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TMI Blog2016 (8) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty is not at all automatic. Meaning thereby, any addition in quantum would not lead to automatic levy of penalty and this is also true in respect of furnishing of inaccurate particulars of income. Not only is the levy of penalty discretionary in nature but the discretion has to be exercised keeping the relevant factors in mind and the approach of the taxman must be fair and objective. This subject has been a matt1er of great controversy. We are satisfied that the penalty u/s 271(1)(c) of the Act on the issue of VAT paid to the Sales tax department and disallowed by the AO cannot be imposed and thus explanation of the assessee in this regard cannot be brushed aside at the threshold and action of the AO and impugned order on this issue is not sustainable. On the basis of foregoing discussion, to reach to a logical conclusion that the CIT(A) did not provide due opportunity of being heard to the assessee and passed an order without proper adjudication and she simply upheld the penalty order which is not a proper and justified approach of a first appellate authority. On merits, as per discussion in the earlier part of this order, we are inclined to hold that the penalty impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do so, which is clear violation of principles of natural justice. The ld. AR further contended that the CIT(A) wrongly assumed that the assessee company requested to decide its appeal on the basis of written submissions only and after fil ing written submissions on 6.2.2012 without affording opportunity of being heard, the CIT(A) passed impugned order on 9.2.2012 i.e. only after two days. 4. Per contra, the ld. DR pointed out that after fi l ing written submissions in the office of the CIT(A) by DAK, the assessee requested that the case may be disposed off as per material available on record and in this situation, the first appel late authority was quite justified in deciding the appeal after considering the material avai lable on record inter alia. The ld. DR final ly submitted that in this situation, the first appel late authority had no option but to decide the appeal exparte, therefore, there was no violation of principles of natural justice and thus the allegation of the assessee in this regard may kindly be rejected. 5. From the relevant operative para 4.1 to the end of the impugned order, we observe that the CIT(A) has reproduced written submissions of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd merely because the same was not allowed to the assessee, penalty cannot be imposed by al leging that the assessee furnished inaccurate particulars of income or concealed particulars of its income. 8. On the issue of depreciation, the ld. AR pointed out that disallowance of depreciation as per the assessment order was on the basis of arithmetical error in calculation of deprecation and arithmetical error of calculating of deprecation for full year instead of six months cannot be said to be concealment of income and furnishing of inaccurate particulars of income and hence penalty on this count cannot be imposed. 9. On the issue of deduction, which was claimed by the assessee company on account of VAT paid to the Sales tax department, the ld. AR submitted that provisions of section 43B of the Act make the assessee entitled to claim the said deduction. The auditor of the assessee company in his tax audit report issued u/s 44AB of the Act specifically gives a note on the subject matter, which is avai lable in Form 3CD. The said amount was disallowed by the ld. AO without considering the provisions of law whereas the assessee company placed on record the complete detai ls of sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eless and it is also not the case of the AO that the assessee has not paid VAT to the Sales tax department. 13. Before we consider the factual matrix of this case to ascertain as to whether in the eyes of the provisions of the Act as explained by numerous judicial pronouncements, penalty can be levied in this case or not, we would like to discuss in nut shell the relevant legal position regarding levy of penalty u/s 271(1)(c) of the Act and as to how and when such penalty can be levied under this section. There are no two opinions about the settled position of law that regular assessment proceedings and penalty proceedings are two entirely different subjects which operate in distinct and separate spheres so much so that entirely different parameters are applicable for making quantum addition and for levying penalty under section 271(1)(c) of the Act. There can be no dispute with regard to the position of law that under section 271(1)(c) penalty can be levied only if either the act of concealment of particulars of income or furnishing of inaccurate particulars of income is found to have been committed by the assessee. These are two different omissions or defaults albeit they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. 14. Reverting to the above noted facts and circumstances of the case, we are satisfied that the penalty u/s 271(1)(c) of the Act on the issue of VAT paid to the Sales tax department and disallowed by the AO cannot be imposed and thus explanation of the assessee in this regard cannot be brushed aside at the threshold and action of the AO and impugned order on this issue is not sustainable. On the basis of foregoing discussion, to reach to a logical conclusion that the CIT(A) did not provide due opportunity of being heard to the assessee and passed an order without proper adjudication and she simply upheld the penalty order which is not a proper and justified approach of a first appellate authority. 15. On merits, as per discussion in the earlier part of this order, we are inclined t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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