TMI Blog2017 (1) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... does not have any bearing on the statutory provisions of section 271(1) ( c) of the I.T. Act, 1961In view of this, we do not incline to uphold the order of the AO on levy of penalty under section 271(1) ( c) of the I.T. Act, on advance against depreciation disallowed while computing the Book Profit under section 115JB of the I.T. Act as well as under the normal computation of total income. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) in cancelling the penalty levied by the AO. - Decided in favour of assessee Disallowances of Income Tax recovery and Transmission charges - Held that:- Both these issues were amply disclosed in Note No. 14(d) and 17 of the Audited Accounts of the assesee. These Notes also shows that the same have been based on the order of the CERC and the claim has been disputed by the payer. In view of this, the income have not been shown by the assessee for tax purposes. Subsequently, on the submission of the assessee, sum have been added to the income of the assessee for the assessment year 2007-08. On that basis, the addition was made in assessment year 2005-06. In the present case, the accrual of the income itself is in doubt wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated argument of the assessee before the AO, the assessee never argued on this issue. 4 Whether on the facts in the circumstances of the case, the Ld. CIT(A) has erred in allowing relief on account of additions on Advance Against Depreciation which was later admitted by the assessee itself in the subsequent years and also assessee had withdrawn the appeal from Hon'ble ITAT on this ground by accepting the stand on the Revenue on this ground. 5 The appellant craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal. ASSESSMENT YEAR : 2005-06 1. Whether on the facts in the circumstances of the case, the Ld. CIT(A) has erred in deleting penalty of ₹ 8.06 crores u/s 271 (1)( c) of the I T Act, 1961. 2. Whether on the facts in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that AO had no initiated penalty proceedings u/s 271(1) (c) in the assessment order while framing assessment. Initiation of penalty proceedings is clearly mentioned in the assessment order and a valid notice was served upon the assessee. 3. Whether on the facts in the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2005-06 is that assessee is a Public Sector Undertaking engaging in transmitting power to State Electricity Board from generating units. For the year under consideration, it filed its return of income at Rs. NIL, however, paid taxes on the Book Profit u/s. 115JB of the I.T. Act, 1961. The assessment under section 143(3) of the Act was made on 28.12.2007 wherein an addition of ₹ 216.10 crores was made on account of disallowance of advance against depreciation. Similar addition was also made to the Book Profit under section 115JB of the I.T. Act. Both these additions were confirmed by the Ld. First Appellate Authority and before the Coordinate Bench, the assessee withdrew its Appeal. Therefore, the penalty proceedings originally initiated were adjudicated upon by the AO vide order dated 27.8.2012 levying the penalty of ₹ 7,77,18,59,200/-. The main reason for levy of penalty was that the assessee had not preferred the appeal and the amount has been added, hence, the penalty is leviable holding that assessee has furnished the inaccurate particulars of its income. The assessee being aggrieved with the order of the ld. AO preferred an appeal before the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of NHPC vs. CIT 320 ITR 374 (SC) wherein it held that advance against depreciation is not an income. He, therefore, submitted that the Ld. CIT(A) has rightly deleted the penalty u/s. 271(1)(c) of the Act. He further submitted that on the income tax recoverable, the Ld. CIT(A) has held that as assessee has disclosed the full facts in the Notes on Account, hence, the penalty was deleted. He further submitted that merely withdrawal of the appeal by the assessee before the Coordinate Bench does not advance or hamper the case of the assessee as far as the issue of levy of penalty is concerned. He further submitted that after the withdrawal of the appeal by the assessee the Hon ble Supreme Court of India has referred the decision in the case of NHPC vs. CIT (Supra) wherein, it is held that Advance against depreciation is income received in advance and it is timing difference, hence, AAD is not a reserve. He further stated that Coordinate Bench has decided this issue in ITA No. 3013-3015 dated 309.2014 has also held that AAD is a liability and is to be discharged in future. He further stated that similar disallowances were made in earlier years and no penalty has been init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of a reserve) except to adjust the same against future deprecation so as to reduce the tariff in the future years. As stated above, at the end of the life of the plant AAD will be reduced to NIL. In fact, Schedule XII-A to the balance sheet of the financial years 2004-05 onwards indicates recouping. In our view, AAD is income received in advance . It is timing difference. It represents adjustment in future which is inbuilt in the mechanism notified on May 26, 1997. This adjustment may take place over a long period of time. Hence, we are of the view that AAD is not a reserve. 08. According to the above decision of the Hon ble Supreme Court advance against depreciation is an income received in advance and therefore, is not hit by Clause (b) while working out the Book Profit of the assessee for the purpose of Income Tax Returns u/s 115JB of the act. Subsequently, the Coordinate Bench vide order dated 30.9.2014 decided the issue with respect to disallowance of the same in the normal computation of total income. The relevant facts were stated at par no. 2 to para no. 4 of that decision and subsequently in para no. 5 wherein it has been held by the Coordinate Bench that it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 519 (SC). ** [2008] 306 ITR 277 (SC). assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. 12. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect ; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the assessee files an appeal or did not contest the addition or disallowance at higher forums , it does not have any bearing on the statutory provisions of section 271(1) ( c) of the I.T. Act, 1961In view of this, we do not incline to uphold the order of the AO on levy of penalty under section 271(1) ( c) of the I.T. Act, on advance against depreciation disallowed while computing the Book Profit under section 115JB of the I.T. Act as well as under the normal computation of total income. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) in cancelling the penalty levied by the AO. 10. With respect to other disallowances of Income Tax recovery and Transmission charges, we are of the opinion that both these issues were amply disclosed in Note No. 14(d) and 17 of the Audited Accounts of the assesee. These Notes also shows that the same have been based on the order of the CERC and the claim has been disputed by the payer. In view of this, the income have not been shown by the assessee for tax purposes. Subsequently, on the submission of the assessee, sum have been added to the income of the assessee for the assessment year 2007-08. On that basis, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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