RAKESH KUMAR GARG, J. - (1.) THE Revenue has filed the present appeal under s. 260A of the IT Act, 1961 ( hereinafter referred to as the "Act" ) called the 'Tribunal') in ITA No. 785/Chandi/ 2004 for the asst. yr. 1995 -96, raising the following substantial question of law : "Whether on the facts and law the Hon'ble Tribunal was legally justified to hold that the penalty under s. 271(1)(c) was not justified in view of the Expln. 4(a) to s. 271(1)(c) due to inaccurate particulars of income by wrongly claiming the deduction under s. 80P(2)(a)(iii) of IT Act as it was engaged in manufacturing, and not in marketing business - declaring 'nil' income. A perusal of the computation of total income shows that the business income of Rs. 6,32,07,617 earned from the activity of manufacturing of sugar, molasses and other by -products from sugarcane was claimed to be 6,32,07,617 was disallowed by the AO. The Commissioner of Income -tax (Appeals) [hereinafter referred to as the "CIT (A)"] dismissed the appeal filed by the assessee against the order of the AO. The Tribunal also upheld the disallowance made by the Revenue authorities with regard to the deduction claimed by the assessee under s. 80P(2)(a)(iii) of the Act. While passing the assessment order under s. 143(3) of the Act, the AO also initiated penalty proceedings under s. 271 (1)(c) of the Act for furnishing inaccurate particulars of income and subsequently a penalty of Rs. 1,77,02,766 was Being aggrieved against the aforesaid order, the respondent preferred an appeal before the CIT(A) -I, Ludhiana, who 4. Still dissatisfied with the aforesaid order, the respondent filed an appeal before the Tribunal, Chandigarh, who vide attempt on the part of the respondent to defraud the Revenue or conceal the facts, and also that the respondent had paid the tax in advance as also on self assessment and further that the claim made by the respondent was a bona fide claim and that all the particulars relating to computation of income were disclosed.
(2.) Feeling aggrieved against the said findings of the Tribunal, Chandigarh, the Revenue has filed the present appeal. Shri Sanjiv Bansal, advocate for the Revenue has vehemently argued that the Tribunal, Chandigarh was not justified in ignoring the fact that the respondent had furnished inaccurate particulars of income by claiming deduction under s. 80P(2)(a)(iii) of the Act as the respondent was engaged in manufacturing activity and not in marketing business. Therefore, the penalty under s. 271(1)(c) of the Act was rightly levied for wrong claim of deduction under s. 80P(2)(a) (iii) of the Act by furnishing inaccurate particulars of income.
(3.) We have heard learned counsel for the appellant Revenue and perused the record. 8. We find no force in the arguments raised by the learned counsel for the Revenue. The issue in this case is as to whether the assessee is guilty of having concealed any particulars of its income or having furnished inaccurate particulars of income. The assessee had made a claim for exemption under s. 80P(2)(a)(iii) of the Act. As per the said provisions of the Act, any society marketing agricultural produce of its members is exempt from taxation. At the relevant time, there were several decisions to support the view that marketing includes processing to make the produce marketable. In the case of Karnal Co -operative Sugar Mills Ltd. vs. CIT (2001) 170 CTR (P&H) 590 : (2002) 253 ITR 659 purchases sugarcane from members and manufactures sugar which involves use of power therefore it is not entitled to 1995 there were various decisions such as Broach District Co -operative Cotton Sales, Ginning and Pressing Society Ltd. vs. CIT (1989) 77 CTR (SC) 70 : (1989) 177 ITR 418 (SC), Addl. CIT vs. Ryots Agricultural Produce Co -operative Marketing Society Ltd. (1978) 115 ITR 709 (Kar), Meenachil Rubber Marketing & Processing Co -operative Society Ltd. vs. CIT (1992) 193 ITR 108 (Ker) and CIT vs. Karjan Co -operative Cotton Sale Ginning & Pressing Society Ltd. (1981) 21 CTR (Guj) 185 : (1981) 129 ITR 821 (Guj), on the basis of which society believed that it was entitled to deduction under s. 80P(2)(a)(iii) of the Act. Thus, the issue of entitlement to said deduction under these provisions was highly debatable. Moreover, undisputedly the society had paid advance tax as well as self assessment tax, not taking into account the deductions under s. 80P(2)(a)(iii) of the Act. The society had only made a claim of deductions in the return of income, which was not allowed by the AO. It is, therefore, evident from the facts that the claim made by the assessee was a bona fide claim. The decision of this Court in case cited in Karnal Co -operative Sugar Mills case (supra), on the question of deductions under s. 80P(2)(a)(iii) of the Act, which is pending, has been referred to the Larger Bench for reconsideration. Thus, it cannot be said that the explanation given by the assessee is found to be false and the assessee has established that the claim made was a bona fide claim and that all the particulars relating to the computation of income had been disclosed. In the case of Cement Marketing Co. of India Ltd. vs. Asstt. CST (1980) 124 ITR 15 (SC), the Hon'ble apex Court has held that where the assessee does not include a particular item in taxable income under a bona fide belief that he is not liable so to include it, it would not be right to condemn as a "false" return inviting imposition of penalty.;