TMI Blog2011 (2) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-language:AR-SA;} <![endif]--> SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI, JM) For the appellant : Shri R. K. Dhanista, DR For the Respondent : Shri S. N. Soparkar, AR ORDER PER BHAVNESH SAINI: The departmental appeal is directed against order of the learned CIT(A)-VI, Baroda dated 28-06-2010 for assessment year 2005-06, challenging the deletion of penalty u/s 271(1) ( c ) of the IT Act on the following grounds: 1(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s. 271 (1) (c) of ₹ 3,80,610/- levied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing so, the Commissioner of Income Tax (Appeals) erred in the following respects: 2.2.1 In computing interest under section 234D of the Act on the aggregate of amount of refund granted under section 143(1) of the Act and interest under section 244A of the Act. 2.2.2 In ignoring the fact that according to the provisions of section 234D of the Act, interest is leviable only on excess amount of Tax Refunded. 2.2.3 In not appreciating the fact that Refund according to the provisions of section 237 of the Act is Amount of tax paid or treated as paid by the assessee and does not include Interest under section 244A of the Act. 3. We have heard the learned representatives of both the parties, perused the findings of the authorities below. 4. The facts of the case in both the appeals are that on quantum appeal the assessee challenged the addition of ₹ 10,40,131/-. It was observed by the AO on perusal of the details of sludge disposal charges that the assessee has made provision of ₹ 10,40,131/- under the head sludge disposal charges . It was noted that the provision of ₹ 10,95,250/- was made on the last day of the previous year an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verify the interest calculation. 5. Both the parties submitted that the appeal for assessment year 2002-03 is considered separately and the order in that case may be followed on quantum. The interest point is not argued. The same is , therefore, dismissed. 6. On penalty appeal, the AO on confirming the addition by the learned CIT(A) levied penalty of ₹ 3,80,610/- by applying Explanation (1) to section 271 (1) (c) of the IT Act. It was submitted before the learned CIT(A) that the AO has ignored the fact that the change in accounting policy relating to provision for sludge disposal charges has been adopted by the assessee to claim expenses on actual basis to harmonize with the fact that the corresponding income is offered to tax in the previous year and the same has been consistently followed by the assessee in subsequent years. Further, as per the norms of the GPCB, the liability to dispose off the sludge accrues as soon as the sludge is generated during the process of treatment of the liquid waste received from the chemical industries and that the assessee company follows the mercantile system of accounting and had accordingly made the provision for sludge dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation provided by the appellant. The disallowances made by the Assessing Officer are a matter of legal interpretation and the appellant has neither concealed any particulars of income nor furnished inaccurate particulars thereof. Thus, the AO is not justified in levying penalty with respect to both the additions, confirmed by the CIT(A), as the very basis for levying the penalty under section 271(1) (c), for furnishing inaccurate particulars or concealing particulars of income, which I pre-condition to levy of penalty, do not exit. By now it is established that Dharmendra Textiles Processors case has been distinguished by various appellate authorities that in cases where addition was made by the AO, levy of penalty is not automatic and that the penalty provision requires a stricter adherence and onus to prove that there was a concealment with a view to avoid tax is on the Revenue. The appellant has filed citations of various appellate authorities, wherein, in almost similar circumstances, the appellant s point of view was upheld. When there are different views on the point involved in the issue, the AO is not justified in levying penalty under section 271(1)(c). Further penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mass). Bacteria s reacts biologically with organic chemicals and generate bio sludge, which is separated and mixed with primary slurry. The solid containing slurry along with bio sludge are filtered through the rotary vacuum drum filters (RVDF). The like-is removed from the filter and stored for sun drying. This sludge is always having different quality because of the water received from different industries is varying nature daily. This solid sludge is to be disposed off as per GPCB and regulations. The sludge disposal charges thus depend upon the generation of sludge, nature and quality of sludge. As per the rules of Guj'arat Pollution Control Board (GPCB), the sludge that is of the nature has to be sent only to the company operating a Secured Land Fill facility for solid waste. Bharuch Envuo Infrastructure Ltd. (BEIL) is the only Company in a Secured Land Fill facility for the disposal of solid waste generated by the Industries in and around Bharuch District and accordingly the solid waste generated that is sent to BEBL. The sludge generated which match exactly with the specification of Cement Industry is sent to the Cement Industry as per their requirement as per the GPCB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of ₹ 330.72 per MT on 5371.820 MT of sledge that could not be removed as on 31 .03.2001. We find that this issue is covered by the decision of the Rajasthan High Court in the case of Udaipur Mineral Development Syndicate Pvt. Ltd. vs. DCIT (261 ITR 706 (Raj), wherein it is stated that the assessee company was engaged in open cast mining of soap stone ceude. A least for exploration of mines was granted to it by the State Government of Rajasthan. There was an agreement between the assessee and the State that as far as possible a lease shall restore the surface land so used to its original condition. The estimated cost of refilling the pit was coming to ₹ 1,51,360/- arid the provision for the same was made as per the clause 2 of part V of the lease agreement. The assessee-company claimed that the liability to refill pits accrued as soon as the pits were dug. The AO denied the claim on the ground that the liability stipulated in the lease agreement to restore the land has not accrued in the assessment year in hand and it does arise when the assessee has filled the pits. The Commissioner of Income-tax (Appeals) has allowed the claim. In appeal before the Tribunal ..... 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