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2016 (7) TMI 314 - ITAT MUMBAIPenalty levied under section 271(1)(c) - addition of depreciation relating to "decapitalised" value of assets - Held that:- We notice that the assessee has voluntarily decapitalised the assets by examining its liabilities position in the assessment year 2003-04. The undisputed fact remains that the Assessing Officer has added the liabilities reversed by the assessee to the total income of the assessee in the assessment year 2003-04. The amount of ₹ 44.34 lakhs is already included in the amount assessed in the assessment year 2003-04, meaning thereby the tax authorities have only changed the year of assessment in respect of the amount of ₹ 44.34 lakhs. Even though the assessee has not carried out the necessary adjustments in the Income-tax depreciation schedule in the assessment year 2003-04, in our view, the concealment, if any, has to be examined only in that year. Accordingly, we are of the view that the addition made by changing the assessment year will not result either in concealment of particulars of income or furnishing of inaccurate particulars of income. - Decided in favour of assessee Addition on account of valuation of eutectic oil - Held that:- We find merit in the submissions of the assessee that the amount realised by the assessee after the expiry of four years cannot be a ground to disturb the closing stock value estimated by the assessee, particularly when the assessee is valuing the eutectic oil stock as nil for the past several years. It is not shown by the Assessing Officer that the assessee did not have any basis for valuing the oil stock at nil value. Even otherwise, we notice that the assessee has offered proper explanations in this regard and it is not the case of the Assessing Officer that the assessee has concealed the particulars relating to eutectic oil stock. Accordingly, we find merit in the contentions of the assessee that the addition made by the Assessing Officer on estimated basis would not give rise to penalty under section 271(1)(c) of the Act - Decided in favour of assessee Disallowance of depreciation on plant not put to use - Held that:- There is merit in the contentions of the assessee that the assets shall lose their individual identity once it enters the block. Otherwise also, we notice that the assessee has offered explanations as to why it was constrained to claim depreciation on these assets. Thus, we notice that the disallowance of depreciation claimed on assets, which had already lost their individual identity by entering into the block, is a debatable issue. Hence, we are of the view that the assessee cannot be levied with the charge of concealment of particulars of income or furnishing any inaccurate particulars of income in respect of this addition.- Decided in favour of assessee Penalty on prior period expenses - Held that:- CIT (Appeals) has given a finding that the claim made by the assessee was not an ingenuine claim and it is a case of postponement of claim only. The learned Commissioner of Income-tax (Appeals) has also taken note of the submissions made by the assessee that these expenses got crystallised during the year under consideration. Hence, there is merit in the view taken by the learned Commissioner of Income- tax (Appeals) that it is a case of mere change of accounting year in which expenses should be claimed and, hence, this issue becomes a debatable issue. It is well-settled proposition of law that penalty under section 271(1)(c) of the Act cannot be levied on debatable issue. Accordingly, we do not find any infirmity in the decision of the learned Commissioner of Income-tax (Appeals) in deleting the penalty levied - Decided in favour of assessee Penalty levied on the addition relating to reversal of excess liabilities - Held that:- Since the liabilities relate to the capital assets, the question as to whether such kind of liabilities can be assessed as income of the assessee under section 41(1) shall become a debatable one. Accordingly, we are of the view that the penalty cannot be levied on the capital portion of the reversed liability and the same should be restricted to the depreciation portion alone. Accordingly, we modify the order of learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to restrict the penalty on the addition relating to depreciation portion alone, which was claimed by the assessee over the years.- Decided in favour of assessee in part Addition relating to closing stock value of eutectic oil - Held that:- The assessee has sold a portion of the oil at ₹ 4,000 per metric tonne. Thus, the claim of the assessee, that it did not have any market value has been disproved in this year. However, the assessee has chosen to declare the market value as nil. Hence, the explanation of the assessee stands disproved by the facts available in its records itself. Accordingly, we are of the view that the learned Commissioner of Income-tax (Appeals) was justified in confirming the penalty levied on this addition. - Decided against assessee Disallowance of loans and advances written off - Held that:- The question as to whether debt has become bad or not, is a debatable issue. The learned authorised representative also contended that there is no requirement of proving that the debt has become bad, after the amendment made in section 36(1)(vii) of the Act. Hence, we are of the view that the penalty could not be levied on a debatable issue. Accordingly, we set aside the order passed by the learned Commissioner of Income-tax (Appeals) on this issue and direct the Assessing Officer to delete the penalty levied thereon.- Decided in favour of assessee Disallowance of depreciation claimed on the research and development equipment - Held that:- As the assessee submitted that it had included the value of research and development equipment as part of block but did not claim depreciation at all. Accordingly, the learned Commissioner of Income-tax (Appeals) directed the Assessing Officer to verify the contention of the assessee and delete the penalty, if the assessee's claim is found to be correct. Since the issue is restored back to the Assessing Officer to verify the claim of the assessee, we do not find any infirmity in it. - Decided in favour of assessee by remand Disallowance of depreciation on stores and spares - Held that:- The assessee has capitalised certain stores and spares and, accordingly, claimed depreciation thereon. The question as to whether the assessee could capitalise its stores and spares is a debatable issue and, hence, the disallowance of depreciation claimed thereon also becomes debatable one. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) passed on this issue and direct the Assessing Officer to delete the penalty levied on this addition.- Decided in favour of assessee Disallowance made under section 43B - Held that:- This issue is debatable one and, hence, the penalty cannot be levied on this addition.- Decided in favour of assessee Addition made under section 145A - Held that:- As the learned Commissioner of Income-tax (Appeals) deleted the identical additions made in the earlier years. Since the facts are identical and since the Assessing Officer has made the addition on estimated basis, we are of the view that the learned Commissioner of Income-tax (Appeals) was justified in deleting the penalty levied on this addition, even though the assessee has accepted the addition by not contesting the same.- Decided in favour of assessee
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