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2011 (6) TMI 451 - AT - Income TaxPenalty u/s 271(1)(c) - wrong claim of deduction u/s 80-IB - Held that - With regard to the claim of deduction on account of export incentive/DEPB u/s 80-IB at the relevant time of making the aforesaid claim, there was diversity of opinion between various Courts and the Tribunal. However, there is no merit in holding the assessee to have furnished inaccurate particulars of income in respect of such claim, which was debatable. The assessee has disclosed the material facts relevant for the computation of its income in its return of income and had also furnished a report of the chartered accountant though incomplete. In respect of such a claim, no justification in the levy of penalty where the claim of the assessee is being denied being a debatable issue. Non-fulfilment of the conditions laid down u/s 80IB - Held that - Where the assessee had disclosed complete particulars vis-a-vis its claim of deduction u/s 80-IB in the return of income filed by it, which was accompanied by audited Financial Statements and also audit report in Form No. 10CCB, though incomplete as per the Assessing Officer, there is no merit in levy of penalty u/s 271(1)(c) Dis-allowance of deduction u/s 80HHC which was made on the subsequent amendment to the provisions of section 80HHC in respect of DEPB - Held that - The said amendment being not there at the time of filing of the return by the assessee cannot be held to have furnished inaccurate particulars of income in respect of its claim of deduction u/s 80HHC of the Act - Decided in favor of Assessee.
Issues Involved:
1. Deletion of penalty levied under section 271(1)(c) of the Income-tax Act, 1961 for the assessment years 2002-03 and 2003-04, related to the wrong claim of deduction under section 80-IB. Issue-wise Detailed Analysis: 1. Penalty under Section 271(1)(c) for Wrong Claim of Deduction under Section 80-IB: Assessment Year 2002-03: The assessee claimed a deduction under section 80-IB amounting to Rs. 89,56,312, which was disallowed by the Assessing Officer (AO) on two grounds: the deduction on export incentives was not allowable as per the Supreme Court ruling in CIT v. Sterling Foods, and the assessee did not establish a new industrial undertaking during the eligible period. The AO imposed a penalty of Rs. 31,97,405 under section 271(1)(c), which was deleted by the Commissioner of Income-tax (Appeals) [CIT(A)]. The CIT(A) observed that the issue of export incentives was debatable, and the claim was bona fide, thus negating the penalty. Regarding the second ground, the CIT(A) noted that the assessee had added new machinery exceeding 80% of the value of old machinery, fulfilling the conditions of section 80-IB, making the issue debatable and not warranting a penalty. The Tribunal upheld the CIT(A)'s decision, agreeing that the issues were debatable and the claim was made in good faith based on a chartered accountant's report. The Tribunal found no merit in the levy of penalty under section 271(1)(c) as the assessee had disclosed all relevant facts and particulars. Assessment Year 2003-04: For this year, the AO imposed a penalty of Rs. 60,76,832 under section 271(1)(c) for the reduction of claims under sections 80HHC and 80-IB. The assessee's claim under section 80HHC included DEPB receipts and export incentives, which were disallowed. Similarly, the deduction under section 80-IB was disallowed on the same grounds as the previous year. The CIT(A) directed the deletion of the penalty, and the Tribunal upheld this decision. The Tribunal noted that the claim under section 80HHC was made before the amendment introduced by the Taxation Laws (Amendment) Act, 2005, and thus the assessee could not be held to have furnished inaccurate particulars. The Tribunal reiterated that the issues were debatable, and the claims were made bona fide, thus no penalty was justified. Conclusion: The appeals by the Revenue for both assessment years were dismissed. The Tribunal confirmed that the issues were debatable, the claims were made in good faith, and the assessee had disclosed all relevant facts, thus no penalty under section 271(1)(c) was warranted.
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