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TMI Blog2009 (2) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... st Nov., 2004. Assessment proceedings were started by issue of notice under s. 143(2) of IT Act, 1961 (the Act) dt. 5th Jan., 2005 and assessment was completed vide assessment order dt. 22nd Dec., 2006 passed under s. 143(3) of the Act. Copy of assessment order has been filed along with present appeal. The AO has discussed this issue in para 3 of the impugned assessment order. It has been mentioned in para 3 that assessee has claimed deduction under s. 10B of the Act amounting to Rs. 3,54,25,995. In order to probe into the veracity of the said claim the assessee was required to furnish details of sale realized in the convertible foreign exchange duly supported by the certificate from the concerned banks. In pursuance of that requirement assessee filed the details. From the said details, the AO noticed that out of total sales of Rs. 7,70,00,620 sales proceeds belonging to two parties, namely M/s APC, Bangalore and M/s ASCOM, Gurgaon were to the tune of Rs. 25,09,574 and Rs. 12,47,457 respectively. Sales to these parties were shown under the category "deemed export" and these were not supported by bank certificate showing the realization of these sales in convertible foreign exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income of the assessee on account of excess deduction claimed under s. 10B on account of deemed exports. It is submitted that the assessee has maintained proper books of accounts which were produced before your goodself at the time of assessment proceedings. It is further submitted that there is no concealment of particulars of income or furnishing of inaccurate particulars of income. Merely because certain amount has been disallowed with the consent of the assessee or the assessee has not preferred any appeal against such addition, such income will not amount to concealed income attracting penalty under s. 271(1)(c). Our above view is duly supported by the following case laws." 6. Apart from above explanation the assessee placed reliance on certain decisions. The first decision relied upon by assessee was the decision of Hon'ble Punjab Haryana High Court in the case of CIT vs. Ajaib Singh Co. (2001) 170 CTR (P H) 489 : (2002) 253 ITR 630 (P H). This decision was relied upon by the assessee to contend that disallowance of expenses per se does not amount to furnishing inaccurate particulars of income. It has been the contention of the assessee that merely because certain ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely on account of routine disallowance and on the contrary, it was noticed during the course of assessment proceedings from the details of realization of export proceeds that this included sale to above-mentioned two parties which were situated in India and which, according to the facts beyond doubt are not supported by sale proceeds realized from these parties in convertible foreign exchange. The assessee with a view to conceal this default had shown sale proceeds realized from these parties under the category of a "deemed export", a term nowhere referred in s. 10B of the Act and, thus, the word "deemed export" has been coined by the assessee to cover up his attempt to furnish inaccurate particulars of income. The said conduct of the assessee leaves no scope for the doubt about his mala fide intention to deprive the Revenue of its due by furnishing inaccurate details of the export sales. 10. The AO further observed that keeping in view the facts of the assessee's case the decision of Hon'ble Supreme Court in the case of K.C. Builders is not applicable and, thus, the AO arrived at a conclusion that assessee has committed a default of furnishing inaccurate particulars of his in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding the appeal. The learned CIT(A) concluded that the AO was justified in coming to the conclusion that assessee has furnished inaccurate particulars of his income by claiming excess deduction under s. 10B and, thus, she confirmed the addition. 12. The assessee is aggrieved, hence, in appeal. 13. After narrating the facts which was vehemently pleaded by the learned Authorised Representative that prior to omission of second proviso to sub-s. (1) of s. 10B by the Finance Act, 2001 w.e.f. 1st April, 2002 the law as it stood on the statute was that in the case where eligible units falling within the provisions of s. 10B the profit and gains derived from domestic sales of eligible goods do not exceed 25 per cent of the total sales, shall be deemed to be profit and gains derived from the export of eligible goods and, thus, the entire profits of the said unit will be eligible for exemption under s. 10B. He contended that the domestic sale of the assessee in the present year does not exceed 25 per cent of the total sales and, thus, the assessee was under bona fide impression that he is eligible for exemption under s. 10B in respect of domestic sales also. It was contended that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that as it has concealed any income or furnished inaccurate particulars of income and penalty under s. 271(1)(c) could not be levied. (iv) CIT vs. Tek Ram (HUF) (2008) 14 DTR (P H) 65 : (2008) 220 CTR (P H) 396 : (2008) 300 ITR 354 (P H) wherein it has been held that when the matter relating to enhanced compensation receivable by the assessee was still in dispute and assessee did not offer the amount of enhanced compensation and interest thereon for tax claiming that it was not taxable in the relevant assessment year, the claim was bona fide and based on one possible view and, therefore, levy of penalty under s. 271(1)(c) was not justified. (v) ITO vs. Burmah Shell Oil Storage Distributing Co. of India Ltd. (1987) 163 ITR 496 (Cal) wherein it has been held that assessee having disclosed all necessary materials, papers and documents before the assessing authority and raising legal issues in support of the claim for devaluation loss, development rebate and depreciation at enhanced rate; rejection of such claim of the assessee cannot amount to concealment for the purpose of s. 271(1)(c). 17. It may also be mentioned here that during the course of hearing learned Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed exemption under s. 10B. The assessee has to satisfy the conditions laid down in s. 10B(3) which reads as under: Sec. 10B(3): This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. 21. Thus, according to s. 10B(3) the assessee is entitled to claim deduction under s. 10B, if the payments are received by the assessee in convertible foreign exchange in the manner specified in that sub-section. In the present case assessee has sold the goods to the local parties and there was no question of assessee of receiving payments in convertible foreign exchange. 22. Explanation 1 to s. 271(1)(c) reads as under: "Explanation 1: Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT(A) or the CIT to be false, or (B) suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only explanation of the assessee is that it is maintaining proper books of account which was produced before the AO at the time of assessment proceedings and there is no concealment of particulars of income or furnishing of inaccurate particulars of income. On these facts, we have to examine that whether assessee's case falls within Expln. 1 or not. 26. According to Expln. 1(B) of s. 271(1)(c) if assessee offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to the same and material to the computation of total income have been disclosed, then the amount added or disallowed shall be deemed to have been concealed. To claim exemption under s. 10B, it was a condition precedent that payments should be received in convertible foreign exchange in the manner specified in sub-s. (3) of that section. The second and foremost requirement of the section as it was existing for the relevant assessment year was that the profits which are claimed to be exempt under s. 10B should be derived by a 100 per cent export oriented undertaking from export of article or things or computer software for certain period spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year as allowed by the competent authority NA (iii) Specify the amount and the relevant previous year in case such amount is brought into India in convertible foreign exchange beyond the period of the six months from the end of the relevant previous year and with the approval of the competent authority, where such amount relates to any other previous year. Also specify the authority and the period upto which the approval was accorded. NA (iv) Amount of sale proceeds, if any, that are credited to a separate account maintained by the assessee with any bank outside India and the reference number of the RBI according permission for the same. NIL 27. In the light of these facts it has to be examined that whether it is a case where assessee has disclosed all the facts relating to the sum added to the income of the assessee and which facts are material to the computation thereby holding the assessee liable for concealing the particulars of his income or furnishing the inaccurate particulars of such income. Even if it is considered that assessee has subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the disallowance has been made only on the basis of difference of opinion or different view taken by the AO. There was only one view that assessee could claim deduction under s. 10B on fulfilling both the two most essential conditions to make entitle the assessee to claim exemption under s. 10B. It has also been noticed that full particulars were also not submitted by the assessee while filing the return and the facts were revealed by the AO during the course of assessment proceedings upon scrutiny of the details. 28. The plea of the learned Authorised Representative that assessee was bona fide in claiming exemption on these two domestic sales as the provisions as stood prior to asst. yr. 2002-03 enabled the assessee to claim the exemption under s. 10B in a case where domestic sales does not exceed 25 per cent of the total turnover. The provision was amended from asst. yr. 2002-03 and two years have already elapsed. Thus, the bona fide of the assessee cannot be attached to the fact that the domestic sales were less than 25 per cent. Bona fide can be attached only if all the particulars relating to domestic sales were mentioned by the assessee while making the claim in the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction of interest paid on overdraft of income by way of interest on FDRs. 32. CIT vs. Harshvardhan Chemicals Mineral Ltd.: In that case the issue was regarding claiming of deductions which were debatable in nature. Here, in the present case the disallowance deduction is not debatable at all. Therefore, this case has also no application to the present case. 33. ITO vs. Burmah Shell Oil Storage Distributing Co. of India Ltd. In that case also assessee had made the claim on the basis of certain legal contentions and duly disclosed details of such claims and rejection of such contentions was not considered the basis for levy of concealment penalty as assessee had disclosed all necessary material, papers and documents. 34. CIT vs. Tek Ram (HUF). In that case the receipt of enhanced compensation by the assessee was in dispute and, thus, the assessee did not offer that amount and interest thereon on the basis that it was not taxable in the relevant assessment year and it was found that claim of the assessee was bona fide based on a possible view and, thus, it was held that penalty under s. 271(1)(c) could not be levied. The facts of this case are also different from the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under s. 276C of the IT Act." 36. It may be mentioned here that the Division Bench of the Hon'ble Supreme Court had referred the question to a Larger Bench vide decision in the case of Union of India vs. Dharamendra Textile Processors Ors. (2007) 212 CTR (SC) 432 : (2007) 295 ITR 244 (SC) wherein their Lordships had observed that the basic scheme for imposition of penalty under s. 271(1)(c) of the IT Act, s. 11AC of the Central Excise Act and r. 96ZQ(5) of the Central Excise Rules is common. Thereafter, referring to the decision of Hon'ble Supreme Court in the case of Dilip N. Shroff vs. Jt. CIT it has been observed that there is a conflict of opinion between the judgment in Dilip N. Shroff vs. Jt. CIT and in the case of Chairman, SEBI vs. Shri Ram Mutual Fund Anr. (2006) 5 SCC 361. Their Lordships further observed that the object behind enactment of s. 271(1)(c) read with Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue and the penalty under the said section is a civil liability. Willful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of prosecution under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the Court operated for quite sometime, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. 43. Salmond in his well-known work states: '.........(T)he theory of case law is that a Judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transaction made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicata or accounts that have been settled in the meantime.' 44. It is no doubt true that after a historic decision in Golak Nath vs. State of Punjab AIR 1967 SC 1643, this Court has accepted the doctri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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