TaxTMI 
TaxTMI 
2014 (11) TMI 20
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....ugned order dated 24.01.2014, Income Tax Appellate Tribunal ('Tribunal', in short), has affirmed the order of the Commissioner of Income Tax (Appeals) ['CIT(A)', in short], deleting penalty levied under Section 271 (1)(c) of the Act amounting to Rs. 128.10 lacs for the assessment year 1999-2000 and Rs. 19.25 lacs for the assessment year 2000-2001. 3. The respondent assessee, a Public Sector Undertaking during the relevant period operated integrated steel plants and was engaged in activities relating to manufacturing and sale of steel articles etc. The respondent-assessee had shown considerable capitalization of assets on account of expansion and modernization. As installation, erection and commissioning of new machinery inv....
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....lar assessment proceedings, no disallowance was made, but then, the Assessing Officer found that income had escaped assessment as "adjustment relating to earlier years" had been allowed as a deduction in the assessment years in question. Consequently, notices under section 148 of the Act were issued. 6. In the re-assessment orders, the Assessing Officer held that "interest" claimed (Rs.. 366 lacs and Rs.. 50 lacs for the assessment years 1999-2000 and 2000-01) pertained to earlier years, and was not related to the years in consideration. Therefore, the said interest claimed in the profit and loss account was disallowed. We are not concerned with the quantum order in these appeals, but with the penalty of Rs. 128 lacs and Rs. 19.25 lacs, fo....
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....curate particulars of its income and thus committed default within the meaning of explanation 1 to Sec. 271 (1)(c)." (The first two sentences in the above quote refers to the orders passed in the quantum proceedings.) 8. Penalty imposed under section 271(1)(c) is a civil liability. The section is enacted as a provision to assist and to vigorously check and prevent loss of revenue, but penalty for concealment can be imposed after noticing and applying the provisions of Section 271 (1)(c) of the Act including Explanation 1. This is the primary and the basic flaw in the penalty orders passed by the Assessing Officer. 9. The C.I.T (A) by a common order dated 20.5.2013 set aside the penalty and observed that it was a case of wrong interpretat....
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....the case of Reliance Petroproducts (supra) and other case laws cited by the assessee. On over all consideration of the facts and circumstances, we see no infirmity in the order of CIT(A) deleting these penalties. His orders are upheld". 11. The appellate orders by the C.I.T (A) and the Tribunal take due notice of the factual matrix and examine the question of bonafides. It stands recorded that the returns filed and income declared was as per the statutory audit report and the interest paid had been capitalized. Subsequently, audit objections that excessive interest had been capitalized, were raised by CVC and CAG. In other words, a part of interest so capitalized should have been treated as revenue expenditure. In order to comply with the ....
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....prudently and being tentative, mentioned:- "Normally the erection, installation and commissioning of plant and machinery in our case takes a considerable time - more than one year. The interests incurred on borrowing related to it are capitalized. The capitalization of interest is by debiting capital WIP/Plant & machinery and crediting interest. The company hasa number of expansion schemes in progress at any given time. When the plant is commissioned, it is shifted from Capital work in progress (WIP) to plant on the basis of capitalization report. Insome cases, the subsequent events bring out the capitalization of a particular scheme over and under capitalized on erroneous adjustments between the schemes or on account of an error in date o....