TaxTMI 
TaxTMI 
2001 (6) TMI 192
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....on during the assessment year 1990-91. (4) The CIT(A) has failed to note that as a gesture towards avoidance of litigation, the assessee agreed to the disallowance of the depreciation and investment allowance claimed. (5) The CIT(A) has failed to note that the claim of the assessee right from the beginning was that depreciation and investment allowance was claimed based on trial production commencement and this was not denied or withdrawn at any point of time by the assessee. 3. The learned counsel for the assessee besides relying upon the grounds of appeal, argued that even though quantum assessment was not challenged because of the reason that the assessment was made on a total income of Nil, the depreciation on machinery was claimed correctly and the other deduction in accordance with law. He further argued that the assessee used the generator for the purpose of production and also submitted that on 1-3-1990, cheque for the payments were cleared and the record was kept for the scrutiny by the Department, in which it was clearly mentioned that initial production was stated and some sales were also made in March 1990. It was further submitted that sales of scrap was done ....
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.... the assessment order on the total income at Nil for the assessment year 1990-91. He also separately initiated proceedings under section 271(1)(c) of the I.T. Act and in response to the notice, the assessee filed reply and pointed out that at the time of assessment, the assessee has filed a letter dated 28-7-1992 stating therein that during the previous year, the company made trial run production in March 1990 and, therefore, the assessee issued 'No objection' in disallowing the loss as well as the depreciation claimed in the assessment. The assessee also explained in the reply dated 24-9-1992 to the Notice under section 271(1)(c), requesting for dropping of penalty proceedings on the ground that the assessee company came forward voluntarily and in good faith made full disclosure and co-operated with the Department. 7. The Assessing Officer did not agree with the contentions of the assessee and was of the view that the assessee deliberately furnished inaccurate particulars and made false claim of depreciation and investment allowance etc., and, therefore, these items were withdrawn. The Assessing Officer, therefore, imposed penalty under section 271(1)(c) of the Act. On appeal, ....
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....etter dated 28-7-1992 was filed primarily to buy peace with the Department. It was also answered to a specific question that the assessee had documentary evidence to show that the assessee had commenced production on trial basis and the claim for depreciation etc., was withdrawn to buy peace. 11. It was also answered that the assessee had made two sales during the year; one on cash and the other on cheque and the cheque was encashed in the account of the assessee. The assessee also paid Sales Tax due to the Sales Tax Department, which according to the assessee shows that some production activity was started and sales was also made. According to the assessee's explanation, a letter was filed withdrawing the claim primarily to buy peace as the assessee was also not going to suffer anything as the return was filed at loss, which was ultimately assessed at Nil income. Therefore, from the statement given before the authorities and explained in the letter, certain facts, in our opinion, have not been considered properly by the lower authorities and that there was some production in the accounting year and the machines were used, Sale of pipes as scrap was shown because of certain reas....
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....ere was no concealment - Tribunal's findings not based on conjecture or surmises - High Court not entitled to take another view.' From the assessee's agreeing to the additions to its income, it does not follow that the amount agreed be treated as concealed income. 14. The Hon'ble Madras High Court in the case of CIT v.. C.J. Rathnaswamy [1997] 223 ITR 5 has held that: "according to the facts arising in the present case, the assessee agreed for an addition of the undisclosed income, but did not agree for addition on the basis that the undisclosed income was his concealed income. It was also admitted that the Department had not brought any other material to show that the assessee had concealed the income or furnished in accurate particulars so as to warrant penalty. The Tribunal was justified in cancelling the penalty.' 15. The Hon'ble Madras High Court, in the case of M.P. Narayanan has held that "firm agreeing to addition of cash credit in its income - No evidence of concealment of income - Application for waiver of penalty would not amount to admission of concealment." The learned counsel for the assessee also relied upon the decision of the Madras High Court in the ca....