2019 (8) TMI 343 - AT - Income Tax

Appeal allowed, penalty canceled under IT Act. Assessee disclosed all facts, no intention to conceal.

The Ballabgarh Cooperative Milk Producers Union Ltd., Milk Plant, Balabgarh. Versus The ACIT, Circle-1, Faridabad.

The Ballabgarh Cooperative Milk Producers Union Ltd., Milk Plant, Balabgarh. Versus The ACIT, Circle-1, Faridabad. - [2019] 73 ITR (Trib) 434 (ITAT [Del]) Issues:1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.2. Disallowance of carry forward and set-off of brought forward losses.3. Disallowance of excess depreciation claimed by the assessee.Issue 1: Levy of Penalty under Section 271(1)(c):The assessee challenged the penalty under section 271(1)(c) by arguing that making a claim, even if not sustainable in law, does not amount to furnishing inaccurate particulars regarding income. The assessee relied on the decision of the Supreme Court in the case of CIT vs Reliance Petro Products Private Limited. The Assessing Officer imposed the penalty as the quantum was upheld by the Ld. CIT(A). The assessee contended that the provisions of Section 72A and Section 72AA, dealing with carry forward and set-off of losses in mergers and demergers, should also apply to Cooperative-Societies. The Ld. CIT(A) dismissed the appeal, stating that such provisions are applicable only to Companies, not other entities like Cooperative-Societies.Issue 2: Disallowance of Carry Forward and Set-off of Brought Forward Losses:The Assessing Officer disallowed the carry forward and set-off of brought forward losses claimed by the assessee. The Ld. CIT(A) upheld this action, stating that such provisions in the Income Tax Act apply only to Companies, not Cooperative-Societies. The assessee argued that the losses incurred by the parent cooperative-society were shared by the newly formed societies after a reorganization, and thus, the losses were legitimately claimed by the assessee-society. The genuineness of the claim was not doubted, and it was contended that no attempt was made to conceal information.Issue 3: Disallowance of Excess Depreciation:The Assessing Officer disallowed excess depreciation claimed by the assessee, as full depreciation was claimed on assets used for less than 180 days. The Ld. CIT(A) upheld this disallowance. The assessee argued that the claim was made inadvertently and rectified upon realization. It was contended that there was no intention to conceal income or furnish inaccurate particulars. The penalty was challenged on the grounds that the show cause notice did not specify the exact grounds under which the penalty was imposed, rendering the penalty proceedings invalid.In the judgment, the Appellate Tribunal ITAT DELHI allowed the appeal of the assessee, canceling the penalty. The Tribunal noted that the assessee had disclosed all material facts, and there was no attempt to withhold or conceal information. The Tribunal emphasized that the penalty proceedings were distinct from the assessment proceedings. It was highlighted that the show cause notice issued before the penalty did not definitively establish that the assessee had concealed income or furnished inaccurate particulars. Citing legal precedents, the Tribunal concluded that the penalty need not be imposed in the circumstances of the case. The orders of the authorities below were set aside, and the penalty was canceled.