2004 (8) TMI 52 - HC - Income Tax

Penalty u/s 271(1)(c) - Assessing Officer pointed out the errors in the assessee s claim for deduction under section 80HHC. - The assessee submitted a reply to the effect that its claim was bona fide and by mistake, total turnover was taken into account instead of turnover of the export unit. The assessee was maintaining separate books of account but it could not produce the same because of fire. The Assessing Officer was not satisfied about the defence of the assessee and imposed penalty equivalent to 100 per cent. of the tax evaded. - There is nothing to show that the mistake by the CA was not bona fide and the mere fact that the certificate issued by the CA was not in accordance with section 80HHC(4) of the Act, was not enough to hold that the mistake was not bona fide. At any rate, as far as the assessee is concerned, no mala fides can be attributed to it, as the claim for deduction was based on the certificate of the CA with whom no collusion has been proved. - cancellation of the order of penalty by tribunal was clearly justified.

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on a claim for deduction under section 80HHC; Assessment of income; Initiation of penalty proceedings; Deletion of penalty by Commissioner of Income-tax (Appeals); Tribunal's affirmation of the deletion of penalty; Questions of law raised by the Revenue regarding the justification of canceling the penalty.

Analysis:
The case involved an appeal by the Revenue against the deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961. The assessee initially declared an income of Rs. 2,87,830 for the assessment year 1994-95, but the Assessing Officer assessed it at Rs. 18,15,080. The assessee claimed a deduction under section 80HHC of Rs. 38,48,376 based on a certificate issued by a CA. However, discrepancies were noted in the claim, leading to penalty proceedings being initiated under section 271(1)(c) of the Act. The Assessing Officer imposed a penalty equivalent to 100% of the tax evaded, citing errors in the claim and lack of proper documentation due to a fire at the business premises.

The Commissioner of Income-tax (Appeals) deleted the penalty, considering the fire incident that prevented the production of books of account and accepting that the mistake in the claim was bona fide, based on the CA's certificate. It was also noted that there was no collusion with the CA and the mistake was not intentional. The Tribunal upheld the Commissioner's decision. The Revenue raised questions of law regarding the justification of canceling the penalty, arguing that the CA's mistake was not bona fide and the certificate did not comply with the Act's provisions.

The High Court, in its judgment, dismissed the appeal by the Revenue. It observed that there was no evidence to suggest that the CA's mistake was not bona fide, and the mere non-compliance of the certificate with the Act's provisions did not imply lack of bona fides. The Court found no mala fides on the part of the assessee, as the deduction claim was based on the CA's certificate without any collusion. Consequently, the Tribunal's decision to cancel the penalty was deemed justified, and no legal question was found to arise from the Tribunal's order.

Therefore, the appeal against the deletion of the penalty under section 271(1)(c) was dismissed by the High Court, affirming the Tribunal's decision based on the bona fide nature of the mistake in the claim and the lack of collusion or intentional wrongdoing on the part of the assessee.

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