TMI Blog2001 (6) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has failed to note that as a gesture towards avoidance of litigation, the assessee agreed to the disallowance of the depreciation and investment allowance claimed. (5) The CIT(A) has failed to note that the claim of the assessee right from the beginning was that depreciation and investment allowance was claimed based on trial production commencement and this was not denied or withdrawn at any point of time by the assessee. 3. The learned counsel for the assessee besides relying upon the grounds of appeal, argued that even though quantum assessment was not challenged because of the reason that the assessment was made on a total income of Nil, the depreciation on machinery was claimed correctly and the other deduction in accordance with law. He further argued that the assessee used the generator for the purpose of production and also submitted that on 1-3-1990, cheque for the payments were cleared and the record was kept for the scrutiny by the Department, in which it was clearly mentioned that initial production was stated and some sales were also made in March 1990. It was further submitted that sales of scrap was done because of certain reasons as explained in the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1990-91. He also separately initiated proceedings under section 271(1)(c) of the I.T. Act and in response to the notice, the assessee filed reply and pointed out that at the time of assessment, the assessee has filed a letter dated 28-7-1992 stating therein that during the previous year, the company made trial run production in March 1990 and, therefore, the assessee issued 'No objection' in disallowing the loss as well as the depreciation claimed in the assessment. The assessee also explained in the reply dated 24-9-1992 to the Notice under section 271(1)(c), requesting for dropping of penalty proceedings on the ground that the assessee company came forward voluntarily and in good faith made full disclosure and co-operated with the Department. 7. The Assessing Officer did not agree with the contentions of the assessee and was of the view that the assessee deliberately furnished inaccurate particulars and made false claim of depreciation and investment allowance etc., and, therefore, these items were withdrawn. The Assessing Officer, therefore, imposed penalty under section 271(1)(c) of the Act. On appeal, the CIT(Appeals) confirmed the order of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department. It was also answered to a specific question that the assessee had documentary evidence to show that the assessee had commenced production on trial basis and the claim for depreciation etc., was withdrawn to buy peace. 11. It was also answered that the assessee had made two sales during the year; one on cash and the other on cheque and the cheque was encashed in the account of the assessee. The assessee also paid Sales Tax due to the Sales Tax Department, which according to the assessee shows that some production activity was started and sales was also made. According to the assessee's explanation, a letter was filed withdrawing the claim primarily to buy peace as the assessee was also not going to suffer anything as the return was filed at loss, which was ultimately assessed at Nil income. Therefore, from the statement given before the authorities and explained in the letter, certain facts, in our opinion, have not been considered properly by the lower authorities and that there was some production in the accounting year and the machines were used, Sale of pipes as scrap was shown because of certain reasons as claimed in the statement and sales were made even thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture or surmises - High Court not entitled to take another view.' From the assessee's agreeing to the additions to its income, it does not follow that the amount agreed be treated as concealed income. 14. The Hon'ble Madras High Court in the case of CIT v.. C.J. Rathnaswamy [1997] 223 ITR 5 has held that: "according to the facts arising in the present case, the assessee agreed for an addition of the undisclosed income, but did not agree for addition on the basis that the undisclosed income was his concealed income. It was also admitted that the Department had not brought any other material to show that the assessee had concealed the income or furnished in accurate particulars so as to warrant penalty. The Tribunal was justified in cancelling the penalty.' 15. The Hon'ble Madras High Court, in the case of M.P. Narayanan has held that "firm agreeing to addition of cash credit in its income - No evidence of concealment of income - Application for waiver of penalty would not amount to admission of concealment." The learned counsel for the assessee also relied upon the decision of the Madras High Court in the case of Murugan Timber Depot, in which it was held that "Quantum of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss in next year. Since the assessment was completed on Nil income, there is no question of setting off of loss in next year. 19. The learned CIT(Appeals) relied upon many cases as listed out in the list submitted by the learned counsel for the assessee. A perusal of these cases reveal that these Judgments are not having any bearing on the penalty proceedings under section 271(1)(c) of the I.T. Act. 20. At the cost of repetition, we may mention here that from all the facts and circumstances of the case, it seems that it is a case of difference of opinion, as the claim for depreciation etc., was made by the assessee on the basis of trial production which was supported by record, but the stand of the Department was that since no commercial production was there, the assessee is not entitled for such claim. All the facts of the case were before the Assessing Officer and as such, it cannot be said to be a case of filing inaccurate particulars or making any concealment before the Assessing Officer. Even if the assessee would claim this deprecation etc., on merits and rejected by the Assessing Officer, still law is clear that even if the explanation of the assessee is rejected, no case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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