2017 (1) TMI 1336 - AT - Income Tax

Levy of penalty u/s .271(1)(c) - Complete disallowance u/s 10B deduction - Held that - The case file already indicates that the assessee has been granted an STPI registration on 18.02.2009. Learned CIT(A) has thus held it entitled for the impugned deduction w.e.f. the said date on proportionate basis. We afforded adequate opportunity of hearing to both the parties. The Revenue fails in disputing assessee s above certification w.e.f. 18.02.2009 so as to deny it Section 10B deduction relief. The latter party has also not been able to repel the CIT(A) s conclusion holding it entitled for Section 10B deduction only w.e.f. the date of certification i.e. 18.02.2009 instead of the entire relevant previous year. We accordingly find no reason to interfere in well reasoned CIT(A) s order under challenge Penalty u/s.271(1)(c) - Held that - There is hardly any dispute in view of our findings on quantum issue that the assessee s auditor s statement about its non STPI certification allegedly made in the course of assessment was factually incorrect as the assessee s certification stood proved w.e.f. 18.02.2009 (supra) as concluded in the above quantum proceedings. We thus observe that the learned CIT(A) has rightly quoted hon ble apex court s decision in a Reliance Petroproducts case 2010 (3) TMI 80 - SUPREME COURT to conclude that the assessee s bonafides are very much in order and each and every disallowance/addition made in the course of quantum proceedings does not necessarily resulting in Section 271(1)(c) penalty in question.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Admission of additional evidence in violation of Rule 46A.
3. Entitlement to Section 10B deduction.
4. Imposition of penalty under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The Revenue challenged the CIT(A)’s decision to condone a delay of 134 days in the assessee’s filing of the appeal. The assessee argued that the delay was due to oversight and inadvertence in communicating and sending necessary records to its Authorized Representative. The CIT(A) found the delay to be a bona fide mistake and admitted the appeal for adjudication on merits. The Tribunal upheld this decision, noting that there was no material to dispute the assessee’s solemn averments and that the delay was neither intentional nor deliberate.

2. Admission of Additional Evidence in Violation of Rule 46A:
The Revenue contended that the CIT(A) erred in admitting additional evidence in violation of Rule 46A. The assessee had claimed Section 10B deduction in its revised return, but the Assessing Officer disallowed it based on the auditor’s statement that the STPI registration was not obtained. The assessee later provided additional evidence showing the STPI certification dated 18.02.2009 and a rectification communication from STPI, Gandhinagar dated 09.07.2013. The CIT(A) admitted this additional evidence, and the Tribunal found no fault in this decision, noting that the Assessing Officer did not dispute the facts in his remand report.

3. Entitlement to Section 10B Deduction:
The CIT(A) held that the assessee was entitled to Section 10B deduction from the date of STPI registration (18.02.2009) on a proportionate basis. The assessee argued for the entire deduction for the relevant year, while the Revenue sought to uphold the complete disallowance. The Tribunal upheld the CIT(A)’s decision, noting that the assessee had been granted STPI registration on 18.02.2009 and was entitled to the deduction from that date. The Tribunal found no reason to interfere with the CIT(A)’s well-reasoned order.

4. Imposition of Penalty under Section 271(1)(c):
The Assessing Officer imposed a penalty of ?24,93,500/- under Section 271(1)(c), terming the assessee’s deduction claim as false and lacking bonafides. The CIT(A) reversed this decision, noting that the assessee had a bona fide belief in its entitlement to the deduction and that the misrepresentation was due to the ignorance of the Chartered Accountant. The Tribunal agreed with the CIT(A), citing the Supreme Court’s decision in Reliance Petroproducts, which states that every disallowance or addition does not necessarily result in a penalty under Section 271(1)(c). The Tribunal thus rejected the Revenue’s appeal on this issue.

Conclusion:
The Tribunal dismissed both the Revenue’s appeals and the assessee’s cross-objection, upholding the CIT(A)’s decisions on all issues. The judgment emphasized the bona fide nature of the assessee’s actions and the procedural aspects of filing additional evidence and audit reports.