Case Law Details
Brief of the Case
ITAT Mumbai held In the case of Mangalam Drugs & Organics Ltd. vs. DCIT that it is clear that the penalty has been levied, on all the additions/disallowances, in a ‘whole sole’ manner. The AO has not given his findings, for levying the penalty, for each issue separately, with respect to the satisfaction of the AO for each of the issue respectively, nor has he given a finding for each issue separately as to whether there was a concealment of income or furnishing of inaccurate particulars of income. Further, the penalty is not automatic and also the Assessee cannot be fastened with the liability of penalty without there being a clear or specific charge. Fixing a charge in a vague and casual manner is not permitted under the law. Fixing the twin charges is also not permitted under the law. In the present case, the penalty has been levied in a highly automatic, mechanised and casual manner. This kind of approach gives rise to avoidable hardships to the taxpayers and should be avoided. Hence penalty on the disallowance of deduction u/s 80HHC was not justified and therefore, same is deleted.
Facts of the Case
This appeal is regarding levy of penalty on the disallowance of Rs.3, 44,238/- being the amount of disallowance of deduction u/s 80 HHC in the quantum appeal. The assessee did not press this ground before the ITAT and it was dismissed by the ITAT without giving any decision of any merits of disallowance.
Held by ITAT
ITAT held that penalty would not be leviable with respect to the disallowance made by the AO u/s 80HHC for the following reasons: Similar disallowance was made by the AO u/s 80HHC in assessment year 2003-04 i.e. immediately preceding year, but no penalty was initiated or levied. In our considered view, when the AO has found that penalty was not leviable with respect to similar disallowance made for deduction u/s 80HHC in A.Y. 2003-04, then following the same yardsticks, he should not take a different stand in this year and burden the assessee with rigorous provisions of penalty. The revenue is expected to follow some consistency with regard to penal provisions. Hon’ble Supreme Court in the case of CIT vs. Excel Industries Ltd. 358 ITR 298(SC) held that consistency should be followed by the Revenue on year to year basis for deciding various issues of the taxpayers. In absence of consistent approach, it may give rise to a chaotic situation and avoidable litigation, which may in turn hamper voluntary compliance by the taxpayers.
The AO has made disallowance on the basis of return of income filed by the assessee and audit report of the assessee. The assessee has made its claim in the profit and loss accounts and computation sheet giving complete facts and particulars. Thus, it cannot be said that there was concealment of facts. Further, it is a well known fact that there has been enormous litigation on account of interpretation of section 80HHC, throughout the country, various tax experts and courts are still grappling with the complexities in appreciation and interpretation of provisions of section 80HHC. These provisions are full of controversies. Under these circumstances, the assessee has taken stand and made a claim accordingly. Merely because the claim of the assessee was not found allowable by the AO in its opinion, it should not ipso facto give rise to an inference that there was concealment of income or furnishing of inaccurate particular of income by the assessee. The Assessee had made a bonfide claim as per the advice received by it
Further, from the penalty order, it is clear that the penalty has been levied, on all the additions/disallowances, in a ‘whole sole’ manner. The AO has not given his findings, for levying the penalty, for each issue separately, with respect to the satisfaction of the AO for each of the issue respectively, nor has he given a finding for each issue separately as to whether there was a concealment of income or furnishing of inaccurate particulars of income. Also the approach of AO that once disallowance has been made, it will automatically established that the assessee has concealed the income is also not correct. Penal provisions are quite harsh; these can make the assessee liable for prosecution, as well. Therefore, the AO is obliged, under the law, to make application of his mind meticulously and carefully for each issue separately and to show and establish precisely and specifically whether there was concealment of income or there was furnishing of inaccurate particulars of income on the part of the assessee. The Assessee cannot be fastened with the liability of penalty without there being a clear or specific charge. Fixing a charge in a vague and casual manner is not permitted under the law. Fixing the twin charges is also not permitted under the law. We drive support from the judgment of Hon’ble Gujrat High Court in the case of New Sorathia Engineering Co vs CIT 282 ITR 642 (Guj).
In the present case, no such exercise has been done at all by the AO while levying the penalty and the penalty has been levied in a highly automatic, mechanised and casual manner. This kind of approach gives rise to avoidable hardships to the taxpayers and should be avoided. Therefore, keeping in view the aforesaid discussion, we find that levy of penalty on the disallowance of deduction u/s 80HHC was not justified and therefore, same is deleted.
Accordingly appeal of the assessee partly allowed.
