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2010 (12) TMI 856 - AT - Income TaxPenalty levied u/s 271(1)(c) - Depreciation - The Tribunal opined that the departmental authorities were justified in incoming to the conclusion that the assessee has failed to satisfactorily prove that the trial production has in fact started - It was also held that there is no evidence like production report indicating the quality of raw material consumed and production of noodles and the names of dealers to whom the alleged noodles were distributed for marketing - The Tribunal ultimately held that the assessee is not entitled to depreciation as well as the claim of expenses in relation to the alleged trial production which is not supported by any evidence - Hence, the learned CIT(A) was not justified in canceling the penalty by passing a non-speaking order. Claim u/s 80 I - Mere making a claim which is no sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding income of the assessee - Rely upon the decision of the Hon ble Supreme in the case of Reliance Petroproducts Pvt. Ltd. (2010 -TMI - 75701 - SUPREME COURT) - Do not find any infirmity in the order of the learned CIT(A) in canceling the penalty on this issue - The finding of fact recorded by the learned CIT(A) is accordingly confirmed - Thus departmental appeal on this issue is dismissed.
Issues Involved:
1. Claim of depreciation 2. Suppression of sales 3. Claim under section 80 I of the IT Act Detailed Analysis: 1. Claim of Depreciation: The AO levied a penalty under section 271(1)(c) of the IT Act, which was challenged by the assessee. The assessee argued that the claim of depreciation on trial production was legitimate and supported by the Hon'ble Gujarat High Court's decision in Ashima Syntex Ltd. The assessee provided various supporting documents to prove that production started in the assessment year under appeal. The CIT(A) accepted the assessee's contention, noting that the issue of depreciation was debatable and the claim was made in good faith. The CIT(A) canceled the penalty, stating: - "The issue with regard to depreciation is a debatable one, the levy of penalty u/s. 271 (1) (c) of I. T. Act is not warranted." - "The appellant made the depreciation in good faith which, however, is not accepted by the A.O., therefore, it cannot be said that very claim made was with a malafide intention." - "Having considered the facts and circumstances of the case, I find that the levy of penalty on disallowance confirmed towards depreciation is not sustained." However, the ITAT found that the CIT(A)'s order was not sufficiently reasoned and noted that the Tribunal had previously confirmed the addition, finding the assessee's claim unsupported by evidence. The ITAT restored the matter to the CIT(A) for a fresh decision with a reasoned order. 2. Suppression of Sales: The AO imposed a penalty for suppression of sales based on an ad hoc and estimated disallowance due to low yield of Mango Pulp. The CIT(A) canceled the penalty, stating that the addition was based on estimation and not on concrete evidence of suppression of sales. The ITAT upheld the CIT(A)'s decision, noting: - "The addition is merely made on estimate and ad hoc basis on which the learned CIT(A) has rightly canceled the penalty u/s 271(1) (c) of the IT Act." - "When the matter was restored to the file of the AO, addition has been deleted by the Tribunal, it would not support the findings of the AO that penalty shall have to be necessarily imposed on such a matter." 3. Claim under Section 80 I: The AO imposed a penalty for an incorrect claim under section 80 I, which was corrected by the assessee during the assessment stage. The CIT(A) canceled the penalty, relying on the Supreme Court's decision in Hindustan Steel Ltd. vs State of Orissa, noting that the claim was bona fide and not made with any malafide intention. The ITAT upheld the CIT(A)'s decision, stating: - "The assessee disclosed all the relevant facts of claim of deduction u/s 80 I of the IT Act before the AO and only the computation was revised allocating the head office expenses for certain units." - "There is no finding that any details furnished by the assessee in its return of income are found to be incorrect or erroneous or false, inviting penalty u/s 271 (1) (c) of the IT Act." - "Mere making a claim which is no sustainable in law, by itself will not amount to furnishing of inaccurate particulars regarding income of the assessee." Conclusion: The ITAT's final judgment resulted in a partial allowance of the departmental appeal for statistical purposes, particularly on the issue of depreciation, which was remanded back to the CIT(A) for a fresh decision. The ITAT upheld the CIT(A)'s cancellation of penalties regarding suppression of sales and the claim under section 80 I.
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