2012 (7) TMI 35

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..... s accepted at the Bar that penalty under section 271(1)(c) of the Act was imposed on account of disallowance, which can be put in five categories, namely, (i) foreign travel expenditure, (ii) provision for warranty, (iii) marketing expenditure (handset, etc., issued to the dealers, AMSCs and employees) net of depreciation, (iv) additions to closing stock (representing handsets issued to employees, AMSCs dealers and material lost in transit), and (v) provision for obsolescence.   With regard to the first two, (i) foreign travel expenses and (ii) provision for warranty, in the quantum proceedings, the Income-tax Appellate Tri- bunal had decided the issue in favour of the respondent-assessee and the appeal filed by the Revenue before thi .....

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..... ssessing Officer on the ground that it is improbable that parts worth so much would have been lying without getting consumed. In its written submissions, the assessee submitted that cellular handsets were not held with the intention to sell them in the ordinary course of business ; therefore, the same were not included in the value of closing stock. It was submitted that merely because the explanation or contention of the assessee is not finally accepted by the Commissioner of Income-tax (Appeals) in appellate proceedings does not form a conclusive ground for levy of penalty. Accordingly, it was prayed that penalty under section 271(1)(c) be not imposed. The arguments advanced by the appellant were examined. First of all, it is seen that t .....

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..... llowance has been affirmed by the Income-tax Appellate Tribunal and the High Court.   The Tribunal, while dealing with the question of penalty under section 271(1)(c) on the ground of obsolescence, has held as under (page 801 of 10 ITR (Trib) :   "We have heard both the parties and have carefully gone through the orders of the authorities below. It is not in dispute that disallowance has been made by the Revenue only to the extent of 25 per cent. of the total claim on account of provision for obsolescences of inventory amounting to Rs.4,94,66,656. In other words, the Assessing Officer has allowed 75 per cent. of the claim and disallowed only 25 per cent. thereof.   The Assessing Officer has disallowed 25 per cent. of the .....

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