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TMI Blog2015 (5) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... by : Shri Manjit Singh, DR O R D E R PER BHAVNESH SAINI,JM The departmental appeal as well as Cross Objection by assessee are directed against the order of ld. CIT(Appeals), Chandigarh dated 10.09.2013 for assessment year 2007-08, challenging the deletion of part penalty under section 271(1)(c) of the Income Tax Act and part penalty maintained under section 271(1)(c) of the Act. 2. The departmental appeal is filed on the following grounds : 1. The order of the learned CIT (A) is erroneous & contrary to facts & Law. 2. The Ld. CIT (A) has erred in deleting penalty amounting to ₹ 31,06,069/- on the issue of disallowance of interest u/s 36(1)(iii) of the Act ignoring the fact that. 2.1 The quantum of disallowance had to be estimated as there was variation in balance outstanding during the year but that does not alter the fact that the assessee had deliberately diverted the charging of interest from non taxable income to taxable income to reduce its taxable income and thereby evade payment of due taxes. 2.2 The decision of Hon'ble Punjab & Haryana High Court in the case of Harigopal Singh [258 ITR 85) is not applicable as the same is distinguishable on facts. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial penalty against assessee and maintained part penalty against the assessee. Both the parties are, therefore, under appeal/Cross Objection before us. The findings of ld. CIT(Appeals) discussing various issues for canceling the penalty or sustaining the penalty in para 5 to 5 of the appellate order are reproduced as under : "5. As per the provisions of section 271(l)(c), penalty can be levied, if the assessee has concealed particulars of its income or furnished inaccurate particulars of such income. For the sake of ready reference, Explanation-1 below section 271(1) is reproduced below: "Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an , explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and such a disallowance does not call for levy of penalty u/s 271(l)(c) in view of the decision of Hon'ble Punjab and Haryana High Court in the case of Harigopal Singh (258 ITR 85), in which it has been held: "Additions in his income were made, as already observed, on estimate basis and that by itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. There has to be a positive act of concealment on his part and the onus to prove this is on the Department." Moreover, the appellant had not concealed any particulars of its income. Hence, the penalty levied on this issue is cancelled. (b) Penalty levied on web/ software development expenses Brief facts of the issue are that the appellant had claimed an amount of ₹ 12,41,796/- on account of web and software development expenses in the books of Dera Bassi unit. The Assessing Officer treated this expenditure as capital expenditure and allowed depreciation at the rate of 60%. The disallowance worked out to ₹ 5,84,188/-. The penalty for concealment has been levied on this addition. During the course of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omotion and advertisements etc. The explanation of the appellant in the assessment proceedings and before my predecessor was that the expenses were debited on the basis of actual expenses incurred in the respective units. It was submitted that rescheduling of expenses on turnover basis was not correct. In nutshell, the appellant had made allocation of expenses on actual basis, whereas in the opinion of the Assessing Officer, it was done only to reduce the taxable profits. In other words, there was difference of opinion on the issue and "so such reallocation of expenses certainly does not call for levy of penalty for concealment, since the appellant had not concealed any particulars of its income. Penalty for concealment levied under similar circumstances was cancelled by Hon'ble Punjab and Haryana High Court in the case of Raj Overseas (336 ITR 261) and by Hon'ble ITAT, Chandigarh in the case of Perfect Forgings (143 TTJ 117). Hence, the penalty for concealment levied on this issue is also cancelled. d) Penalty levied on reduction of deduction u/s 80IC Brief facts of the issue are that the appellant had claimed deduction u/s 80IC to the tune of ₹ 3,43,67,266/- in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the appellant to claim higher deduction. The ratio of judgement of Hon'ble Delhi High Court in the case of M/s Zoom Communication (P) Ltd. (327 ITR 510) is squarely applicable to the facts of the instant case. The Hon'ble High Court had held as under in this case: "It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271 (1) would come into play and work to the disadvantage of the assessee. 20. The Court cannot overlook the fact that only a small percentage of the Income-tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty-under section 271(l)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so. The Assessing Officer has levied penalty for concealment on this disallowance also. During the course of appellate proceedings, the Ld. Counsel for the appellant has submitted that while filing the return, the depreciation loss should have been deducted before deducting the claim u/s 80IC, whereas the deduction u/s 80IC was to be deducted before deducting the amount of depreciation. According to him, this resulted into incorrect claim of carry forward of current year's depreciation. I have considered the submission of the Ld., Counsel. It is correct that the appellant had claimed brought forward of current year's depreciation due to wrong application of law, since the depreciation was to be deducted before deducting the claim of deduction u/s 80IC. However, as discussed herein above, the income of the appellant had increased due to various disallowances because of which the entire current year's depreciation was absorbed in the current year itself and the appellant was not entitled to any claim of carry forward of depreciation. Thus, the mistake committed by the appellant in the computation of income was wiped out because of the additions. Moreover, penalty for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 9. The other issue for levy of penalty is disallowance of expenses on account of re-allocation of expenses. The assessee made allocation of expenses on actual basis whereas in the opinion of the Assessing Officer, it was done only to reduce taxable profit. With regard to the re-allocation of expenses of various units, there may be a difference of opinion as the Assessing Officer did not accept opinion of the assessee with regard to one unit but certainly it would not give rise for levy of the penalty against the assessee. The ld. CIT(Appeals) by following the decision of the Hon'ble Punjab & Haryana High Court, in the case of Raj Overseas (336 ITR 261) and order of ITAT Chandigarh Bench in the case of Perfect Forgings (143 TTJ 117 )cancelled the penalty on this issue. 10. The other issue is with regard to levy of penalty levied on reduction of deduction under section 80IC of the Act. The ld. CIT(Appeals) noted that he has already cancelled the penalty on account of re-allocation of the expenses. Therefore, for re- allocation of interest expenses under section 80IC, he has cancelled the penalty, however, noted that assessee has claimed more than the deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, otherwise, the book profits are deemed as the total income of the assessee in terms of section 115JB of the Act. Where the income computed in accordance with the normal procedure is less than the income determined by legal fiction, namely, the book profits under on 115JB of the Act and the income of the assessee is assessed under Section 115JB and not under the normal provisions, the tax is paid on the income assessed under section 115JB of the Act. Concealment of income would have no role to play and would not lead to tax evasion. Therefore, penalty cannot be imposed on the basis of disallowances or additions made under the regular provisions." 12. He has further submitted that Hon'ble Punjab & Haryana High Court in unreported decision in the case of CIT Vs M/s Vardhman Acrylics Ltd., Ludhiana ITA 346 of 2013 vide order dated 04.08.2014 by following the same judgement in the case of Nalwa Sons Investment Ltd. (supra) dismissed the departmental appeal, copy of the order is placed on record. The ld. counsel for the assessee, therefore, submitted that on this reason alone, the entire penalty may be deleted. However, ld. DR relied upon order of the Assessing Officer. 13. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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