2013 (12) TMI 713 - AT - Income Tax

Penalty u/s 271(1)(c) - Under valuation of WIP and deduction u/s 80HHC - Held that - Following assessee s own case for earlier years - The principle in both years remains same - The penalty for concealment of income cannot be made where there is difference in calculation of an exemption as claimed by assessee and as allowed by Assessing Officer due to difference in opinion in respect of various heads of expenses and income relating to export or non-export income - Decided against Revenue. Penalty for depreciation on film city - Held that - The assessee relying upon the decision in A. V. Mevyyappa Chettiar claimed depreciation @ 25% on studio building - Up to the date of filing of return that is on 31.12.1999 the decision of the case remained in favour of assessee - Later on the Hon ble Supreme Court reversed the decision - The depreciation claimed under bonafide belief does not amounts to furnishing of inaccurate particulars of income - Decided against Revenue. Carry forward of loss of amalgamating company - Held that - At the time of filing of return, the assessee was under a bonafide belief that it will continue to carry on the business of amalgamating company - The addition was debatable as is apparent from the order of Ld. CIT (A) in respect of quantum additions wherein he had reduced the disallowance from Rs. 3 lacs to Rs. 2.50 lacs - Decided against Revenue.

Issues Involved:
1. Cancellation of penalty imposed under Section 271(1)(c) of the Income Tax Act.
2. Disallowance of brought forward losses of M/s Mandakini Aqua Minerals Pvt. Ltd.
3. Addition due to under-valuation of closing Work-in-Progress (WIP).
4. Disallowance on account of excess claim of deduction under Section 80HHC.
5. Disallowance of penalty paid in pursuance of the order of the Commissioner of Central Excise.
6. Disallowance of depreciation in respect of film city and C-35.

Detailed Analysis:

1. Cancellation of Penalty Imposed Under Section 271(1)(c):
The Revenue appealed against the cancellation of a penalty amounting to Rs. 29,99,293/- imposed by the Assessing Officer (AO) under Section 271(1)(c). The Commissioner of Income Tax (Appeals) [CIT (A)] had deleted the penalty, which was contested by the Revenue.

2. Disallowance of Brought Forward Losses of M/s Mandakini Aqua Minerals Pvt. Ltd.:
The CIT (A) found that at the time of filing the return for the Assessment Year (AY) 1999-2000, the appellant company was eligible to claim the losses of the amalgamating company. However, due to the discontinuation of the business of bottling mineral water, the appellant got disentitled to set off these losses under Section 72A. The CIT (A) concluded that the disallowance of the loss did not amount to concealment of income, as it was a wrong claim rather than a false one, citing the Supreme Court decision in CIT vs. Reliance Petro Products Ltd.

3. Addition Due to Under-Valuation of Closing WIP:
The CIT (A) noted that the addition to the closing WIP was made on an estimate basis without any excess quantity or rate difference found. The addition was based on the estimation of further expenditure on raw materials before converting them into finished products. The CIT (A) held that such an estimation difference does not attract a penalty for concealment, following the ITAT's decision.

4. Disallowance on Account of Excess Claim of Deduction Under Section 80HHC:
The CIT (A) observed that similar issues had been addressed in the appellant's own case for previous years, where the ITAT had directed a re-computation of the deduction under Section 80HHC. The CIT (A) concluded that the issue was debatable and that a different stand taken by the appellant for computing the deduction could not amount to concealment of income.

5. Disallowance of Penalty Paid in Pursuance of the Order of the Commissioner of Central Excise:
The CIT (A) found that the issue of allowability of expenditure towards excise duty demands was debatable, as evidenced by the reduction of the disallowance by the CIT (A) and its sustenance by the ITAT. The CIT (A) held that mere sustenance of addition in quantum proceedings does not lead to a penalty for concealment, citing the Supreme Court decision in CIT vs. Reliance Petro Products Ltd.

6. Disallowance of Depreciation in Respect of Film City and C-35:
The CIT (A) noted that the claim for a higher rate of depreciation on studio buildings was based on judicial decisions in favor of the assessee, which were later reversed by the Supreme Court. The CIT (A) concluded that the issue was debatable and that the appellant's claim, based on existing judicial decisions, could not be termed as concealment.

Conclusion:
The ITAT upheld the CIT (A)'s decision to delete the penalty, agreeing that the issues involved were debatable and that the appellant had not furnished inaccurate particulars of income. The appeal filed by the Revenue was dismissed.

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