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TMI Blog2012 (7) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... n the return as well as in the assessment proceedings. However, the Assessing Officer had disallowed the claim u/s 80HHC of the Act on the ground that in this case, the export was of capital goods and gain was not derived from the business of the export of goods and merchandise. The Assessing Officer held that in view of the fact that in section 80HHC of the Act, the legislature has purposely used the word "derived from" as against the word "attributable to" as in section 80E of the Act, the assessee was not entitled to claim deduction u/s 80HHC of the Act. For levying penalty u/s 271(1)(c) of the Act, he relied upon various judgments on the subject of "income" derived from and "income attributable to" export activity. 3. Against such action of the Assessing Officer, assessee filed appeal before the first appellate authority and filed written submissions along with the paper book and further contended before the first appellate authority that claim of the assessee was bona fide and were duly supported by certificates, but all particulars of income and deduction u/s 80HHC were duly furnished before the Assessing Officer based on CA's certificate and there was no concealment of part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In view of the above, Ld.AR of the assessee submitted that the Assessing Officer was not justified in imposing penalty u/s 271(1)(c) of the Act, amounting to Rs.6,62,266/- since it is not a case of furnishing of inaccurate particulars of income and the various addition made and confirmed by the CIT(A) have been challenged and otherwise disallowance made do not attract penalty, so penalty be deleted. 5. The CIT(A) while considering and accepting the plea of the assessee has concluded to delete the impugned penalty as per para.5 & 6 of his order, while taking note of various judgments, explanations, precedents and facts of the case, which are reproduced as below: "5. I have gone through the various submissions made by the appellant facts and evidences placed on records and have also considered the various legal prepositions on this issue. The AD has levied penalty under Section 271(1)(c) of Income Tax Act amounting to RS.6,62,266 allegi.ng that the appellant had furnished inaccurate particulars of income simply by rejecting the claim under Section 80HHC on account of interpretations of the provisions of Section 80HHC based on various judgments. It is seen that the issue of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd covers the issue. Similarly, the decision of the Tribunal in the case of Impulse Pvt. Ltd. vs. ITO (supra) also supports this view that mere rejection of the claim of the assessee under Section 80HHC will not attract concealment penalty under Section 271(l)(c) of the Act. Having regard to the above decisions, I am of the view that there is no element of concealment for imposition of penalty in the instant case. The penalty is accordingly deleted." 6. Aggrieved by this order of CIT(A), department has come up in appeal and while relying upon the order of the Assessing Officer, it was pleaded for setting aside the order of CIT(A) and restoring that of the Assessing Officer because the claim has been made by the assessee which was not allowable because deduction under section 80HHC of the Act, cannot be admissible on capital goods exported. Therefore, it is a clear case of furnishing of inaccurate particulars/concealment of income and addition made by the Assessing Officer has duly been confirmed up to ITAT level in quantum appeal. Therefore, penalty is exigible in this case and there is no occasion for CIT(A) to just delete the impugned penalty by not considering the vital aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson has concealed the particulars of his income or furnished inaccurate particulars of such income. It is settled position that assessment proceedings and penalty proceedings are separate and distinct and as held by Hon'ble Supreme Court in the case of Ananthraman Veerasinghaiah & Co. Vs. CIT, 123 ITR 457, the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penal ty proceedings. I t is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1) (c) of the Act are different than those applied for making or confirming the additions. It is, therefore, necessary to re-appreciate and reconsider the matter so as to find out as to whether the addition or disallowance made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1)(c) of the Act, and whether it is a fit case to impose the penalty by invoking the said provisions. The provisions of sect ion 271(1)(c) of the Act stipulate that if the Assessing Officer or the CIT(Appeals) or the Commissioner, in the course of proceedings under this Act, is satisfied that any person has concealed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the assessee discharged the onus cast on it in terms of Explanation 1 to sec. 271(1)(c) of the Act. Hon'ble Supreme Court in the case of Dilip N. Shroff v. Jt . CIT [2007] 210 CTR (SC) 228 : [2007] 291 ITR 519 (SC) while considering the scope of these provisions u/s 271(1) ( c) of the Act observed in the following terms: "The legal history of sect ion 271(1) (c) of the Act t raced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-sect ion (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof . By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 322 ITR 158, after considering various decisions including Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/ 161 Taxman 218 (SC) and Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 / 174 Taxman 571 (SC) concluded that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. In the case under consideration, there is nothing to suggest that the assessee furnished any inaccurate particulars or concealed the particulars. Admittedly, the claim for deduction of u/s 80HHC with respect to export of capital goods which was held to be not derived from business of export was there in the documents forwarded with the return. In this view of the matter, no fault can be found with the claim of the assessee that it had claimed the deduct ion in a bona fide manner. 12. In the case under consideration, as noted by Ld.CIT(A) that the assessee had given all the particulars of income and had disclosed all facts to the AO in relation to claim for deduction u/s 80HHC with respect to export of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be falsely (or in an aggregated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of very Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature. 11. In this behalf the observations of this Court made in Sree Krishna Electrical v. State of Tamil Nadu & Anr. [(2009) 23VST 249 (SC)] as regards the penalty are apposite. In ..... 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