2014 (5) TMI 710 - HC - Income Tax

Penalty u/s 271(1)(c) of the Act Claim of exemption u/s 10B of the Act Foreign exchange remittance Held that - The assessee s submissions based upon the reading of the provisions of the Exim policy are of no assistance - the terms of the statute are clear and they do not allude to or refer to any external document or instrument or even other enactments, the admissibility of benefits in those external documents or enactments cannot automatically be used as aids of construction or read into the provisions of the controlling enactment - the reference to the exim policy or a pointed reference to admissibility of reliefs as are given in that policy u/s 10B, it would not be open to the assessee to claim that transactions, which are not exports in a strict sense of the term and in which the assessee does not receive foreign exchange remittance, be treated as such - The plain text of Section 10B particularly Section 10 B (3) exclude the possibility of a reasonable argument in this regard the contention of the revenue is accepted that there is some relief to the assessee, to the extent that convertible foreign exchange may be received or brought into India by the assessee - the claim to Section 10B benefit was inaccurate thus, the order of the Tribunal is upheld Decided against Assessee.

Summary

Issues:
Assessment of penalty under Section 271(1)(c) for claiming exemption under Section 10B of the Income Tax Act for assessment years 2004-05, 2005-06, and 2006-07.

Analysis:
1. The case involved the assessment of penalty under Section 271(1)(c) for claiming exemption under Section 10B of the Income Tax Act for the assessment years 2004-05, 2005-06, and 2006-07. The appellant had claimed exemption under Section 10B based on manufacturing engineering products exported jointly with another EOU. The claims were disallowed by the Assessing Officer, and penalty proceedings were initiated alongside. The appellant did not challenge the assessment orders for 2004-05 and 2005-06 but appealed against the penalty for 2006-07.

2. The High Court observed that the appellant did not meet the twin conditions of export out of India and receipt of foreign exchange through remittance as required under Section 10B(3) to claim the benefit. The Court rejected the appellant's argument based on the exim policy, stating that external documents or enactments cannot be used to interpret the Income Tax Act provisions. The Court emphasized that the plain text of Section 10B excludes treating non-export transactions without foreign exchange remittance as exports.

3. The Court referred to the Explanation to Section 271(1)(c) which justifies penalty proceedings when inaccurate particulars are furnished. Citing the case of CIT v. Reliance Petro-products Pvt. Ltd., the Court held that inaccuracies or claims contrary to the statute warrant penalties. In this case, the Court found the claim for Section 10B benefit to be inaccurate and erroneous, justifying the imposition of the penalty.

4. The Court dismissed the belated appeals against the penalty, emphasizing that the appellant's claim for Section 10B benefit was inaccurate and not in accordance with the law. The Court clarified that any reduction in tax would lead to a corresponding reduction in the penalty amount. Consequently, the Court dismissed the appeals and related writ petition challenging the penalty orders for the assessment years in question.

5. The Court's decision highlighted the importance of complying with statutory requirements for claiming tax benefits and penalties for inaccurate claims. The judgment serves as a reminder for taxpayers to ensure strict adherence to legal provisions to avoid penalties and legal consequences in tax matters.