2020 (4) TMI 89 - AT - Income Tax

Penalty u/s 271 (1) (c) - CIT-A cancelling the penalty levied for disallowance of depreciation on non-existing assets AND disallowance of prior period expenses - HELD THAT - Disallowances/ additions made by the AO in respect of depreciation on non-existing assets and prior period expenses were deleted by this Tribunal vide order dated 28-08-2017 in 2017 (9) TMI 649 - ITAT JAIPUR . Thus the additions itself are not in existence then the penalty levied by the AO would not survive. The ld. DR has submitted that the Department has filed an appeal against the order of this Tribunal before the Hon'ble Jurisdictional High Court, however the findings of this Tribunal on these issues have not been disturbed by the Hon'ble Jurisdictional High Court till date. Therefore, in the facts and circumstances of the case when additions/ disallowances were deleted by this Tribunal then the penalty deleted by the ld. CIT(A) does not require any interference. Levy of penalty u/s 271(1)(c) on account of disallowance of provisions for doubtful debts - HELD THAT - From the findings of the AO as well as Tribunal in the quantum proceedings, it is clear that it is not a case of furnishing inaccurate particulars of income or concealment of particulars of income but the claim of the assessee is regarding provision for bad and doubtful debts being outstanding dues from the electricity disconnection consumers. Once the assessee has produced and disclosed all the relevant facts then mere disallowance of claim by the AO on the ground that the same is not allowable as per provisions of the Income Tax would not lead to the conclusion that the assessee has furnished the inaccurate particulars of income or concealed the particulars of income. Accordingly, following the judgement in the case of CIT Vs. Reliance Petroproducts (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT the penalty levied by the AO against disallowance of claim of provision for bad and doubtful debts is deleted. - Decided in favour of assesse.

Summary

Issues:
- Penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2010-11.
- Disallowance of depreciation on non-existing assets.
- Disallowance of provisions for doubtful debts.
- Disallowance of prior period expenses.

Analysis:
1. The Tribunal addressed the cross-appeals against the penalty order passed under section 271(1)(c) of the Income Tax Act for the Assessment Year 2010-11. The AO had made additions for depreciation on non-existing assets, provisions for doubtful debts, and prior period expenses. The ld. CIT(A) deleted the penalty for depreciation and prior period expenses as these additions were previously deleted by the Tribunal in the quantum appeal. However, the penalty for doubtful debts was confirmed as upheld by the Tribunal. Both the Revenue and the assessee filed cross-appeals against this decision (Para 2.1).

2. Disallowance of Depreciation on Non-Existing Assets: The Revenue contended that the penalty for disallowance of depreciation on non-existing assets should not have been canceled. The Tribunal noted that the additions were deleted by them, and the High Court had not disturbed these findings. Therefore, the penalty was not justified, and the Revenue's grounds were dismissed (Para 3.2).

3. Disallowance of Provisions for Doubtful Debts: The assessee argued that the disallowance of provisions for doubtful debts did not amount to concealment of income. The AO disallowed the claim, but the Tribunal found that the assessee had disclosed all relevant facts. The Tribunal held that the claim was not a case of furnishing inaccurate particulars of income. Citing the judgment in CIT Vs. Reliance Petroproducts, the penalty on this ground was deleted, and the assessee's appeal was allowed (Para 4.2-4.4).

4. Disallowance of Prior Period Expenses: The Tribunal did not specifically discuss the disallowance of prior period expenses in the detailed analysis provided. It can be inferred that since the ld. CIT(A) had deleted the penalty for this item along with depreciation on non-existing assets, the Tribunal upheld this decision without further discussion (Para 2.1).

5. In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, emphasizing that the penalty on provisions for doubtful debts was not justified. The order was pronounced on 09/01/2020 (Para 5.0).