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2016 (4) TMI 1008 - AT - Income TaxPenalty u/s 271(1)(c) - addition made on account of writing off unused hologram - Held that - We note that the ld. AR s main argument against non-leviability of penalty u/s 27l (l)(c) on this addition is that as per UP Excise Rules, the holograms printed and issued for a particular year can only be consumed during the year and the Distilleries have to destroy the same after the end of the year as per rules and guidelines framed by Excise Department; and the unused hologram is of no use for business purpose, therefore, its market value is nil. Therefore, the assessee has written off unused hologram at the end of the year consistently. We find that during the instant assessment year, the AO has made addition and, at first appellate stage, the CIT(A) gave relief to the assessee. However, ITAT held that unless the hologram is destroyed, the same cannot be written off. We find that the ld. CIT (A) observed that at the time of filing Income Tax return, the decision of ITAT order was not there, hence, the assessee was of bonafide belief that writing off of unused hologram is legal since it cannot be used next year and we concur with the said view of the ld. CIT (A) and also of the view that the claim of the assessee is not bogus. Accordingly, we uphold the order of the CIT (A) deleting the penalty on this addition also. So, we uphold the order of the CIT (A) deleting the penalty levied u/s 271(1)(c) of the Act. - Decided in favour of assessee
Issues:
Deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961. Analysis: 1. The sole issue in the revenue's appeal is the deletion of penalty of Rs. 11,64,041/- under section 271(1)(c) of the Act. The AO had completed the assessment determining the income at Rs. 95,59,885/- and levied a penalty under section 271(1)(c) based on various additions/disallowances made. The CIT (A) deleted the penalty, stating that for penalty under section 271(1)(c) to be levied, the assessee must have filed inaccurate particulars of income or concealed the particulars of income. The CIT (A) analyzed each addition separately to determine if the penalty was justified. 2. Addition on account of provision of Interest on Sugar Development Fund (SDF) for Rs. 14,45,710/-: The CIT (A) noted that the loan from the Sugar Development Fund was sanctioned by the Government of India and IFCI was only the disbursing agency. The CIT (A) found that there were reasonable grounds for the assessee to believe that section 43B was not applicable, and hence, the penalty was not justified. 3. Addition on account of Dharmada collection and interest on accumulated fund: The CIT (A) observed that there were conflicting decisions on the taxability of Dharmada collection at the time of filing the return. The CIT (A) concluded that penalty under section 271(1)(c) was not justified in this case. 4. Addition of Rs. 1,69,655 on account of writing off unused hologram: The CIT (A) found that the assessee had a bona fide belief that writing off unused hologram was legal as per UP Excise Rules. The CIT (A) held that the claim of the assessee was not bogus, and hence, the penalty under section 271(1)(c) was not leviable. 5. The ITAT upheld the order of the CIT (A) deleting the penalty under section 271(1)(c) for all the additions. The ITAT noted that the issue was covered by its decision in the assessee's case for AY 2007-08. The ITAT agreed with the CIT (A) that the assessee had genuine reasons for the claims made, and therefore, the penalty was not justified. 6. The cross objection filed by the assessee was supportive of the CIT (A)'s order. Since the ITAT had dismissed the revenue's appeal and upheld the CIT (A)'s order, the cross objection became infructuous and was dismissed. 7. In conclusion, the appeal of the revenue and the cross objection of the assessee were both dismissed by the ITAT, upholding the order of the CIT (A) in deleting the penalty under section 271(1)(c) of the Act.
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