TMI Blog2019 (8) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhusaval - We find that in the course of the penalty proceedings as well as the appellate proceedings emanating therefrom before the CIT(A), the assessee had satisfactorily explained that the coal cost freight issue - Bhusaval of ₹ 16,31,85,000/- was an expenditure pertaining to the year under consideration. As a matter of fact, the assessee had in its revised return of income claimed the said amount as an expenditure on the basis of the remarks and report of its statutory auditors. In the backdrop of the aforesaid facts, we are of a strong conviction that the aforesaid claim of expenditure raised by the assessee was based on a bonafide and justified grounds. We are also of a strong conviction that as the issue pertaining to coal cost rate Bhusaval was never discussed in the assessment order, therefore, the said fact also supports the claim of the assessee that no penalty u/s 271(1)(c) could have been validly levied in its hands in respect of the said issue. Also, we find that the assessee in the course of the penalty proceedings before the A.O, and also in the course of the appellate proceedings before the CIT(A) had satisfactorily explained that the coal cost freight i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k after one of the three aspects of the erstwhile electricity board i.e generation, transmission and distribution of electricity. Accordingly, the year under consideration i.e period relevant to A.Y. 2006-07 was the first year of operation of the assessee company. The assessee company had e-filed its return of income for A.Y. 2006-07 on 30.11.2006, declaring Nil income after claiming set off of brought forward losses and unabsorbed depreciation amounting to ₹ 623,47,43,689/-. Subsequently, the assessee filed a revised return of income declaring Nil income after claiming set off of brought forward losses amounting to ₹ 288,90,26,701/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Thereafter, the case of the assessee was selected for scrutiny assessment under Sec. 143(2). 3. During the course of the assessment proceedings it was observed by the A.O that in the revised return of income of the assessee company a note had been posted below the statement of computation of income, which read as under : Reason for revising the return: The return of income is being revised as the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) provision for difference in oil stock on account of physical inventory taken by the assessee in the month of September and October: ₹ 20.04 lacs; and (iii) coal cost freight issue-Bhusaval: ₹ 1631.85 lacs. It was observed by the CIT(A) that the A.O in the course of the assessment proceedings while declining to accept the revised return, had observed, that in the absence of any material evidence or details the reduction in the total income in the assesses revised return of income could not be accepted. It was observed by the CIT(A) that the A.O while framing the assessment had not looked into and examined the details/constituent forming part of the difference of ₹ 334.57 crores, and the addition of the said amount was made only on account of non-acceptance of the revised return of income filed by the assessee. Further, the CIT(A) called for a remand report from the A.O on various items including the abovementioned three items/issues. After necessary deliberations on the remand report filed by the A.O and the counter comments of the assessee, the CIT(A) concluded that the provision of difference in oil stock of ₹ 20.04 lac was allowable since the physic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted for and charged as per the mutual agreement between the Managing Directors of both the companies. It was noticed by the CIT(A) that the accounts of the assessee company were initially prepared on the basis of unaudited accounts. However, as the statutory auditors at the time of audit of the accounts of the assessee company had reported that the tariff of electricity was to be charged/accounted for as per the tariff prescribed by the regulator i.e MERC vide its order dated 07.09.2006, therefore, it was at this stage that it was realised by the assessee that it had accounted for excess sales of electricity in its accounts. Accordingly, in the backdrop of the aforesaid facts the assessee had filed a revised return of income wherein the excess billing of ₹ 320.72 crores was reversed by it. It was observed by the CIT(A) that the reversal of the excess billing was carried out by the assessee as per the audited accounts which were based on the order of MERC. On the basis of his aforesaid deliberations, it was observed by the CIT(A) that as the assessee company had reversed the excess billing of ₹ 320.72 crores in conformity with the MERC order which was binding on it, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the coal cost freight at Bhusaval amounting to ₹ 16,31,85,000/- was an expenditure pertaining to the year under consideration. It was noticed by the CIT(A) that the assessee in its revised return of income had on the basis of the remarks and report of its statutory auditors claimed the aforesaid amount as an expenditure. The CIT(A) being of the view that as the explanation advanced by the assessee in respect of the aforesaid claim of expenditure was bonafide and justified being based on the auditors report, therefore, the penalty levied of the said aspect under Sec.271(1)(c) deserved to be deleted. On the basis of his aforesaid observations the CIT(A) finding merit in the appeal of the assessee deleted the penalty imposed by the A.O u/s 271(1)(c) and allowed the appeal. 7. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R ) for the assessee, at the very outset of the hearing of the appeal submitted, that as the disallowance of the excess provision for purchase of power amounting to ₹ 320,72,82,510/- in the hands of the assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osure vis-a-vis the aforesaid addition in its statement of accounts, therefore, no penalty under Sec. 271(1)(c) was liable to be imposed in its case. As regards the reliance placed by the A.O on the judgment of the Hon ble Supreme court in the case of UOI Vs. Dharmendra Textiles Processors (2007) 212 CTR 432 (SC), it was submitted by the ld. A.R, that as the same was distinguishable on facts, therefore, the same would not assist the case of the revenue. In fact, it was submitted by the ld. A.R that the A.O while relying on the aforesaid judicial pronouncement had misconceived the factual position prevalent in the case of the assessee in context of the issue under consideration. Lastly, it was submitted by the ld. A.R that as the assessee was a fully owned government company, therefore, it was preposterous to allege that it had concealed its income. 8. Per contra, the ld. Departmental Representative (for short D.R ) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee had admitted the addition of ₹ 16,31,85,000/- in context of its claim of expenditure pertaining to Coal Cost Freight Issue-Bhusav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discernible from the orders of the lower authorities and admitted by the ld. A.R before us, the aforesaid addition had not been assailed by the assessee in its quantum appeal before the Tribunal. Resultantly, the disallowance of the assesses claim of coal cost freight issue Bhusaval of ₹ 1631.85 lac has attained finality. It is the claim of the ld. A.R, that as the assessee company in the course of the first appellate proceedings had focussed on the other issue wherein high stakes of ₹ 200 crores of tax demand was involved, therefore, by way of an inadvertent omission the aforesaid addition/disallowance sustained by the CIT(A) was not carried any further in appeal before the Tribunal. 10. We shall in the backdrop of the aforesaid factual matrix now deliberate on the merits of the contentions advanced by the ld. A.R, wherein he had tried to impress upon us that the CIT(A) had rightly observed that no penalty under Sec.271(1)(c) was sustainable in respect of the addition/disallowance made by the A.O in respect of coal cost freight issue-Bhusaval amounting to ₹ 1631.85 lacs. It is the claim of the ld. A.R that the assessee which is generating power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the coal cost freight issue-Bhusaval of Rs,16,31,85,000/- forms part of ₹ 334.57 crores i.e the difference in the total income as per the original and the revised return of income filed by the assessee. As observed by us hereinabove, no discussion as regards the disallowance of the aforesaid coal cost freight issue- Bhusaval of ₹ 16,31,85,000/- is available in the assessment order. In fact, it was only in the course of the quantum appellate proceedings that when the assessee had filed the complete details in respect of the difference of ₹ 334.57 crores, that the A.O had thereafter in his remand report submitted that the reduction to the said extent should not be allowed. We find that the aforesaid disallowance of ₹ 16,31,85,000/- was upheld by the CIT(A) while disposing off the quantum appeal, for the reason, that the assessee had failed to submit its counter comments on the A.O s remand report on the issue under consideration. Be that as it may, we find that in the course of the penalty proceedings as well as the appellate proceedings emanating therefrom before the CIT(A), the assessee had satisfactorily explained that the coal cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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