2016 (3) TMI 80 - AT - Income Tax

Penalty u/s.271(1)(c) - disallowances on difference of calculation of 80IB deduction - addition u/s.69C on account of expenditure and interest from bank - Held that - On the issue of deprecation of Jammu unit due to mistake of the assessee company at the time of filing of return deduction was not claimed and subsequently revised computation of income was filed in addition to revised computation of 80IB deduction. The assessee company explained the circumstances of deduction u/s.80IB to the Assessing Officer and Commissioner of Income Tax (Appeals) and filed rectification petition u/s.154 against the order of Sec.143(3) of the Act and also against the order of 271(1)(c) of the Act. Finally, the ld. Assessing Officer has considered rectification petition dated 21.04.2015 of the assessee and passed order dated 7.7.2015 allowing deprecation in respect of Jammu unit eligible for deduction u/s.80IB. The mistake committed by the assessee company was rectified in the year 2015 and there was a genuine reason for the assessee to file petitions as per the law and claimed relief. Further, the assessee has not furnished any inaccurate particulars on the issue of depreciation and we rely on the decision of Apex Court in the case of CIT vs. Reliance Petro Products Ltd 2010 (3) TMI 80 - SUPREME COURT . In respect of addition of unexplained expenditure of ₹ 3,29,664/- the assessee has not reconciled the payments of Bank account with books of accounts maintained though the Department collected information based on AIR data. Even before us, the assessee has not supported his case with Bank statements of Credit Card expenses. Further, unaccounted receipts of ₹ 11,950/- pertaining to interest on bank deposits, which the assessee has omitted to include in the books of accounts for taxation purpose. In respect of these two additions the ld. Authorised Representative submitted that to buy peace with the Department has not filed appeal before the Commissioner of Income Tax (Appeals). However, no bonafide explanation from the assessee side for making inaccurate particulars to the Department. Considering the facts and circumstances of penalty, we direct the Assessing Officer to recompute penalty in respect of sustained addition of unexplained expenditure ₹ 3,29,664/-and unclaimed receipts of ₹ 11,950/- only - Decided partly in favour of assessee

Summary

Issues:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act on disallowances made by the Assessing Officer.
2. Disallowance of depreciation under section 80IB.
3. Addition under section 69C on account of expenditure.
4. Addition of unaccounted interest from bank deposits.

Issue 1: Levy of Penalty under Section 271(1)(c)
The appeal was filed against the order of the Commissioner of Income-tax (Appeals) concerning the assessment year 2009-2010. The Assessing Officer had made additions to the total income of the assessee, leading to penalty proceedings under section 271(1)(c) of the Income Tax Act. The Assessing Officer alleged that the assessee had concealed real income and wrongly claimed depreciation, leading to the levy of a penalty of Rs. 29,82,025. The assessee contended that there was no deliberate concealment and explained the circumstances regarding the revised computation of income. The Commissioner of Income Tax (Appeals) upheld the penalty, presuming inaccurate particulars filed by the company, which led to the appeal before the Tribunal.

Issue 2: Disallowance of Depreciation under Section 80IB
The assessee, a manufacturer of insecticides, had initially not claimed depreciation for an eligible unit in Jammu, leading to additions by the Assessing Officer. The company rectified this mistake by filing a rectification petition under section 154, which was allowed in 2015. The Tribunal noted that there was a genuine reason for the mistake, and the assessee had not furnished inaccurate particulars. The Tribunal relied on the decision of the Apex Court in the case of CIT vs. Reliance Petro Products Ltd 322 ITR 158 to support its decision.

Issue 3: Addition under Section 69C on Account of Expenditure
The Assessing Officer had made an addition under section 69C for unexplained expenditure and unaccounted interest on bank deposits. The assessee did not reconcile the payments with the bank account statements, and there was an omission of including interest on bank deposits in the books of accounts. The Tribunal directed the Assessing Officer to recompute the penalty only for the sustained additions of unexplained expenditure and unclaimed interest, partially allowing the appeal of the assessee.

In conclusion, the Tribunal partly allowed the appeal of the assessee concerning the levy of penalty under section 271(1)(c) and the additions made by the Assessing Officer, providing relief in certain aspects while upholding the penalty in others.