Mamta Machinery Pvt. Ltd.,, Ahmedabad v. The DY.CIT., Circle-4,, Ahmedabad

ITA 671/AHD/2007 | 2002-2003
Pronouncement Date: 29-01-2010 | Result: Allowed

Appeal Details

RSA Number 67120514 RSA 2007
Bench Ahmedabad
Appeal Number ITA 671/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 15 day(s)
Appellant Mamta Machinery Pvt. Ltd.,, Ahmedabad
Respondent The DY.CIT., Circle-4,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 29-01-2010
Date Of Final Hearing 21-01-2010
Next Hearing Date 21-01-2010
Assessment Year 2002-2003
Appeal Filed On 13-02-2007
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRIT.K. SHARMA JM AND D.C.AGRAWAL AM MAMTA MACHINERY (P) LTD. 5/1/1-A PHASE-1 GIDC VATVA AHMEDABAD. V/S . DY. COMMISSIONER OF INCOME-TAX CIRCLE-4 AHMEDABAD. PAN NO.AABCM 8241 P (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M. J. SHAR AR RESPONDENT BY:- SHRI M.C. PANDIT SR.DR O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T TWO SEPARATE ORDERS OF LD. CIT(A) FOR ASST. YEARS 2001-02 & 2002 -03 CONFIRMING THE ORDERS OF AO IN LEVYING THE PENALTY OF RS.25 76 748 /- AND RS.4 98 394/- RESPECTIVELY FOR THE TWO YEARS UNDER SECTION 271(1) (C) OF THE ACT. ITA NO.670/AHD/2007 ASST. YEAR 2001-02 2. IN THIS CASE AO MADE THE FOLLOWING ADDITIONS WHI LE ASSESSING TAXABLE INCOME:- ITA NO. 670 & 671/AHD/2007 ASST. YEARS :2001-02 & 2002-03 2 (I) ADDITION OF RS.4 66 235/- UNDER SECTION 40A. TH E ASSESSEE CLAIMED A SUM OF RS.4 66 235/- IN THE P & L A/C TOWARDS ROY ALTY PAYABLE OUTSIDE INDIA. NO TAX WAS DEDUCTED AND IT WAS REFLECTED IN THE BALANCE SHEET ON THE LIABILITY SIDE AND ACCORDINGLY THE CLAIM WAS NO T ALLOWED. DURING THE COURSE OF PENALTY PROCEEDINGS IT WAS CLAIMED THAT I T WAS A PURE TECHNICAL MISTAKE AND THERE WAS NO CONCEALMENT OF INCOME. THE AO DID NOT AGREE AND INCLUDED THIS AMOUNT FOR LEVY OF PENALTY. LD. C IT(A) CONFIRMED THE SAME ON THE GROUND THAT ASSESSEE IS A COMPANY WHOSE ACCOUNTS ARE AUDITED UNDER SECTION 44AB AND THERE IS NO REASON W HY HE SHOULD NOT MAKE NECESSARY ADJUSTMENT IN THE STATEMENT OF INCOM E IN ACCORDANCE WITH LAW. IT WILL NOT BE A CASE OF PURE OMISSION IN MAKI NG SUCH CLAIM. ACCORDING TO HIM THE ASSESSEE HAS FURNISHED INACCUR ATE PARTICULARS OF INCOME. 3. LD. AR FOR THE ASSESSEE SUBMITTED THAT IT IS A P URE TECHNICAL MISTAKE WHICH HAS BEEN ACCEPTED BY THE ASSESSEE AND THEREF ORE IT IS NOT A CASE OF CONCEALMENT OF INCOME OR OF FURNISHING OF INACCURAT E PARTICULARS OF INCOME. THE ASSESSEES CASE IS ALSO NOT COVERED UND ER EXPLANATION 1A OR 1B TO SECTION 271(1)(C). (II) ADDITION OF RS.52 430/- BEING INTEREST ON INCO ME-TAX REFUND. THE ASSESSEE RECEIVED A SUM OF RS.53 430/- AS INTEREST ON I.T. REFUND. IT WAS NOT DECLARED IN THE PROFIT AND LOSS ACCOUNT WHEN AO NOTICED IT THE ASSESSEE AGREED TO THE DISALLOWANCE. AO INITIATED P ENALTY PROCEEDINGS. FINDING THE EXPLANATION NOT SATISFACTORY AO LEVIED THE PENALTY. LD. CIT(A) ALSO CONFIRMED THE SAME ON THE GROUND THAT A SSESSEE DID NOT BRING IT TO THE NOTICE OF AO ON ITS OWN PRIOR TO DETECTIO N BY THE DEPARTMENT. IF AO WOULD NOT HAVE NOTICED IT WOULD HAVE REMAINED E SCAPED. THERE IS NO BONA FIDE ATTRIBUTABLE TO THE ASSESSEE IN AGREEING FOR ADDITION. 3 4. BEFORE US LD. AR SUBMITTED THAT GRANT OF INTERES T IS IN THE KNOWLEDGE OF DEPARTMENT THEREFORE ASSESSEE SHOULD NOT BE PENALIZED FOR SOMETHING WHICH IS ALREADY IN THE KNOWLEDGE OF THE DEPARTMENT. (III) SALES PROMOTION EXPENSES OF RS.36 000/-. THE AO MADE THE ADDITION ON THE GROUND THAT EXPENDITURE WERE NOT VE RIFIABLE. THERE WAS NO SPECIFIC EVIDENCE. THE ADDITION WAS ALSO SUSTAINED BY THE TRIBUNAL. NO BONA FIDE IN CLAIMING THIS EXPENDITURE WAS EXPLAINE D. THERE IS NO EXPLANATION AS SUCH IN RESPECT OF THIS ADDITION. TH E LD. A.O. LEVIED THE PENALTY ON THIS AMOUNT WHICH WAS ALSO CONFIRMED BY LD. CIT(A). 5. LD. AR SUBMITTED THAT ASSESSEE HAD INCURRED EXPE NDITURE FOR SALES PROMOTION BUT FOR WANT OF EVIDENCE IN THE FORM OF RELEVANT VOUCHERS ADDITION WAS CONFIRMED. IT IS NOT A CASE THAT ASSES SEE HAS FURNISHED ANY INACCURATE PARTICULARS OF INCOME OR CONCEALED ANY I NCOME. (IV) DEPRECIATION ON FACTORY BUILDING AT RS.1 31 64 5/-. ASSESSEE HAD RECEIVED A RENT OF RS.10 80 000/- ON LETTING OUT ON E PORTION OF THE FACTORY PREMISES. THIS WAS DECLARED AS HOUSE PROPERTY INCOM E AND DEDUCTION UNDER SECTION 24 WAS CLAIMED. IN ADDITION TO THIS A SSESSEE FURTHER CLAIMED DEPRECIATION AT 10% ON THIS PORTION OF FACTORY BUIL DING. THE AO NOTICED SUCH DOUBLE CLAIM AND DISALLOWED DEPRECIATION THERE ON. LD. AO LEVIED PENALTY U/S 271(1)(C) AND LD. CIT(A) CONFIRMED THE SAME ON THIS AMOUNT ON THE GROUND THAT THE CLAIM OF DEPRECIATION ON THE BUILDING GIVEN ON RENT IS SO OBVIOUS THAT IT IS TO BE HELD THAT ASSESSEE H AS FURNISHED INACCURATE PARTICULARS OF HIS TAXABLE INCOME. THE ASSESSEE IS A COMPANY SUBJECT TO TAX AUDIT AND CANNOT CLAIM IMMUNITY ON SUCH ERRORS. 4 6. LD. AR SUBMITTED THAT FACTORY BUILDING WAS A COM POSIT BUILDING AND ACCORDINGLY SHOWN IN THE BOOKS OF ACCOUNT THERE FORE DEPRECIATION ON THE WHOLE BUILDING WAS CLAIMED EVEN THOUGH PART OF THE BUILDING WAS RENTED. IT IS A BONA FIDE MISTAKE AND ASSESSEE SHOU LD NOT BE PENALIZED FOR SUCH BONA FIDE MISTAKE. (V) DEDUCTION UNDER SECTION 80HHC - WHILE COMPUTING DEDUCTION UNDER SECTION 80 HHC THE AO EXCLUDED A SUM OF RS.23 33 671/- IN RESPECT OF COMMISSION INCOME BEING AN ITEM COVERED UNDER CLAUSE (BAA) OF EXPLANATION TO SECTION 80 HHC. THIS EXCLUSION WA S SUSTAINED IN APPEAL BY THE LD. CIT(A). THE AO LEVIED PENALTY IN RESPECT OF THIS AMOUNT. DURING PENALTY PROCEEDINGS IT WAS CLAIMED THAT CERT AIN EXPENSES OUT OF SUCH COMMISSION INCOME WERE INCURRED AND PAID TO TH E EMPLOYEES FOR SALES OF MACHINES AND HENCE TOTAL EXCLUSION WAS NOT CORRECT. SINCE THIS CLAIM WAS NOT VERIFIABLE HE DIRECTED THE AO TO VER IFY THE QUANTUM OF COMMISSION INCOME WHICH IS DEBATABLE AND RE-WORK QU ANTUM OF PENALTY UNDER SECTION 271(1)(C) AFTER TAKING INTO ACCOUNT T HE RELIEF GIVEN BY THE APPELLATE AUTHORITIES ON VARIOUS ISSUES CONCERNING DEDUCTION UNDER SECTION 80 HHC. 7. LD. AR SUBMITTED THAT THERE IS A DIFFERENCE OF O PINION ON THE ISSUE OF EXCLUSION OF VARIOUS ITEMS WHILE COMPUTING DEDUC TION UNDER SECTION 80 HHC. HE FURTHER REFERRED TO THE DECISION OF HYDERAB AD TRIBUNAL IN NASA CONTINENTAL EXPORTS LTD. VS. DY CIT 124 TAXMAN 172 FOR THE PROPOSITION THAT IF PENALTY IS INITIATED ONLY IN RESPECT OF ONE ADDITION THEN PENALTY IN RESPECT OF OTHER ADDITIONS CANNOT BE LEVIED. THE LD . AR HAD ARGUED THAT AO HAD INITIATED PENALTY PROCEEDINGS ONLY IN RESPEC T OF ADDITION CONCERNING INTEREST ON INCOME-TAX REFUND EVEN THOUG H FINALLY AT THE END OF THE ASSESSMENT ORDER HE HAD ISSUED NOTICE UNDER SECTION 271(1)(C). BUT SINCE IN THE BODY OF THE ORDER HE HAD RECORDED SATI SFACTION IN RESPECT OF 5 ONE ITEM ONLY THEN HE HAS NO POWER TO LEVY PENALTY IN RESPECT OF OTHER ADDITIONS. 8. LD. AR THEN REFERRED TO THE DECISION OF MADRAS H IGH COURT IN CIT VS. SRI SARADHA TEXTILES PROCESSORS (P) LTD. (2006) 286 ITR 449 (MAD) FOR THE PROPOSITION THAT NO PENALTY CAN BE LEVIED F OR BONA FIDE MISTAKE. 9. ON THE OTHER HAND LD. DR SUBMITTED THAT NONE OF THE EXPLANATION OF THE ASSESSEE IS BONA FIDE. EVEN THOUGH AO MIGHT HAV E SPECIFICALLY MENTIONED ABOUT NOTICE UNDER SECTION 271(1)(C) WHIL E MAKING ADDITION IN RESPECT OF INTEREST ON INCOME-TAX REFUND BUT HE HAD INITIATED PENALTY IN RESPECT OF THE ADDITIONS BY SO MENTIONING AT THE EN D OF THE ORDER. MERELY BECAUSE AO HAS SPECIFICALLY MENTIONED IN RESPECT OF ONE ADDITION ABOUT INITIATION OF PENALTY IT SHOULD NOT MEAN THAT HE DI D NOT INTEND TO INITIATE PENALTY IN RESPECT OF OTHER ADDITIONS AS IT IS CLEA R THAT HE HAD AT THE END OF THE ORDER INITIATED PENALTY IN RESPECT OF ENTIRE AS SESSMENT ORDER. 10. IN RESPECT OF SPECIFIC ADDITION LD. DR SUBMITTE D THAT ASSESSEE COMPANY IS A BIG COMPANY ITS ACCOUNTS ARE AUDITED IT HAS ASSISTANCE OF TECHNICAL EXPERTS THEREFORE IT SHOULD NOT BE ACCEP TED THAT IT WAS ONLY A MISTAKE. THE MISTAKE CANNOT BE SAID TO BE BONA FIDE . REGARDING INTEREST ON REFUND LD. DR SUBMITTED THAT MERELY BECAUSE DEPA RTMENT HAS ISSUED THE INTEREST IT DOES NOT MEAN THAT OBLIGATION OF AS SESSEE IS MITIGATED. IT IS THE DUTY OF THE ASSESSEE TO DISCLOSE WHATEVER INTER EST IT HAS RECEIVED. IT IS NOT A MISTAKE. REGARDING SALES PROMOTION EXPENSES L D. DR SUBMITTED THAT ASSESSEE HAS MADE THE CLAIM WITHOUT ANY SUPPORT. TH US IT HAS NOT FURNISHED COMPLETE PARTICULARS WHICH INCLUDED VOUCH ERS ALSO. REGARDING CLAIM OF DEPRECIATION ON BUILDING LD. DR SUBMITTED THAT IT IS IN THE KNOWLEDGE OF ASSESSEE THAT IT HAS MADE DOUBLE CLAIM S ONCE UNDER SECTION 6 24 AND OTHER UNDER SECTION 32. IT IS ALSO NOT A BON A FIDE MISTAKE. REGARDING DEDUCTION UNDER SECTION 80 HHC LD. DR SUB MITTED THAT THE ADDITION IS CONFIRMED BY LD. CIT(A) IN RESPECT OF C OMMISSION ONLY AND THAT TOO HE HAS DIRECTED TO VERIFY WHETHER ANY COMM ISSION PAYMENT WAS DEBATABLE AND NOT TO LEVY PENALTY IN RESPECT OF SUC H PAYMENTS. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE PRELIMINARY A RGUMENTS THAT AO HAS NOT INITIATED PENALTY IN RESPECT OF ALL THE ADDITIO NS SEPARATELY IS DEVOID OF ANY MERIT. BECAUSE AO HAS INITIATED PENALTY PROCEE DINGS AT THE END OF THE ASSESSMENT ORDER BY ISSUING PENALTY NOTICE. THE SAT ISFACTION OF THE AO IN RESPECT OF ALL THE ADDITIONS IS TAKEN CARE OF BY SE CTION 271(1B) WHICH READS AS UNDER :- SEC.271(1B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDE R OF ASSESSMENT OR RE- ASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1) SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONST ITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAID CLAUSE (C). HENCE ONCE AO HAS ISSUED PENALTY NOTICE AT THE END OF THE ASSESSMENT ORDER THEN IT WILL BE DEEMED TO BE SATISFACTION IN INITIATING PENALTY IN RESPECT OF ALL THE ADDITIONS MADE BY HIM IN THE ASS ESSMENT ORDER. MERELY BECAUSE AO HAS IN RESPECT OF ONE ADDITION SPECIFICA LLY SO MENTIONED TO INITIATE PENALTY PROCEEDINGS IT DOES NOT MEAN THAT AO DID NOT INTEND TO INITIATE PENALTY PROCEEDINGS IN RESPECT OF OTHER AD DITIONS PARTICULARLY WHEN LAW PROVIDES FOR SUCH DEEMED SATISFACTION. A P ERSON IN WHOSE CASE NO INDIVIDUAL SATISFACTION IN RESPECT OF EACH ADDIT ION IS MADE CANNOT BE PUT IN A BETTER POSITION AS COMPARED TO A PERSON IN WHOSE CASE AO HAS NOT 7 MADE ANY SPECIFIC NOTE OF SATISFACTION IN RESPECT O F EACH ADDITION BUT HAS MADE A NOTE OF COMMON SATISFACTION AT THE END OF TH E ORDER. THIS SITUATION IS ALSO TAKEN CARE OF BY SECTION 292B AS A DEEMED SATISFACTION IN RESPECT OF ANY ADDITION PROPOSED BY THE AO. THEREFORE THE PRELIMINARY OBJECTION OF THE LD. AR ABOUT SATISFACTION HAVING BEEN NOT RE CORDED IN RESPECT OF EACH ADDITION IS REJECTED. 12. REGARDING ADDITION UNDER SECTION 40A ON INCOME- TAX REFUND AND DEPRECIATION ON BUILDING WE ARE OF THE VIEW THAT TH ESE ARE NOT BONA FIDE MISTAKES BECAUSE ASSESSEE IS NOT A TAX PAYER WHICH DOES NOT GET SUPPORT FROM TECHNICAL EXPERTS. ITS ACCOUNTS ARE AUDITED UN DER SECTION 44AB WHERE IT IS EXPECTED THAT SUCH MISTAKES IF ANY SH OULD HAVE BEEN POINTED OUT. IT IS ALSO NOT A CASE WHERE ASSESSEE IS FILING RETURN FOR THE FIRST TIME IT IS ASSESSED TO TAX FOR LONG. CASE OF THE ASSESSEE I S COVERED UNDER EXPLANATION 1B TO SECTION 271(1)(C) IN RESPECT OF I NTEREST ON IT REFUND. THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY AND AMOUNT OF INTEREST RECEIVED BY THE ASSESSEE WAS NOT DISCLOSED BY IT. I N RESPECT OF TWO OTHER ITEMS DISALLOWANCE CLAIMED ON ROYALTY AND DEPRECIA TION NO SUCH REPLY WAS FILED BY THE ASSESSEE BEFORE THE AO ON THE GROU ND THAT AO HAD INITIATED PENALTY ONLY IN RESPECT OF ONE ITEM I.E. INTEREST ON IT REFUND. WE NOTICE THAT AO HAD ISSUED A GENERAL PENALTY NOTICE BY VIRTUE OF NOTE MADE BY HIM AT THE END OF THE ORDER ISSUE PENALTY NOTIC E THEREFORE IT CANNOT BE SAID THAT AO ONLY INTENDED TO CALL FOR ASSESSEE S EXPLANATION IN RESPECT OF ONE ITEM VIZ. INTEREST ON IT REFUND ONLY. THUS T HE CASE OF THE ASSESSEE IS COVERED UNDER EXPLANATION 1A TO SECTION 271(1)(C ) IN CASE OF THESE TWO ITEMS. EVEN OTHERWISE THE EXPLANATION FURNISHED BEF ORE US I.E. IT WAS A BONA FIDE MISTAKE IS NOT ACCEPTABLE BECAUSE A MISTA KE IS BONA FIDE WHEN EITHER THE ASSESSEE IS NOT AWARE OF THE TAXATION LA WS OR IS FOLLOWING CONSISTENTLY A PARTICULAR METHOD AND THERE IS SUDDE N CHANGE IN LAW OR 8 ISSUE IS SO COMPLICATED THAT HE IS UNABLE TO ANALYS E AND UNDERSTAND THE RIGHT IMPLICATION. BUT WHERE ISSUES ARE SO SIMPLE SUCH AS NOT CLAIMING DEDUCTION IN RESPECT OF PAYMENTS TO BE MADE OUTSIDE IF TDS IS NOT DONE OR NO DEPRECIATION SHOULD BE CLAIMED IN RESPECT OF THE BUILDING WHICH IS GIVEN ON RENT AND INCOME THEREFROM IS REGULARLY ASS ESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY THEN SUCH MISTAKES CAN NOT BE BONA FIDE. WHEN A CLAIM IS MADE IN THE CASE OF ASSESSEE WHOSE ACCOUNTS ARE AUDITED UNDER SECTION 44AB THEN IT IS EXPECTED THAT SUCH PE RSON IS CAREFUL ENOUGH TO MAKE CLAIM IN ACCORDANCE WITH LAW. THEREFORE IN OUR CONSIDERED VIEW EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE THAT IT HAS COMMITTED A BONA FIDE MISTAKE. IN CIT VS. SRI SARADHA TEXTILES PROCE SSORS (P) LTD. (SUPRA) ON WHICH ASSESSEE HAS RELIED THAT ASSESSEE HAD FILE D REVISED RETURN ACCEPTING THE CLAIM OF DEPRECIATION HONBLE MADRAS HIGH COURT HAD CONSIDERED THAT ASSESSEE DID NOT HAVE ANY MALA FIDE INTENTION. IN OUR CONSIDERED VIEW THE QUESTION OF INTENTION BEING MAL A FIDE OR NOT IS NO LONGER NECESSARY IN VIEW OF THE DECISION IN THE CAS E OF UNION OF INDIA VS. DARMENDRA TEXTILES (2008) 306 ITR 277 (SC). WE ACCO RDINGLY CONFIRM LEVY OF PENALTY IN RESPECT OF CLAIMS OF PAYMENT OF ROYALTY WITHOUT MAKING TDS INTEREST ON IT REFUND AND DEPRECIATION ON FACT ORY BUILDING. 13. IN RESPECT OF SALES PROMOTION EXPENDITURE WE FI ND THAT THE ASSESSEE HAS NOT PRODUCED THE VOUCHERS IN RESPECT OF CERTAIN ITEMS AND HENCE DISALLOWANCE WAS MADE. EXPLANATION OF THE ASSESSEE IS THAT VOUCHERS COULD NOT BE PRODUCED IS APPARENTLY BONA FIDE WHEN WE LOOK TO THE TOTAL CLAIM OF SALES PROMOTION EXPENSES AT RS.5 77 295/-. WE ACCORDINGLY CANCEL THE PENALTY IN RESPECT OF THIS ADDITION. 14. IN RESPECT OF DEDUCTION UNDER SECTION 80 HHC WE FIND THAT LEVY OF PENALTY IS CONFINED ONLY TO THE ADDITION OF RS.23 3 3 691/- BEING PAYMENT 9 OF COMMISSION. THE ASSESSEE HAD TAKEN A VIEW THAT T HIS COMMISSION INCOME IS FROM MANUFACTURING ACTIVITY AND IS DIRECT LY RELATED TO IT. THE CLAIM OF ASSESSEE WAS MADE FOR DEDUCTION UNDER SECT ION 80 HHC THEREON BUT THIS CLAIM WAS NEGATED. LD. CIT(A) HAD DIRECTED TO VERIFY WHETHER THERE IS ANY ITEM OF DEBATABLE NATURE. 15. IN OUR CONSIDERED VIEW RECEIPT OF COMMISSION CA NNOT BE CLEARLY SAID TO BE INCOME FROM OTHER SOURCES UNLESS ONE EXA MINES ACCOUNTS VOUCHERS AND NATURE OF RECEIPT. THERE COULD BE COMM ISSION DIRECTLY COMING FROM MANUFACTURING AND COMMISSION INCOME WHI CH IS NOT DIRECTLY SO CONNECTED. THIS IS LIKE INTEREST INCOME WHICH MAY PERTAIN TO MANUFACTURING ACTIVITY/EXPORT ACTIVITIES OR IT MAY NOT HAVE DIRECT NEXUS. THE ISSUE IS DEBATABLE AND CAN BE DECIDED ONLY AFTE R LONG DRAWN DELIBERATIONS. ACCORDINGLY IT CANNOT BE SAID THAT C LAIM OF THE ASSESSEE WAS PRIMA FACE WRONG AND WOULD FALL WITHIN THE AMBIT OF SECTION 271(1)(C). SINCE THE ISSUE IS TO A GREAT EXTENT DEBATABLE AND ASSESSEE HAD CONSIDERED THE COMMISSION RECEIPT AS ITS BUSINESS INCOME AND C LAIMED DEDUCTION THEREON UNDER SECTION 80 HHC IT CANNOT BE SAID THAT CLAIM WAS NOT AT ALL BONA FIDE. AS A RESULT LEVY OF PENALTY UNDER SECTI ON 271(1)(C) ON THIS AMOUNT IS CANCELLED. THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.671/AHD/2007 ASST. YEAR 2002-03 16. IN THIS YEAR PENALTY UNDER SECTION 271(1)(C) IS LEVIED ON ADDITION MADE BY THE AO BY DISALLOWING THE CLAIM OF ASSESSEE FOR DEDUCTION UNDER SECTION 80 HHC ON COMMISSION INTEREST ETC. THE AO LEVIED THE PENALTY IN RESPECT OF ENTIRE ADDITION WITHOUT IDENTIFYING A S TO WHICH ITEMS WERE IN 10 THE KNOWLEDGE OF THE ASSESSEE THAT THEY WERE REQUIR ED TO BE EXCLUDED. THE LD. CIT(A) PRACTICALLY RESTORED THE MATTER TO THE F ILE OF AO FOR WORKING OUT THOSE ITEMS OF ADDITION FOR CALCULATING DEDUCTI ON UNDER SECTION 80 HHC WHICH WERE IN THE KNOWLEDGE OF ASSESSEE. 17. WE HAVE HEARD LD. AR AND LD. DR. SINCE IT HAS T O BE SATISFIED AS TO WHICH ITEM UNDER EXPLANATION (BAA) TO SECTION 80 HH C IS CLEARLY DISALLOWABLE AND WHICH ITEMS ARE DEBATABLE WE RESTO RE THE MATTER TO THE FILE OF AO FOR RE-WORKING OUT THE LEVY OF PENALTY A FTER GIVING AN OPPORTUNITY OF BEING HEARD AND IDENTIFYING CLEARLY THOSE ITEMS WHICH CANNOT AT ALL BE TREATED AS INCOME DERIVED FROM EXP ORT ACTIVITIES. NO PENALTY UNDER SECTION 271(1)(C) CAN BE LEVIED IN RE SPECT OF ITEMS OF EXCLUSION OF INCOME WHICH ARE DEBATABLE. WE ACCORDI NGLY ALLOW THE APPEAL OF ASSESSEE BUT FOR STATISTICAL PURPOSES. 18. IN THE RESULT APPEAL FOR ASST. YEAR 2001-02 IS PARTLY ALLOWED AND APPEAL FOR ASST. YEAR 2002-03 IS ALLOWED FOR STATIS TICAL PURPOSES. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 29.01.2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 29.01.2010 11 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD