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TMI Blog2019 (1) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... in reopening proceedings u/s 147 in the midst of concept of Block of assets u/s 32(1)(ii) read with Section 50 of the 1961 which was applicable to the instant case as the assessee is engaged in the business of shipping. As already seen above that there is lack of clarity in the placement of section 32 and its subsections. Merely because the legal claim filed by the assessee is not accepted by Revenue will not automatically make tax-payer liable for penalty u/s 271(1)(c). The assessee had a bonefide belief that its claim is allowable keeping in view provisions of Section 32(1)(iii) albeit assessee was governed by Block of assets as per provision of Section 32(1)(ii) and 50 of the 1961 Act but no doubt explanation offered by the assessee was bonafide and Explanation 1 to Section 271(1)(c) will be applicable which takes assessee out of penalty provisions as are contained in Section 271(1)(c). - Decided in favour of assessee. - I.T.A. No.5884/Mum/2018 - - - Dated:- 14-11-2018 - Shri Joginder Singh, Vice President And Shri Ramit Kochar, Accountant Member For the Assessee : Shri. Rajeev Waglay For the Revenue : Shri. Chaudhary Arun Kumar Singh ORDER PER RAMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Confirming the above penalty without appreciating the fact that the appellant had to be made aware as to which of the 2 charges i.e. (a), for concealing of particulars of income or (b) furnishing of inaccurate particulars of income are being put against him. And if it was not so, the notice was invalid penalty u/s. 271 (1) (c ) could not be valid. 9. Confirming the above penalty without appreciating the fact that even in the show cause notice dated 5.7.2016 issued u/s. 274 r.w.s 271 to the appellant, the appellant was asked to show cause for concealing the particulars of income and furnishing inaccurate particulars of income and as such, the said notice was invalid and penalty u/s. 271 (1) (c ) could not be levied. 10. Confirming the above penalty without appreciating the fact that there was a catena of judgments of the High Courts including Bombay High Court in CIT Vs. Samson Perinchery - 2017] 392 ITR 4 as well as catena of Tribunal decisions wherein it was held that if the appropriate words (as mentioned above ) were not stuck off in the notice u/s. 274 r.w.s. 271, the penalty levied was invalid. And hence, the order passed by the CIT(A) -4 deserves to be set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d does not affect the nature of the claim. As the write-off pertained to an asset, the same should have been added back in the computation of income which has not been done. Therefore, the assessee's claim of the same as a revenue loss is incorrect and not sustainable. In view of the same a sum of ₹ 42,45,129/- is disallowed and added back to the total income of the assessee. (Disallowance of ₹ 42,45,129/-) As the assessee has filed inaccurate particulars of income, penalty proceedings u/s. 271(1)(c) are initiated separately. 4. The AO initiated penalty proceedings under Section 271(1)(c) of the 1961 Act against assessee by issuance of notice dated 28.01.2016. The assessee was asked to explain why penalty u/s. 271(1)(c) should not be levied against the assessee. The assessee during reassessment proceedings had earlier submitted reply dated 15.01.2016 explaining its position , as under: We wish to inform during the period we have shifted our Mumbai office location, and we have relocated furniture and fixtures which can be moved to new premises, and there were certain fixed assets like fittings and interiors which could not be dismantled and thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference arrives where Law is not clear about the fact. But in the instance case, it is not the saver. Wrong claim, which is not backed by any section of the Act, itself attracts the penalty. 10. in view of the above, in the facts and circumstances of the case and in law, I am of the opinion that the assessee has filed inaccurate particulars of the income thereby suppressing the taxable income within the meaning of section 271(1)(c) of the Act, 1961 read with explanation 1 thereto. I, therefore, hold that the assessee as a defaulter u/s 271(1)(c) of the Act and accordingly levy penalty as under 6. Aggrieved by the penalty levied by the AO u/s 271(1)(c) of the 1961 Act vide orders dated 29.07.2016, the assessee filed first appeal before Ld. CIT(A) who rejected the contentions of the assessee and upheld the penalty levied by the AO u/s 271(1)(c) of the 1961 Act, vide appellate orders dated 09.08.2018 passed by learned CIT(A). 7. Aggrieved by the appellate order dated 09th August 2018 passed by learned CIT(A), the assessee has filed second appeal before the tribunal. It is submitted at the outset by learned counsel for the assessee that the assessee has not filed any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(SC). The assessee has also filed written submissions before the tribunal to contend that the penalty levied by the AO u/s 271(1)(c) of the 1961 Act and as confirmed by learned CIT(A) be deleted. 8. The Ld. DR on the other hand strongly relied upon the appellate order passed by Ld. CIT(A) . 9. We have considered rival contentions and perused the material on record including orders of authorities below, paper book filed by the assessee and case laws cited before us. We have observed that the assessee is in the business of shipping activities. The assessee filed return of income u/s. 139(1) on 14-10-2010 declaring income of ₹ 2,22,87,602/- . The revenue framed scrutiny assessment u/s 143(3) vide assessment order dated 30.03.2013 wherein returned income was accepted by Revenue and no additions were made to the returned income. Subsequently , AO issued notice dated 16.03.2015 u/s. 148 of the 1961 Act to the assessee wherein concluded assessment was reopened u/s 147 of the 1961 Act. The said reopening of the concluded assessment was done within a period of four years from the end of the assessment year and clearly first proviso to Section 147 of the 1961 Act is not applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in statute , the write off of the fixed asset sold, discarded, demolished or destroyed in the case of tax-payer engaged in generation or generation and distribution of power is still available provided the said deficiency is actually written off in the books of accounts. This issue of write off of loss on fixed assets written off on being sold, discarded , demolished or destroyed is not ripe with complete clarity as placement of Section 32 and its sub-sections in the statute are placed in a manner which could easily lead to incomplete clarity in the minds of tax-payers. The true position, however, so far as non allowability of loss on write off of fixed assets on being discarded by tax-payer which is now governed by concept of Block of Asset u/s 32(1)(ii) read with Section 50 of the 1961 Act for taxpayers other than engaged in generation or generation and distribution of power is conceded by the assessee by not filing an appeal against quantum assessment framed by the AO u/s 143(3) r.w.s. 147 , as taxpayers engaged in power sector as described in statute are still allowed to take benefit of write off of loss on fixed assets on being discarded, demolished, destroyed or sold as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia)for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia)shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset:] [Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed. Explanation.-For the purposes of this proviso,- (a) the expression commercial vehicle means heavy goods vehicle , heavy passenger motor vehicle , light motor vehicle , medium goods vehicle and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation 2.-For the purposes of this [sub-section] written down value of the block of assets shall have the same meaning as in clause* (c) of sub-section (6) of section 43.] Explanation 3.-For the purposes of this sub-section, [the expression assets ] shall mean- (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature Explanation 4.-For the purposes of this sub-section, the expression know-how means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto). [Explanation 5.-For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee. ***** ***** The provisions of section 32 (1)(iii) as reproduced above refers to building, machinery,plant or furniture in respect of which depreciation is claimed and allowed under clause (i) but there are two clause(i) one immediately after sub-section (1) of Section 32(1) which deals with buildings, machinery , plant or furniture, being tangible assets and second further beneath it which deals with taxpayers engaged in generation or generation and distribution of power , thus leading to state of comfusion While Section 32(1)(iii), infact, speaks of building , machinery , plant or furniture in respect of which depreciation is claimed and allowed under clause 32(1)(i) which deals with taxpayers engaged in generation or generation and distribution of power. Thus, in such cases of taxpayers engaged in generation or generation and distribution of power , terminal depreciation by way of loss on fixed asset written off continued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted the claim of the assessee for loss on fixed assets written off in the original assessment framed u/s 143(3) of the 1961 Act , vide assessment orders dated 30.03.2013 (pb /page 21/22). No new tangible incriminating material was received by the AO as the reopening was done based on the material already on record while framing original assessment u/s 143(3) and in first round the claim of the assessee was allowed when the original assessment u/s 143(3) was framed on 30-03-2013. No doubt the Revenue can rightfully open concluded assessment u/s 147 under the prevailing circumstances of the case as the reopening was done within four years from the end of the assessment year and first proviso to Section 147 is not applicable . There is no estoppels against law. So far as penalty u/s 271(1)(c) levied by Revenue is concerned in the instant case, the decision of Hon ble Supreme Court in the case of Reliance Petroproducts Private Limited(supra) is relevant as the assessee lodged its legal claim for allowability of loss on fixed assets written off as the said assets became unusable / damaged on a bonafide belief but the said claim was not accepted in reopening proceedings u/s 147 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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