1 Court No. - 10 Case :- INCOME TAX APPEAL No. - 65 of 2015 (ASSESSMENT YEAR 2006-07) Appellant :- Rave Entertainment Pvt. Ltd. Respondent :- Commissioner Of Inocme Tax Kanpur Counsel for Appellant :- S.K. Garg,Ashish Bansal Counsel for Respondent :- C.S.C. It Hon'ble Arun Tandon,J. Hon'ble Dr. Satish Chandra,J. present appeal is filed by assessee against impugned order dated 28th November 2014 passed by Income Tax Appellate Tribunal, Lucknow in ITA No. 125/LKW/2012 for assessment year 2006-07. On 25.03.2015 appeal was admitted by this Court on following substantial question of law : Whether in facts and circumstances of case, levy of penalty under Section 271(1)(c) is justified or not? brief facts of case are that appellant-assessee is Private Limited Company. During assessment year 2002-03, assessee was engaged in construction of Multiplex Theater, but same could not become commercially operational and functional even after trial runs . So on 07.11.2002, assessee has filed return showing nil income where no depreciation was claimed on capital expenditure. But A.O. suo moto has allowed depreciation by taking view that trial runs having been carried out by assessee, so project is complete. For assessment year 2003-04 onwards, assessee has claimed deduction under Section 80-IB(7A)of Income Tax Act though, there was no positive income. Similarly, in assessment year 2004-05, assessee has claimed 2 deduction under Section 80-IB (7A) of Act, but same was denied by A.O. For assessment year under consideration (2006-07), appellant was advised to claim deduction under Section 80-IB(7A) of Act, for reason that A.O. in assessment year 2002-03, has considered completion of project. For purpose, assessee has submitted audit report in prescribed form 10CCBA of Income Tax Rules, 1962. However, claim was rejected by A.O. vide order dated 26.12.2008. At sametime, A.O. has opined that assessee has wrongly made above claim which amounts concealment of income, so he levied penalty under Section 271(1)(c). But, C.I.T.(A) has cancelled levy of penalty by observing that assessee made wrong but legal claim, so there was no concealment. However, Tribunal vide its impugned order has restored order of A.O. by setting aside order of first appellate authority. Being, aggrieved assessee has filed present appeal. With this background, Shri S.K. Garg assisted by Shri Ashish Bansal, learned counsel for assessee relied on order of first appellate authority. learned counsel for assessee submits that initial mistake was of A.O., who has allowed depreciation suo moto for assessment year 2002-03. A.O. wrongly treated trial runs as business runs , which was not so. Legally, assessee was entitled to claim deduction under Section 80-IB(7A) for assessment year 2003-04 and onwards. For year under consideration (2006-07), assessee was advised by Chartered Accountant to make legal claim for deduction. For purpose, necessary form was also submitted alongwith return. However, A.O. rejected same and assessee has accepted it as no further appeal was filed. In these circumstances, assessee has made claim as per legal 3 advice and there was no malafide intention to conceal any income. claim of deduction does not amount concealment of income. Moreover, no satisfaction was recorded by A.O. before initiating penalty proceedings. requirement to record satisfaction is absolute even after amendments made in law relating to levy of penalty under section 271(1)(c). It is also submission of learned counsel for assessee that same claim was made by appellant in assessment year 2004-05, which was disallowed and penalty proceedings were also started in said assessment year, but later, it was dropped vide order dated 31.3.2010. He read out section 80-IB(7A), which on reproduction reads as under : (7A) amount of deduction in case of any multiplex theatre shall be- (a) fifty per cent of profits and gains derived, from business of building, owning and operating multiplex theatre, for period of five consecutive years beginning from initial assessment year in any place : Provided that nothing contained in this clause shall apply to multiplex theatre located at place within municipal jurisdiction (whether known as municipality, municipal corporation, notified area committee or cantonment board or by any other name) of Chennai, Delhi, Mumbai or Kolkata; (b) deduction under clause (a) shall be allowable only if- (i) such multiplex theatre is constructed at any time during period beginning on 1st day of April, 2002 and ending on 31st day of March, 2005; (ii) business of multiplex theatre is not formed by splitting up, or reconstruction, of business already in existence or by transfer to new business of any building or of any machinery or of plant previously used for any purpose; (iii) assessee furnishes alongwith return of income, report of audit in such form and containing such particulars as may be prescribed and duly signed and verified by accountant, as defined in Explanation below sub-section (2) of section 288, certifying that deduction has been correctly claimed. 4 After reading provision, he submits that assessee had never furnished inaccurate particulars of income as appears from assessment order. According to learned counsel, in case of penalty, proceedings under Section 271(1)(c) are separate and distinct from assessment proceedings. This aspect will have to be taken into consideration. assessee has claimed deduction on legal advice rendered by professionally qualified persons, thus, claim made in return was pressed not only on factual matrix of case, but also on legal advice. There was no occasion or even necessity for assessee to revise its return for assessment year 2006-07. For purpose, he relied on ration laid down in following cases : (a) Price Waterhouse Coopers Pvt. Ltd vs. CIT [2012] 348 ITR 306 (SC); (b) CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 32: (2000)246 ITR 568(Del); (c) Diwan Enterprises vs. CIT (2001) 167 CTR (Del) 324: (2000)246 ITR 571(Del); (d) Shri Bhagwat Finance Co. Ltd vs. CIT (2005) 196 CTR (Del) 462: (2006)280 ITR 412 (Del); (c) V.V. Projects and Investments P. Ltd. vs. Dy. CIT (2008) 216 CTR (AP) 196: (2008) 6 DTR (AP) 265 : (2008) 300 ITR 40 (AP); (d) Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26(SC); (e) Burmah-Sheel Oil Storage and Distributing Co. of India vs. ITO reported in (1978) 112 ITR 592; (f) Cement Marketing Co. of India Ltd. vs. ASCT (1980) 124 ITR 15 (SC); (g) CIT vs. Harshvardhan Chemicals and Mineral Ltd. (2003) 259 ITR 212 (Rajasthan-Jaipur bench); (h) CIT vs. International Audio Visual Co. (2007) 288 ITR 570 (Del.); 5 (i) CIT vs. Nath Bros. Exim International Ltd. (2007) 288 ITR 670 (Del.); (j) CIT vs. Shahabad Coop. Sugar Mills (2010) 322 ITR 73 (P&H); (k) CIT vs. Sidhartha Enterprises (2010) 322 ITR 80 (P & H); (l) CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC); (m) CIT vs. Hindustan Hydraulics (2014) 369 ITR 255 (P& H); and (n) CIT vs. Sewak Ice and Cold Storage P.Ltd. (2014) 369 ITR 316 (All). On other hand, Shri Dhanjay Awasthi, learned counsel for Department has justified impugned order. He submits that that assessee has wrongly made claim for deduction. assessee has not revised return to drop claim specially when in earlier years, claim for deduction under Section 80-IB(7A) was already rejected by A.O. But repeatedly, assessee is making said claim. It is also submission of learned counsel for Department that failure of assessee to file revise return is without any bona-fide reason, hence, penalty is justified. Since, no defects have been shown by assessee in return filed, therefore, case laws cited by assessee are not applicable in instant case. To support his argument, he relied on ratio laid down in following cases : (a) Ashish Kumar vs. CIT [2014] 43 Taxmann 92 (P&H); (b) CIT vs. HCIL Kalindee Arsspl (2013) 37 Taxmann 347(Del); and (c) Standard Hind Co. vs. CIT (2012) 22 Taxmann 62 (Alld). We heard both parties at length and gone through materials available on record. From record, it appears that penalty was levied by A.O. by observing that assessee had made wrong claim under Section 80-IB(7A). Tribunal 6 has confirmed said penalty by observing that assessee has not revised its return, so penalty is justified. But fact remains that assessment proceedings and penalty proceedings are quite different. findings are not binding on each other as per ratio laid down in case of Durga Kamal Rice Mill vs. CIT 265 ITR 25 (Calcutta). While discussing explanation 1 of Section 271(1)(c), Hon'ble Rajasthan High Court opined that in debatable claims, no penalty can be levied (CIT vs. Harshvardhan Chemicals 259 ITR 212 (Raj). In case of penalty, lenient view will have to be taken as per C.B.D.T. circular 451 dated 17.2.1986. Similar views were taken by Madhya Pradesh High Court in case of Shyam Koyal vs. CIT 286 ITR 251 (MP). In instant case, assessee has made claim for deduction under Section 80-IB(7A), which was rejected by A.O. claim of assessee is legal claim. Nothing was concealed by assessee. Entire material was available before A.O. For legal advise rendered by Chartered Accountant under bona-fide belief, no penalty is leviable as per ratio laid down in case of CIT vs. S. Dhanabal, 309 ITR 268 (Del) where it was observed that . claim of assessee had been duly certified by chartered accountant and, therefore, plea of assessee that claim was made under bona fide mistake deserved to be accepted. Importantly, Tribunal also noted that all primary facts wee before Assessing Officer and that deduction was to be allowed on percentage applicable under section 80HHE. Tribunal returned specific finding that assessee cannot e said to have furnished inaccurate particulars and concluded that Commissioner of Income-tax (Appeals) had rightly cancelled penalty. Revenue's appeal was consequently dismissed. Further record, it appears that construction of Multiplex had not been completed by 31.3.2002, although part of it had been completed and part so completed had started yielding income also. Section 80-IB(7A) specifically talks about construction and not commencing of business. CIT(A) while deciding issue of leviability of penalty under Section 271(1) 7 (c) in favour of assessee has specifically noted that in financial year 2002-03, there was investment in project, relevant portion is reproduced hereunder : 6.4.4 After going through case records & submission made, I am of considered view :- (i) that issue decided by A.O. and confirmed by Ld. CIT(A) in A.Y. 2002-03 revolved around date of commencement of business . This finding cold not ipso-facto be taken by A.O. in A.Y. 2004-05 as conclusive finding with regard to period of construction of multiplex theatre as envisaged under section 80IB(7). It was incumbent upon A.O. to give specific findings in this regard especially when appellant had submitted that there was construction of value exceeding Rs. 4.12 crore in subsequent years (including F.Y. 2002-03). In this view of matter, it cannot be said that impugned claimed made by assessee was bogus claim or claim that was wholly untenable. It may be mentioned that penalty can be imposed only when there was some element of deliberate default and not mere mistake. finding had been recorded on facts that furnishing of inaccurate particulars was simply mistake and not deliberate attempt to evade tax. It is pertinent to mention that order imposing penalty for failure to carry out statutory obligation is result of quasi-criminal proceedings and penalty will not ordinarily be imposed unless party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in concious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. In audit report in Form 10CCBA relevant to assessment year 2006-07 (year under appeal here) also date of completion of construction has been mentioned as 1.5.2002 falling in assessment year 2003-04. On basis of these facts there was strong justification for assessee to claim exemption under section 80IB(7A) in assessment year 2006- 07 as it was fourth year and benefit is available for five consecutive years beginning from initial assessment year. 8 fact about completion of construction as noted by CIT(A), supported by audit report, remained undisputed at stage of Tribunal. Therefore, assessee cannot be visited with charge of filing inaccurate particulars, on basis of which penalty under section 271(1)(c) has been levied by Assessing Officer. It is also relevant to mention that penalty has been levied for furnishing inaccurate particulars, whereas Tribunal in para 8 of its order which reads as under :- 8. We have considered rival submissions. We find that admittedly return of income for present year was filed by assesse on 30/11/2006 i.e. before order of CIT(A) in assessment year 2002-03 as per which he rejected claim of assessee regarding its eligibility for deduction u/s 80IB and same has become final because no appeal was filed by assessee before Tribunal against this order of CIT(A) but it is also true that assessee could have revised return of income for present year till 31/03/2008 and in that situation, there could not have been any occasion to levy any penalty but assessee has chosen not to do so and hence, we find force in contention of learned D.R. of Revenue and also in stand taken by Assessing Officer that assessee has concealed its income and therefore, penalty is justified under these facts. In view of above, we are of view that by making legal claim for deduction under Section 80-IB(7A) assessee is not guilty to concealment of income. In earlier years, A.O. himself has cancel levy of penalty for similar reasons. When it is so, then principal of consistency will have to be followed as per ratio laid down in case of Radhasoami Satsang, 193 ITR 321 (SC). From record, it also appears that A.O. has not given any finding that claim of deduction was bogus. A.O. has only stated that such claim was not leviable as conditions envisaged under Section 80-IB(7A) were not fulfilled. Thus, claim was found to be legally unacceptable, but it does not amount to furnish inaccurate particulars/concealment of income. It is simple case of non-allowance of legal claim for which penalty is not desireable. Hence, we set 9 aside impugned order of Tribunal and restore order passed by first appellate authority, who has rightly cancelled levy of penalty. answer to substantial question of law is in favour of assessee and against Department. In result appeal filed by assessee is allowed. (Dr. Satish Chandra, J.) (Arun Tandon, J.) Order Date :- 16.04.2015. Anurag/- Rave Entertainment Pvt. Ltd. v. Commissioner Of Inocme-tax, Kanpur