2012 (4) TMI 360 - AT - Income Tax

Additions made by the AO u/s 10A and 80HHE - Penalty of ₹ 10,00,000/- in the AY 2003-04 & ₹ 1,05,00,000/- in the AY 2004-05 levied by the AO u/s 271(1)(c) - During the course of assessment proceedings, the Assessing Officer noticed that the assessee, inter alia, did not receive or bring in convertible foreign exchange into India within the stipulated time on account of exports made by it to the extent of ₹ 13,16,087/- in Leela Unit & ₹ 25,08,077/- in GNR unit - the assessee claimed deduction on the basis of report dated 27.11.2003 of the CA in form no. 56 F & 10CCAF - assessee, in the instant case, merely made a bona fide claim for the deduction in terms of the said certificate while pointing out that the aforesaid amounts towards exports were not realized within the stipulated period. Not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed - The assessee, in the instant case, merely made a bona fide claim for the deduction in terms of the said certificate while pointing out that the aforesaid amounts towards exports were not realized within the stipulated period A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee - Held that the disallowance of claim for deductions u/s 10A & 80HHE in relation to unrealised exports or disallowance of an estimated amount, having recourse to provisions of sec.14A the Act cannot be considered as concealment of income or furnishing inaccurate particulars thereof, especially when all the relevant particulars were disclosed before the AO - Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate - Appeals are dismissed

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) for AY 2003-04 and AY 2004-05.
2. Non-acceptance of ITAT's decision by the department and subsequent appeal to the High Court.
3. Whether claims under Sections 10A and 80HHE are debatable issues.
4. General errors and tenability of CIT(A)'s order.

Issue-Wise Detailed Analysis:

1. Deletion of Penalty Levied Under Section 271(1)(c) for AY 2003-04 and AY 2004-05:
The Revenue appealed against the deletion of penalties amounting to Rs. 10,00,000 for AY 2003-04 and Rs. 1,05,00,000 for AY 2004-05, which were imposed by the AO under Section 271(1)(c). The AO had initially levied these penalties on the grounds that the assessee concealed particulars of income by making incorrect claims under Sections 10A and 80HHE. The CIT(A) cancelled the penalties, reasoning that the disallowance of claims did not necessarily imply concealment or furnishing of inaccurate particulars, especially since the ITAT had deleted the quantum additions. The CIT(A) also noted that the issues regarding the allowability of deductions under Sections 10A and 80HHE were debatable and supported by various judicial decisions.

2. Non-Acceptance of ITAT's Decision by the Department and Subsequent Appeal to the High Court:
The Revenue contended that the CIT(A) erred in deleting the penalties without considering that the ITAT's decision to delete the quantum additions had not been accepted by the department, which had filed an appeal under Section 260A in the High Court. However, the CIT(A) and the Tribunal emphasized that the mere filing of an appeal does not automatically validate the imposition of penalties, especially when the primary additions had been deleted by the ITAT.

3. Whether Claims Under Sections 10A and 80HHE Are Debatable Issues:
The CIT(A) and the Tribunal held that the claims under Sections 10A and 80HHE were indeed debatable issues. The assessee had disclosed all relevant facts and particulars in the prescribed forms and had made claims based on a bona fide belief that their applications for extension of time for realizing export proceeds would be accepted. The Tribunal noted that the mere disallowance of claims does not amount to concealment or furnishing of inaccurate particulars, especially when the claims were supported by a chartered accountant's certificate and all relevant facts were disclosed.

4. General Errors and Tenability of CIT(A)'s Order:
The Revenue argued that the CIT(A)'s order was erroneous and untenable in law and on facts. However, the Tribunal upheld the CIT(A)'s order, stating that the penalty under Section 271(1)(c) is not automatic and requires a finding of concealment or furnishing of inaccurate particulars, which was not established in this case. The Tribunal emphasized that the assessment proceedings and penalty proceedings are distinct, and the findings in the assessment proceedings are not conclusive for the purposes of penalty. The Tribunal also referenced various judicial decisions, including the Supreme Court's ruling in Reliance Petroproducts, which held that a mere making of a claim, which is not sustainable in law, does not amount to furnishing inaccurate particulars.

Conclusion:
The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decision to cancel the penalties for both assessment years. The Tribunal concluded that the assessee had made bona fide claims and disclosed all relevant particulars, and the mere disallowance of claims did not justify the imposition of penalties under Section 271(1)(c). The Tribunal also noted that the issues were debatable and supported by judicial precedents, and there was no evidence of concealment or furnishing of inaccurate particulars by the assessee.

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