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TMI Blog2016 (6) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... under the category of filing of inaccurate particulars of income resulting in concealment. In the matter before us, no wrong claim was made. The assessee had made entries in the books of accounts as per the mandate of AS-2. So, it cannot be held that it had concealed its particulars of income. It is not the case of the AO that the assessee had not disclosed the fact of obsoleteness of the stock or notice from the state government authorities. Therefore, there was no justification of invoking the provisions of section 271(1)(c)of the Act. Making additions or disallowing certain expenses during the assessment proceedings is totally different from invoking penal provisions. There is no provision in the Act of automatic levy of penalty for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supporting evidence to substitute the claim, that the claim made by the assessee was not genuine. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA) who confirmed the order of the AO. Meanwhile, he initiated penalty proceedings. In its reply to the show cause notice of penalty, the assessee stated that all the activities relating to the business had effectively stopped during the year, that the provision for loss was due to the non-availability of the buyer to buy obsolete stock line with the company, that the stock being chemical product shelf-life was over, that it became hazardous waste, that Gujarat Pollution Control Board had asked the assessee to dispose-off the waste at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome as well as had filed inaccurate particulars. Therefore, he levied a penalty of ₹ 67. 13 lakhs under section 271 (1) (c) of the Act. 3. During the appellate proceedings, before the FAA, the assessee stated that it had debited the P L account by an amount of ₹ 1. 81 crores, being provision for loss on stock, that the stock was old and was no longer realisable, that the provision pertained to the finished goods which were manufactured in the year 1998-99 and the semi-finished goods which were attempted to be manufactured in that year, that in chemical industries goods were not at all realisable after more than four years, that in order to present a true and fair view of its financial position the net realisable value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO. 4. Before us, the Authorised Representative (AR) stated that the assessee had made provision for loss of stock as provided in the AS-2, that it had filed all the necessary details about the provision made , that there was no concealment of income, that the stock could not be sold in subsequent years, that the assessee was suffering losses, that the chemicals had short shelf-life, that stock was not usable. He referred to the page 14 of the paper book. The Departmental Representative (DR) supported the order of the AO and the FAA. 5. We have heard the rival submissions and perused the material before us. We find that the assessee had made a provision for claimed ₹ 1. 82 crores as provision for loss of stock and had debi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty. Principles of taxation jurisprudence say that in order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee s income and (ii)the amount in question was not disclosed by the assessee in his return. Explanation filed by the assessee, about the disputed amount plays a vital role in deciding the justification of levying concealment penalty. In the matter before us, the assessee had disclosed all the necessary details. In our opinion, explanation filed by the assessee in that regard was bona fide. Secondly, it is an accepted principle of tax-jurisprudence that additions made during assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word particulars used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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