Pooja Industries, Solan vs Assessee

Pooja Industries, Vs. The Income Tax Officer, Plot No.75, Sector 1, Ward 1, Parwanoo, Distt. Solan. Solan. PAN: AAGFP3843G (Appellant) (Respondent)

Appellant by : Shri Surinder Babbar Respondent by : Shri R.K. Gupta, DR

Date of hearing : 25.05.2015 Date of Pronouncement : 05.06.2015

PER T.R. SOOD, A.M.:

In this appeal, the assessee raised following grounds of

appeal :

"1. O n t h e f ac t s a n d c i r c u ms t a n c e s o f t h e c a s e , t h e L d .

CIT(A) has erred in c o n c u r r e n c e wi t h t h e L d . A . O . i n upholding the penalty of Rs.34,03,835/- and the s a me i s l i a b l e t o b e d e l e t e d .

2. O n t h e f ac t s a n d c i r c u ms t a n c e s o f t h e c a s e , t h e L d .

CIT(A) has grossly erred in holding that the assessee h a d m a d e i n c o r r e c t c l a i m o f f ac t a n d n o t i n c o r r e c t c l a i m o f l a w a n d t r i e d t o c l a i m d e d u c t i o n f o r wh i c h i t was not eligible in concurrence with the Ld.A.O. that t h e a s s e s s e e h a s wi l l f u l l y a n d i n t e n t i o n a l l y c l a i m e d wr o n g d e d u c t i o n u / s 8 0 I C @ 1 0 0 % o n a c c o u n t o f 2

substantial expansion to its unit instead of eligibnle d e d u c t i o n u / s 8 0 I B a l l o wa b l e @ 2 5 % . "

2. After hearing both the parties, we find that the

assessee was deriving income from running of flour mill

manufacturing atta, maida and suji, etc. The assessee had

claimed deduction under section 80IC of the Income Tax Act

amounting to Rs.1,12,94,962/-. This deduction was denied

because according the Assessing Officer, deduction under

section 80IC of the Act was not allowable to flour mill because

the same was mentioned in Schedule-XIII. The deduction was

allowed under section 80IB(4) at 25%. The penalty

proceedings under section 271(1)(c) of the Act were also

initiated. In response to the show cause notice, it was

submitted that the assessee has carried out substantial

expansion and was under the bonafide belief that the assessee

was entitled to deduction under section 80IC of the Act.

However, the Assessing Officer did not accept the submissions

of the assessee and levied penalty at the minimum rate of

100% under section 271(1)(c) of the Act amounting to

Rs.34,03,835/-.

3. On appeal, the assessee mainly submitted that the

claim of the assessee under section 80IC of the Act was

rejected by holding that the assessee was running a flour mill,

whereas the fact is that the assessee was running roller flour

mill. Further the deduction was claimed on the basis of

exemption order issued by the Government of Himachal

Pradesh in respect of sales tax exemption in the case of roller 3

flour mills. In any case, the assessee has disclosed all the

particulars. Therefore, it is not a case of concealment of

particulars. The penalty should not have been levied and in

this regard, reliance was placed on the decision of the Hon'ble

Supreme Court in the case of CIT Vs. Reliance Petro Products

Pvt. Ltd., 322 ITR 158. Reliance was also placed on the

decision of the Hon'ble Punjab & Haryana High Court in the

case of CIT Vs. Himachal Agro Foods Limited, 9 DTR 46 for

the proposition that merely a wrong claim of deduction under

section 80IB of the Act would not lead to penal consequences. Further reliance was placed on the decision of the Hon'ble

Supreme Court in the case of Cement Marketing Co. of India

Ltd. Vs. ACIT of Sales Tax, 124 ITR 15. The learned CIT

(Appeals) did not find force in the submissions of the assessee

and confirmed the levy of penalty vide para 5.1, which is as

under :

"5 .1 The main issue in this case is whether imposition of penalty u/s 271(1) (c) is valid when assessee has tried to claim deduction under section 80IC treating its flour mill as roller flour mill and considering its business not in thirteenth schedule of Income Tax Act for the purpose of deduction u/s 80IC of the Act. In this case assessee is trying to manipulate the facts to evade the taxes by going into technicality of language and trying to distinguish its business from flour mill by stating that it is a "roller flour mill" and not a 'flour mill'. Thus the assessee has twisted facts to evade taxes by claiming wrong deduction u/s 80IC.

Further, case laws relied upon by the assessee are not applicable to facts and circumstances of assessee's case. For example assessee placed reliance upon CIT Vs Reliance Petro Products P Ltd. (2010) 322 ITR 158 (SC) wherein Hon'ble Apex Court has held that incorrect claim of law does not attract penalty. Whereas in the present case assessee had made incorrect claim of fact and not of incorrect claim of law and tried to claim 4

deduction for which it was not eligible. Similarly, in case of CIT Vs Himachal Agro Foods Limited (2008) 9 DTR (P&H) 46, there was a bonafide mistake on the part of assessee wherein wrong year was taken for claim of deduction u/s 80IB of the Act. But in the present case there is no inadvertent mistake on the part of the assessee as the assessee has been contesting the issue of distinction between flour mill and roller flour mill up to ITAT level. Thus in view of forgoing discussion penalty imposed by the A. O. is confirmed and appeal of the assessee is dismissed."

4. Before us, the learned counsel for assessee

reiterated the submissions made before the learned CIT

(Appeals). It was further emphasized that the assessee was

under bonafidie claim that the assessee was eligible for

deduction under section 80IC of the Act particularly in view of

sales tax Exemption order for roller flour mills issued by the

Joint Secretary (Industries) to the government of Himachal

Pradesh, copy of which is placed at pages 10 and 11 of the

Paper Book. He also relied upon the decisions which were

cited before the learned CIT (Appeals). He further placed

reliance on the decision of the Hon'ble Bombay High Court in

the case of CIT Vs. Larsen & Toubro Ltd., 366 ITR 502.

5. On the other hand, the learned D.R for the Revenue

strongly supported the order of the learned CIT (Appeals).

6. We have considered the rival submissions carefully.

We find that it is a case of mere denial of deduction which the

assessee has claimed on roller flour mills with a bonafide plea

that the same was also eligible for deduction after substantial

expansion because the government of Himachal Pradesh had

issued the order exempting the same from sales tax.. In our 5

opinion, this is a simple case of denial of deduction which was

claimed under bonafide belief.

7. In any case, the assessee had made full disclosure

regarding deduction and in fact, deduction has been allowed

under section 80IB(4) at 25%. Therefore, it is not a case of

concealment of particulars. The Hon'ble Supreme Court in

the case of CIT Vs. Reliance Petro Products Pvt. Ltd. (supra)

has made the following observations :

"A glance at the provisions of section 271(1)(c) of the I n c o me - t a x A c t , 1 9 6 1 s u g g e s t s t h a t i n o r d e r t o b e c o v e r e d b y i t , t h e r e h a s t o b e c o n c e a l me n t o f t h e p a r t i c u l a r s o f t h e i n c o me o f t h e a s s e s s e e . S e c o n d l y , t h e a s s e s s e e mu s t have f urnished inaccurate particulars of his income. The meaning of the wo r d "particulars" used in section 2 7 1 ( 1 ) ( c ) wo u l d e mb r a c e t h e d e t a i l s o f t h e c l a i m m a d e . Where no inf ormation given in the return is f ound to be incorrect or inaccurate, the assessee cannot be held guilty of f urnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to f urnishing inaccurate particulars. There can be no dispute that everything wo u l d depend upon the return f iled by the assessee, b e c a u s e t h a t i s t h e o n l y d o c u me n t wh e r e t h e a s s e s s e e c a n furnish the particulars of his i n c o me . When such p a r t i c u l a r s a r e f o u n d t o b e i n a c c u r a t e , t h e l i a b i l i t y wo u l d arise. To attract penalty, the details supplied in the return mu s t n o t b e a c c u r a t e , n o t e x a c t o r c o r r e c t , n o t according to the truth or erroneous."

8. Further the Hon'ble Himachal Pradesh High Court in

the case of CIT Vs. Himachal Agro Foods Limited (supra) held 6

t h a t me r e wr o n g c l a i m o f d e d u c t i o n u n d e r s e c t i o n 8 0 I B o f t h e

A c t wh i c h wa s c l a i me d u n d e r b o n af i d e b e l i e f wo u l d n o t l e a d t o

penal consequences. Similar observations have been made by

the Hon'ble Bombay High Court in the case of CIT Vs. Larsen

& Toubro Ltd. (supra). Therefore, in our opinion it is not a

fit case for levy of penalty and accordingly we set aside the

order of the learned CIT (Appeals) and deleted the penalty.

9. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on this 5th day

of June, 2015.

Sd/- Sd/- (BHAVNESH SAINI) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 5 t h June, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh