2009 (4) TMI 941 - AT - Income Tax

Summary

Issues involved:
The judgment involves challenges to penalty levied under section 271(1)(c) of the Income Tax Act in three separate appeals by M/s Mayur Overseas, M/s Raj Overseas, and M/s Yati Overseas for assessment years 2003-04 and 2004-05.

M/s Mayur Overseas:
M/s Mayur Overseas, engaged in manufacturing and export of carpets, filed its return of income claiming deduction under section 80-IB on export incentives. The AO disallowed the claim based on previous Tribunal orders. The CIT(A) upheld the disallowance, leading to penalty proceedings under section 271(1)(c). The assessee argued that the issue was debatable, citing similar cases where penalties were deleted. The ITAT considered the facts and found the claim to be bona fide, given the conflicting views on the admissibility of the deduction. Relying on various judgments, the ITAT allowed the appeal and deleted the penalty.

M/s Raj Overseas and M/s Yati Overseas:
Similarly, M/s Raj Overseas and M/s Yati Overseas, also involved in carpet manufacturing and export, faced disallowance of deduction under section 80-IB by the AO and CIT(A). The penalty under section 271(1)(c) was imposed, leading to appeals. The assessees argued that the issue was debatable, supported by expert opinions and legal precedents. The ITAT, considering the conflicting views of different High Courts and the bona fide nature of the claim, allowed the appeals and deleted the penalties in line with the recent order in a similar case.

Conclusion:
The ITAT, after thorough consideration of the facts and legal arguments, allowed all three appeals by M/s Mayur Overseas, M/s Raj Overseas, and M/s Yati Overseas, deleting the penalties imposed under section 271(1)(c) based on the debatable nature of the issue regarding the admissibility of deduction under section 80-IB on export incentives like duty drawback and DEPB.