2011 (9) TMI 1055 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of penalty u/s 271(1)(c) of the Income-tax Act, 1961 by Learned CIT(Appeals) for assessment year 2004-05.

Summary:

Issue 1: Deletion of penalty under sec. 271(1)(c) by Learned CIT(Appeals)

The revenue appealed against the deletion of penalty of Rs. 12,27,443 u/s 271(1)(c) by Learned CIT(Appeals) for assessment year 2004-05. The ITAT found no merit in the appeal as no one appeared on behalf of the assessee. The additions and disallowances made by the Assessing Officer were scrutinized, with a focus on the disallowed depreciation on goodwill amounting to Rs. 2,50,000. The ITAT noted that certain amounts previously deleted by ITAT could not be a basis for imposing penalty, leaving only the depreciation on goodwill in question. The penalty was deleted by the Learned CIT(Appeals) on the grounds that the admissibility of depreciation on goodwill was debatable, hence penalty imposition was unwarranted.

Issue 2: Interpretation of law regarding depreciation on goodwill

The ITAT referenced the decision of the Hon'ble Delhi High Court in the case of CIT vs. Hindustan Coca Cola Beverages Pvt. Ltd. to analyze the claim of depreciation on goodwill. The Assessing Officer initially accepted the claim, but the order was sought to be revised by the Commissioner u/s 263. The ITAT and subsequently the High Court upheld the Assessing Officer's view, emphasizing that if a plausible view is taken, the Commissioner cannot intervene under sec. 263. The Hon'ble High Court's analysis highlighted that goodwill represents a positive reputation built over time and falls within the definition of intangible assets. The ITAT concurred with the decisions of the High Court and the Supreme Court in similar cases, leading to the dismissal of the revenue's appeal.

In conclusion, the ITAT upheld the deletion of the penalty by Learned CIT(Appeals) and dismissed the revenue's appeal on 27.09.2011.