Wednesday, 23 October 2013

Whether exemption u/s 10B can be denied merely on the basis that confirmation regarding export sale has not been received till date of making such claim - NO: HC

THE issues before the Bench are - Whether exemption u/s 10B can be denied merely on the basis that confirmation regarding export sale has not been received till the date of making such claim; Whether exemption can be denied, even if assessee has made complete disclosure in its books of accounts and Whether penalty for concealment can be warranted in such a case. And the verdict goes against the Revenue.
Facts of the case

Assessee, a proprietor of M/s. Shyam Solutions, was engaged in the business of export of computer softwares. While filing the income tax return, it had claimed exemption u/s 10B. During assessment, AO opined that assessee had not brought back the entire amount to India and some amount which had not been brought for, assessee had applied for necessary permission. The extension was granted up to 31.12.2003, which was further extended up to 31.03.2004 in respect of the amount to be brought in India. The amount of Rs.29,48,843/- was not received, during the extended period, but the assessee had claimed exemption. Thus, AO observed that the exemption claimed was false. In reply, assessee did not submit explanation, therefore, AO issued show cause notice u/s 274 read with Section 271(1)(c). Finally, AO had levied penalty of Rs.7,96,200/- u/s 271(1)(c). On appeal, CIT(A), had cancelled the said penalty and observed that concealment of income was not established. On further appeal by Revenue, Tribunal had uphold the cancellation of penalty. On appeal before High Court, it had restored the matter back to the Tribunal to decide the issue afresh in accordance with the law. As per the direction of High Court, again, the Tribunal had passed a fresh order dated 18.03.2010, where the cancellation of the penalty was again upheld.

Before HC, the Revenue’s counsel had justified the levy of penalty by AO and submitted that the assessee in FORM No. 56G attached with the return where it was shown that an amount of Rs.1,60,81,545/- was brought into India. For the remaining amount, permission had been applied for, which was granted upto 31.12.2003 and further upto 31.03.2004. Since the amount of Rs.24,48,843/- was not received till the extension granted and assessee had claimed exemption in respect of its total export sale, the AO asked to explain as to why 90% of the aforesaid amount which works out Rs.26,53,959/- be not added in the taxable profit of the assessee which the assessee has claimed exemption u/s 10B. No satisfactory reply was submitted by the AO. It was further submitted that the amount of Rs.29,48,843/- had not been received by the assessee upto the prescribed period and, therefore, it was the duty of the assessee to inform the AO. Thus, the assessee had concealed the income and claimed false exemption. It was further submitted that the penalty is a civil liability and willfully concealment in not essential ingredient for attracting the civil liability. It was a fit case of the prosecution u/s 276(c). On the other hand, assessee’s counsel had justified the impugned order and submitted that the details for amount received back in India, was filed on 29.03.2004, though the limitation period was upto 31.03.2004. It was further submitted that the claim was made as per the account submitted by the assessee.

Held that,

++ it appears that the accounts were duly audited and the exemption under Section 10B was claimed by furnishing the report in FORM No. 56G read with Rule 16E of the Income Tax Rules, 1962. So, all the facts were disclosed to the AO. From the record, it also appears that the claim denied by the AO under Section 10B was based on the facts disclosed in the return of income filed by the assessee. It is also evident that uncollected sums were export income from the software which was not approved by the clients. So, the assessee did not receive the same in time. As and when payment received, the same was disclosed to the Department. In view of above, the variation between the claim made by the assessee under Section 10B of the Act vis-a-vis the claim disallowed in the assessment, occurred solely owing to bonafide reasons as entertained by the assessee at the time of filing the return. No malafide intention or element of concealment is involved in this case, so it is out of the ambit of penal provisions contained in Section 271(1)(c);

++ in the instant case, it appears that there was no concealment on the part of the assessee as AO has not collected independent material. Bonafide and inadvertent mistake is genuine. In the instant case no attempt to concealment was made as per the ratio laid down in the case of Price Water vs. CIT and CIT vs. Atar Singh & Bros., 2008 (11) MTC 35 (All). To this effect, there is concurrent finding of both the appellate authorities and in the absence of any adverse material, we find no reason to interefere. In the instant case, the facts were fully furnished. So, no penalty is leviable. In view of above discussion and by considering the totality of the facts and circumstances of the case, we do not find any reason to interfere with the impugned order passed by the Tribunal. Hence, the order passed by the appellate authority is hereby sustained. The answer to the substantial question of law is in favour of the assessee and against the department. In view of above, the appeal filed by the department is dismissed, as stated above.
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