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TMI Blog2010 (9) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... as many as six grounds of appeal but the only grievance raised in all these grounds of appeal is that, on the facts and in the circumstances of the case, the CIT(A) was not justified in confirming the impugned penalty. What have been set out as grounds of appeal, are, in effect, no more than arguments in support of this grievance of the assessee. We will, therefore, take up all these grounds of appeal together and address ourselves to the core issue i.e. whether or not the facts and circumstances of the case did justify imposition of the impugned penalty. 3. The relevant material facts are like this. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed a deduction of Rs 2,66,63,949 , under section 80 HHC, but while computing the profit eligible for the said deduction, the assessee has not set off brought forward losses of earlier years. The Assessing Officer was of the view that this claim is inadmissible in view of the judgment of Hon'ble Supreme Court in the case of IPCA Laboratories Ltd v. DCIT (266 ITR 521). It was in this backdrop, and relying upon the aforesaid decision of Hon'ble Supreme Court, declined deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this backdrop that the Assessing Officer proceeded to impose penalty of Rs. 97,99,000 being an amount equivalent to one hundred percent of tax sought to be evaded by claiming wrong deduction under section 80HHC. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The CIT(A) observed that the claim of the assessee, being contrary to the law laid down by Hon'ble Supreme Court, amounts to furnishing inaccurate particulars of income. As regards the question of assessee's claim being bona fides, the CIT(A) observed that Hon'ble Supreme Court's decision in Ipca Laboratories case (supra) was pronounced on 11th March 2004, and if the assessee was indeed acting bona fides, the assessee could have as well revised his income tax return by 31st March 2004 and thus withdraw the claim of deduction. The action of the Assessing Officer was thus confirmed by the CIT(A). The assessee is not satisfied and is in appeal before us. 5. Learned counsel's attack on the impugned order is three fold - first, that since the assessee has made the claim in a transparent manner and with complete disclosure, rejection of such a claim cannot be visited with penalty proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d proposition that what is to be seen is the law prevailing as on the time when action being called into question was taken. What is called into question in this case is the action of the assessee in claiming the deduction under section 80HHC, and this action, therefore, needs to be examined vis-à-vis the legal position prevailing at the time when claim was made. Learned counsel then refers to the judgment of Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158) in support of the proposition that merely because a legal claim has not been accepted, it cannot be construed to be a case of furnishing of inaccurate particulars of income. It is submitted that in the present case, there is nothing more than rejection of a legal claim made by the assessee, and, therefore, it is not a fit case for imposition of penalty. In the light of these submissions, learned counsel urges us to delete the impugned penalty. 6. Learned Departmental Representative, on the other hand, submits that the claim may have been correct vis-à-vis the legal position at the time of filing of income tax return, but then the legal position had since changed and the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurate particulars of income inasmuch as the claim made by the assessee is at variance with the law settled by Hon'ble Supreme Court. We have, however, noted that while the income tax return was filed on 31st October 2003, the judgment of Hon'ble Supreme Court in the case of Ipca Laboratories (supra), which held the claim to be inadmissible, came much later i.e. on 11th March 2004. The question of concealment of income or furnishing of inaccurate particulars is to be considered vis-à-vis the action of the assessee at the time of the filing of the income tax return. The assessee cannot be faulted for not knowing what future held in store for him. What is to be examined by us is the conduct of the assessee as at the point of time when income tax return was filed and whether the return so filed can be said to have inaccurate particulars of income. The case of the Assessing Officer clearly fails on this test, as the claim was made by the assessee in accordance with the law prevailing as on the point of time when the income tax return was filed. The case made by the Assessing Officer thus does not meet our approval. To that extent, Hon'ble Supreme Court's judgment in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee leading to satisfaction of conditions laid down in Clause B of Explanation 1 to section 271(1)(c), namely that the assessee is not able to substantiate an explanation in respect of any fact material to the computation of total income, and, in addition to this, the assessee is also not able to prove that such explanation was given bonafide and all the facts relating to the same and material to the computation of total income have been disclosed by the assessee. When this deeming fiction comes into play, the related addition or disallowance in computing the total income of the assessee, for the purposes of section 271(1)(c), is deemed to represent the income in respect of which inaccurate particulars have been furnished, but that the levy of penalty hinges on assessee's substantiating the explanation, proving that it is bonafides and that all the material facts are disclosed. Viewed in this perspective also, however, we find that the Assessing Officer does not have a legally sustainable case. We have noted the assessee has a reasonable explanation for having made this claim in the income tax return, and all the necessary details are filed by the assessee and the claim is made i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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