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Issues involved: Levy of penalty under section 271(1)(c) of the I.T. Act.
Summary: The appellant, engaged in pharmaceutical formulations business, filed a return of income claiming additional depreciation under section 32(iia) which was disallowed by the Assessing Officer. Penalty proceedings were initiated, resulting in a penalty of Rs. 19,19,100 levied u/s 271(1)(c). The CIT(A) upheld the penalty, citing the case law of CIT vs. Gold Coin Health Food (P) Ltd. The appellant contended that the claim was made in good faith based on legal advice, and there was no intention to evade tax. The appellant's counsel argued that the claim was bonafide and not a deliberate attempt to evade tax, referencing relevant case laws. Due to the untimely demise of the counsel, the appellant could not properly represent the case before the CIT(A). The Departmental Representative argued that the claim was bogus and penalty was correctly imposed. Upon review, the Tribunal found that the appellant had set off carried forward unabsorbed depreciation, resulting in a Nil income despite the disallowed additional depreciation. The Tribunal concluded that Explanation 4 of section 271(1)(c) was not applicable in this case. It was noted that penalty under section 271(1)(c) is warranted only in cases of concealment of income or furnishing inaccurate particulars, which was not evident here. The Tribunal observed that the claim for 100% depreciation, though disallowed, was not tantamount to furnishing inaccurate particulars. The Tribunal also considered the bonafide nature of the claim, as evidenced by the carried forward depreciation amounts. The Tribunal, therefore, canceled the penalty and allowed the appellant's appeal. In conclusion, the Tribunal ruled in favor of the appellant, canceling the penalty imposed under section 271(1)(c) of the I.T. Act.
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