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TMI Blog2013 (8) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars thereof, neither of which is the case herein. Even under Explanation-1 to Section 271 (1)(c), a presumption is raised, which is a rebuttable presumption. In the present case, even this presumption is not, at the outset, even available against the assessee, inasmuch as the explanation offered by the assessee has neither been found to be false, nor has the assessee not been able to substantiate the same, nor has such explanation been shown to be not bona fide - all facts relating to the explanation and material to the computation of the assessee's total income stood duly disclosed by the assessee. where in the return of income filed, the assessee had duly disclosed all the details regarding the claim of deduction u/s 80IC of the Act, which claim was supported by the Tax Audit Report and the Tax Audit Report contained all the facts relating to the substantial expansion as required by Section 80IC, the Assessing Officer nowhere alleged the assessee to have withheld any information or to have furnished any false information, the disallowance had been made merely on account of a bona fide difference of opinion between the assessee and the department regarding the manner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn, called Advance Valves Company, was located in Gagret, District Una, HP. Advance Valves Company was engaged in the manufacture of valves. It started operations from 20.09.1999 and was claiming deduction u/s 80IB of the Act. During the year under consideration, the assessee firm claimed exemptions u/s 10A of the Act on the profit of the business of the SEZ Unit, i.e., M/s Advance Valves Global and deduction u/s 80IB of the Act on the profit of the business of the Gagret unit, i.e., Advance Valves Company in the original return. However, in the revised return, the assessee claimed deduction u/s 80IC of the Act on the profit of the Gagret unit, i.e., M/s Advance Valves Company, showing total sales amounting to Rs. 7,01,68,508/- and net profit of Rs. 2,67,90,071/-. The Assessing Officer noticed from the audit report that the date of commencement of operation of Advance Valves Company was 20.09.1999 and that Assessment Year 2005-06 (the year under consideration) was the initial year from which deduction u/s 80IC of the Act was being claimed. 4. On query, the assessee submitted that deduction u/s 80IB of the Act was claimed in respect of the profit derived from the industrial undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er asked the assessee to explain the basis of working out the arm's length price, as also to explain as to why, in accordance with Section 10A (7) read with Section 80IA(10) of the Act, the difference of Rs. 1,46,735/- be not treated as the assessee's income, not being profit eligible for exemption u/s 10A of the Act. The assessee maintained that it was charging the same amount from its related concern, as was being charged from other customers. The Assessing Officer, however, did not find the invoices of the related concern, i.e., UNS Enterprises and of other customers, to be comparable, since the invoice of UNS Enterprises was of a different financial year and even therein, in one case, the price charged from UNS Enterprises was equal to that charged from related customers even after a gap of almost one year and three months. The Assessing Officer, thus, held that out of the said transaction with M/s UNS Enterprises, the amount of Rs. 1,46,735/- was being treated as taxable income of the assessee, being profit not eligible for exemption. The assessee had claimed exemption of Rs. 36,03,379/- in respect of its SEZ Unit, u/s 10A of the Act. The Assessing Officer, however, held an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any year, as on the first day of the previous year in which substantial expansion is undertaken; that thus, increase in the value of Plant Machinery has to be taken into account from the first day of the previous year in which the substantial expansion has started; that as per Section 80IC (8)(v), initial assessment year means the year in which substantial expansion is completed; and that therefore, the initial assessment year for claim of deduction in the case of the assessee was Assessment Year 2005-06 and so, the claim made by the assessee, in accordance with law, was allowable. 9. Vide order dated 31.03.2010, however, the penalty in question was levied on the assessee by the Assessing Officer, holding that the assessee had failed to prove that the investment in Plant Machinery during the year was less than 50% and the assessee had been unable to fulfill the condition for entitlement to deduction of Rs. 2,67,90,071/- u/s 80IC of the Act; that the assessee had, further, claimed wrong exemption of Rs. 1,46,735/- u/s 10A of the Act, failing to furnish evidence to prove that the exemption had been rightly claimed; that the assessee had furnished an explanation which it had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rg, disallowance of deduction u/s 80IC was confirmed by the Ld. CIT (A) on the ground of the assessee not having carried out substantial expansion of the unit by 31.03.2005, i.e., to the extent of 50% of the value of the Plant Machinery as on 01.04.2004; that the Ld. CIT (A) has erred in failing to consider that it was in these circumstances that the penalty in question was rightly imposed on the assessee. The Ld. DR has placed reliance on 162 ITR 481 (Patna), 327 ITR 510 (Del) and 328 ITR 44 (Del). 12. The ld. counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. It has been contended that deduction u/s 80IB of the Act was claimed for the period from Assessment Year 2000-01 to 31.10.2003; that the unit was acquired as a going concern w.e.f. 01.11.2003; that for Assessment Year 2004-05, i.e., from 01.11.2003 to 31.03.2004, the claim u/s 80IB of the Act was disallowed, observing that the unit had been formed by splitting up/re- construction of the earlier business; that the Ld. CIT (A), vide order dated 04.02.2008 (copy at APB 31-60); that the Tribunal vide its order dated 23.04.2010 (copy at APB 61-69), upheld the CIT (A)'s order, observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CA:- i) 'CIT vs. S. Dhanabai', 309 ITR 268 (Del); ii) 'CIT vs. Kas Movie (P) Ltd' (ITA No.793 of 2011) (Del); iii) 'CIT vs. Deep Tools (P) Ltd.', 274 ITR 603 (P H); iv) 'CIT vs. Ved Parkash Likhi and Sons (HUF)' (ITA No.458 of 2010) (P H); v) 'CIT vs. S.D. Rice Mills', 275 ITR 206 (P H); vi) 'HCIL Arsspl Triveni (JV) vs. ACIT' (ITA Nos.4579 4580/Del/2010) (Delhi ITAT); vii) 'ACIT vs. DSL Software Ltd.', 147 TTJ 67; viii) 'Rudolph Staudinger vs. ACIT' (2007) 18 SOT 115; and 10 ITA No.5486/Del/2011 ix) 'Aristocrat Luggage Ltd. vs. DCIT' (ITA No.6841/Mum/2006) (Mumbai ITAT). 13. It has been contended that by placing reliance on 'CIT vs. Zoom Communication (P) Ltd.', 327 ITR 510 (Del) (supra) and 'CIT vs. Escorts Finance Ltd.', 328 ITR 44 (Del), the department seeks to contend that it is not the department's onus to establish mens rea in a case like the present one; that this is not the assessee's case at all and the case law relied on by the department are all different on facts; that both these case laws stand dealt with by the Hon'ble Delhi High Court vide its judgement (copy placed on record) dated 19.07.2012, in ITA No.1190/2011, in the case of 'CIT vs. Soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From those material facts, A.O. had not made out any case of 'insubstantial expansion. My predecessor CIT (A), although gave a new finding; did so by utilizing and analyzing the same data/facts, as reported by appellant itself. Thus, no material facts were concealed. To that extent, I agree that explanation 1 to Section 271 (1)(c) does not apply to the present case. I also find from a carefully perusal of penalty order that A.O. has failed to elaborate and establish as to how "appellant has furnished an explanation which it was not able to substantiate and failed to prove it was bona fide'. The A.O. has not dealt with appellant's explanations that (a) the view of A.O. for disallowing claim u/s 80IC, was altogether different from the view on the basis of which penalty was being proposed (b) even auditor has given a report in prescribed form 10CCB, based on all discussed figures of WDV and expansion/addition to machineries in various years (c) appellant had not concealed any material facts, relevant to the issue of deduction u/s 80IC. I find that A.O. has failed to counter appellant's these relevant arguments, made for rebutting the presumption of concealment. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving been used in the business, but on the ground of the assessee having failed to comply with the requirement of substantial expansion. This ground, it is pertinent to note, had never been invoked by the Assessing Officer for making the disallowance for the year. This disallowance was not challenged by the assessee before the Tribunal. However, this fact of the addition not having been challenged before the Tribunal, by itself does not lead to any inevitable conclusion of leviability of concealment penalty, as held in :- i) 'CIT vs. Ganesh Mal Nanak Chand 1976....CTR (Raj) 193; ii) 'Sohan Lal G. Sanghi vs. ACIT', 125 ITR 184 (MP); iii) 'ACIT vs. Aggarwal Sanitary and Hardware Company', 82 TTJ (Chd) 501; and iv) 'Canbay Software vs. DCIT', 122 TTJ 721 (Pune). 19. Penalty proceedings and assessment proceedings are separate. Though the findings in assessment proceedings may be relevant for the purposes of levy of concealment penalty, they are not material for such levy, on a stand alone basis. The requirement u/s 271 (1)(c) of the Act is either concealment of particulars of income or furnishing of inaccurate particulars thereof, neither of which is the case herein. Even und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpansion under the said Section, there is a difference of opinion between the assessee and the department and the claim of the assessee in this regard has not been shown to be mala fide. The assessee nurtured a bona fide belief that it had carried out substantial expansion by making necessary investment in Plant Machinery during the period from 01.04.2002 to 31.03.2005 and that it was, thus, eligible to claim deduction u/s 80IC of the Act in respect of the profits earned in its Gagret unit. Such claim has not been shown to be without basis, or false. Now, there is a bona fide difference of opinion entertained by the assessee with that of the department regarding the manner of determining the substantial expansion for the purpose of allowability of deduction u/s 80IC of the Act, such issue being a highly vexed debatabale legal issue. In such circumstances, as held, inter alia, in the following cases, no concealment is leviable:- i) 'CIT vs. Deepak Kumar', 232 CTR 78 (P H); ii) 'CIT vs. Nalwa Sons Investment Ltd.', 327 ITR 543 (Del); iii) 'CIT vs. Dharam Pal Prem Chand Ltd.', 329 ITR 572 (P H); iv) 'CIT vs. Arisudana Spinning Mills Ltd.', 326 ITR 429 (P H); v) 'CIT vs. Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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