TaxTMI 
TaxTMI 
2019 (8) TMI 840
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd in law, the ld. CIT(A) erred in deleting the penalty imposed u/s. 271(l)(c) of the Income Tax Act, 1961, ignoring the facts that the quantum addition was confirmed in appeal. 3. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 4. The appellant craves leave to amend, or alter any grounds or add a new ground, which may be necessary.' 2. Briefly stated, the assessee company is engaged in the business of generation of electricity and had started functioning from 06.06.2005 after the erstwhile Maharashtra State Electricity Board was trifurcated into three companies viz. (i) Maharashtra State Electricity Distribution Company Ltd.; (ii) Maharashtra State Power Generation Company Ltd.; and (iii) Maharashtra State Electricity Transmission Company Ltd. Each of the aforesaid companies were to look after one of the three aspects of the erstwhile electricity board i.e generation, transmission and distribution of electricity. Accordingly, the year under consideration i.e period relevant to A.Y. 2006-07 was the first year of operation of the assessee company. The assessee company had e-filed i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee. The A.O while framing the assessment also initiated penalty proceedings under Sec. 271(1)(c) of the Act. 4. Aggrieved, the assessee assailed the assessment framed by the A.O in appeal before the CIT(A). The claim of the assessee that it had validly filed a revised return of income since there was sufficient omission and discovery of wrong statement in its 'original' return of income found favour with the CIT(A), who therein concluded that the assessee had validly filed the revised return of income. A perusal of the details of difference of an amount of Rs. 334,57,16,988/- as per the total income in the 'original' and the revised return of income revealed that the same was comprised of three items viz. (i) reduction on account of reversal of excess billing as per MERC order : Rs. 320.72 crores; (ii) provision for difference in oil stock on account of physical inventory taken by the assessee in the month of September and October: Rs. 20.04 lacs; and (iii) coal cost freight issue-Bhusaval: Rs. 1631.85 lacs. It was observed by the CIT(A) that the A.O in the course of the assessment proceedings while declining to accept the revised return, had observed, that in the absence of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e vacated. As regards the claim of reversal of excess billing of Rs. 320.72 crores raised by the assessee in its revised return of income, it was observed by the CIT(A), that as the tariff (rate of electricity) to be charged by the assessee from its clients was regulated by Maharashtra Electricity Regulatory Commission (for short 'MERC'), therefore, the assessee was obligated to charge the rate of tariff from its clients strictly as per the order of MERC. It was observed by the CIT(A) that as at the time of finalisation of the accounts of the assessee company for the year under consideration the MERC order was not there, therefore, the bill to be raised by the assessee on its sole client viz. MSE Distribution Company Ltd. was accounted for and charged as per the mutual agreement between the Managing Directors of both the companies. It was noticed by the CIT(A) that the accounts of the assessee company were initially prepared on the basis of unaudited accounts. However, as the statutory auditors at the time of audit of the accounts of the assessee company had reported that the tariff of electricity was to be charged/accounted for as per the tariff prescribed by the regulator i.e MER....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee. As regards the penalty imposed by the A.O on the issue of provision for difference in oil stock of Rs. 20.04 lac, it was observed by the CIT(A) that as the said addition/disallowance had been deleted in the course of the quantum appeal by his predecessor, therefore, no penalty on the said count thereafter survived. Further, the CIT(A) adverted to the penalty imposed by the A.O on the issue of coal cost freight issue-Bhusawal of Rs. 16,31,85,000/-. It was observed by the CIT(A) that unlike in the course of the assessment proceedings the assessee had in the course of the penalty proceedings and also in the course of the appellate proceedings emanating therefrom before him, had satisfactorily explained that the coal cost freight at Bhusaval amounting to Rs. 16,31,85,000/- was an expenditure pertaining to the year under consideration. It was noticed by the CIT(A) that the assessee in its revised return of income had on the basis of the remarks and report of its statutory auditors claimed the aforesaid amount as an expenditure. The CIT(A) being of the view that as the explanation advanced by the assessee in respect of the aforesaid claim of expenditure was bonafide and justifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... A.R that as the aforesaid expenditure was incurred by the assessee, therefore, a claim for deduction for the same was validly raised by it in its revised return of income. It was fairly admitted by the ld. A.R that as in the course of the quantum appeal the assessee had focused primarily on the other issues which involved substantial stakes, therefore, inadvertently, the aforesaid issue which was comparatively a minor item was not given much attention and on account of a bonafide omission was not assailed before the Tribunal in the quantum appeal filed by the assessee. Further, it was averred by the ld. A.R that as the assessee had came forth with a complete disclosure vis-a-vis the aforesaid addition in its statement of accounts, therefore, no penalty under Sec. 271(1)(c) was liable to be imposed in its case. As regards the reliance placed by the A.O on the judgment of the Hon'ble Supreme court in the case of UOI Vs. Dharmendra Textiles Processors (2007) 212 CTR 432 (SC), it was submitted by the ld. A.R, that as the same was distinguishable on facts, therefore, the same would not assist the case of the revenue. In fact, it was submitted by the ld. A.R that the A.O while relying o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ff the quantum appeal of the assessee for the year under consideration viz. Maharashtra State Power Generation Company Ltd. Vs. ACIT, Central -10(1), Mumbai (ITA No.302/Mum/2010, dated 03.03.2017), therefore, the penalty imposed by the A.O on the said count will have to meet the same fate and thus stands vacated. Accordingly, in the backdrop of the aforesaid facts the only issue which survives as regards the penalty levied by the A.O under Sec.271(1)(c) is the addition/disallowance made by the A.O in respect of coal cost freight issue-Bhusaval of Rs. of Rs. 1631.85 lacs. As is discernible from the orders of the lower authorities and admitted by the ld. A.R before us, the aforesaid addition had not been assailed by the assessee in its quantum appeal before the Tribunal. Resultantly, the disallowance of the assesses claim of coal cost freight issue - Bhusaval of Rs. 1631.85 lac has attained finality. It is the claim of the ld. A.R, that as the assessee company in the course of the first appellate proceedings had focussed on the other issue wherein high stakes of Rs. 200 crores of tax demand was involved, therefore, by way of an inadvertent omission the aforesaid addition/disallowa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for by the assessee. Accordingly, it is the claim of the ld. A.R that as the aforesaid expenditure that was incurred was not claimed as a deduction, therefore, the assessee on learning about its said mistake, had thereafter accounted for and raised the claim for the same in its revised return of income. 11. We have given a thoughtful consideration to the issue before us in the backdrop of the contentions advanced by the authorized representatives for both the parties. As is discernible from the records, the disallowance of the coal cost freight issue-Bhusaval of Rs,16,31,85,000/- forms part of Rs. 334.57 crores i.e the difference in the total income as per the 'original' and the revised return of income filed by the assessee. As observed by us hereinabove, no discussion as regards the disallowance of the aforesaid coal cost freight issue- Bhusaval of Rs. 16,31,85,000/- is available in the assessment order. In fact, it was only in the course of the quantum appellate proceedings that when the assessee had filed the complete details in respect of the difference of Rs. 334.57 crores, that the A.O had thereafter in his 'remand report' submitted that the reduction to the said exte....