TMI Blog2016 (9) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... t the plastic body of ball pen has cracked and for recycling of bags the assessee is not a manufacturer but it is a simple trader who can’t recycle the absolute stock. On the issue of disallowance regarding other deprecation and expenses we note that in the impugned order the genuineness and incurrence of expenditure has not been doubted and this disallowances have been made on the allegation of non-existence at any business activity and disallowances on these counts have been made merely because not business activity was carried out during the A.Y by the assessee. However, the addition based on the said allegations have attained finality due to dismissal of appeal on account of non prosecution, but we may point out that the assessee bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel of the assessee submitted that since the return was filed belatedly and not claim for carry forward loss of ₹ 28,76,930/- was claimed and return was filed at NIL income. The Ld. Counsel also pointed out that after making additions the income reached to ₹ 5,70,535/- which was further reduced to ₹ 4,26,373/- when the rectification application filed by the assessee u/s 154 of the Act was allowed by the A.O. 4. The Ld. Counsel pointed out that in the first para of penalty order the A.O incorrectly noted that return was filed at returned loss of ₹ 28,76,930/-. The Ld. Counsel also pointed out however the CIT(A) directed the A.O to recompute the penalty on ₹ 5,70,335/- but this penalty is also not validly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solute stock and spending money on storage of such stock. The Ld. Counsel also contended, regarding claim of depreciation and other expenses, that the incurrence and genuineness of the expenditure has not been doubted by the A.O and the same was disallowed on account of no business activity allegation which is not acceptable. The Ld. Counsel also contended that merely because no business activity was carried out during the period a company cannot be deprived form claiming expenses for running and maintaining its legal assistance. Placing reliance entire decision of Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd (2010) 322 ITR 158 (S.C) the Ld. Counsel submitted that where there is no finding that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have retrospective effect. The Ld. DR also pointed out that in view of subsequent division of Apex Court the penalty order has to be sustained. 9. The Ld. Counsel of the assessee also placed rejoinder, to the above submission of the Ld. DR, and contended that the Tribunal allowed the appeal only on the basis of proposition laid down by the Hon'ble Supreme Court in the case of the Virtual Soft Systems Ltd (Supra) and other contentions of the assessee on merits and regarding explanation on the additions has not been considered this leaving aside the applicability of Explanation 4 being declared as retrospective by the Hon ble Apex Court the other contentions of the assessee on merits of the additions and consequent penalty was not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty has been levied has to be considered for the logical analysis and evaluation of the impugned order of the A.O as well as of the CIT(A). 12. Now in view of foregoing discussion we proceed to decide contention of the assessee on merits of the penalty. First of all we may point out that the three additions have been made during original assessment proceedings and appeal of the assessee was dismissed on account of non prosecution without any adjudication on merits. In this backdrop when we analyze the firs addition made on account of stock written off then we note that during the assessment proceedings the assessee filed letter of three different parties to whom impugned stock was shown and the same was rejected by them. Thereafter, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed in accurate particulars of its income. We may point out that in the case of CIT vs. Reliance Petro Products Pvt. Ltd 322 ITR 158 (S.C) as relied by the Ld. AR , it has been held that mere disallowance of a claim cannot by itself, from the basis for initiation of penalty proceedings in absence of any material to show that the claim of the assessee was unjustified and deliberately under false premises with the interior intent to evade fiscal liability. The relevant operative part of said decision reads as follows: Where there is no finding that any details supplied by the assessee in its Return are found to be incorrect or erroneous or false, there would be no question of inviting penalty u/s 271(1)(c). A mere making of the claim, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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