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TMI Blog2012 (7) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... aring loss of Rs. 13,65,54,483/-, supported by audited statement of accounts which was processed u/s 143(1). Thereafter Assessing Officer issued notice u/s 148 and consequent to the assessment, the assessee's loss was reduced to Rs. 7,66,79,891/-. The reduction in loss was on account of following additions/ disallowances: 1. Depreciation on plant & machinery Rs. 89,95,173/- 2. Loss on sale of investments Rs. 59,15,000/- 3. Loss on sale of vehicle Rs. 1,27,900/- 4. Disallowance u/s 43B Rs. 17,325/- 5. Disallowance u/s 43B Rs. 4,48,19,194/- Rs. 5,98,74,592/- 2.1. Assessing Officer also initiated penalty proceedings u/s 271(1)(c) in respect of above items of additions/ disallowances. 2.2. Against assessment order, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was facing huge losses and as per auditors report, following disclosures have been made by the auditors of the company: "xiv) According to the records of the company provident fund and employees state insurance dues amounting to Rs. 46,74,283/- have not been deposited with the appropriate authorities. ... xvi) The company is a sic industrial company within the meaning of the Sic Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)." 3.1. The fact that assessee was a sic company has not been disputed by the department. 3.2. Coming to the item-wise disallowance, following is submitted: (1) Depreciation on plant & machinery: In assessment year 2000-01, similar type of depreciation claimed by the assessee was disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in use when it is kept ready for use. In the case before us the returned loss of Rs. 11,25,5490/- was assessed at loss of Rs. 8,02,40,150/- meaning thereby that the Assessing Officer had allowed certain expenses while completing the loss returned by the assessee. The assessee had disclosed all assets in the return of income. Under liberal interpretation of word 'used', the depreciation is allowable where machinery is kept ready whereas under the strict interpretation the actual use of the machinery is necessary for claim of depreciation. Therefore, the claim of depreciation being a debatable issue, penalty under section 271(1)(c) of the Act cannot be imposed though the addition on account of disallowance of depreciation has not been agi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loss from business to long term capital gain cannot be held as concealment of particulars of income or furnishing inaccurate particulars of such income, more so when all the relevant details were on the record. 3.5. Apropos claim of PF and ESI, it is pleaded that in the audit report itself, assessee hade voluntarily disclosed that all these payments were not paid in the govt. treasury due to the paucity of funds. Therefore, the claim in P&L A/c cannot be considered excluding all other disclosures. It has not been disputed that due to non payment of fee, assessee had to change the Chartered Accountant, which became a reason for some of the disallowances. The facts being on record, the same cannot be subjected to penalty. 3.6. Apropos 43B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the ratio of decisions in the cases of CIT Vs. Escort Finance Ltd. 328 ITR 44 (Del.); and CIT Vs. Zoom Communication Pvt. Ltd. 327 ITR 510 (Del.). 4.2. Ld. DR further relied on ITAT Delhi Bench 'A' judgment dated 31-8- 2010 in the case of M/s Anand & Anand Vs. ACIT in which the mistaken legal advice was held to be not a defence for the assessee in penalty. 5. We have heard rival contentions and gone through the relevant material available on record. Apropos the issue of claim of depreciation, penalty imposed under similar facts and circumstances has been deleted by the ITAT in preceding year, as reproduced above. Respectfully following the same, the penalty qua the claim of depreciation is deleted. 5.1. Apropos long term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not filed by the Chartered Accountant due to dispute on payment of professional fees with the C.A are the same is indicated by the record. In our considered view the details having been furnished along with the return of income, the assessee's case is not liable to be visited with penalty u/s 271(1)(c). 5.4. Apropos ld. DR's reliance of ITAT order in the case of M/s Anand & Anand (supra), the facts and circumstances in that case are peculiarly different inasmuch as in this case assessee had earlier paid advance tax on a particular item of income and later on, in the guise of legal opinion, the same was claimed to be a capital receipt, it had no earlier history and was a profit making organization. In the present case, the facts are pecu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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