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Issues involved: Appeal by Revenue for assessment year 2006-07 regarding deletion of penalty u/s 271(1)(c) of the Income Tax Act, 1961 based on the belief of the assessee regarding the written down value of assets.
Summary: Issue a) Deletion of penalty u/s 271(1)(c) of the Income Tax Act: The respondent- assessee converted its capital asset into stock-in-trade during the assessment year 2006-07, resulting in a discrepancy in the written down value of the asset. The assessing officer added an amount to the income of the assessee and initiated penalty proceedings. The assessee claimed that the discrepancy was due to mistakenly computing the book value of the asset as per the Companies Act instead of the Income Tax Act. The Commissioner of Income Tax (A) deleted the penalty, which was upheld by the Tribunal. The Tribunal found that the assessee had shown all particulars in its financial statements and tax audit reports, and there was a bona fide belief in arriving at the written down value. The Tribunal held that there was no concealment of income or furnishing of inaccurate particulars, citing the decision in Commissioner of Income Tax V/s. Reliance Petroproducts Private Limited. The High Court dismissed the appeal, stating that the impugned order was based on factual findings. Issue b) Bona fide belief of the assessee regarding the written down value: The Tribunal found that the assessee had a genuine and bona fide belief in arriving at the written down value of the assets, which was not found to be false by the Revenue. The Tribunal noted that the conversion of machinery into stock-in-trade at book value did not result in short term capital gain or loss, indicating a genuine mistake on the part of the assessee. Citing the decision in Commissioner of Income Tax V/s. Reliance Petroproducts Private Limited, the Tribunal held that the penalty was not justifiable as there was no intention to conceal income or provide inaccurate particulars. The High Court upheld the Tribunal's decision based on factual findings and dismissed the appeal. Issue c) Ignoring Revenue's plea regarding revised particulars: The Revenue contended that the inaccurate particulars were revised only after being discovered by the assessing officer during the assessment process. However, the Tribunal focused on the genuine belief of the assessee in calculating the written down value based on the Companies Act, leading to no short term capital gain or loss. The Tribunal's decision was supported by the Supreme Court's ruling in Commissioner of Income Tax V/s. Reliance Petroproducts Private Limited, emphasizing the absence of concealment or furnishing of inaccurate particulars. The High Court upheld the Tribunal's findings and dismissed the appeal without costs.
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