2017 (2) TMI 687 - AT - Income Tax

Penalty u/s 271(1)(c) - quantum addition deleted - Held that - Penalty imposed u/s 271(1)(c) will not survive. Our view find support from the decision in K.C. Builders vs ACIT (2004 (1) TMI 7 - SUPREME Court) and the ratio laid down in CIT vs S.P. Viz, (1988 (3) TMI 8 - MADRAS High Court). Even otherwise, when the quantum addition is deleted, there remains no basis at all for levying the penalty for concealment or furnishing inaccurate particulars. The penalty cannot stand on its legs when addition on the basis of which the penalty was imposed remains no more in existence, thus, the appeal of the assessee is allowed and the ld. Assessing Officer is directed to delete the penalty. - Decided in favour of assessee

Issues Involved:
1. Legality of reopening the assessment under section 148.
2. Non-allowance of set-off of brought forward unabsorbed depreciation.
3. Calculation of disallowance under section 14A.

Issue-Wise Detailed Analysis:

1. Legality of Reopening the Assessment under Section 148:
The assessee contended that the reopening of the assessment under section 148 was illegal, null, and void since full, correct, and complete particulars of income were filed during the original assessment proceedings. The Tribunal examined this claim and found that the reopening was not justified as the assessee had not concealed any particulars of income nor filed inaccurate particulars thereof.

2. Non-Allowance of Set-Off of Brought Forward Unabsorbed Depreciation:
The primary issue was the non-allowance of set-off of brought forward unabsorbed depreciation aggregating to ?7,23,04,034/- in respect of assessment years 1994-95 to 1998-99 of the amalgamated company SPL Polymers Ltd. against the profits of the assessee company. The Tribunal analyzed the provisions of section 32(2) of the Income Tax Act, 1961, and the amendments made by the Finance Act, 2001. It referred to the judgment of the Hon’ble Gujarat High Court in General Motors India Pvt. Ltd. Vs. DCIT, which held that the amendment to section 32(2) by the Finance Act, 2001, applicable from assessment year 2002-03, allowed the unabsorbed depreciation to be carried forward indefinitely without the restriction of 8 years. The Tribunal concluded that the unabsorbed depreciation from assessment years 1994-95 to 1998-99 should be allowed to be carried forward and set off against the profits of the assessee company.

3. Calculation of Disallowance under Section 14A:
The assessee also raised the issue of the non-exclusion of interest on loans taken for business purposes while calculating disallowance under section 14A. The Tribunal did not provide a detailed analysis on this issue in the provided text, focusing instead on the primary issue of the set-off of unabsorbed depreciation.

Conclusion:
The Tribunal, after considering the rival submissions and the material on record, concluded that the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, would not survive since the quantum addition on which the penalty was based had been deleted. The Tribunal directed the Assessing Officer to delete the penalty, thereby allowing the appeals of the assessee. This decision was supported by the precedent set in K.C. Builders vs ACIT and CIT vs S.P. Viz, where it was held that when the quantum addition is deleted, the basis for levying the penalty for concealment or furnishing inaccurate particulars no longer exists.

Final Order:
Both appeals by the assessee were allowed, and the Assessing Officer was directed to delete the penalty. The order was pronounced in the open court on 31/01/2017.

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