9911796707
TMI Blog2012 (7) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... not tenable as the requisite satisfaction, as discussed by the Hon'ble Delhi High Court in the case of Madhushri Gupta reported in 317 ITR 107, has not been recorded by the learned Assessing Officer in the body of assessment order. 4. That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in sustaining the penalty Rs. 23,92,060/- levied under section 271(1)(c ) of the Act by the learned Assessing Officer on account of disallowance and consequential addition made to the total income in respect of Non-saleable/Damaged Stock written off in the Profit & Loss account during the year under appeal. 5. That on the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) has failed to appreciate that the claim of the appellant vis-à-vis write off of Nonsaleable/ Damaged Stock in the Profit & Loss account is a bonafide claim inasmuch as the said claim ahs been approved by the statutory auditors and whereas the similar claim has already been allowed by the revenue in subsequent year. 6. That on the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) was wrong in imposing penalty u/s 271(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India vs. Dharmendra Textiles Processors, 306 ITR 277 imposed the penalty. 5. During the course of appellate proceedings before the CIT(A) it was submitted that the assessee company debited a sum of Rs. 59,43,008/- on account of provision for non-saleable/damaged stock. It was submitted that the sum represented the actual write off of non-saleable stock in the ordinary course of business and did not represent any provision. It was also submitted that the assessee was engaged in the business of processing and selling of food products for the purpose of export and the food products processed and packaged by the assessee company were perishable in nature; bearing the date of expiry beyond which they could not be sold; and hence non-saleable/expired stock needed to be discarded. It was also submitted that in the business of food processing the assessee company has to comply with several legal requirements like Food Products Order (FPO), 1955 - Section 3 of the Essential Commodities Act, 1955 provides for regulation of sanitary and hygienic conditions in manufacture of fruit and vegetable products. Meat Food Products Order (MFPO), 1973 - section 3 of the Essential Commodities Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference of opinion on debatable/arguable issue. It was also submitted that provisions of Explanation 1 to sec.271(1)(c) are not applicable. Neither the assessee has failed to provide an explanation nor was the explanation furnished by the assessee found to be false. Further it is also not a case where explanation offered stands unsubstantiated or found to be lacking bona fide. Since the assessee had offered plausible explanation and his explanation has not been found to be false, nor it is a case of the AO that Clause B of Explanation 1 was to be attracted. Therefore, explanation offered by the assessee is bona fide and no penalty u/s 271(1)(c) is leviable. The assessee has placed reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158. 7. The learned CIT(A) however, noticed that the assessee has not written off the value of these stocks and the assessee has simply made the provisions on this account. Nothing is mentioned regarding scrap value of these items. The learned CIT(A) rejected the contention of the assessee and confirmed the penalty u/s 271(1)(c ) by holding that the explanation offered by the assessee was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and while doing so the AO has relied on the order of ITAT in the quantum proceedings. He further submitted that penalty proceedings are separate from the assessment proceedings and the findings arrived at in quantum may have persuasive value but the same are not conclusive for levy of penalty. He placed reliance on the decision of Hon'ble Calcutta High Court in the case of CIT vs. Bimal Kumar Damini, 261 ITR 857 and the decision of Hon'ble Delhi High Court in the case of CIT vs. J.K. Synthetics Ltd., 219 ITR 267. 11. The learned AR of the assessee further submitted that entries have been passed in the books of account in a bona fide manner and as per guidelines of the auditors there was no case of penalty. Penalty u/s 271(1)(c) is discretionary and as is evident from the fact that the legislature has used the word "may" and same is not automatically invoked in each and every case particularly in a case where entire income of the assessee is exempt u/s 10B of the Act. He placed reliance on the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa, 83 ITR 26. He also placed reliance on the following decisions:- 1. ITAT Delhi in the case of Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings and findings arrived at in quantum appeal may have persuasive value but the same are not conclusive for levying penalty. Hon'ble Delhi High Court in the case of CIT vs. J.K. Synthetics Ltd., 219 ITR 267, has held that in quantum appeal there was no finding of the Appellate Tribunal that the claims made by the assessee were not bona fide or that there was any fraud or gross or willful neglect on its part. Moreover, the proceedings for imposition of penalty and assessment proceedings are two separate and independent proceedings and, therefore, separate and distinct provisions have been enacted in the statute for initiation of the same. Therefore, the findings recorded by the Tribunal in the quantum appeal cannot be said to be decisive. In the penalty proceedings the Tribunal had not found that the assessee had concealed the particulars of its income or had furnished inaccurate particulars of its income. There was no error apparent from the record which had to be corrected. Hon'ble Calcutta High Court in the case of CIT vs. Bimal Kumar Damani, 261 ITR 857, has held that the observations made by the Appellate Tribunal in quantum proceedings are not a finding for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act penalty, there should be concealment of income or furnishing of inaccurate particulars of such income. Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra) has held as under:- "A glance at the provisions of section 271(1)(c ) of the Income-tax Act, 1961, suggest that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c ) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When ..... X X X X Extracts X X X X X X X X Extracts X X X X
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