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2021 (7) TMI 1244 - ITAT MUMBAILevy of penalty u/s 271(1)(c) - assessee’s claim of write off of brought forward unabsorbed depreciation was disallowed by the Assessing Officer while computing book profits under section 115JB of the Act on the premise that cumulative balance in the books of assessee for Financial Year 2002-03 show profits and Reserves & Surplus - HELD THAT:- The assessee made claim on the premise that business loss/unabsorbed depreciation were to be considered on year to year basis. The assessee in support of its computation of claim placed reliance on the decision of Tribunal in the case of Amline Textiles Pvt. Ltd. [2008 (11) TMI 438 - ITAT MUMBAI]. As against this, the Assessing Officer rejected the claim of assessee following aggregation approach, as reflected in the Balance Sheet. Per approach of Assessing Officer there would be no unabsorbed depreciation/business losses available for adjustment under section 115JB of the Act. There are two school of thoughts in computing set off of unabsorbed depreciation/business losses i.e. year to year basis vs aggregation. Both views are possible as per the language of Explanation- 1 clause (iii) to section 115JB (1) of the Act. This makes the issue debatable. The method adopted by the assessee at the time of filing return was one of the acceptable view. Ergo, the assessee is able to furnish reasonable explanation in making a claim of unabsorbed depreciation while computing book profits u/s 115JB of the Act. In light of the fact discussed above coupled with the fact that divergent views have been expressed by the Tribunal on the issue of treating unabsorbed depreciation/business loss of preceding assessment years while computing book profits u/s 115JB, makes the issue debatable. Hence, no penalty under section 271(1)(c) of the Act can be levied on such disallowance It is no more res-integra that levy of penalty is not automatic. Even if addition/disallowance made by Assessing Officer is accepted by the assessee and is not contested further, it would not result in levy of penalty. Assessment proceedings and penalty proceedings are separate and distinct. The Assessing Officer has to record satisfaction before initiating penalty proceedings and the penalty proceedings are subject to judicial scrutiny independent of additions/disallowances made under assessment proceedings. Therefore, levy of penalty for the reason that the addition/disallowance has been accepted by the assessee is not sustainable ground - Penalty levied under section 271(1)(c) of the Act is deleted - Decided in favour of assessee.
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