TCA No.599 of 2017 dt. 24.07.2020 1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 24.07.2020 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE KRISHNAN RAMASAMY T.C.A.No.599 of 2017 Principal Commissioner of Income Tax I, No.63, Race course Road, Coimbatore ... Appellant vs. M/s. Core Carbons Pvt Ltd, 91, Krishna Colony, Singanallur, Coimbatore - 641005. Respondent Prayer ::- Appeal filed against order of Income Tax Appellate Tribunal, Madras C Bench, dated 20 April 2017 in ITA No.1378/Mds/2015. For appellant : Mr.T.R.Senthil Kumar For respondent : Mr.S.Sridhar ORDER (Made by DR.VINEET KOTHARI, J.) Court was held by Video Conference, as per Resolution of Full Court dated 3 July 2020, by Judges at their respective residence and counsel, staff of Court appearing from their respective residences. 2. Revenue has filed this appeal under Section 260A of Income Tax Act, raising following purported substantial questions of law for our http://www.judis.nic.in TCA No.599 of 2017 dt. 24.07.2020 2 consideration :- 1. Whether Appellate Tribunal is correct in deleting penalty levied u/s 271(I)(c) without considering that "Mens rea" is apparent in this case? 2. Whether Tribunal is correct in deleting Penalty relying on earlier decision [2010] of Supreme Court in case of Reliance Petro Products vs CIT when latter [2013] judgement of Supreme Court in case of MAK Data P Ltd Vs CIT had clearly held that "Voluntary disclosure does not release assessee from mischief of penal proceedings under section 271(I)(c)"? 3. Tribunal, while deleting penalty under Section 271 (1)(c) of Act, and upholding order of First Appellate Authority, viz., Commissioner of Income Tax Appeals, has given following reasons in paragraphs 10 and 11 of its order dated 20 April 2017. said paragraphs are quoted below for ready reference :- 10. We have carefully gone through judgment of Apex Court in Reliance Petroproducts (P) Ltd. (supra). In case before Apex Court, assessee-company claimed interest expenditure as deduction. However, Assessing Officer disallowed claim of assessee and made addition. assessee claimed interest expenditure on loan borrowed by it for purchasing some IPL shares. assessee did not earn any income by http://www.judis.nic.in TCA No.599 of 2017 dt. 24.07.2020 3 way of dividend from those shares. assessee claimed disallowance of expenditure under Section 14A of Act. assessee explained before Assessing Officer that entire details were given in writing and there was no concealment of income nor any inaccurate particulars of such income were furnished. In those factual circumstances, Apex Court held that mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of assessee. Such claim made in return cannot amount to inaccurate particulars. 11. Moreover, there was real confusion as stated above in view of extension of Sunset Clause and amendment made in Finance Act, 2008 and 2009. Therefore, claim made by assessee being bona fide one, this Tribunal is of considered opinion that CIT(Appeals) has rightly deleted penalty levied, by Assessing Officer. As found by Apex Court in Reliance Petroproducts (P.) Ltd. (supra), mere making claim under Section 10B of Act after furnishing all particulars of income, cannot be reason for concluding that assessee has furnished inaccurate particulars or concealed any part of income. In view of above, this Tribunal do not find any reason to interfere with order of lower authority and accordingly same is http://www.judis.nic.in TCA No.599 of 2017 dt. 24.07.2020 4 confirmed. 4. learned counsel for appellant/Revenue, Mr.T.R.Senthil Kumar vehemently submitted before us that Assessee deliberately made claim under Section 10B of Act for deduction of its 100% export income, it being 100% EOU beyond Sunset year of AY 2010-11 and AY 2011-12 involved in present case. He therefore submitted that Assessee clearly had mens rea or wrong intention to avail benefit of exemption under Section 10B of Act beyond its eligibility up to AY 2009-10. He pointed out circular No.1/2005 was issued way back in year 2005 itself, which made it clear that claim of 100% EOU will also expire after balance period of their becoming 100% EOU. He therefore submitted that there was no reason at all for Assessee to claim this exemption for two Assessment Years beyond AY 2009-10 up to which year only Assessee was entitled to avail benefits. 5. On other hand, Mr.Sridhar, learned counsel for respondent Assessee submitted that there was bona fide confusion in mind of Assessee on account of statement of Union Finance Minister made on floor of Parliament, extending Sunset clause for this exemption for 100% Export Oriented Units up to year 2015. However, he fairly conceded that when Assessing Authority initiated action to deny such exemption for AY 2011-12, in present Assessment year, Assessee not only withdrew his claim for exemption under Section 10B of Act for AY http://www.judis.nic.in TCA No.599 of 2017 dt. 24.07.2020 5 2011-12 but also for previous Assessment year AY 2010-11, by filing appropriate rectification application under Section 154 of Act. He therefore submitted that fact remains that Assessee has not availed any exemption under Section 10B of Act beyond AY 2009-10, in present case. He submitted that there was no mens rea, or ill intention on part of Assessee in initially making claim under bona fide confusion but withdrew same immediately upon being made aware of correct legal position, by initiation of proceedings by Assessing Authority. He submitted that Hon'ble Supreme Court in case of CIT v. Reliance Petroproducts (P.) Ltd. (2010) 322 ITR 158, which has been relied upon by Tribunal for setting aside penalty under Section 271(1)(c) of Act, is applicable to facts of case and therefore, he submitted that no substantial question of law arises in present appeal filed by Revenue and this Court could not restore penalty under Section 271(1)(c) of Act, in facts and circumstances of case, where Assessee, as 100% Export Oriented Unit, made inadvertent claim under Section 10B of Act for these two assessment years, which he immediately withdrew upon being made aware of correct legal position in light of CBDT circular of year 2005 and proceedings undertaken by Assessing Authority for Assessment year 2011-12. 6. Having heard learned counsel for parties, we are of http://www.judis.nic.in TCA No.599 of 2017 dt. 24.07.2020 6 opinion that no substantial questions of law arises in present appeal filed by Revenue. considerations for imposition of penalty under section 271(1)(c) of Act are different and same parameters, which are applicable for imposition of tax on Assessee, cannot be applied while considering cases of penalty, especially for penalty for concealment and filing of inaccurate particulars under section 271(1)(c) of Act. 7. It is true that assessee made claim under section 10B of Act for two of his assessment years, namely AY 2010-11 and AY 2011-12 wrongly, to which it was not entitled. But, fact is undisputed that Assessee has not really gone away with this exemption claim finally, upon assessment. He has withdrawn his claim for previous assessment year 2010-11 even by invoking rectification jurisdiction under section 154 of Act, and for present assessment year 2011-12 also, he has withdrawn his claim before assessing authority itself. Therefore, only mistake, which is rather inadvertent on part of Assessee, is to make claim under section 10B of Act, but he has finally withdrawn same. fact remains that there has been no revenue loss or loss of tax to department in present case. 8. We are of considered opinion that imposition of penalty and realisation thereof is not regular source of income for Income Tax Department. It is only justifiably imposition of tax which is intended to be recovered and unless there is mens rea or guilty animus on part of http://www.judis.nic.in TCA No.599 of 2017 dt. 24.07.2020 7 Assessee, penalty under section 271(1)(c) of Act is exception rather than rule. 9. In these circumstances, where two regular appellate authorities have granted relief to Assessee by deleting penalty imposed by Assessing Authority under section 271(1)(c) of Act, we don't think that it is fit case for re-imposition thereof, by allowing appeal of Department before us under section 260A of Act, which lies only on substantial questions of law arising from order of learned Tribunal. 10. We do not find any substantial question of law arising in present case and imposition of penalty, always being quasi judicial exercise at discretion of competent authorities, cannot give rise to any substantial question of law. 11. We are, therefore, not inclined to entertain present appeal of Revenue under section 260A of Act and we dismiss same with no order as to costs. (V.K.,J.) (K.R.,J.) 24.07.2020 kpl/tar To Income Tax Appellate Tribunal, Madras C Bench http://www.judis.nic.in TCA No.599 of 2017 dt. 24.07.2020 8 DR.VINEET KOTHARI, J. and KRISHNAN RAMASAMY, J. (tar) T.C.A.No.599 of 2017 24.07.2020 http://www.judis.nic.in Principal Commissioner of Income-tax I, Coimbatore v. Core Carbons Pvt. Ltd