2017 (10) TMI 62 - AT - Income Tax

Penalty under Section 271(1)(c) - treatment of reducing the sales consideration in relation to assets of the Daruhera s unit from the respective block of assets and claiming depreciation on the adjusted block of assets - Held that - There is no closure of business of the assessee as affirmed by the Hon ble Delhi High Court and consequently the block of the assets continue to exist there is absolutely no infirmity in assessee s treatment of reducing the sales consideration in relation to assets of the Daruhera s unit from the respective block of assets and claiming depreciation on the adjusted block of assets. Keeping in view of the above stated facts and various pronouncements quoted above we are of the view this is not a case where there is no closure of business of the assessee same has been affirmed by the Hon ble Delhi High Court and consequently the block of the assets continue to exist there is absolutely no infirmity in assessee s treatment of reducing the sales consideration in relation to assets of the Daruhera s unit from the respective block of assets and claiming depreciation on the adjusted block of assets. Hence there is no case of penalty therefore Ld. CIT(A) has rightly deleted the same which does not need any interference on our part hence we uphold the same and reject the ground no. 1 raised by the Revenue. Deferred allowance of 4/5th of legal and other expenses on restructuring of business - Held that - It is settled law that no penalty is leviable in cases where a question of law is admitted in the Hon ble High Court. Admission of question of law by the Hon ble High Court on this issue itself shows that the claim of the assessee was legitimate and debatable. Hence no penalty under section 271(1)(C) is leviable where the issue is debatable and a question of law is admitted by the High Court hence we are of the view that Ld. CIT(A) has rightly deleted the penalty on this issue which does not need any interference on our part hence we uphold the same and reject the ground no. 2. Aforesaid Our view is fortified by the decision of the Hon ble Delhi High Court in case of CIT II vs Liquid Investments and Trading Ltd (2010 (10) TMI 1021 - DELHI HIGH COURT ). Exclusion of miscellaneous income from the claim of tax deduction under section 10A and 10B - Held that - The assessee had obtained certificates from a Chartered Accountant in Forms 56F and 56G and had thus acted on the basis of an expert advice/opinion for claiming 10A/10B deductions. That the assessee had made adequate disclosure in the audited financial statements the notes to the computation of income filed along with the return of income. During the course of assessment proceedings the assesseee had provided the necessary explanations and made due submissions dated 05 December 2008 which were supported by sufficient documentation and guided by judicial decisions. Keeping in view of the detail discussion as above we are of the view that there is no case of penalty. Hence the minimum penalty imposed by the Assessing Officer was rightly cancelled which does not need any interference on our part hence we uphold the same and reject the ground no. 3.

Summary

Issues Involved:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2005-06.

Analysis:
1. Issue 1 - Deletion of Penalty for Depreciation:
The case involved the deletion of a penalty of ?2,07,46,650 imposed under section 271(1)(c) for disallowances including depreciation on assets of a closed unit. The assessee argued that all mandatory disclosures were made, and the issue was supported by judicial decisions. The tribunal noted that non-acceptance of a claim during assessment does not automatically warrant a penalty. Citing various legal precedents, including the Reliance Petroproducts case, it was held that a mere disallowance does not justify penalty imposition. The tribunal found no concealment or inaccurate particulars of income, upholding the deletion of the penalty.

2. Issue 2 - Deferred Allowance on Restructuring Expenses:
The second issue concerned the deferred allowance of expenses on restructuring, amounting to ?1,37,65,600. The High Court admitted the question of law, indicating a debatable issue. The tribunal emphasized that where a question of law is admitted by the High Court, no penalty should be levied. Referring to the Liquid Investments case, it was established that the claim was legitimate and debatable, justifying the deletion of the penalty by the CIT(A), which was upheld by the tribunal.

3. Issue 3 - Exclusion of Miscellaneous Income for Tax Deduction:
The final issue revolved around the exclusion of miscellaneous income from tax deductions under sections 10A and 10B. The Assessing Officer's ad-hoc disallowance was deemed insufficient for penalty imposition. The assessee had obtained certificates from a Chartered Accountant and made adequate disclosures, supported by documentation. The tribunal concluded that the exclusion of miscellaneous income did not warrant a penalty, as the assessee acted on expert advice. Consequently, the penalty was rightly cancelled by the CIT(A, which was upheld by the tribunal.

In conclusion, the tribunal dismissed the Revenue's appeals, affirming the deletion of the penalty under section 271(1)(c) for the Assessment Year 2005-06. The decision was based on the adequacy of disclosures, legal precedents, and the debatable nature of the issues involved. The tribunal upheld the CIT(A)'s orders, emphasizing the absence of concealment or inaccurate particulars of income, and the legitimate nature of the debated claims.