2010 (7) TMI 553 - HC - Income Tax

Penalty - furnishing of inaccurate particulars - exemption u/s 80IB - Held that - it cannot be disputed that the issue was debatable and deduction claimed by the Assessee did not lack bonafides. In such a situation, penalty under Section 271(c) of the Act was not attracted. In recent judgment of the Hon ble Supreme Court in CIT v. Reliance Petroproducts (P) Ltd. (2010 -TMI - 75701 - SUPREME COURT), the legal position to this effect has been reiterated. If the Assessee has made full disclosure in the return, claim for deduction cannot be held to be giving of inaccurate particulars.

Summary

Issues:
Leviability of penalty when the assessee's claim was found not acceptable under Section 80IB on export incentives.

Analysis:
The judgment dealt with two appeals raising a common issue regarding the leviability of penalty when the assessee's claim was not accepted. The Revenue challenged the deletion of penalty under Section 271(1)(c) by the Income Tax Appellate Tribunal (ITA) in both cases. The primary contention was whether the assessee deliberately furnished inaccurate particulars by claiming deductions under Section 80IB on export incentives, despite the availability of contrary decisions like Sterling Foods Vs. CIT and Liberty India Vs. CIT. The Tribunal's decision to delete the penalty was based on the debatable nature of the issue and the bonafide belief of the assessee in making the claim. The Tribunal cited precedents from the Hon'ble Punjab & Haryana High Court and the Hon'ble Rajasthan High Court to support its decision.

The Assessee, a manufacturer deriving income from exports, claimed a deduction under Section 80-IB of the Act for income from duty drawback. The Assessing Officer disallowed the claim, citing the Supreme Court's decision in CIT v. Sterling Foods India. Subsequently, a penalty was levied, which was upheld by the CIT(A) but deleted by the Tribunal. The Tribunal noted that the issue was debatable, and the claim made by the Assessee was not lacking in bonafides. Referring to the recent judgment in CIT v. Reliance Petroproducts, the Tribunal emphasized that if the Assessee made full disclosure in the return, the claim for deduction could not be considered as furnishing inaccurate particulars. Therefore, the Tribunal's decision to delete the penalty was considered a possible view, leading to the dismissal of the appeals.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalty under Section 271(1)(c) in both appeals. The Court agreed that the issue was debatable, and the Assessee's claim was made in good faith, not warranting the imposition of a penalty. The Court referred to relevant legal precedents and recent judgments to support the Tribunal's decision. As no substantial question of law arose, the appeals were dismissed.