Case Law Details
Hon’ble Supreme Court in the case of M/s Hindustan Steel Ltd. vs State of Orissa (1972) 83 ITR 26(SC) and decision of Hon’ble High Court of Delhi in Escorts Finance Ltd. (2009) 226 CTR (Del) 105 wherein it was held that where facts are clearly disclosed in the return, penalty cannot be levied merely because an amount is not allowed or taxed as income.
Turning to the facts and circumstances of the present case, admittedly, the assessee made claim of deduction u/s 80HHC of the Act which was reduced during the reassessment proceedings finalized u/s 263/143(3) of the Act and a substantial part of the claim of the assessee for deduction u/s 80HHC of the Act was reduced and the AO held that the assessee was entitled to claim deduction u/s 80HHC of the Act of Rs.25,13,742 or against the deduction of Rs.58,00,945 as claimed by the assessee in its return of income. In this factual matrix, while the AO passed an order of reassessment in pursuance to order of CIT u/s 263 of the Act and on recomputation of deduction, the AO allowed the claim of the assessee for deduction u/s 80HHC Act at a lower figure but even in this situation, it cannot be inferred that the assessee has concealed its particulars of income or has furnished inaccurate particulars of its income. Thus, we come to a conclusion that the CIT was right in following decision of Hon’ble Supreme Court in the case of CIT vs Reliance Petroproducts Pvt. Ltd. (supra) and the CIT deleted the penalty on just and cogent reason because penalty cannot be levied merely because the assessee’s claim was not accepted or was not acceptable to the revenue, that by itself would not attract the penalty u/s 271(1)(c) of the Act. Accordingly, we are unable to see any ambiguity, perversity or any other valid reason to interfere with the impugned order and appeal of the revenue being devoid of merits is dismissed.
The acid test as propounded in the cited leading court cases, rightly so, and relied upon and followed by the ITAT, Delhi, again equally rightly, is that , – should “just and cogent reason” be given in a case on hand there could be no levy “merely because the assessee’s claim was not accepted or was not acceptable to the revenue”. Well, the legality or soundness of the underlying principle of the stated proposition, in one’s conviction, is unassailable. Nonetheless, in each and every such case, to be fully satisfied,- purely from an ‘objective’ viewpoint,- whether or not the other largely accepted test of justice having been done , must also be seen to have been done, for several attendant reasons, may prove an onerous exercise. In other words, the dispute may not necessarily get settled at the last fact finding stage of ITAT but may be dragged on to courts on the ground of a ‘substantial question of law’.
That is an aspect requiring to be considered in-depth and needs to be covered suitably by either (a) legislating levy of ‘interest’ and at a reasonably acceptable rate (same as done in certain other contexts such as, late filing of return, non-payment of tax due), in place of the extant provision for ‘penalty’, and /or (b) have covered cases in which the additional burden is significant or not insignificant, under the scheme of “dispute resolution”. That could, perhaps, pave the way for mitigation of or prolongation of litigation, as may be imagined, to a considerably desirable extent.
To make it explicit, the thoughts tried to be shared are off hand; might nonetheless be given a closer look -through , if found worth a serious examination, before deciding to accept and go ahead.