2012 (12) TMI 660 - AT - Income Tax

Deduction u/s 80HHC & 80IB - income derived from DEPB, duty draw back and premium on sale of DEPB - Following the decision of Supreme Court in case of M/s Liberty India Versus Commissioner of Income Tax 2009 (8) TMI 63 - SUPREME COURT on the income derived from DEPB and duty draw back, deduction under section 80HHC and 80IB cannot be allowed - Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB of the 1961 Act. Penalty u/s 271(1)(c) - furnishing of inaccurate particulars Held that - Following the decision of Supreme court in case of COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS FVT. LTD. 2010 (3) TMI 80 - SUPREME COURT mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the assessee - No infirmity in the order of the CIT(A) - Merely because the assessee has a different perception of the situation than the Assessing Officer, even though, in the ultimate analysis, the stand of the Assessing Officer is to be upheld, it cannot be said that the assessee has concealed any particulars - in the result both the appeals of the Revenue are dismissed

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2003-04 and 2004-05.

Analysis:
1. The appeals were filed by the Revenue against the order of the ld. CIT(A) deleting the penalty under section 271(1)(c) of the Income-tax Act for the assessment years 2003-04 and 2004-05. The issue revolved around the deduction claimed under sections 80HHC and 80IB of the Act on gross total income without subtracting income derived from DEPB, duty draw back, and premium on sale of DEPB. The deduction was initially disallowed, leading to the imposition of the penalty.

2. The Tribunal heard the appeals together as the facts were similar, with the only difference being the quantum. The lead case discussed was for the assessment year 2003-04. The assessee claimed the deduction under sections 80HHC and 80IB without deducting income from DEPB and duty draw back. The penalty was imposed for furnishing inaccurate particulars of income, which was based on the disallowance of the deduction. However, subsequent legal developments clarified that such incentives were not part of the net profit for the purpose of sections 80IA or 80IB.

3. The assessee contended that the issue was debatable at the time of claiming the deduction, citing various judicial pronouncements to support their position. The ld. CIT(A) deleted the penalty considering the bona fide belief of the assessee. The Revenue challenged this decision before the Tribunal, emphasizing the Assessing Officer's order.

4. The Tribunal analyzed the issue and noted that the controversy regarding the deduction under sections 80HHC and 80IB on income derived from DEPB and duty draw back was debatable until clarified by the Apex Court in a subsequent judgment. The Tribunal agreed with the ld. CIT(A) and the legal propositions cited by the assessee, concluding that the penalty under section 271(1)(c) could not be levied based on a bona fide belief in claiming the deduction.

5. The ld. CIT(A) elaborated on the concept of "furnishing of inaccurate particulars of income," emphasizing that legal claims, even if later found legally unacceptable, do not amount to furnishing inaccurate particulars. The Tribunal concurred with the ld. CIT(A)'s reasoning and upheld the decision to delete the penalty. The Tribunal found no infirmity in the ld. CIT(A)'s order and dismissed the Revenue's appeals for both assessment years.