IN INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI Before Shri A. Mohan Alankamony, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I T.A. No. 1229/Mds/2016 Assessment Year :2002-03 Assistant Commissioner of M/s. FL Smidth Limited, Income Tax, Vs. No. 34, Egatoor, Kelambakkam, Corporate Circle 2(1), Old Mahabalipuram Road, Chennai 600 034. Chennai 603 103. [PAN:AABCR0346N] ( Appellant) (Respondent) Appellant by : Shri Supriyo Pal, JCIT Respondent by : Shri N. Vijayakumar Pauna Date of hearing : 25.07.2016 Date of Pronounce ment : 30.09.2016 O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by Revenue is directed against order of ld. Commissioner of Income Tax (Appeals) 6, Chennai, dated 24.02.2016 relevant to assessment year 2002-03. only effective ground raised by Revenue is that ld. CIT(A) has erred in deleting penalty levied under section 271(1)(c) of Income Tax Act, 1961 [ Act in short]. 2 I.T.A. No.1229/M/16 2. brief facts of case are that assessee is engaged in business of design, fabrication and supply of cement equipment and. assessee has filed its return of fringe income for assessment year 2002-03 on 31.10.2002 declaring total income of .3,10,70,066/-. assessment was completed under section 143(3) of Act, determining income at .9,22,42,335/-. Subsequently, assessment was revised under Section 154 of Act determining income of .9,26,68,392/-. Thereafter, again on 31.12.2008, revision was made giving effect to order dated 22.06.2007 of ITAT, Chennai determining income at .9,16,60,121/-. Reassessment proceedings were initiated by issuance of notice under section 148 of Act on 23.03.2009 and reassessment was completed at total income of .9,99,04,240/- on 24.12.2009 . Penalty was imposed under section 271(1)(c) of Act vide impugned order dated 28.06.2010 amounting to .29,43,150/-. penalty was levied in respect of restriction of claim of deduction under section 80HHB of Act. 3. Against penalty order, assessee carried matter in appeal before ld. CIT(A) and by relying on various case law, filed detailed written submissions dated 19.02.2016, wherein assessee has submitted as under: 1.1 Appellant is engineering multinational company engaged in business of manufacture, supply and supervision of erection & commissioning of large cement plants in India as well as outside India. 3 I.T.A. No.1229/M/16 1.2 In respect of projects carried outside India, Appellant had been claiming deduction u/s. 80HHB of Act. Copies of certificates issued by Chartered Accountants (CA Certificate) in Form No.10CCAH for AY's 2000-01 & 2001-02 is enclosed in Annexure-I for your immediate reference. 1.3 As per section 80HHB(1) of Act, assessee is entitled to claim deduction on profits derived from business of execution of foreign projects. 1.4 Upto financial year 1999-2000, deduction was allowable at rate of 50% of profits derived from foreign projects u/s 80HHB. Clause (ii) to sub-section (3) of section 80HHB stipulated condition that 50% of said profits is to be transferred to reserve account known as "Foreign Projects Reserve Account". 1.5 From financial year 2000-2001, quantum of deduction available to assessee was reduced to 40%, 30%, 20% and 10% respectively for previous years ended 31.03.2001, 31.03.2002, 31.03.2003 and 31.03.2004. Consequential amendment was also made to clause (ii) to sub-section (3) of section 80HHB to provide for respective percentage of profits to be transferred to "Foreign Projects Reserve Account". 1.6 For subject AY 2002-03, Appellant is eligible to claim 80HHB deduction at rate of 30% of profits derived from foreign projects. 1.7 During subject AY 2002-03, Appellant had obtained CA certificate in Form 10CCAH from Chartered Accountant to certify computation of deduction u/s 80HHB as required u/s 80HHB(3)(ia). copy of said certificate is attached as Annexure 2. 1.8 Appellant submits that Chartered Accountant while computing amount to be transferred to "Foreign Projects Reserve Account" under clause (ii) to sub-section (3) of section 80HHB erroneously applied rate of 50% on deduction u/s 80HHB instead of applying rate of 30% on profits. Consequently, amount transferred to Foreign Projects Reserve Account was lower by Rs. 82,44,120 although Appellant could have transferred higher amount to Reserve account as may be evident from profit and loss account for financial year ended March 2002 (Refer Annexure 3). 4 I.T.A. No.1229/M/16 1.9 During course of scrutiny assessment proceedings, learned AO restricted claim of deduction under Section 80HHB to extent of amount transferred to "Foreign Projects Reserve Account. Appellant acknowledged inadvertent error; recomputed business income and also paid due taxes thereon. 1.10 However, AO initiated penal proceedings u/s 271(1)(c) for concealment/furnishing of inaccurate particulars of income and levied penalty of Rs.29,43,150 being 100% of consequential tax levy. 1.11 We submit that company had sufficient profits available for transfer to "Foreign Projects Reserve Account" and as such Appellant had transferred said sum relying on certificate issued by Chartered Accountant (refer P&L account in Annexure 2). 1.12 It may also be noted that, in preceding previous years, Appellant had been duly transferring requisite quantum to "Foreign Projects Reserve Account" as required u/s 80HHB even when appellant had incurred overall losses. Therefore, we submit that there is no mala-fide intention on part of Appellant to transfer lower amount to such reserves. Appellant has good track record of paying taxes duly and was being compliant with section 80HHB for all of previous years. 1.13 AO has failed to appreciate fact that there was all inadvertent human error on part of Chartered Accountant (who was different from CA who issued certificate in earlier years) while issuing certificate u/s 80HHB and as such AO has not examined aforesaid facts in right perspective while proceeding to levy penalty u/s 271(1)( c) of Act. 3.1. After considering above submissions of assessee and also by considering various judicial pronouncements, ld. CIT(A) deleted penalty levied under section 271(1)(c) of Act. 4. On being aggrieved, Revenue is in appeal before Tribunal and by relying on grounds raised in appeal, ld. DR has submitted that since assessee has furnished inaccurate particulars, deletion of levy 5 I.T.A. No.1229/M/16 of penalty is unwarranted and pleaded that order of ld. CIT(A) should be reverted. On other hand, by reiterating submissions as made before ld.CIT(A), ld. Counsel for assessee has submitted that there was no concealment of income or furnishing of inaccurate particulars warranting levy of penalty and prayed that order of ld. CIT(A) should be sustained. 5. We have heard both sides, perused materials available on record and gone through orders of authorities below. Consequent upon order of Tribunal vide its order dated 22.06.2007, Department has realized that there was income escaped assessment and thereafter, reassessment proceedings were initiated and completed assessment under section 143(3) r.w.s. 147 of Act on 23.03.2009. As such, based on particulars furnished by assessee, Department has not properly verified particulars of assessee while doing original assessment under section 143(3) of Act dated 31.03.2005. 6. During course of penalty proceedings, assessee has represented that while issuing certificate, Chartered Accountant has inadvertently omitted to consider ceiling in respect of amount credited by assessee to foreign projects reserve account, thereby claim made by assessee was disallowed. Otherwise, Department did not have any incriminating material evidence for even for initiating reassessment 6 I.T.A. No.1229/M/16 proceedings or leading to levy of penalty during course of penalty proceedings except relying on various case law by Assessing Officer. In first appellate order, ld. CIT(A) has given concurrent findings that Assessing Officer has not discharged his onus. In penalty order, Assessing Officer has not brought any material on record as to what constitutes inaccurate particulars of income in assessee s case and how he has arrived at satisfaction that same constitute furnishing of inaccurate particulars within meaning of section 271(1)(c) of Act. In this case, assessee has furnished all details of expenditure as well as income in its return for assessment. There was no finding of assessing authority that any of details supplied by assessee in its return were found to be incorrect or erroneous or false. It is admitted fact that only on inadvertent mistake of Chartered Accountant, assessee has made claim under section 80HHB of Act. Apart from assessee, even Assessing Officer who framed original assessment order made mistake in overlooking contents of tax audit report and tax audit report suggest that there is no question of assessee concealing its income. There is also no question of assessee furnishing any inaccurate particulars. All that happened in present case is that through bonafide and inadvertent error, C.A. failed to note ceiling in respect of amount credited by assessee to foreign project reserve account while computing deduction under section 80HHB of Act, that 7 I.T.A. No.1229/M/16 by itself would not, in our considered opinion, attract penalty under section 271(1)(c) of Act. Our above view has been duly fortified by Hon ble Supreme Court in case of Price Waterhouse Coopers Private Ltd vs. CIT 348 ITR 306 (SC). Moreover, In case of CIT v. Reliance Petro Products Pvt. Ltd. 322 ITR 158, Hon ble Supreme Court has observed that mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding income of assessee. Such claim made in return cannot amount to inaccurate particulars . Under above facts and circumstances, we find no reason to interfere with order passed by ld. CIT(A) in deleting penalty levied under section 271(1)(c) of Act. Thus, ground raised by Revenue is dismissed. 7. In result, appeal of Revenue is dismissed. Order pronounced on 30th September, 2016 at Chennai. Sd/- Sd/- (A. MOHAN ALANKAMONY) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 30.09.2016 Vm/- Copy to: 1. Appellant, 2. Respondent, 3. CIT(A), 4. CIT, 5. DR & 6. GF. Assistant Commissioner of Income Tax, Corporate Circle 2(1), Chennai v. M/s. FL Smidth Limited