AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 17
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....ions were made on account of change in method of valuation of closing stock amounting to Rs. 21.43 lacs and on account of late payment of PF& ESI amounting to Rs. 2,28,864/-. During the course of assessment proceedings, it was observed by the AO that as per the method of accounting employed the valuation of stock in process had been changed from cost plus expenses to estimated realizable value. This resulted in a higher claim of loss by a sum of Rs. 21.43 lacs. The change in method of valuation had not been found justified by the AO. Therefore, the AO made the addition under both the heads i.e. valuation of closing stock at Rs. 21.43 lacs and PF & ESI at Rs. 2,28,864/-. 2.2 This was challenged before the ld. CIT(A) who has confirmed the addition on account of change of method of valuation at Rs. 21.43 lacs vide his order dated 12-01-2009. A show cause notice dated 24-02-2010 for imposing of the penalty u/s 271(1)(c) of the Act was issued to the assessee. The assessee also filed its reply dated 09-03-2012 in response to show cause notice which has been reproduced by the AO at pages 1 to 3 in the penalty order. 2.3 After considering the reply of the assessee, the AO held that there....
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....am not inclined to agree with the findings of the AO. In the present case, the appellant had duly disclosed the complete particulars regarding change in the method of valuation of stock in process from cost plus expenses to estimated realizable value. It was categorically mentioned in Note 18 of Schedule 15 of the annual report of the assessee company that the material cost included an amount of Rs. 21.43 lacs being valuation loss on account of valuation of tock in process of thread division which was estimated at realizable value. Further in the tax audit report, it was categorically mentioned in Annexure B that the Modern Thread Unit, the valuation of stock in process had been changed from cot plus expense to net realizable value. Thus the appellant had made complete disclosure regarding change in the method of valuation. Further the valuation of work in process had been done as per AS-2 issued by Institute of Chartered Accountant of India which provided that practice of writing down the inventories below the cost to net realizable value was consistent with the view that the asset should not be carried in excess of amount expected to be realized from its sale or use. Further appe....
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....inst the municipal corporation as not payable to the assessee was not declared by the assessee as its income but the non-acceptance of these particulars stated by the Assessing Officer did not amount to concealment of income. The Tribunal observed that the credit outstanding against the same creditors was accepted by the Assessing Officer in subsequent years and therefore, no penalty could be levied. Since the additions were made only on account of divergent views taken with regard to the material on record, it was unsafe to conclude that the assessee was guilty of concealment of income or of furnishing inaccurate particulars thereof. On appeal, the Hon'ble Delhi High Court held that the Tribunal was not right in holding that change in the method of accounting by the assessee company was not justified. Even assuming the Assessing Officer was justified in not accepting the legal stand taken by the assessee itself, it could not be said that the assessee had concealed the same. The assessee's claim against the municipal corporation for deductions made by the municipal corporations from the bills of the assessee was dismissed by the High Court and hence the stand adopted by the....
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....not be imposed. The ld. CIT (A) further relied on the case of CIT vs. National Mining Co. [311 ITR 289 [P&H] (The assessee- firm derived its income from job work of various contracts....... Therefore there was no question of concealment or of furnishing of inaccurate particulars within the meaning of Section 271(1)( c ) of the Act. In this case the levy of penalty was cancelled. The ld. CIT (A) further relied on the case ACIT vs. Pioneer Tubewell Industries (P) Ltd.[ 254 ITR AT 107, Calcutta( While framing the assessments for the assessment years 1987-88 and 1989-90, it was noticed by the Assessing Officer that the assessee had advanced unsecured loans of Rs. 19,42,049 and Rs. 8,55,833/- to its sister concern in both the assessment years under consideration for which no interest was charged by the assessee....... Mere addition made by the Assessing Officer and confirmed by the CIT (A) was not a ground for levying penalty u/s 271(1)(c ). Accordingly the order levying the penalty was cancelled. These decisions are squarely applicable to the facts and circumstances of the present case. I therefore, direct the AO to cancel the order levying penalty of Rs. 7,65,060/- u/s 271(1)(c ....
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....ial year and every profit and loss account of a company shall show a true and fair view of the profit or loss of a company at the end of the financial year. The balance sheet as well as profit and loss account are required to be prepared as per Schedule VI to the Companies Act. In order to ensure that both these accounting statements present the state of affairs of the company as per the requirements of the Companies Act, specific provisions have been incorporated in the Companies Act itself. In sub-section (3)(a) to (3)(c) of section 211 inserted by the Companies (Amendment) Act, 1999(with retrospective effect from 31.10.1998), it is provided that the profit and loss account and balance sheet of the company has to comply with the Accounting Standards. As per sub-section (3)(c) 'accounting standards' means the standard of accounting recommended by the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949, as may be prescribed by the Central Government in consultation with the National Advisory Committee on accounting standards established under subsection (1) of section 210A. The Accounting Standards-2 issued by the Institute of Chartered....
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....ing of a claim, which is not sustainable in law, by itself, will not attract penalty under this section. When the assessee furnishes all the particulars in the return which are not found to be inaccurate it is upto the authorities to accept the claim of the assessee in the return or not, but the penalty cannot be levied. Reliance in this regard is placed on the decision of Himachal Pradesh High Court in case of CIT vs. HP State Forest Corporation Limited reported in 340 ITR 204. (PBP No.40-41) In the said case the assessee was engaged in the business of extraction of timber and resin from forests. During the course of assessment proceedings it was noticed by the Assessing Officer that the assessee had reduced its closing stock of certain amount on account of deterioration of old stock. The addition was confirmed by the appellate authorities and thereafter the Assessing Officer imposed penalty u/s 271(1)( c) upon the assessee. The appellate tribunal held that no penalty could have been imposed upon the assessee as the assessee had disclosed all material facts and there was no concealment on the part of the assessee. On appeal by the department before the High Court it was held tha....
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....n which has not been found to be not bonafide. It was also held that the additions sustained in quantum appeal by itself is not sufficient to levy penalty under the provisions of section 271(1)(c ) unless the Assessing Officer proves that the explanation of the assessee was false or malafide. Reliance is placed on the decision of Delhi High Court in the case of CIT vs. IFCI Limited reported in 328 ITR 611. In the said case the assessee had written off investments in its books of accounts and claimed deduction on account of loss occurred to it. Assessee's claim was disallowed and the Assessing Officer also levied penalty u/s 271(1)( c). The assessee contended that the entire facts were disclosed in the return and it could not be treated as concealment of income. The Commissioner of Appeals affirmed the order of the Assessing Officer but on second appeal the Tribunal held that the assessee had declared the entire material in the return of income and merely because a claim of a deduction on account of loss incurred in the capital field as revenue loss was not allowed, it would not make it liable for penalty for concealment of income or furnishing of inaccurate particulars of such in....