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2019 (7) TMI 641

..... re tax neutral over period of time and thus taxation cannot be escaped perennially on the aforesaid two items. Over-Valuation of stock in one year would result in higher valuation of opening stock in other year and profit will be accordingly adjusted downwards in the subsequent assessment years. Same is the case with depreciation allowance. This apart, the assessee has independently offered explanation for such error which cannot be bracketed in the realm of mala fide per se. The variation in the valuation of stock is less than 3%. The method of valuation adopted by the assessee in sync with the method adopted by the AO in the earlier years and is also a recognized method. Importantly, no difference in net quantitative tally has been brough .....

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..... ( CIT(A) in short), dated 09.07.2014 arising in the penalty order passed by the AO dated 22.03.2013 under s. 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning A.Y. 2008-09. 2. Briefly stated, the assessee filed return of income for A.Y. 2008-09 declaring total income at ₹ 2,43,00,960/-. In the course of the assessment proceedings, the AO inter alia made additions/disallowance on two items namely (a) under valuation of closing stock of jewellery to the extent of ₹ 44,93,791/-, (b) wrong claim of depreciation on building to the extent of ₹ 6,08,307/-. As a consequence, the AO initiated penalty proceedings under s. 271(1)(c) for wrongful claim on above counts and imposed penalty @ 100% on the tax evade on such concea .....

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..... er shows possible inadvertence in the action of the assessee. 6. As regards wrong claim of depreciation on building, the Ld. AR pointed out that depreciation was claimed for the full year by the assessee as the building was purchased as per sale deed dated 27.09.2006. However, the AO as allowed depreciation for half year as it was assumed to be put to use for less than six months on the ground that the office/showroom was inaugurated in January 2008 and consequently put to use thereafter. The Ld. AR submitted that the claim of the assessee is not entirely wrong and the action of the Revenue is ultimately taxed neutral as depreciation of lesser figure allowed would results in consequent increase in depreciation of the equivalent amount in th .....

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..... re a fair and plausible explanation has been offered by the assessee for ascertainment of value of closing stock, the pre-requisites for invoking Explanation-1 to sec. 271(1)(c) are not, in our view, satisfied. A mere wrongful claim or a bona fide error could not automatically invite stringent penalty. The assessee in our view has successfully offered explanation which is reasonable & commensurate in the circumstances. The depreciation allowance also claimed for the full year is not entirely without any basis. The ownership of the property was actually transferred in favour of the assessee and such property was hold for more than 180 days. In such a situation, an error committed by higher claim of depreciation would not automatically le .....

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