2014 (6) TMI 668 - AT - Income Tax

Levy of penalty u/s 271(1)(c) of the Act - Depreciation on leased assets and disallowance u/s 14A of the Act Disallowance of higher depreciation on UPS - Held that - In the earlier assessment year, it has been held that the disallowance on depreciation on leased assets is set aside, the order of the FAA is set aside and the AO is directed to allow depreciation on leased assets - no ground for penalty survives - for disallowance of depreciation on UPS at 60% it was treated as a part of the computer system - penalty on this issue would stand to be necessarily set aside. Disallowance of incremental commission Disallowance of expenditure on renovation and architect s fees as capital expenditure - Held that - The disallowance as finally sustained by him and which has since been restored back to the file of the AO by the tribunal in the quantum proceedings there is no hesitation in setting aside the and the penalty is to be set aside - CIT(A) has not adjudicated the ground, mistakenly treating the same as covered by his predecessor s order for AY 2003-04, which does not list the disallowance - therefore, there has been an omission on the part of the CIT(A) in adjudicating the ground the matter is to be remitted back Decided partly in favour of Assessee.

Summary

Issues:
Appeal against penalty u/s.271(1)(c) of the Income Tax Act, 1961 for A.Y. 2004-05.

Analysis:
The appeal was made by the Assessee challenging the penalty imposed by the Commissioner of Income Tax (Appeals) for the assessment year 2004-05. The Authorized Representative argued that the penalty was confirmed on five grounds, but the Tribunal had deleted the disallowance on depreciation on leased assets and disallowance u/s. 14A. The Tribunal confirmed the penalty only on the treatment of renovation expenditure and architect's fees as capital expenditure. The Departmental Representative relied on the orders by the Revenue authorities.

1. Depreciation on Leased Assets:
The disallowance on depreciation on leased assets was deleted by the Tribunal, setting aside the first appellate authority's order. Consequently, the penalty on this ground was deleted.

2. Higher Depreciation on UPS:
The Tribunal restored the matter back to the Assessing Officer as the quantum order had been set aside. The penalty on this issue was set aside, allowing the Revenue to levy penalty in the set-aside proceedings if deemed fit.

3. Incremental Commission Disallowance:
The disallowance of incremental commission was partially allowed by the CIT(A) and later restored back to the Assessing Officer by the Tribunal. The penalty on this ground was deleted, allowing the Revenue to levy penalty in the set-aside proceedings if necessary.

4. Expenditure on Renovation and Architect's Fees:
The matter regarding the disallowance of expenditure on renovation and architect's fees was not adjudicated by the CIT(A) and was mistakenly treated as covered by a previous order. The Tribunal decided to send the matter back to the CIT(A) for adjudication.

5. Disallowance of Expenditure u/s.14A:
The disallowance of expenditure u/s.14A was deleted by the Tribunal in the quantum proceedings. As a result, this ground was dismissed.

In conclusion, the appeal was partly allowed, and the penalty was deleted on certain grounds while other issues were sent back for further adjudication.