2015 (3) TMI 60 - AT - Income Tax

Tribunal cancels penalties under Income Tax Act, 1961, citing fall in profit and disallowed deductions.

The Tribunal allowed the appeal, directing the Assessing Officer to delete the penalties imposed under section 271(1)(c) of the Income Tax Act, 1961, ... Penalty u/s 271(1)(c) - AO levied penalty in respect of the addition made on account of fall in GP, disallowance of depreciation and deduction claimed u/s.80IB - Held that:- There is no dispute with regard to the deletion of addition in respect of the addition of ₹ 25,46,363/- made on account of fall in GP and the addition made on account of disallowance of deduction amounting to ₹ 2,38,533/-, the AO has disallowed the deduction on the basis that the assessee did not disallow the interst of ₹ 5,82,803/-. The ld.counsel for the assessee submitted that the assessee had, in fact, disallowed the interest and rectification order u/s.154 of the Act was passed by the AO and rest of the disallowance was deleted by the Tribunal vide order dated 12/08/2011 in ITA No.3496/Ahd/2008 (supra). These facts are not controverted by the Revenue by placing any contrary material, therefore we hereby direct the AO to delete the penalty levied on an amount of ₹ 2,38,533/-. In view of the fact that the assessee has claimed depreciation during the year under consideration. The Revenue has not controverted the same, therefore following the ratio laid down in the case of CIT vs. Reliance Petroproducts Pvt.Ltd.(2010 (3) TMI 80 - SUPREME COURT ), we are of the considered view that the ld.CIT(A) was not justified in confirming the penalty on this issue, therefore the AO is hereby directed to delete the penalty levied on addition of ₹ 2,32,001/- - Decided in favour of assessee. Issues:1. Penalty under section 271(1)(c) of the Income Tax Act, 1961.Analysis:The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the penalty levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer had made additions during the assessment, including fall in Gross Profit, disallowance of deductions claimed under section 80IB of the Act, disallowance of depreciation, and invoking section 41(1) of the Act. The penalty was imposed on these additions totaling Rs. 30,16,897, with a penalty of Rs. 11,03,958. The appellant challenged this penalty, leading to an appeal before the Tribunal.The appellant initially faced a procedural issue where a challan of Rs. 10,000 was mentioned but not enclosed with the appeal memo. The appellant later submitted a challan of Rs. 500, explaining it as an inadvertent mistake due to a typographical error. The Tribunal accepted this explanation but cautioned against such errors in the future. Moving to the merits of the case, the appellant argued against the penalty by presenting arguments related to the additions made in the assessment. The Tribunal reviewed each addition, considering the appellant's submissions and relevant case laws.Regarding the fall in Gross Profit and disallowance of deductions under section 80IB, the Tribunal found in favor of the appellant, noting that the Assessing Officer's disallowances were not justified. The Tribunal directed the Assessing Officer to delete the penalty levied on these amounts. Similarly, in the case of disallowance of depreciation and deduction claimed under section 80IB, the Tribunal observed that the appellant had indeed claimed depreciation during the relevant year. Relying on the decision of the Supreme Court in CIT vs. Reliance Petroproducts Pvt. Ltd., the Tribunal concluded that the penalty on this issue was not justified. Consequently, the Tribunal directed the Assessing Officer to delete the penalty levied on this addition as well.In conclusion, the Tribunal allowed the appeal of the assessee, directing the Assessing Officer to delete the penalties imposed. The decision was pronounced on January 9, 2015, at Ahmedabad.