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2012 (5) TMI 109 - AT - Income TaxLevy of penalty u/s 271(1)(c) Claim of deduction u/s 10B and 80HHE Held that - Not a case where the assessee has not disclosed full details at the time of filing of returns or during the course of assessment proceedings - assessee claimed that export sales of Rs.549.76 lacs were not realized before the end of six months from the end of the FY 2003-04 and that company was yet to file an application for extension of time - mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty when there is nothing on record to show that the explanation offered by the assessee adverse no levy of penalty in favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act. 2. Non-realization of export proceeds within the permissible time. 3. Validity of the explanation provided by the assessee. 4. Application of Explanation 1 to Section 271(1)(c). 5. Distinction between erroneous claims and concealment of income. Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act The primary issue in this case is the levy of penalty under Section 271(1)(c) of the Income Tax Act. The penalty was imposed because the assessee claimed a deduction under Section 10B based on a certificate issued by a known firm of Chartered Accountants, despite not realizing a sum of Rs. 2,20,00,871/- in convertible foreign exchange within the permissible time. The Assessing Officer (AO) found this claim to be inaccurate and imposed a penalty of Rs. 17.50 lakhs. 2. Non-realization of Export Proceeds within the Permissible Time The AO discovered that the export proceeds were not realized within the stipulated time frame. Despite this, the assessee did not file a revised return during the assessment proceedings. The penalty order noted that the assessee was aware of the non-realization but failed to disclose it until directed by the AO to produce evidence regarding the realization of export proceeds or an extension of time granted by the prescribed authorities. 3. Validity of the Explanation Provided by the Assessee The assessee's explanation was based on the certificate from BSR & Co., which indicated that the unrealized export proceeds were subsequently realized. The Tribunal found that the explanation offered by the assessee was bona fide and that no material particulars were concealed or inaccurately furnished. The Tribunal referenced its decision in the assessee's case for assessment years 2003-04 and 2004-05, where it was concluded that the assessee had disclosed all relevant details at the time of filing returns and during the assessment proceedings. 4. Application of Explanation 1 to Section 271(1)(c) Explanation 1 to Section 271(1)(c) specifies conditions under which the penalty for concealment of income can be imposed. These conditions include the failure to offer an explanation, offering an explanation found to be false, or offering an explanation that is not substantiated and not bona fide. The Tribunal found that the assessee had discharged the onus cast on it under Explanation 1 by providing a bona fide explanation and disclosing all material facts. Therefore, the penalty provisions under Explanation 1 were not attracted in this case. 5. Distinction Between Erroneous Claims and Concealment of Income The Tribunal emphasized the distinction between making an erroneous claim and concealing income. It cited the Supreme Court's ruling in the case of Reliance Petroproducts Pvt. Ltd., which held that merely making a claim that is not sustainable in law does not amount to furnishing inaccurate particulars of income. The Tribunal found that the assessee's claim for deduction under Sections 10A and 80HHE, supported by a chartered accountant's certificate, was made in a bona fide manner. The mere disallowance of the claim did not imply concealment of income or furnishing of inaccurate particulars. Conclusion The Tribunal upheld the decision of the CIT(A) to delete the penalty, concluding that the assessee had made a bona fide claim for deduction and disclosed all relevant particulars. The Tribunal dismissed the Revenue's appeal, affirming that no penalty under Section 271(1)(c) was warranted in this case. The appeal was thus dismissed.
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