TaxTMI 
TaxTMI 
2016 (9) TMI 707
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....s 271(1)(c) of the Income tax Act, 1961 is erroneous both on facts and circumstances of the case." 3. We have heard arguments of both the sides and carefully perused the relevant materials placed on the record of the Tribunal. The Ld. Counsel of the assessee submitted that since the return was filed belatedly and not claim for carry forward loss of Rs. 28,76,930/- was claimed and return was filed at NIL income. The Ld. Counsel also pointed out that after making additions the income reached to Rs. 5,70,535/- which was further reduced to Rs. 4,26,373/- when the rectification application filed by the assessee u/s 154 of the Act was allowed by the A.O. 4. The Ld. Counsel pointed out that in the first para of penalty order the A.O incorrec....
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.... in the market. The Ld. Counsel also submitted that in these circumstances the director of the company took a conscious decision in the interest of company to write off the stock as there was no point of keeping the absolute stock and spending money on storage of such stock. The Ld. Counsel also contended, regarding claim of depreciation and other expenses, that the incurrence and genuineness of the expenditure has not been doubted by the A.O and the same was disallowed on account of no business activity allegation which is not acceptable. The Ld. Counsel also contended that merely because no business activity was carried out during the period a company cannot be deprived form claiming expenses for running and maintaining its legal assistan....
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.... of the subsequent decision of Hon'ble Supreme Court in the case of CIT Vs. Gold Coin Foods Pvt. Ltd 172 Taxman 38 (S.) wherein it was held that the operation of Explanation 4 to Section 271(1)(c) of the Act being clarificatory, will have retrospective effect. The Ld. DR also pointed out that in view of subsequent division of Apex Court the penalty order has to be sustained. 9. The Ld. Counsel of the assessee also placed rejoinder, to the above submission of the Ld. DR, and contended that the Tribunal allowed the appeal only on the basis of proposition laid down by the Hon'ble Supreme Court in the case of the Virtual Soft Systems Ltd (Supra) and other contentions of the assessee on merits and regarding explanation on the addition....
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....nly penalty cannot be deleted on the legal ground i.e. prospective effect of Explanation 4 to Section 27(1)(c) of the Act but other submission, contentions and explanation of the assessee on the merits of the all three issues on which penalty has been levied has to be considered for the logical analysis and evaluation of the impugned order of the A.O as well as of the CIT(A). 12. Now in view of foregoing discussion we proceed to decide contention of the assessee on merits of the penalty. First of all we may point out that the three additions have been made during original assessment proceedings and appeal of the assessee was dismissed on account of non prosecution without any adjudication on merits. In this backdrop when we analyze the f....
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....intaining the existence of a legal entity. On the basis of above, we are inclined to hold that there is no sustainable allegation by A.O in the penalty order that either the assessee has concealed particulars of its income or has furnished in accurate particulars of its income. We may point out that in the case of CIT vs. Reliance Petro Products Pvt. Ltd 322 ITR 158 (S.C) as relied by the Ld. AR , it has been held that mere disallowance of a claim cannot by itself, from the basis for initiation of penalty proceedings in absence of any material to show that the claim of the assessee was unjustified and deliberately under false premises with the interior intent to evade fiscal liability. The relevant operative part of said decision reads as f....