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TMI Blog2012 (11) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... A. MOHAN ALANKAMONY, JJ. Revenue by :- Shri Vinod Tanwani, Sr. DR Assessee by:- Smt . Urvashi Shodhan, AR ORDER PER D K TYAGI (JM) :- This is Revenue s appeal against the order of the learned CIT(A) dated 08-07-2009 deleting penalty of Rs.2,35,75,803/- levied u/s 271(1)(c) of the Income-tax Act, 1961 for Assessment Year 2004-05. 2 The facts as noted by the learned CIT(A) in his order are as under:- 2.1 The AO made the following disallowances in the assessment which have been confirmed by the CIT(A) vide his order dated 28-09- 2007. (i) Not allowing deduction u/s 80HHC w.r.t. DEPB income. (ii) Disallowance on account of public issue expenses of Rs.16,51,946/-. (iii) Not allowing 10% of DEPB licence against indirect expenses for deduction u/s 80HHC. (iv) Interpretation of the term Total Turn Over and Export Turn Over for the purpose of 80HHC(3). (v) Not allowing deduction in respect of disclaimer certificate issued. (vi) Disallowance of Rs.1,31,406/- on account of consultation fees paid to Dalal Macdonald. The A.O. had initiated penalty proceedings u/s 271(l)(c) of the IT Act in respect of the above disallowances. In response to show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther observed that the explanations added to section 271(1) (c) in their entirety indicated element of strict liability on the appellant for concealment or for giving inaccurate particulars while filing return. The A.O. placed reliance on the decisions in the case of Union of India vs. Dharmendra Textile Processors (2007) 295 UR 244(SC) as well as Banaras Textorium vs. CIT (1988), 169 ITR 782 (All.), Zeekoo Shoe Factory vs. CIT (1981) 127 ITR 837. In view of the above facts, the A.O. held that the appellant had famished inaccurate particulars of income and thereby concealed its income and accordingly a penalty of Rs.2,35,75,8037- has been levied. 3 The learned CIT(A) has decided the issue in the following manner:- 2.2 During the course of appellate proceedings, the A.R. of the appellant submitted that the AO while framing the penalty order did not consider the detailed submissions made by the company and did not appreciate the circumstances in which major disallowances were made by the A.O. .The disallowances were confirmed by the CIT(A), on the ground that no one could appear before the CIT (A). It was argued that the order passed by the A.O. was not a speaking order and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f furnishing inaccurate particulars of income within the meaning of sec. 271(1)(c) of the Act. The A.R. further contended that with every new major decision of any Court, legal position with respect to claim u/s.80HHC kept on changing and the legal position regarding claim of deduction u/s.80HHC had been very unclear and disputable. Under the above circumstances, it is not correct to say that there was fraud or gross or willful negligence on the part of the appellant and simple rejection of appellant's bonafide explanation without anything more or without assigning any specific valid reason to reject the same, does not make it gross or willful negligence on the part of the appellant. The A.R. further relied on the decision in the case of CIT vs. Mani Bhai and Brothers, (2007) 209 CTR 46 (Guj) and submitted that the A.O. had made no effort to substantiate any concealment for any of the items disallowed and deficiency in claim by a bonafide mistake would not be sufficient for levying penalty for concealment. The A.R. further submitted that in the tax audit report the auditor has not pointed disallowability of public issue expenditure and as such the appellant has relied upon the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f amendment brought out by the Taxation Laws Amendment Act 2005 with retrospective effect and because the conditions specified therein were not satisfied. As regards claim of expenditure related to public issue of Rs.16,51,9467-, the appellant had furnished full particulars before the A.O. and had claimed the same as revenue expenditure, the appellant had clearly pointed out before the A.O. that there was no increase in share capital nor any funds were received by the appellant and the appellant had relied upon the decision of Apex court in the case of CU V. General Insurance Corporation 286 ITR 232. But the A.O. has rejected the claim of the appellant on the ground that in the case of the appellant there disinvestment of promoter's quota and the facts of the Apex court are different and hence the said decision does not apply. The A.O. held the same as capital expenditure allowed deduction u/s.35D of the I.T. Act .Similarly the claim of the appellant as expenditure for the consultancy fee paid to Dalai Macdonald of Rs.1,31,406/-ns rejected by the A.O. As regards the claim of the appellant in respect of the above two expenses as revenue expenditure, though there is a column in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding claim U/S.80HHC claim of the appellant has been rejected relying on different judicial decisions, it can be said that there is furnishing of inaccurate particulars of income, Further it is not the case that explanation of the appellant in respect of the various claims which have been disallowed and for which penalty has been levied has not been substantiated or found to be false so as to attract explanation 1 to section 271(1)(c). Further, the issue is disputable and debatable and so disallowances would not result into levy of penalty u/s. 271(1)(c), and no penalty can be levied, unless it is established that there is clear cut furnishing of inaccurate particulars of income. In the instant case all the facts were disclosed by the appellant in assessment proceedings and further the explanation filed by the appellant was reasonable and was bona fide. Moreover, mere rejection of the appellant's claim cannot be equated with concealment. In the instant case, it is found that a different view has been taken by the A.O. out of the two possible views while rejecting the claim of the appellant and while recalculating the deduction u/s 80HHC and the recomputation / recalculation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld the order of the AO. In respect of other additions i.e. (ii) to (vi) above, he submitted that since the Tribunal in the quantum appeal has set aside the issues to the file of the learned CIT(A), therefore, penalty proceedings should also be restored to the file of the learned CIT(A) to be decided afresh by the learned CIT(A) after deciding the quantum. 5. The learned counsel of the assessee, on the other hand, placing reliance on Circular No.2/2006, dated 17-1-2006 submitted that in respect of addition u/s 80HHC with respect to DEPB, the AO in fact should not have imposed the penalty at all, therefore, the order passed by the learned CIT(A) on this issue, may kindly be upheld. She also relied on some decisions for making submission that no penalty is leviable on the additions made u/s 80HHC. As far as penalty on other additions is concerned, she had no objection if the matter goes to the file of the learned CIT(A). 6. After hearing both the parties and perusing the records, we find that in view of the Circular No.2/2006, dated 17-1-2006 relied upon by the learned counsel of the assessee, the AO should not have imposed the penalty at all in this case in respect of additi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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