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TMI Blog2016 (6) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... was pointed out by the Assessing Officer to the assessee. When the assessee itself noticed the mistake and came forward and offered the income for taxation, the assessee cannot be held in default for furnishing inaccurate particulars. Thus we are of the opinion that the excess claim under section 80-IB of the Act made by the assessee was on the basis of the bonafide mistake of the Auditor and the assessee cannot be held for furnishing inaccurate particulars of income and, accordingly, the penalty levied under section 271(1)(c) of the Act on the incorrect claim of deduction under section 80-IB is deleted - Decided in favour of assessee Penalty levied on disallowance of deduction under section 80-IB on account of higher allocation of head office/common expenses - Held that:- We find that facts of allocation of common expenses are identical to the facts of the case of Dharmpal Premchand Ltd (2010 (9) TMI 155 - DELHI HIGH COURT ), thus respectfully following the ratio of the said decision wherein held that 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 80IB of the Act, which was suo-moto disallowed and offered to tax by the appellant in the course of assessment proceedings. 2.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that the excess claim of deduction under section 80IB of the Act to the extent of ₹ 5,77,22,220/-, which was based on the certificate granted by the auditors, was made due to inadvertence and was a bonafide mistake, not warranting imposition of penalty under section 271(1 )(c) of the Act. 2.2 That the Commissioner of Income Tax (Appeals) erred on facts and in law in holding that excess claim of deduction under section 801B was not suo-moto offered for disallowance by the appellant during the course of assessment proceedings. 2.3 That the Commissioner of Income Tax (Appeals) erred on facts and in law in holding that suo-moto surrender of excess claim of deduction under section 80IB of the Act through a letter, during the course of assessment proceedings did not partake the character of revision of income, in the absence of filing revised return within the time limit and in accordance with the provisions of section 139(5) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rate of hundred percent in respect of three units namely Unit-V (Ralholi-Silvasa), Unit-X (Saily- Silvasa), Unit-IX (Pondicherry) and 30% deduction in respect of Unit-IV (Saily- Silvasa). Subsequently, in the course of scrutiny proceedings through letter dated 01/12/2006, the assessee revised its claim of deduction under section 80- IB of the Act to ₹ 5,77,22,220/- stating that deduction in respect of unit-X and unit-IX was claimed wrongly at the rate of 100% as against the 30% allowable, accordingly in the order under Section 143(3) of the Act, the Assessing Officer allowed the deduction at the rate of 30% in respect of the two units. Further, the Assessing Officer observed that common expenses related to the units eligible for 80-IB deduction incurred by the head office had not been allocated to the respective units. The Assessing Officer after determining common expenses of ₹ 72,13,618/- allocated the expenses in the ratio of the turnover of the respective unit resulting into reduction of deduction under section 80-IB of the Act. The deduction finally allowed after withdrawing the access deduction under claimed under section 80-IB in respect of the two units and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the assessee failed to substantiate its explanation regarding addition/disallowances made in the assessment. The learned Commissioner of Income-tax (Appeals) in the impugned order has repeated the finding of the earlier Commissioner of Income-tax (Appeals) on the issue in dispute. According to the Commissioner of Income-tax (Appeals) the correct amount of addition on this account would have been ₹ 5,84,17,392/-, which was not objected by the Authorized Representative of the assessee. The learned Commissioner of Income-tax (Appeals) held that mere filing of letter before the Assessing Officer rectifying the claim of deduction under section 80-IB would not absolve the assessee from the charges of furnishing inaccurate particulars/concealment committed by the assessee. The learned Commissioner of Income Tax(Appeals) was of the view that the said income was never disclosed in the return, not even by way of the revised return and, therefore, provisions of section 271(1)(c) were attracted. As regard to the argument of the assessee that it was a bona-fide mistake, the learned Commissioner of Income-tax (Appeals) observed that there was no material evidence on record to j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities below submitted that notice under section 143(2) was issued to the assessee for scrutiny of the case and then only the assessee realized mistake and no revise return was filed by the assessee rectifying its mistake. 4.3 We have heard the rival submission and perused the material on record. We find that there is no dispute on the issue that the claim of 100% deduction under section 80-IB in respect of the two units was wrong but the dispute is whether the mistake was bonafide and whether it was detected suo motu by the assessee and rectified before being noticed by the Assessing Officer. We find from the facts of the case that the Auditor computed deduction @ 100% in respect of the two units in reference and the assessee claimed the same deduction in the return of income filed. According to us, it is a very much likelihood that a normal person will claim the deduction in the return of income what has been computed by the Auditor, who has been authorized by the Act to submit a audit report in form No. 10 CCB in respect of the claim of deduction. In the circumstances, it cannot be said that there was a malafide intention behind the claim of excess deduction and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mistake. He noticed that there was no dispute about figures and the transaction in question. The first transaction and full gain was disclosed by the respondent-assssee as short-term capital gains. The assessee had paid tax @ 10% which was applicable to short-terms capital gains. The Assessing Officer had observed that tax at normal rate of 30% was applicable. The assessee accepted the said position and has paid and interest. In Price Waterhouse Coopers Pvt. Ltd. Vs. Commissioner of Income Tax, (2012), the Supreme Court deleted the penalty and has accepted that human errors do happen in spite of caliber, expertise and due care. Mistakes, when explained and shown to be bona find, do not justify levy of penalty. It has been observed as under:- ?? The contents of Tax Audit Report suggest that there is no question of the assessee concealing? Its income. There is also no question? of the assessee furnishing any inaccurate particulars. All that happened in the present case is that through a bona fide? and inadvertent error? failed to add the provisions for gratuity to its total income. This can only be described as a human error? Which we are all prone to make. The caliber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stake of the Auditor and the assessee cannot be held for furnishing inaccurate particulars of income and, accordingly, the penalty levied under section 271(1)(c) of the Act on the incorrect claim of deduction under section 80-IB is deleted. Accordingly, the grounds 2 to 2.5 of the appeal are allowed. 5. In grounds no. 3 to 3.1 the assessee has challenged penalty levied on disallowance of deduction under section 80-IB of the Act amounting to ₹ 6,95,173/- on account of higher allocation of head office/common expenses. The facts in respect of the disallowance are that the Assessing Officer in the details furnished during the course of assessment observed that the assessee had not allocated the head office expenses with the unit eligible for deduction under section 80-IB of the Act. It was submitted by the assessee that books of account of each unit were independent and there was no common expenses which were relatable and allocable to those units. The Assessing Officer did not accept the submission of the assessee and held that head office was nothing but a controlling agency for all the units and thus it cannot be said that the expenditure incurred in the head office had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the findings of the authorities below. 5.4 We have heard the rival submissions and perused the material on record. In the case of CIT Vs. Dharmpal Premchand Ltd. (supra) the assessee was engaged in the manufacture of flavoured chewing tobacco and kiwam and claimed deduction under section 80-IA and 80-IB of the Act. The claim of deduction of the assessee was denied and penalty under section 271(1)(c) of the Act was levied. The learned Commissioner of Income Tax(Appeals) deleted the penalty accepting the assessee s contention that it had disclosed all material facts pertaining to the computation of deduction admissible under section 80-IA and 80-IB that the directors remuneration had been duly debited in the head office and no amount was allocated towards a unit and the interest earned on banks and interest paid to the others had a direct nexus to the business activities and, therefore, the deduction of said amount would be admissible to the assessee. The Tribunal held that allocation of expenses between the head office in the unit would always be a debatable issue and affirmed the order of the Commissioner of Income-tax (Appeals). The Hon ble High Court in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of ₹ 19,200/- paid in respect of the loan taken from Mr. Ravi Kapoor, which was treated as unexplained cash credit under section 68 of the Act in the preceding assessment year. 6.1 The facts in respect of the issue in dispute are that in the assessment proceeding the AO made addition of ₹ 1,06,200/- for interest paid in respect of loan taken from five parties, which were held as unexplained cash credit in earlier years. The penalty was levied only in respect of one loan from Mr. Ravi Kapoor which was only finally sustained by the ITAT as unexplained cash credit. The learned Commissioner of Income Tax(Appeals) has upheld the penalty on the ground that the assessee has shown a false entry in the form of unexplained cash credit which amounted to furnishing of inaccurate particulars of income. 6.2 Before us learned Authorized Representative of the assessee submitted that all documents in respect of the cash creditors were submitted before the Assessing Officer and relied on the judgment of the Punjab and Haryana High Court in the case of CIT Vs. Sunila Sharma in ITA No. 57/2013 (P H H.C.) wherein it is held that no penalty can be imposed if the confirmations from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versus Sunila Sharma (supra). In the facts of the case the Hon ble High Court has held as under: 9. The factual matrix of the case has been discussed above. The assessee furnished the details regarding the bank accounts from where she got the gifts, the dates, the details of the bank accounts and the demand drafts of Toronto Dominion Bank, Canada were furnished to substantiate that the gift was from her brother who was residing at Canada. The concealment, as such, in the facts and circumstances, was missing, as admittedly, it was not that the amount was detected subsequently but the factum of the gifts from the brother and sister had been mentioned in the note in the income tax return. The explanation was later on asked for and further particulars could not be furnished on account of sour relationship and the fact that she was not in touch with her brother who had allegedly shifted Canada, thereafter. 10. In such circumstances, the discretion which has been exercised by the Tribunal, in setting aside the penalty, cannot be said to be perverse or suffering from such illegality which would warrant interference. The Tribunal has discussed the matter in detail and thrashed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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