TMI Blog2015 (6) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... of depreciation is concerned, the assessee has admitted that the mistake in adopting rate at 100% was bonafide. We accept the explanation furnished by the assessee in erroneously applying higher rate of depreciation. It was in the impugned assessment year that rate of depreciation was reduced from 100% to 80%. The assessee applied 100% rate of depreciation instead of 80%. The mistake can be said to be a silly mistake caused by callousness. The assessee should have been more careful in applying the rate of depreciation. In view of the facts of the case, we are of the view that levy of penalty is not justified. - Appeal Decided in favour of assessee - ITA No. 582/PN/2009, ITA No. 588/PN/2009, ITA Nos. 1265 & 1266/PN/2010 - - - Dated:- 12-6-2015 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER Assessee By: Shri Kishor Phadke Revenue By: Shri A.K. Modi ORDER PER VIKAS AWASTHY, JM:- These are set of four appeals impugning the order of Commissioner of Income Tax (Appeals)-I, Pune for the assessment years 2003-04, 2004-05 and 2005-06. In ITA No. 582/PN/2009 the Revenue has assailed the order of Commissioner of Income Tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reparation covered by item 2 of the Eleventh Schedule to the Act. It was held in the case of Kothari Products Ltd. Vs. ACIT (supra) that assessee manufacturing Zarda Yukt Pan Masala is entitled for deduction u/s. 32AB and 80I of the Act. In subsequent assessment years similar issue had come up before the Tribunal. The Tribunal taking consistent stand rejected the claim of the assessee in respect of deduction u/s. 80I and 80IA on sale and manufacturing of Gutka. 4. Further, the assessee had received sales tax incentive on generation of power by windmills. The assessee treated the same as capital receipt. The assessee in support of its claim placed reliance on the decision of Special Bench of Mumbai Tribunal in the case of DCIT Vs. Reliance Industries Ltd. reported as 88 ITD 273. The Revenue treated the amount of sales tax incentive as Revenue receipt. 5. The assessee had claimed higher rate of depreciation on items ancillary to the running of windmills viz site development, construction of control room of transformer, labour cost for internal development, payment to Suzlon Developers Pvt. Ltd. and payment to Maharashtra Energy Development Agency. The assessee in the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (Appeals) has rightly deleted the penalty as the additions/disallowance which are subject matter of penalty involved substantial question of law. The assessee has filed appeal before the Hon'ble Bombay High Court challenging the order of Tribunal. The Hon'ble High Court has admitted the appeals of the assessee and its group companies on the same issue. The ld. AR placed on record copy of the order of Hon'ble Bombay High Court admitting appeal after framing substantial question of law. The ld. AR contended that substantial question of law is involved in quantum appeals therefore penalty is not leviable. In support of his submissions the ld. AR of the assessee placed reliance on the decision of Hon'ble Bombay High Court in the case of CIT Vs. M/s. Nayan Builders and Developers in ITA No. 415 of 2012 decided on 08-07-2014 and the decision of Pune Bench of the Tribunal in ITA Nos. 580 581/PN/2009 in assessee s own case for assessment years 1999-2000 2000-01 decided on 30-08-2011. 9. The ld. AR in support of his grounds raised in ITA No. 588/PN/2009 contended that the assessee had claimed depreciation on structures incidental or ancillary struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aration and chewing tobacco and hence denied deduction claimed by the Appellant under sections 80-I and 80-IA of the Act? b) Whether the Tribunal s conclusion based on arguments which were neither taken by the Respondent No. 1 in the assessment order or by the Departmental Representative in the course of hearing nor brought to the notice of the Appellant by the Tribunal is in gross violation of the principles of natural justice? 12. The assessee has also placed on record a copy of order of the jurisdictional High Court in ITA Nos. 2446 2061 of 2011 in the case of Rasiklal M. Dhariwal (HUF), Pune Vs. ACIT, one of the group concerns of the assessee. The Hon'ble High Court vide order dated 22-02-2013 admitted the appeals on the following substantial question of law: Whether the Tribunal ought to have held that the benefit received by the Appellant on account of the policy on wind power generation was capital in nature and, therefore, not liable to tax? 13. We are of the considered view that since the first two issues on which the penalty has been levied u/s. 271(1)(c) involves substantial question of law, therefore, no penalty is leviable thereon. The Hon'ble j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Once it turns out that claim of the assessee could have been considered for deduction as per a person properly instructed in law and is not completely debarred at all, the mere fact of confirmation of disallowance would not per se lead to imposition of penalty. Since the disallowance in quantum have been held by the jurisdictional High Court to be involving a substantial question of law, the penalty is not exigible under the provisions of section 271(1)(c) of the Act. Moreover, penalty is not automatic on the basis of quantum addition. In view of above discussion, order of the CIT(A) deleting penalties in both the years needs no interference from our side. We uphold the same. 14. In view of the facts of the case and the decision of the Hon'ble Bombay High Court rendered in the case of CIT Vs. M/s. Nayan Builders and Developers (supra), we do not find any reason to interfere with the order of the Commissioner of Income Tax (Appeals) in deleting penalty. Accordingly, all the three appeals of the Revenue are dismissed. 15. Now, we take up the appeal of assessee in ITA No. 588/PN/2009 for the assessment year 2003-04. The assessee in its appeal has impugned the order of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not open to the AO to impose penalty on the admittedly identical facts for the impugned assessment year. The relevant observation of the Tribunal at para 4 to 6 of the order read as under: 4. We have considered the rival contentions, perused the relevant material on record and duly considered, the factual matrix of the case as also the applicable legal position. 5. We find force in the submission of the learned counsel for the assessee that when the similar notes enclosed with the returns for the assessment years 2000-01, 2002-03, and 2003-04, the Assessing Officer had dropped penalty proceedings, it was not open to the Assessing Officer to impose penalty, on the admittedly identical facts, for this assessment year. A co-ordinate bench of this Tribunal, in the case of Orient Press Ltd. [99 TTJ 1091], has held that if the Assessing Officer has dropped penalty on similar set of facts in the other years, the penalty needs to be dropped on that ground alone. In the said case, the Tribunal has observed as follows: 4. It is difficult to understand as to how Revenue can defend imposition of penalties for assessment years 1993-94 and 1994-95, when, on the materially similar set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sometimes it may be less. Therefore, addition may be justified in quantum proceedings. However, the same in our opinion cannot be the basis for imposing penalty u/s.271(1)(c) of the I.T. Act. In this view of the matter we are of the considered opinion that no penalty is leviable on account of treatment of a part of the agricultural income amounting to ₹ 5,95,866/- as undisclosed income. We therefore direct the AO to cancel the levy of penalty on this addition. In view of the above discussion, the order of Ld.CIT(A) is modified and the AO is directed to recompute the penalty in the light of the directions given above. Accordingly, levy of penalty for disallowance of depreciation claim on structures ancillary to windmill is deleted. 17. As far as rate of depreciation is concerned, the assessee has admitted that the mistake in adopting rate at 100% was bonafide. We accept the explanation furnished by the assessee in erroneously applying higher rate of depreciation. It was in the impugned assessment year that rate of depreciation was reduced from 100% to 80%. The assessee applied 100% rate of depreciation instead of 80%. The mistake can be said to be a silly mistake c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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