2014 (6) TMI 107 - AT - Income Tax

Deletion of penalty u/s 271(1)(c) of the Act Bogus purchases - Disallowance of depreciation Bad debts written off - Public issue expenses - Held that - Either the additions on which the penalty has been levied were restored back for reconsideration or decided in assessee s favour - also in issue of disallowance of depreciation on tangible assets was restored back to the file of the AO to be directed as per the directions given in A.Y. 2002-03 - the issue of bogus purchases has also been decided by the Tribunal in favour of the assessee - The entire disallowance was deleted - In respect of third addition on which the penalty in question u/s.271(1)(c) has been levied pertained to public issue expenses , which has also been decided by the Tribunal by holding that a view already taken in assessee s own case should be followed for this year as well - CIT(A) has deleted the penalty after considering the merits of each addition. As far as the onus on the assessee was concerned for the purpose of levy of penalty, according to CIT(A) all the relevant particulars were disclosed and there was no concealment of facts and the bad debt was erroneously disallowed - the assessee had a bona fide belief that the claim would be allowed in terms of Section 35D of IT Act - On the one hand the quantum additions have not been confirmed by the Tribunal and on the other hand the CIT(A) has discussed the merits of each addition, while disposing off the penalty issue - thus, the deletion of the penalty is confirmed Decided against Revenue.

Summary

Issues:
- Deletion of penalty levied under section 271(1)(c) for assessment years 2003-04 and 2004-05.

Analysis:
1. Assessment Year 2003-04:
- The Revenue challenged the deletion of penalties totaling Rs. 2,89,39,072/- and Rs. 1,77,74,855/- for various additions made by the AO.
- The Tribunal examined the assessment orders and penalty orders for this year, focusing on depreciation, bad debts, and public issue expenses.
- The Tribunal referred to a consolidated order of ITAT 'C' Bench Ahmedabad for previous years and concluded in favor of the assessee for depreciation, bad debts, and public issue expenses.
- The Tribunal found no justification to sustain the additions made by the AO and set aside the orders, allowing the appeals of the assessee.

2. Assessment Year 2004-05:
- The Tribunal reviewed the penalty levied for disallowance of depreciation, bogus purchases, and public issue expenses.
- The issue of disallowance of depreciation on tangible assets was restored back to the AO as per directions from a previous year.
- The Tribunal decided in favor of the assessee for bogus purchases and public issue expenses, following earlier orders and directing reconsideration by the AO.
- The learned CIT(A) deleted the penalties after considering the merits of each addition, noting that the explanations provided were not false and there was no concealment of facts.
- The Tribunal confirmed the deletion of penalties for this year as well, dismissing the appeals of the Revenue.

3. Overall Decision:
- Considering that the quantum additions were either allowed or sent back for reconsideration by the Tribunal, and the CIT(A) had discussed the merits of each addition, the penalties were deleted.
- The Tribunal found no merit in the Revenue's grounds and dismissed both appeals, upholding the deletion of penalties for assessment years 2003-04 and 2004-05.

This detailed analysis highlights the Tribunal's examination of the penalty levied under section 271(1)(c) for the mentioned assessment years, focusing on specific additions and the subsequent decisions in favor of the assessee based on the merits of each case.