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ACIT, Circle-3 (1) , New Delhi Versus Consolidated Finvest & Holdings Ltd.

2015 (7) TMI 322 - ITAT DELHI

Penalty u/s 271(1)(c) - expenditure claimed by the assessee u/s 35D - CIT(A) deleted addition - Held that:- In accordance with the provisions of section (5A) of section 35D the resulting company was eligible for deduction but no deduction was claimed by the resulting company i.e. Consolidated Photo Products Ltd. as per computation of income for the year under consideration. In view of above noted facts, we are inclined to agree with the conclusion of the CIT(A) that the impugned claim of deducti .....

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ucts (2010 (3) TMI 80 - SUPREME COURT) and Pricewaterhouse Coopers Pvt. Ltd. vs CIT (2012 (9) TMI 775 - SUPREME COURT ) wherein it was held that penalty is not imposable merely on the ground that the assessee submitted the claim under a bonafide belief and due to inadvertent mistake which was not found to be acceptable or was not accepted by the revenue. Respectfully following the ratio of these judgements of Hon’ble Apex Court, we finally hold that the view taken by the CIT(A) is justified and .....

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06 by which penalty order dated 5.3.2010 passed u/s 271(1)(c) of the Income Tax Act, 1961 (for short the Act) has been set aside and the AO was directed to delete the impugned penalty. The sole ground raised by the revenue reads as under:- 1. The ld. CIT(A) has erred on facts and in law in deleting penalty imposed u/s 271(1)(c) of the IT Act in respect of expenditure of ₹ 52,30,121/- claimed by the assessee u/s 35D of the Act. 2. Briefly stated the facts giving rise to this appeal are that .....

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efore the CIT(A) wherein the assessee did not press disallowance made by the AO u/s 35D of the Act. Subsequently, the AO issued notice dated 19.2.2010 requiring the assessee to show cause as to why penalty u/s 271(1)(c) of the Act be not imposed with reference to additions sustained on further appeal before the CIT(A) viz. disallowance of ₹ 52,30,127 u/s 35D of the Act and disallowance of ₹ 97,381 u/s 14A of the Act. After considering detailed reply dated 26.2.2010 of the assessee, t .....

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s and carefully perused the relevant material placed on record. At the very outset, from the operative part of the penalty order dated 5.3.2010, we note that the AO imposed penalty of ₹ 19,49,466 on account of both the disallowances which were upheld by the CIT(A) when these grounds were not pressed by the assessee before first appellate authority and the issue attained finality. From the grounds raised by the revenue as reproduced hereinabove, we note that the revenue has only agitated th .....

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the provisions of section 35D of the Act. The DR further submitted that the relevant assessment year was the last year for this claim. Ld. DR further submitted that Dadra Unit was demerged under the scheme of demerger w.e.f. 1.4.2004 into transferee company viz. Consolidated Photo Products Ltd. (now known as Jindal Photo Limited). Ld. DR further submitted that the assessee claimed deduction u/s 35D of the Act by furnishing inaccurate particulars of its income, therefore, the AO was justified in .....

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ny justified reason and basis, therefore, the impugned order may be set aside by restoring that of the AO. 6. Replying to the above, ld. Advocate of the assessee supported the impugned order and submitted that the unamortized amount of public issue expense lying in the books of account was not described with assets of demerged unit at Dadra by the accountants while preparing the scheme of demerger and due to this inadvertent and bonafide mistake, the assessee company claimed deduction u/s 35D of .....

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r consideration. Ld. counsel strenuously contended that the assessee company was not at any advantageous position to claim deduction u/s 35D of the Act as both the companies i.e. appellant company and the transferee company belong to the same group, therefore, the mistake was bonafide and inadvertent and hence penalty was not leviable. 7. Ld. counsel of the assessee has further drawn our attention towards paper book page no. 106 and 107 and submitted that no deduction for the aforesaid expenditu .....

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ct of explanation of a unit at Dadra, UP for a period of 10 years w.e.f. A.Y. 1996-97 in accordance with the provisions of section 350 of the Act. The relevant assessment year was the last year for a claim of deduction in terms of section 35D of the Act. However, this unit at Dadra was demerged under the scheme of demerger w.e.f. 1.4.2004 into transferee company viz. Consolidated Photo Products Ltd. (now known as Jindal Photo Ltd.). The unamortized amount of public issue expense laying in the bo .....

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igible for deduction in accordance with provision of sub-section (5A) of Section 35D of the Act for the unexpired period in the hands of resulting company i.e. Consolidated Photo Products Ltd. It is further seen that no deduction for the aforesaid expenditure was claimed in the return of income of consolidated Photo Products Ltd. Which was otherwise eligible in terms of section 35D(5A) of the Act. The return of income was filed by M/s Consolidated Photo Products Ltd. at total income of ₹ 2 .....

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ntion is bonafide and the mistake is inadvertent. Therefore, the AO is directed to delete the impugned penalty imposed u/s 271(1) (c). 9. In view of above, at the very outset, we note that although the assessee claimed deduction u/s 35D of the Act, the unamortized amount of public issue expense lying in the books of account was disallowed by the AO and addition was made. We further note that this disallowance attained finality when the assessee accepted the conclusion of the AO by not pressing t .....

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ate particulars of such income. Explanation 1 to section 271(1) (c) of the Act further makes it clear that where in respect of any facts material to the computation of total income of any person under this Act, such person fails to offer an explanation or offers an explanation which is found by the AO to be false or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material t .....

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e is that due to inadvertent mistake and under bonafide belief, the amount of unamortized public issue expense was claimed as deduction u/s 35D of the Act as the same was not described with assets of demerged unit at Dadra by the accountant of the assessee while preparing the scheme of demerger. The contention of ld. DR is that the Dadra unit was showing loss which was subsequently merged with the assessee and in this situation, the assessee placed claim u/s 35D of the Act with the intention to .....

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