Decided on November 18,2014

The D.C.I.T. Appellant
Parabolic Drugs Ltd. Respondents


Bhavnesh Saini, Member (J) - (1.) THIS appeal by revenue is directed against the order of ld. CIT(Appeals) Central, Gurgaon dated 25.09.2013 for assessment year 2005 -06 challenging the cancellation of penalty under section 271(1)(c) of the Act.
(2.) BRIEFLY , the facts of the case are that the assessment was completed on 21.12.2009 under section 47/143(3) of the Act at Rs. 98,74,970/ -. Against the addition of Rs. 29,62,491/ -, penalty proceedings were initiated. The Assessing Officer has observed that the assessee did not qualify as small scale industry as the investment in the plant & machinery in this undertaking was of Rs. 351.59 lacs. Consequently, the claim of deduction under section 80IB of the Act of Rs. 29,62,491/ - was disallowed. This disallowance was confirmed in appeal. It was a case of the Assessing Officer that assessee did not qualify as small scale industry as the investment in the plant & machinery was more than the monetary limit prescribed, hence, the assessee made wrong claim of deduction under section 80IB(3), therefore, vide separate order, penalty under section 271(1)(c) of the Act was levied. The assessee challenged the levy of penalty before ld. CIT(Appeals) and the written submission of the assessee is incorporated in the appellate order in which the assessee briefly explained that all particulars were disclosed in the return of income as well as at the assessment stage for claim of deduction under section 80IB of the Act. Therefore, it is not a case of concealment of income or filing inaccurate particulars of income. The assessee company is in the business of manufacturing of bulk drugs and fine chemicals. The deduction under section 80IB was disallowed for the reason that assessee had made investment in plant & machinery more than the limit prescribed by the Ministry of Industries, in respect of small scale industries. It was submitted that assessee company was under a bona fide belief that it was a small scale undertaking in view of various confusing notifications which kept on changing time and again. The auditor has also qualified for deduction in the audit report. The levy of penalty is not automatic and is discretionary in nature, therefore penalty may be cancelled. The ld. CIT(Appeals), considering explanation of assessee in the light of various judgments, cancelled the penalty and allowed the appeal of the assessee. His finding in appellate order in para 4.3 and 5 are reproduced as under: 4.3.I have considered the submission of the assessee as well as the impugned order. I have also gone through the plethora of cases relied upon by the assessee. The Ld. AO had initiated the penalty proceedings u/s. 271(1)(c) as it has been held that the assessee has filed inaccurate particulars and so concealed his income to the extent of Rs. 29,62,491/ - in as much as the claim for deduction u/s. 80IB(3) on ground of it being a small scale undertaking was false. As per sec. 271(1)(c), penalty is to levied if the assessee has concealed particulars of income or has furnished inaccurate particulars of such income. Assessee has contended that the penalty was not sustainable as the charge contemplated u/s. 271(1)(c) is not clear. Be that as it is, it is a fact that deduction has been claimed u/s. 80IB(3) in the status of a small scale industry. This was found to be incorrect as per the Notification of the Ministry of Industry for small scale units. The investment in Plant and Machinery was found to be exceeding the prescribed limit. It is the assessee's contention that it was under bona -fide belief that it was a small scale industry in view of the various confusing notifications of the Ministry which changed from time and again. It was also emphasized that the books were duly audited and that Form 10CCB was quantified after looking into the conditions for claiming the deduction. Furthermore, assessee stated that as all particulars of its Plant and Machinery as well as the calculation of deduction u/s. section 80IB was furnished in the return of income, so it could not be said that particulars of income were concealed or filed inaccurately. Here a claim has been made which was found to be incorrect. This claim was on the basis of certificate issued by the auditor in the requisite Form 10CCB. The violation is the investment in plant and machinery exceeded the limit prescribed by the Ministry of Industries. Notification as to the limit of investment has been modified in 1997 and 2009 as evident from the impugned order. All material facts as regards its investment cannot be said to have been withheld by the assessee as the return filed was accompanied by audited accounts and Form 10CCB. Consequently considering the facts of the case, I am inclined to hold that the assessee had fully disclosed all material facts and so it is apparent that there is neither any concealment of income nor furnishing of inaccurate particulars of its income. The penalty levied is therefore directed to be deleted. 5. IN the result the appeal of the assessee is allowed."
(4.) The ld. DR relied upon order of the Assessing Officer and submitted that assessee made wrong claim of deduction under section 80IB of the Act. Therefore, penalty was leviable under section 271(1)(c) of the Act. He has submitted that since claim of deduction was not bona fide, therefore, it amounts to concealment of income and relied upon decision of the Delhi High Court in the case of CIT vs. Zoom Communication P. Ltd. : 327 ITR 510. The ld. DR also relied upon decision in the case of CIT vs. Escorts Finance Ltd. : 328 ITR 44, decision in the case of Krishna Kumar Chamanlal & another v. CIT & another : 217 ITR 645, decision in the case of Rajaram and Co. v. CIT : 193 ITR 614 and decision in the case of Beena Metals v. CIT : 240 ITR 222.;

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