AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 314
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....owances : "(i) Addition of depreciation relating to decapitalised value of assets Rs. 44,34,346. (ii) Disallowance of depreciation on plants, which are not on active use Rs. 29,08,253. (iii) Addition relating to valuation of closing stock of eutectic oil Rs. 13,00,000. (iv) Disallowance of prior period expenses Rs. 78,01,000." 4. In the appeal filed by the assessee, the learned Commissioner of Income-tax (Appeals) deleted the penalty levied on the disallowance of prior period expenses and confirmed the penalty levied on the remaining three items. The assessee is in appeal challenging the confirmation of penalty and the Revenue is in appeal challenging the deletion of penalty. 5. The first item on which the penalty was levied relates to the addition of depreciation relating to "decapitalised" value of assets. The facts relating to the same are stated in brief. The assessee had built capital assets during the period from 1991 to 1998. During that period, it had capitalised the value of the assets built by it. It is stated that some of the bills were accounted on provisional basis as per the assessment of the management. It is pertinent to note that as per the accounting pri....
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....owever, confirmed the addition of depreciation of Rs. 44.34 lakhs on substantive basis with the observation that deduction of corresponding amount may be given in the assessment year 2003-04. 7. In the penalty proceedings, the assessee submitted that the decapitalisation has taken place in the financial year 2002-03 and the depreciation for the assessment year 1999-2000 was claimed on the basis of block of assets available in that year. The Assessing Officer was not convinced with that explanation and, accordingly, levied penalty under section 271(1)(c) of the Act on the abovesaid amount and the same was also confirmed by the learned Commissioner of Income-tax (Appeals). 8. We have heard the parties on this issue. The learned counsel appearing for the assessee submitted that the assessee has furnished all the particulars relating to decapitalisation in its books of account relating to the financial year 2002-03. He submitted that the assessee has passed due accounting entries in that year. However, the Assessing Officer has decided to add a sum of Rs. 44.34 lakhs, being the amount of depreciation relating to the period from 1991 to 1998 on protective basis in the assessment year ....
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....the financial year relevant to the assessment year 2003-04. Accordingly, he took the view that the valuation of the oil at nil was not correct and, accordingly, he estimated the value of eutectic oil as on March 31, 1999, at Rs. 2,000 per metric tonne. Accordingly, he valued the closing stock of oil at Rs. 13 lakhs and added the same to the income of the assessee. The Assessing Officer also levied penalty on the abovesaid addition and the learned Commissioner of Income-tax (Appeals) also confirmed the same. 12. The learned counsel submitted that the assessee has duly disclosed the availability of eutectic oil in his books of account. It has also justified in valuing the same at nil value as it remained as non-movable item for the past several years. He submitted that the assessee was making efforts to sell of the same in the market and finally it found an ex-employee who purchased the same at Rs. 4,000 per metric tonne in the year relevant to the assessment year 2003-04. He submitted that sales amount realised by it has been duly offered as income in the assessment year 2003-04. The learned authorised representative submitted that the assessee has consistently taken the market val....
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....reon by holding that they were not put to use and they have been held for disposal only. The learned counsel submitted that after introduction of block concept of depreciation, individual assets lose their identity and, hence, the Assessing Officer was not justified in disallowing the depreciation by listing out certain plants. Accordingly, the learned authorised representative submitted that the disallowance of depreciation made by the Assessing Officer is not justified on the merits also. He submitted that the assessee has furnished all relevant details relating to the depreciation claimed by the assessee and it has neither concealed any particulars of income nor furnished any inaccurate particulars of income. Accordingly, he contended that the penalty levied on the disallowance of depreciation was not justified. 15. We have heard the learned Departmental representative on this issue and perused the record. From the orders passed by the tax authorities we notice that the Assessing Officer has culled out details of plant not in use from the books of account maintained by the assessee, which shows that the assessee has not concealed any particulars of income or furnished any inacc....
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....ddition. 18. We shall now take up the appeals relating to the assessment year 2003- 04. The Assessing Officer levied penalty on the following additions made by him : "(i) reversal of excess liabilities of Rs. 4,87,38,201 (ii) prior period expenses of Rs. 1,10,19,632 (iii) stock of eutectic oil of Rs. 12,70,000 (iv) disallowance under section 43B-Rs. 76,17,656 (v) loan and advances written off of Rs. 6,35,000 (vi) depreciation on research and development equipment of Rs. 8,18,57,646 (vii) depreciation on stores and spares of Rs. 47,46,477 (viii) disallowance under section 145A of Rs. 87,83,980." The learned Commissioner of Income-tax (Appeals) deleted the penalty pertaining to (ii), (iii) and (viii) referred to above and confirmed the penalty in respect of the remaining additions. Both the parties have filed appeals challenging the decision of the learned Commissioner of Income-tax (Appeals). 19. The first issue relates to the penalty levied on the addition relating to reversal of excess liabilities. This addition relates to the decapitalisation of assets, which was discussed in the preceding paragraphs while dealing with the appeal of the assessee relating to the....
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....tion relating to depreciation portion alone, which was claimed by the assessee over the years. 22. The next issue relates to the penalty levied on addition relating to closing stock value of eutectic oil-Rs. 12,70,000. The details relating to valuation of eutectic oil was discussed in the preceding paragraph while dealing with the appeal of the assessee relating to the assessment year 1999-2000. In this year, the assessee has sold a portion of the oil at Rs. 4,000 per metric tonne. Thus, the claim of the assessee, that it did not have any market value has been disproved in this year. However, the assessee has chosen to declare the market value as nil. Hence, the explanation of the assessee stands disproved by the facts available in its records itself. Accordingly, we are of the view that the learned Commissioner of Income-tax (Appeals) was justified in confirming the penalty levied on this addition. 23. The next issue relates to the penalty levied on the disallowance of loans and advances written off-Rs. 6,35,000. The assessee had accounted for amounts receivable from the nearby villages towards water charges, electricity, etc. Since the assessee could not realise the same over t....
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....the order of the learned Commissioner of Income-tax (Appeals) passed on this issue and direct the Assessing Officer to delete the penalty levied on this addition. 26. We shall now take up the appeal filed by the Revenue for the assessment year 2003-04. The first issue relates to the penalty levied on disallowance of prior period expenses. Identical issue was considered by us in the preceding paragraphs while dealing with the appeal filed by the Revenue for the assessment year 1999-2000. Consistent with the view taken therein, we confirm the order of the learned Commissioner of Income-tax (Appeals) on this issue. 27. The next relates to the penalty levied on the disallowance made under section 43B of the Act. The Assessing Officer disallowed the payments made towards provident fund, employees' State insurance, etc., beyond the due date prescribed in the respective Acts but within the grace period specified therein. It is the case of the assessee that the payment made within the grace period should also be considered as the payment made within the statutory period. We are of the view that this issue is debatable one and, hence, the penalty cannot be levied on this addition. Eve....