9911796707
TMI Blog2016 (7) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... furnishing of inaccurate particulars of income. - Decided in favour of assessee Addition on account of valuation of eutectic oil - Held that:- We find merit in the submissions of the assessee that the amount realised by the assessee after the expiry of four years cannot be a ground to disturb the closing stock value estimated by the assessee, particularly when the assessee is valuing the eutectic oil stock as nil for the past several years. It is not shown by the Assessing Officer that the assessee did not have any basis for valuing the oil stock at nil value. Even otherwise, we notice that the assessee has offered proper explanations in this regard and it is not the case of the Assessing Officer that the assessee has concealed the particulars relating to eutectic oil stock. Accordingly, we find merit in the contentions of the assessee that the addition made by the Assessing Officer on estimated basis would not give rise to penalty under section 271(1)(c) of the Act - Decided in favour of assessee Disallowance of depreciation on plant not put to use - Held that:- There is merit in the contentions of the assessee that the assets shall lose their individual identity once it ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, that it did not have any market value has been disproved in this year. However, the assessee has chosen to declare the market value as nil. Hence, the explanation of the assessee stands disproved by the facts available in its records itself. Accordingly, we are of the view that the learned Commissioner of Income-tax (Appeals) was justified in confirming the penalty levied on this addition. - Decided against assessee Disallowance of loans and advances written off - Held that:- The question as to whether debt has become bad or not, is a debatable issue. The learned authorised representative also contended that there is no requirement of proving that the debt has become bad, after the amendment made in section 36(1)(vii) of the Act. Hence, we are of the view that the penalty could not be levied on a debatable issue. Accordingly, we set aside the order passed by the learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to delete the penalty levied thereon.- Decided in favour of assessee Disallowance of depreciation claimed on the research and development equipment - Held that:- As the assessee submitted that it had included the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed these appeals before us. 2. The assessee is a Government of India undertaking and is engaged in the business of manufacturing of basic chemicals and chemical intermediates. 3. We shall now take up the appeals filed for the assessment year 1999- 2000. In this year, the Assessing Officer levied penalty in respect of the following four disallowances : (i) Addition of depreciation relating to decapitalised value of assets ₹ 44,34,346. (ii) Disallowance of depreciation on plants, which are not on active use ₹ 29,08,253. (iii) Addition relating to valuation of closing stock of eutectic oil ₹ 13,00,000. (iv) Disallowance of prior period expenses ₹ 78,01,000. 4. In the appeal filed by the assessee, the learned Commissioner of Income-tax (Appeals) deleted the penalty levied on the disallowance of prior period expenses and confirmed the penalty levied on the remaining three items. The assessee is in appeal challenging the confirmation of penalty and the Revenue is in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer was also concurred with that view. However, the assessee submitted that the Assessing Officer has already assessed a sum of ₹ 487.38 lakhs relating to reversal of liabilities in the assessment year 2003-04 itself and, accordingly, submitted that the addition of ₹ 44.34 lakhs would amount to double addition. Hence, the Assessing Officer added the abovesaid amount of ₹ 44.34 lakhs on protective basis in the assessment year 1999- 2000. In the appellate proceedings relating to the assessment year 1999- 2000, the learned Commissioner of Income-tax (Appeals), however, confirmed the addition of depreciation of ₹ 44.34 lakhs on substantive basis with the observation that deduction of corresponding amount may be given in the assessment year 2003-04. 7. In the penalty proceedings, the assessee submitted that the decapitalisation has taken place in the financial year 2002-03 and the depreciation for the assessment year 1999-2000 was claimed on the basis of block of assets available in that year. The Assessing Officer was not convinced with that explanation and, accordingly, levied penalty under section 271(1)(c) of the Act on the abovesaid amount and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer to delete the penalty levied on the abovesaid amount. 11. The next issue on which the penalty under section 271(1)(c) of the Act was levied relates to the addition on account of valuation of eutectic oil. The assessee had held stock of 650 metric tonnes of eutectic oil for the past several years. Over the years, the assessee considered the market value of the same as nil, as the same remained as a non-movable item and was lying with the assessee for the past several years. However, the Assessing Officer noticed that the assessee has sold the same at ₹ 4,000 per metric tonnes during the financial year relevant to the assessment year 2003-04. Accordingly, he took the view that the valuation of the oil at nil was not correct and, accordingly, he estimated the value of eutectic oil as on March 31, 1999, at ₹ 2,000 per metric tonne. Accordingly, he valued the closing stock of oil at ₹ 13 lakhs and added the same to the income of the assessee. The Assessing Officer also levied penalty on the abovesaid addition and the learned Commissioner of Income-tax (Appeals) also confirmed the same. 12. The learned counsel submitted that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lars relating to eutectic oil stock. Accordingly, we find merit in the contentions of the assessee that the addition made by the Assessing Officer on estimated basis would not give rise to penalty under section 271(1)(c) of the Act. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) passed on this issue and direct the Assessing Officer to delete the penalty levied thereon. 14. The next issue relates to penalty levied on disallowance of depreciation on plant not put to use. The learned counsel submitted that the Assessing Officer has listed out certain plants and disallowed depreciation claimed thereon by holding that they were not put to use and they have been held for disposal only. The learned counsel submitted that after introduction of block concept of depreciation, individual assets lose their identity and, hence, the Assessing Officer was not justified in disallowing the depreciation by listing out certain plants. Accordingly, the learned authorised representative submitted that the disallowance of depreciation made by the Assessing Officer is not justified on the merits also. He submitted that the assessee has furnished all relevant de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) has also taken note of the submissions made by the assessee that these expenses got crystallised during the year under consideration. Hence, there is merit in the view taken by the learned Commissioner of Income- tax (Appeals) that it is a case of mere change of accounting year in which expenses should be claimed and, hence, this issue becomes a debatable issue. It is well-settled proposition of law that penalty under section 271(1)(c) of the Act cannot be levied on debatable issue. Accordingly, we do not find any infirmity in the decision of the learned Commissioner of Income-tax (Appeals) in deleting the penalty levied on this addition. 18. We shall now take up the appeals relating to the assessment year 2003- 04. The Assessing Officer levied penalty on the following additions made by him : (i) reversal of excess liabilities of ₹ 4,87,38,201 (ii) prior period expenses of ₹ 1,10,19,632 (iii) stock of eutectic oil of ₹ 12,70,000 (iv) disallowance under section 43B-Rs. 76,17,656 (v) loan and advances written off of ₹ 6,35,000 (vi) depreciation on research and development equipment of ₹ 8,18,57,646 (vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the learned Commissioner of Income-tax (Appeals) has given a further relief to the extent of ₹ 44.34 lakhs directed by him to be assessed in the assessment year 1999-2000. Since the liabilities relate to the capital assets, the question as to whether such kind of liabilities can be assessed as income of the assessee under section 41(1) shall become a debatable one. Accordingly, we are of the view that the penalty cannot be levied on the capital portion of the reversed liability and the same should be restricted to the depreciation portion alone. Accordingly, we modify the order of learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to restrict the penalty on the addition relating to depreciation portion alone, which was claimed by the assessee over the years. 22. The next issue relates to the penalty levied on addition relating to closing stock value of eutectic oil-Rs. 12,70,000. The details relating to valuation of eutectic oil was discussed in the preceding paragraph while dealing with the appeal of the assessee relating to the assessment year 1999-2000. In this year, the assessee has sold a portion of the oil at ₹ 4,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Since the issue is restored back to the Assessing Officer to verify the claim of the assessee, we do not find any infirmity in it. 25. The next issue relates to the penalty levied on the disallowance of depreciation on stores and spares-Rs. 47.46 lakhs. The learned Commissioner of Income-tax (Appeals) has confirmed the penalty levied on the abovesaid item without discussing the same. However, we notice that the assessee has capitalised certain stores and spares and, accordingly, claimed depreciation thereon. The question as to whether the assessee could capitalise its stores and spares is a debatable issue and, hence, the disallowance of depreciation claimed thereon also becomes debatable one. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) passed on this issue and direct the Assessing Officer to delete the penalty levied on this addition. 26. We shall now take up the appeal filed by the Revenue for the assessment year 2003-04. The first issue relates to the penalty levied on disallowance of prior period expenses. Identical issue was considered by us in the preceding paragraphs while dealing with the appeal filed by the Revenue for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w take up the appeals filed by both the parties for the assessment year 2004-05. The penalty was levied on the following additions : (i) depreciation allowance on account of decapitalisation of assets of ₹ 10,52,291 (ii) prior period expenses of ₹ 1,10,49,240 (iii) valuation of eutectic oil at ₹ 10,87,068 (iv) disallowance under section 43B of ₹ 44,37,656 The learned Commissioner of Income-tax (Appeals) confirmed the additions listed as (i) and (iii) and deleted the penalty in respect of the remaining two items. 30. In respect of the addition relating to depreciation claimed on decapitalisation of assets, we have held in the assessment year 2003-04, the penalty is leviable on the depreciation portion of the liabilities reversed by the assessee. Accordingly, we direct the Assessing Officer to examine this addition in the light of the discussions made by us in the preceding paragraph while dealing identical issue in the assessment year 2003-04. The order of the learned Commissioner of Income-tax (Appeals) stands modified accordingly. 31. In respect of valuation of eutectic oil, we are of the view that the penalty could be levied on the net ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
