M/S Cane Development Council , Faizabad vs Department Of Income Tax

M/s Cane Development Council v. DCIT Masodha Motinagar Circle Mashodha, Faizabad Faizabad (Cross-Objector) (Respondent)

Appellant by: Shri. Punit Kumar, D.R. Respondent by: None Date of hearing: 12 03 2015 Date of pronouncement: 26 03 2015

ORDER

PER SUNIL KUMAR YADAV:

This appeal is preferred by the Revenue against the order of the ld. CIT(A) deleting the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter called in short "the Act").

2. In support of the order of the ld. CIT(A), the assessee has also filed cross objection.

3. This appeal was listed for hearing on 12.3.2015, but none appeared on behalf of the assessee. On a perusal of record, it is noticed that notice of hearing was duly served upon the assessee, but none appeared on behalf of the assessee.

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4. On a careful perusal of the orders of the authorities below and the grounds raised in this appeal, we are of the view that this appeal can be disposed of even in the absence of the assessee.

5. Penalty was levied on account of disallowance of deduction claimed by the assessee under section 80P of the Act. The disallowance made by the Assessing Officer was confirmed by the ld. CIT(A). The penalty order was challenged before the ld. CIT(A) and the ld. CIT(A) having noticed that in assessment years 2009-10 and 2010-11, the disallowance made by the Assessing Officer was deleted by the ld. CIT(A) having observed that the commission and interest receipts which have been taxed by the Assessing Officer are meant for specific projects and required to be spent for meeting the expenses of these projects and the surplus, if any, arising is not the income of the assessee, has held that there was no question of taxing the commission and interest.

6. During the course of hearing, the ld. D.R. could not dispute the finding of the facts recorded by the ld. CIT(A) in his order. Nothing has been stated with regard to the fate of the order of the ld. CIT(A) for assessment years 2009-10 and 2010-11. In that situation, penalty under section 271(1)(c) of the Act is not leviable, as there may be difference of opinion with regard to the disallowance of claim of the assessee. For the sake of reference, we extract the relevant portion of the order of the ld. CIT(A) as under:-

"4. I have considered the matter. It is found that in the case of the appellant similar additions 'we're made by the AO in the AYs 2009-10 & 2010-11. The AO disallowed the claim, of deduction u/s SOP in respect of contribution received from the sugar mills in form of commission and bank interest for the reason that the appellant is not a co-operative society and the activities carried out by it do not qualify for deduction u/s 80P. In the appellate orders passed by me on 18.02.2014 in Appeal Nos. OT(A)-I/Lko/11-12/115 & CIT(A)-

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I/Lko/12-13/113 for AYs 09-10 & 10-11 respectively it has been held that-the commission and interest receipts which have been taxed by the AO are meant for specific projects and required to be spent for meeting the expenses of these projects. Consequently, the surplus, if any arising is not income of the appellant and thus there does not arise any question of taxing commission and interest as income. I find that similar arguments were made by the appellant before the AO during the penalty proceedings which were not considered by her. The AO failed, to appreciate that the penalty proceedings are different from the assessment proceedings. It is also noted that the appellant has disclosed all the facts during the assessment proceedings. The addition was only made because the appellant under mistaken legal advice filed return as co-operative society and claimed deduction u/s 80P of the Act. The addition was made by the AO and subsequently confirmed by the CIT(A) because the appellant could not present his case properly in light of the judgments of the appellate authorities deciding the issue in his favour. It is noted that the addition in respect of which penalty has been imposed is disputed, involve change of opinion and interpretation of provisions of the Act. Since the appellant has disclosed the full facts the AO was not justified in imposing penalty u/s 271(l)(c) for merely making of a claim on a wrong legal advice. Reliance is placed on the following judgments:

a. CIT v. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC) b. CIT v. Arctic Investment (P) Ltd., (2010) 190 Taxman 157 (Del.) c. CIT v. The Shahabad Coop. Sugar Mills Ltd., 322 ITR 73 (P & H) Under the circumstances penalty order u/s 271(l)(c) imposing penalty of Rs.13,04,379/- for furnishing inaccurate particulars is cancelled. Grounds are decided in favour of the appellant."

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7. Since the Revenue has not pointed out any defect in the order of the ld. CIT(A), we find no infirmity therein and we confirm the same.

8. Since the order of the ld. CIT(A) is confirmed, the cross objection of the assessee has become infructuous. Accordingly, the same is dismissed.

9. In the result, appeal of the Revenue and the cross objection of the assessee are dismissed.

Order was pronounced in the open court on the date mentioned on the captioned page.

Sd/- Sd/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED: 26th March, 2015 JJ:1703

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar