TMI Blog2012 (3) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) passed the order dated 16.05.2002 u/s 250/143(3). As a result of which the total income assessed was determined at ₹ 1,72,15,647/- against this the assessee came in appeal before the CIT(A) who passed the order dt. 5.12.2003. Against this order also the Revenue came in appeal before the ITAT who passed the consolidated order dated 17.7.2009 in ITA 2346/Del/01 and ITA 1180/Del/04. Consequent to the said order the A.O. issued penalty notice and after hearing the assessee penalty was imposed on account of four different reasons. The assessee carried the issue before the CIT(A) who upheld the penalty order to the extent of upholding the action to impose penalty on account of inaccurate particulars of income to the extent of ₹ 3,65,107/- pertaining to disallowance of expenses, however penal action was quashed on the remaining three reasons. Aggrieved by this the Revenue is in appeal before the Tribunal. 3. The relevant facts qua the issue agitated in the departmental appeal as per the penalty order are set out in paras 3.1, 3.2 and 3.4. The same read as under. 3.1 Under valuation of closing stock of raw material in respect of polyster film at C-27: During ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/05/2002 of the AO, this issue was not pressed by the assessee and hence the addition was confirmed by the CIT(A). Appeal of the Department on this issue filed against the order of the CIT(A) delivered in first round has been dismissed by the Hon ble ITAT. In this way, addition on this issue as on date has become final at ₹ 7,07,358/-. The issue regarding imposition of penalty on this issue has been considered. In its reply dated 06/04/2010 the assessee has submitted that the confirmation of addition did not mean that the assessee s claim was surreptitious or false and it does not lead to imposing any penalty on the assessee. There is no force in this contention of the assessee. On the facts of the case there is no doubt that the assessee has under valued the closing WIP to the extent of ₹ 7,07,358/- to reduce its tax liability and hence furnished inaccurate particulars of income. 3.4 Depreciation in respect of C-90, Noida Unit: During the year, the assessee had claimed the following depreciation in respect of C-90, Noida Unit: - Building ₹ 88,256/- Plant Machinery ₹ 2,75,201/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase cost for determining the value of closing stock. However, while adjudicating the said issue, he directed that 275 polyester film rolls acquired on 18.03.1997 were to be valued @ ₹ 4091/- per roll by applying FIFO method being used by the assessee. In view of the same, addition of ₹ 2,47,732/- got sustained while the remaining addition was deleted. 4.2. On account of these reasons it was argued that a perusal of the penalty order which showed that apart from stating that addition has been sustained in the quantum proceedings there is no fresh argument brought out nor any other material has been discussed addressing any act of concealment or filing of inaccurate particulars by the assessee. It was submitted that mere sustenance of addition towards valuation of closing stock would not automatically lead to levy of penalty. It was also submitted that it is not the case of the AO that any physical quantity of closing stock was not included in the Profit Loss A/c. The addition it was argued has resulted merely on account of different value of rate applied for determining the closing stock. This issue it was urged as such can be said to be contentious and deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re were only two units where reasonable indirect costs incurred were required to be added to the value of closing WIP declared in the audited Balance Sheet. Thus, as per the appellate directions in CIT(A) order, a relief of ₹ 42,99,418/- was granted and an addition of ₹ 7.07,358/- got sustained. In the appeal filed by the revenue before the ITAT, the order of CIT(A) was upheld, rather the quantum sustained in appellate proceedings got further reduced marginally, in the cross appeal of the assessee. 13. At the outset it is the submission of the appellant that identical issue concerning under valuation of closing stock of WIP for which concealment penalty was levied during AY 2001-02 has been adjudicated by ITAT, New Delhi in ITA No. 991/D/2008. In para 6.2 of the said order, the action of the CIT(A) in deleting the impugned penalty in respect of the above discussed issue has been confirmed. 5.1. Considering the same the CIT(A) relying upon the order of the Tribunal quashed the penalty order on this count. The facts were found to be similar as in the said order in assessee s own case that addition made on the basis of enhancing the value of closing WIP on an estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was also placed upon CIT vs. Reliance Petro Products Pvt. Ltd. 32 ITR 158 (S.C.) CIT vs. IFCI Ltd. 328 ITR 611 (Delhi). 7. Aggrieved by these actions the revenue is in appeal before the Tribunal. 7.1. Ld. DR relying upon the penalty order contended that the impugned order deserves to be set aside and the penalty order upheld. It was argued that in the quantum proceedings there was under valuation of closing stock of raw material in respect of polyster film C-27and calculations of the assessee were not correct. It was vehemently contended that the assessee could not address the aspect as to how rate of a different date was being applied. 7.2. On the second issue of valuation of work-in-progress it was his contention that the enhancement was done based on past history. Relying upon the finding in the quantum order placed on page 19 of the paper book it was his contention that enhancement of closing WIP of the units on account of loading of proportion overhead costs has been the basis for the addition as that element it has been held cannot be ruled out. 7.3. Referring to the third issue pertaining to depreciation in respect of C-90, Noida Unit it was his contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustained on the ground of : a) under valuation of stock lying in WIP (Rs.3,45,261); b) addition sustained pertaining to Magnum Unit Group Housing Society, Andheri (W), Mumbai (Rs.3,72,401); c) Provision for foreign exchange fluctuations (Rs.2,82,581); and d) addition made by way of disallowance of excess deduction claimed u/s 80-1A (Rs.10,13,3561) 12.2. In appeal against the said action before the CIT(A) the CIT(A) upheld the penal action qua the expenses pertaining to the flat at Mumbai, however on the other issues he cancelled the penalty imposed. Aggrieved by this the Revenue is in appeal before the Tribunal. 12.3. On the issue of undervaluation of closing stock lying in WIP he quashed the penalty following the order in ITA 991/Del/2008 of the Tribunal in assessee s own case for A.Y. 2000-2001. 12.4. Considering the imposition of penalty on account of excess claim of deduction u/s 80-IA on the profits of the eligible unit C-26 the CIT(A) accepted the arguments on behalf of the assessee in holding that the reduction in the quantum of deduction is on account of certain overhead expenses which was held to be evident from the CIT(A) s order in the quantum procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accepted in quantum proceedings that by itself cannot lead to levy of penalty for concealment. Further, if the assessee at the time of hearing could not produce details for an amount of ₹ 11,905/-, the same cannot lead to a conclusion regarding filing of inaccurate particulars. In view of the same and the legal position discussed above, the penalty on disallowance of foreign exchange fluctuation loss aggregating ₹ 2,82,581/- is hereby deleted. 13. Aggrieved by the above action the Revenue is in appeal before us. 14. Ld.D.R. placed heavy reliance upon the penalty order. In regard to the first issue of undervaluation of stock lying in work-inprogress it was submitted that arguments qua the same issue in the earlier year would apply here also. In regard to the excess claim of deduction claimed it was his argument that since the assessee is relying upon a beneficial provisions he ought to have been doubly sure while making its claim. In regard to the next issue of foreign exchange fluctuation which has led to the penal action being quashed it was his argument that the said claim had 2 limbs; first in regard to the claim of an amount which was held to be capital ..... X X X X Extracts X X X X X X X X Extracts X X X X
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