Case: The Commissioner of Income Tax Vs. M/S. Petals Engineers Private Limited

Oral Judgment:(B.R. Gavai, J.)This Appeal takes exception to the Judgment and Order passed by the learned Income Tax Appellate Tribunal, Panaji, dated 05.09.2006.2. The Appeal has been admitted by the Division Bench of this Court on 16.04.2007 on the following substantial questions of law :A) Whether on the facts and in the circumstances of the case, the ITAT was justified in deleting the penalty u/s 271(1)(c), though the claim of the assessee u/s 80IA was disallowed, by the ITAT by same order dated 05.09.2006B) Whether on the facts and in the circumstances of the case, the ITAT, was justified in deleting the penalty merely on the ground that the claim of the assessee was debatable, as the Assessee has admitted that they have shifted its plant and machinery to the new premises previously used for the same purpose 3. Heard Smt. Asha Dessai, learned Senior Standing Counsel along with Shri Rao, learned Junior Standing Counsel appearing for the Appellant.4. The facts in brief giving rise to the present Appeal are as under:The Respondent-Assessee had filed his return for the assessment year 1994-95. In the said returns, it had claimed deductions under Section 80IA on the ground that it had set up a new plant and machinery at Kundaim. The claim of the Respondent-Assessee under Section 80IA came to be rejected by the Assessment Officer. By an Order dated 22.03.1999 while rejecting the said claim, the Assessment Officer also levied a penalty @ 300% amounting to Rs.7,01,355/- under Section 271(1)(c) of the Income Tax Act. Being aggrieved thereby, an Appeal was preferred by the Respondent-Assessee before the Commissioner of Income Tax (Appeal). The Appeal in so far as claim of deduction under Section 80-IA is concerned, came to be dismissed. However, the Appeal was allowed to the extent of imposition of penalty. Being aggrieved thereby, further three appeals were filed by the Revenue as well as assessee before the learned Tribunal. The learned Tribunal dismissed the Appeal of the assessee in so far as deductions under Section 80-IA. However, the appeals filed by Revenue in so far as imposing of penalty is concerned, were dismissed. Being aggrieved thereby, the Revenue has come before this Court.5. Ms. Asha Dessai, learned Senior Standing Counsel appearing for the Appellants, submitted that though the Assessee only shifted his unit from Fatorda to Kundaim, it had claimed the benefit as if the entire new unit was being established at Kundaim and, therefore, the penalty was rightly imposed by the Assessing Officer and upheld by the Commissioner of Income Tax. The learned Senior Standing Counsel therefore submitted that a substantial question of law as to when the the Income Tax Appellate Tribunal disallowed the claims of deduction under Section 80-IA, whether it is permissible for it to reverse the Order in so far as penalty is concerned6. It would be relevant to refer to the note appended by the Respondent-Assessee along with its returns for the assessement year 1994-95, which reads thus :"The company is eligible for deduction u/s 80-IA in respect of its entire gross total income as the only activity of the Company is the new industrial undertaking set up at Kundaim Industrial Estate. Kundaim, Ponda, Goa which commenced operation from 3-7-1993. The original cost of Plant and Machinery transferred from our plant at Fatorda to the new Plant at Kundaim is Rs.3,75,780 (WDV as at 1st April 1993 Rs. 2,02,234). The total cost of new Plant & Machinery capitalized at Kundaim factory is Rs.22,40,,809. Therefore, the cost of plant and machinery transferred from Fatorda to Kundaim factory is less than 20% (Rs.4,48,162) of the cost of new plant and machinery installed at our new industrial undertaking.Deduction u/s 80-G has not been claimed in respect of donation of Rs.90,000 in view of the claim u/s 80-IA.7. It could be clearly seen that the Respondent-Assessee has specifically stated that it was transferring the same plant and machinery from factory at Fatorda to Kundaim. The value of the said plant and machinery was shown to be Rs.3,75,780/- as on 01.04.1993 and its depreciated value was shown to be Rs.2,02,234/- and it is specifically specified that the total cost of new Plant and Machinery capitalised at Kundaim factory is Rs.22,40,809/-. The Assessee had also obtained an expert advice with M/s. Prafull Jain & Associates, which had given an advice that the Assessee was entitled for benefit under Section 80-IA(2) (iv)(b) with regard to Kundaim unit. One Shri Prafull Jain, who was an expert filed an affidavit stating therein that according to my interpretation, the company did not shift the claim for deduction u/s 80-I to 80-IA. The unit at Kundaim Industrial Estate is a new industrial undertaking, manufacturing a much wider range of products. It can be thus clearly seen that the Assessee under the bonafide impression, that since more than 80% of the cost at new factory was by installing new plant and machinery and only less than 20% of the cost was towards transferring the plant and machinery, it was entitled to benefit under Section 80-IA. It is not in dispute that the Assessee has not concealed any fact from the authorities. A specific reference has been made to this. The Tribunal has observed that for attracting penalty, a mens rea is necessary. It has found that neither there is suppression of fact or misrepresentation of fact by the Assessee and, as such, the Order of penalty was not sustainable in law.8. The interference against Judgment and Order of Tribunal would be warranted only if the Order passed by it is perverse or unsustainable in law. Merely because, this Court finds that two views are possible and other view is more attractive to it, it cannot be a ground to interfere with a well reasoned Order.

Decision:
0[ds]It can be thus clearly seen that the Assessee under the bonafide impression, that since more than 80% of the cost at new factory was by installing new plant and machinery and only less than 20% of the cost was towards transferring the plant and machinery, it was entitled to benefit under SectionIt is not in dispute that the Assessee has not concealed any fact from the authorities. A specific reference has been made to this. The Tribunal has observed that for attracting penalty, a mens rea is necessary. It has found that neither there is suppression of fact or misrepresentation of fact by the Assessee and, as such, the Order of penalty was not sustainable in law.8. The interference against Judgment and Order of Tribunal would be warranted only if the Order passed by it is perverse or unsustainable in law. Merely because, this Court finds that two views are possible and other view is more attractive to it, it cannot be a ground to interfere with a well reasoned Order.