2009 (11) TMI 1004 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty u/s 271(1)(c) for the assessment year 2001-02.
2. Deletion of addition due to difference in stock value for the assessment year 2003-04.

Summary:

Issue 1: Deletion of penalty u/s 271(1)(c) for the assessment year 2001-02

The Revenue's grievance in ITA No. 477/AHD/2007 was against the deletion of a penalty of Rs. 45,73,277/- levied by the A.O. u/s 271(1)(c) for the assessment year 2001-02. The assessee had revised its return to re-compute deductions u/s 80IA and 80HHC, leading to a revised total income. The A.O. initiated penalty proceedings for furnishing inaccurate particulars of income and subsequently levied the penalty.

The assessee argued that the revised return was filed to rectify a mistake based on discussions with tax authorities, and no penalty should be levied for such a correction. The Commissioner of Income Tax(Appeals) agreed, stating that the revised return merely rectified a mistake and taxes were paid accordingly. The Tribunal upheld this view, noting that the issue of whether relief u/s 80IA should be deducted before computing relief u/s 80HHC was highly debatable, as evidenced by various judicial precedents and the Hon'ble Madras High Court's decision in SCM Creations. Thus, the penalty was rightly cancelled.

Issue 2: Deletion of addition due to difference in stock value for the assessment year 2003-04

In ITA No. 478/AHD/2007, the Revenue contested the deletion of an addition of Rs. 35,50,506/- made by the A.O. due to a difference in stock value as per books and that declared to the bank. The A.O. had made the addition as the assessee failed to produce evidence to justify the value declared to the bank.

The Tribunal noted that the difference was only in value, not quantity, and relied on the Hon'ble Madras High Court's decision in CIT vs. Jaya Simha Babu, which held that the assessee's income should be assessed based on material required for assessment, not merely on statements given to third parties like banks. The Tribunal upheld the Commissioner of Income Tax(Appeals)'s decision to delete the addition, as the burden of proving undisclosed income was on the Revenue, which was not discharged merely by referring to the bank statement.

Conclusion:

Both the appeals by the Revenue and the Cross Objections by the assessee were dismissed. The Tribunal upheld the deletion of the penalty u/s 271(1)(c) and the addition due to the difference in stock value, affirming the decisions of the Commissioner of Income Tax(Appeals).