IN MIND. SOME OF THOSE FACTORS APART FROM BEING INHERE NT IN THE NATURE OF PENALTY PROCEEDINGS AS HAS BEEN NOTICED I N SOME OF THE DECISIONS OF THIS COURT INHERES ON THE FACE OF THE STATUTORY PROVISIONS. PENALTY PROCEEDINGS ARE NOT TO BE INITI ATED AS HAS BEEN NOTICED BY THE WANCHOO COMMITTEE ONLY TO HARA SS THE ASSESSEE. THE APPROACH OF THE ASSESSING OFFICER IN THIS BEHALF MUST BE FAIR AND OBJECTIVE. THE TERM 'INACCURATE PARTICULARS' IS NOT DEFINED. F URNISHING OF AN ASSESSMENT OF VALUE OF THE PROPERTY MAY NOT BY I TSELF BE FURNISHING OF INACCURATE PARTICULARS. EVEN IF THE E XPLANATIONS ARE TAKEN RECOURSE TO A FINDING HAS TO BE ARRIVED AT HAVING REGARD TO CLAUSE (A) OF EXPLANATION 1 THAT THE ASSE SSING OFFICER IS REQUIRED TO ARRIVE AT A FINDING THAT THE EXPLANATION OFFERED BY AN ASSESSEE IN THE EVENT HE OFFERS ONE WAS FALSE. HE MUST BE FOUND TO HAVE FAILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATIN G TO THE SAME AND MATERIAL TO THE INCOME WERE NOT DISCLOSED BY HI M. THUS APART FROM HIS EXPLANATION BEING NOT BONA FIDE IT SHOULD HAVE BEEN FOUND AS OF FACT THAT HE HAS NOT DISCLOSED ALL THE FACTS WHICH WAS MATERIAL TO THE COMPUTATION OF HIS INCOME . 7.3 IN THE LIGHT OF AFORESAID OBSERVATIONS O F THE HONBLE APEX COURT WHAT IS TO BE SEEN IN THE INSTANT CASE IS WHETHER THE CLAIM FOR DEDUCTION U/S 80HHC AND 80IB OF THE ACT ON TH E BASIS OF CERTIFICATE OF THE ACCOUNTANT MADE BY THE ASSESSE E WAS BONA-FIDE AND WHETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED THE ASSESS EE CANNOT BE HELD LIABLE FOR CONCEALMENT PENALTY U/S 271(L)(C) OF THE ACT. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO ESTABLISH TH AT THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTIONS 80HHC AND 80IB OF THE ACT IN RELATION TO SERVICE CHARGES WAS NOT BONA FID E. A MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELYING O N DIFFERENT INTERPRETATIONS DOES NOT AMOUNT TO CONCEALMENT OF T HE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF BY THE ASSESSEE. HON'BLE APEX COURT IN CIT V. RELIANCE PETROPRODUCTS (P .) LTD. [2010] 322 ITR 158/ 189 TAXMAN 322 AFTER CONSIDERING VARIOUS DECISIONS I NCLUDING DILIP N. SHROFF V. JT. CIT [2007] 291 ITR 519/ 161 TAXMAN 218 (SC) AND UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 / 174 TAXMAN 571 (SC) 11 ITA NO.972/AHD/200 9 CONCLUDED THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUST AINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTI CULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOU NT TO FURNISHING INACCURATE PARTICULARS. IN THE CASE UNDER CONSIDERATIO N THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE FURNISHED ANY INACCUR ATE PARTICULARS OR CONCEALED THE PARTICULARS . ADMITTEDLY THE CLAIM F OR DEDUCTION U/S 80HHC & 80IB WAS DULY SUPPORTED BY THE CERTIFICATE OF THE CHARTERED ACCOUNTANT IN THE PRESCRIBED FORM. IN THIS VIEW OF THE MATTER NO FAULT CAN BE FOUND WITH THE CLAIM OF THE ASSESSEE THAT IT HAD CLAIMED THE DEDUCTION IN A BONA FIDE MANNER. IN SOMEWHAT SIMILA R CIRCUMSTANCES. HONBLE PUNJAB AND HARYANA HIGH COUR T CANCELLED THE PENALTY LEVIED IN RESPECT OF DISALLOWANCE OF DE DUCTION U/S.80I IN THE CASE OF CIT VS. SD RICE MILLS 275 ITR 206 (P&H ). SIMILAR VIEW WAS TAKEN IN ACIT VS. ARISUDANA SPINNING MILLS LTD. 19 DTR1(CHD.) AND MODEL FOOTWEAR P LTD. VS. ITO 124 ITD 353(DEL.) . MOREOVER MERE FACT THAT THE REPORT PREPARED BY THE CA IN FOR MS 10CCAC OR 10CCB WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 80HHC(4) OR 80IA(7) OF THE ACT WAS NOT ENOUGH TO H OLD THAT THE MISTAKE WAS NOT BONA FIDE. THIS VIEW IS SUPPORTED BY THE DECISION IN THE CASE OF CIT VS. DEEP TOOLS PVT. LTD. 274 ITR 603 (P&H) WHERE IN ALSO LEVY OF PENALTY WAS HELD TO BE UNJUSTIFIED. IN CIT VS. CAPLIN POINT LABORATORIES LTD. 293 ITR 524(MAD.) HONBLE HIGH COURT WHILE ADJUDICATING THE LEVY OF PENALTY IN RELATION TO CLAIM FOR DEDUCTION U/S 80HHC & 80I OF THE ACT HELD IN THE L IGHT OF AFORESAID DECISION OF THE HONBLE APEX COURT IN DILIP N. SHROFF(SUPRA) THAT A MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELY ING ON DIFFERENT INTERPRETATIONS DOES NOT AMOUNT TO CONCEALMENT OF T HE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME BY THE ASSESSEE. 7.4. IN VIEW OF THE FOREGOING WE ARE OF THE OPI NION THAT MERE ERRONEOUS CLAIM IN THE ABSENCE OF ANY CONCEALMENT O R FURNISHING OF INACCURATE PARTICULARS IS NO GROUND FOR LEVYING PE NALTY ESPECIALLY 12 ITA NO.972/AHD/200 9 WHEN THERE IS NOTHING ON RECORD TO SHOW THAT ANY MA TERIAL PARTICULARS WERE CONCEALED OR FURNISHED INACCURATE . IN THESE C IRCUMSTANCES WE ARE OF THE OPINION THAT LEVY OF PENALTY IS NOT JUS TIFIED. CONSEQUENTLY WE HAVE NO HESITATION IN UPHOLDING THE CONCLUSION OF THE LD. CIT(A) IN RESPECT OF LEVY PENALTY IN RELATION TO CLAIM FOR DEDUCTION U/S 80HHC AND 80IB ON SERVICE CHARGES. THEREFORE GROUN D NO.1 IN THE APPEAL IS DISMISSED. 8. GROUND NOS.2 AND 3 BEING MERE PRAYER NOR ANY SUB MISSIONS HAVING BEEN MADE ON THESE GROUNDS DO NOT REQUIRE A NY SEPARATE ADJUDICATION AND ARE THEREFORE DISMISSED. 9. IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 29 -07-2011 SD/- SD/- ( BHAVNESH SAINI ) JUDICIAL MEMBER ( A N PAHUJA ) ACCOUNTANT MEMBER DATED : 29-07-2011 COPY OF THE ORDER FORWARDED TO: 1. ELECTROTHERM (I) LTD. A-1 SKYLARK APARTMENT S ATELLITE ROAD AHMEDABAD 2. INCOME-TAX OFFICER WARD-4(1) R. NO.105 1 ST FLOOR NAVJIVAN TRUST BUILDING NAVJIVAN P.O. AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VIII AHMEDABAD 5. DR ITAT AHMEDABAD BENCH-A AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD