Commissioner of Income Tax vs Shahabad Co-Op. Sugar Mills Ltd.

Adarsh Kumar Goel, J.—The Revenue has preferred this appeal u/s 260A of the income tax Act, 1961, against the order of the income tax Appellate Tribunal (Chandigarh Bench "A") passed in I.T.A. No. 1041/ Chandi/2005, dated June 7, 2006, for the assessment year 1995-96, proposing to raise the following substantial questions of law:

i) Whether, on the facts and in the circumstances of the case, the learned income tax Appellate Tribunal was right in law in deleting the penalty of Rs. 2,62,41,380 imposed u/s 271(1)(c) of the income tax Act totally ignoring the fact that the assessee had furnished inaccurate particulars of income by furnishing inaccurate particulars and making wrong claim of deduction u/s 80P(2)(a)(iii) ?

(ii) Whether, on the facts and in the circumstances of the case, the learned income tax Appellate Tribunal was right in law in deleting the penalty in respect of wrong claim of deduction u/s 80P(2)(d) and wrong claim of depreciation on guest house when the learned income tax Appellate Tribunal in its order has not given any reasons for deleting the penalty on these counts ?

The assessee is an agricultural society engaged in marketing of sugar by its members. The said claim was rejected on the ground that the claim was available only on marketing of agricultural produce and not on manufactured article. While disallowing the said claim, penalty was also levied for making wrongful claim and thereby avoiding tax. The said view was upheld by the Commissioner of income tax (Appeals) but the Tribunal even while holding that the claim of the assessee was not tenable, set aside the levy of penalty on the ground that there was no conscious breach of law which was required for levy of penalty, as held by the Hon''ble Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa, There was no concealment or deliberate withholding of information or furnishing of incorrect particulars.

This appeal was deferred in view of pendency of quantum appeal filed by the assessee being I.T.A. No. 165 of 2005 (Shahabad Co-op. Sugar Mills Ltd. v. Deputy CIT, Spl. Range, Karnal), which has been allowed by a separate order passed today, in view of the Full Bench judgment of this court in The Budhewal Co-operative Sugar Mills Ltd. Vs. Commissioner of Income Tax, , holding that the claim of the assessee was valid. This being the position, there could be no scope for levy of penalty. However, learned counsel for the Revenue submits that wrong claim of the assessee was not only u/s 80P of the Act but also u/s 80P(2) of the Act in respect of depreciation on guest house.

From the order of the Tribunal, we do not find any such point having been raised by the Revenue. In any case, reasoning which has been applied for setting aside penalty in respect of wrong claim u/s 80P of the Act will also apply to wrong claim under the head of depreciation. Making of wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty u/s 271(1)(c) of the Act.

No substantial question of law arises. The appeal is dismissed.