2013 (7) TMI 616 - AT - Income Tax

Penalty levied under Section 271(1)(c) Disallowance of deduction under Section 80IA on the ground that the assessee did not engage more than ten workers Held that - Workers employed by sister concern to carry out the job work contractually assigned to them should be considered as the workers employed because they were involved only for the purpose of manufacturing for and on behalf of the assessee company - Decision of Hon ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. 2010 (3) TMI 80 - SUPREME COURT would be squarely applicable, wherein it was observed that, merely because the assessee did not file the appeal against the assessment order, it cannot be presumed that there was any concealment of income or furnishing of wrong particular - Even on merits, the assessee had a good case and had he filed the appeal against the original assessment order, the assessee s claim would have been allowed. As per the judgment in the case of CIT Vs. Delhi Press Patra Prakashan Ltd. - 2013 (6) TMI 70 - DELHI HIGH COURT , wherein it was considered that the employees of the sister concern who were engaged for executing the business of the assessee company was considered as the employees who were engaged for the purpose of manufacturing so as to entitle the assessee to claim the deduction under Section 80I - In the instant case, deduction under Section 80IA was bona fide and merely because the Assessing Officer did not accept the same and had taken a different view, it would not amount to either concealment of income or furnishing of inaccurate particulars - cancelled the penalty levied under Section 271(1)(c) Decided against the Revenue.

Summary

Issues Involved:
- Appeal against cancellation of penalty under Section 271(1)(c) of the Income-tax Act, 1961 by the Assessing Officer.

Detailed Analysis:

1. Issue of Penalty Cancellation:
The appeal by the Revenue was directed against the cancellation of penalty amounting to Rs. 39,20,736/- levied under Section 271(1)(c) of the Income-tax Act, 1961 by the Assessing Officer. The Assessing Officer disallowed the deduction under Section 80IA claimed by the assessee, asserting that the assessee did not engage more than ten workers. The contention that workers employed by another entity for job work should be considered as the assessee's workers was not accepted, leading to the disallowance of the deduction. The penalty was levied at 200% of the tax sought to be evaded. However, on appeal, the learned CIT(A) cancelled the penalty, prompting the Revenue to file this appeal.

2. Arguments and Considerations:
During the hearing, the learned DR argued that the assessee did not fulfill the conditions for the deduction under Section 80IA, making the claim incorrect. He contended that the penalty under Section 271(1)(c) was justified, citing relevant case law. On the contrary, the counsel for the assessee argued that the claim was bona fide, supported by the history of allowed deductions in preceding years. The assessee's position was that the claim might be wrong but not false, and the interpretation of the provision was debatable. The Tribunal analyzed the arguments, referencing the decisions in the cases of Reliance Petroproducts Pvt. Ltd. and Zoom Communication P. Ltd.

3. Decision and Rationale:
After careful consideration, the Tribunal concluded that the assessee's claim was bona fide. The consistent allowance of deductions in previous and subsequent years supported the genuineness of the claim. Merely because the assessee did not challenge the assessment order did not imply mala fide intent. The Tribunal upheld the order of the learned CIT(A) based on the principle that a claim incorrect in law but bona fide does not warrant penalty under Section 271(1)(c). By following the decisions in the cases of Reliance Petroproducts Pvt. Ltd. and Zoom Communication P. Ltd., the Tribunal dismissed the appeal by the Revenue, affirming the cancellation of the penalty.

In conclusion, the Tribunal's decision emphasized the importance of bona fide claims and distinguished between incorrect claims in law and mala fide intentions, ultimately leading to the dismissal of the Revenue's appeal against the cancellation of the penalty under Section 271(1)(c) in this case.