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2021 (5) TMI 102 - ITAT DELHIPenalty u/ s 271(1)(c) - additions were made on account of transfer pricing adjustment in respect of sale of fixed assets - CIT-A deleted the penalty levy - HELD THAT:- We find that the assessee has sold assets at the WDV of the assets as per company law whereas the TPO held that the assessee ought to have sold the assets at the value of the WDV of the block of assets as per the Income Tax Act. The WDV as per the Income Tax Act may not be / cannot be the fair market value of the assets. The assets were transferred at the book value as per the audited accounts of the assessee which is a recognized method of providing depreciation. Such sale of assets after valuation and the adjustment by the TPO by resorting to CUP method cannot be a ground for levy of penalty u/ s 271(1)(c). The case of concealment or furnishing of inaccurate of particulars of income cannot attract the provisions of penalty u/ s 271 (1)(c). Hence, we hold that penalty levied on this ground has been rightly deleted by the ld. CIT (A). Disallowance on account of expenses - claim of the assessee with regard to personnel expenses, operative expenses and finance expenses cannot be accepted as the assessee has not carried out any business activities during the year under consideration - HELD THAT:- On going through the assessee's activities it can be held that the assessee is continuing to carry out business activities. The activities undertaken are in connection with terms of contract. It cannot be said that the business ceased to exist just because there was no activity of trading or manufacturing during the given period. The assessee has undertaken the activities of reworking and removing of defects in respect of goods sold earlier and also exported certain goods. The assessee has also filed the statutory returns. The disallowance has been made on the grounds that the business has not been carried out but not on the grounds that the expenses are not related to the business. With regard to the penalty levied on such issue, we find that such disallowance do not fall under the category of furnishing of inaccurate particulars or concealment of such particulars of income. The penalty cannot be sustained in view of the judgment of Delhi Cloth & General Mills Co. Ltd. [1984 (1) TMI 10 - DELHI HIGH COURT ] wherein it was held that the mere fact that a claim for expenditure stands disallowed does not by itself lead to the inference that the assessee had furnished inaccurate particulars in regard to that item. Also see Reliance Petorproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT]- Thus we hereby confirm the order of the ld. CIT (A) which held that it a “mere disallowance” of an expense does not warrant a penalty for filing inaccurate particulars of income u/s 271(1)(c). Decided in favour of assessee.
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