2022 (4) TMI 1380 - AT - Income Tax

Penalty u/s 271(1) (c) - TP Addition - HELD THAT - We note that the Hon ble Ahmedabad ITAT in quantum appeal in relation to Transfer Pricing additions for captioned year i.e. AY 2005- 06 in assessee s own case 2022 (2) TMI 1220 - ITAT AHMEDABAD has restored the matter back to the file Ld. Assessing Officer for fresh adjudication. Accordingly in our view respectfully following the above decision it would be fit to restore the penalty issue to file of Ld. Assessing Officer. Penalty in respect of excess claim for depreciation - HELD THAT - We note that on same issue and similar facts Hon ble ITAT Ahmedabad in appellant s case for A.Y. 03-04 2015 (9) TMI 59 - ITAT AHMEDABAD in . 2012 (1) TMI 414 - ITAT AHMEDABAD deleted the penalty imposed on the issue of excess claim of depreciation. Penalty in respect of claim u/s 80-IA - HELD THAT - penalty in respect of claim u/s 80-IA - HELD THAT - We note that Hon ble ITAT in assessee s own case for AY 2003-04 2015 (9) TMI 59 - ITAT AHMEDABAD and for AY 2004-05 2012 (1) TMI 414 - ITAT AHMEDABAD has deleted the penalty in respect of claim u/s 80-IA Revenue appeal dismissed.

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act.
2. Transfer Pricing Adjustments.
3. Disallowance of Depreciation.
4. Disallowance of Deduction under Section 80-IA.

Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act:
The primary issue revolves around the deletion of the penalty amounting to ?4,99,15,099/- levied under Section 271(1)(c) of the Income Tax Act. The Revenue contended that the CIT(A) erred in deleting the penalty despite the quantum additions being confirmed, indicating that the assessee had furnished inaccurate particulars in its return of income. The CIT(A) had deleted the penalty, holding that the Assessing Officer imposed it in a mechanical manner without appreciating the facts and explanations provided by the assessee.

2. Transfer Pricing Adjustments:
During the assessment proceedings, the Assessing Officer made a Transfer Pricing Addition of ?2,70,80,409/-. The CIT(A) deleted the penalty related to this addition, noting that the assessee had disclosed all material facts and adopted appropriate methods for working out the Arm's Length Price (ALP). The TPO had adopted a different method for adjustment without rejecting the assessee’s method, thus the addition could not be termed as furnishing inaccurate particulars of income or concealment. The ITAT upheld this view, emphasizing that the necessary ingredients for attracting Explanation 1 to Section 271(1)(c) were absent, and the penalty was not justified.

3. Disallowance of Depreciation:
The Assessing Officer disallowed depreciation of ?2,66,83,892/- and imposed a penalty, which was later deleted by the CIT(A). The CIT(A) observed that the disallowance was due to a difference in the Written Down Value (WDV) after allowing enhanced depreciation in previous years. The assessee had claimed depreciation based on a bona fide tax audit report, and similar penalties had been deleted by the ITAT in the assessee’s own case for earlier years. The ITAT confirmed this, noting that the penalty on excess depreciation had been deleted in previous years due to the debatable nature of the issue and the bona fide belief of the assessee.

4. Disallowance of Deduction under Section 80-IA:
The Assessing Officer disallowed the deduction under Section 80-IA amounting to ?8,26,43,706/-, which included ?4,90,84,017/- for the New Power Plant and ?3,35,59,689/- for the Captive Power Plant. The CIT(A) deleted the penalty, noting that similar penalties had been deleted in earlier years. The assessee had disclosed all material facts and claimed the deduction based on a tax audit report and a certificate in Form 10CCB. The disallowance was due to a difference of opinion regarding the market price of electricity. The ITAT upheld this view, citing the Supreme Court’s decision in Reliance Petroproducts Ltd., which supported the deletion of penalties for disallowance of such claims under Section 80-IA.

Conclusion:
The ITAT dismissed the Revenue’s appeal, confirming the deletion of penalties by the CIT(A) on all grounds. The penalties were deemed unjustified as the assessee had disclosed all material facts, and the disallowances were based on differences in opinion or debatable issues. The ITAT's decision was consistent with its rulings in the assessee’s own case for earlier years, reinforcing the principle that penalties under Section 271(1)(c) should not be imposed where the assessee’s claims are made in good faith and with due diligence.

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