TMI Blog2005 (11) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... Tanners [ 2005 (7) TMI 84 - ALLAHABAD HIGH COURT] in which it has been held that clause (iii) of Explanation 4 to section 271(1)(c) as amended by Finance Act, 2002, are applicable prospectively and do not apply the relevant assessment year 1985-86 and, therefore, in the absence of positive assessed income penalty u/s 271(1)(c) was not leviable. Even otherwise it is settled law that one has to adopt that interpretation which favours the assessee as held by the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd.[ 1973 (1) TMI 1 - SUPREME COURT] . Therefore, on this ground also penalty is not sustainable. Assessing Officer has merely stated that penalty u/s 271(1)(c) is initiated for furnishing inaccurate particulars . A similar note recorded by the Assessing Officer was held to be insufficient to indicate the satisfaction of the Assessing Officer by the Hon'ble Delhi High Court in the case of Diwan Enterprises v. CIT [ 1998 (11) TMI 27 - DELHI HIGH COURT] . In CIT v. Ram Commercial Enterprises Ltd. [ 1998 (10) TMI 13 - DELHI HIGH COURT] , the Hon'ble Delhi High Court held that merely because penalty proceedings have been initiated, it cannot be assumed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the labour unions among themselves, the work could not be resumed. However, the company was always ready to start the mill and kept ready the infrastructure including the Plant Machinery for use. There was, therefore, not actual but passive use of the Plant Machinery. During the year even though there was suspension of work by the labourers the company had to spend various establishment and other expenses to keep the mill ready for use, as and when the need arises. The reliance was placed on the decisions in CIT v. India Tea Timber Trading Co. [1996] 221 ITR 857 (Gauhati) and Capital Bus Services (P.) Ltd. v. CIT [1980] 123 ITR 404 (Delhi). However, the Assessing Officer was of the view that since the assets have not been used by the assessee-company for the business purposes because the company had suspended its operation during the entire year, the depreciation allowance cannot be granted in view of ratio of decision in CIT v. Oriental Coal Co. Ltd. [1994] 206 ITR 682 (Cal.), Hindustan Chemical Works Ltd. v. CIT [1980] 124 ITR 561 (Bom.) and Hyderabad Construction Co. Ltd. v. CIT [1981] 129 ITR 813 (AP). It was also found by the Assessing Officer that the assessee claimed a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns (P.) Ltd v. CIT [1979] 120 ITR 745. It was also claimed by the assessee that the travelling expenditure had been legitimately claimed, therefore, there is no concealment on the part of the assessee. However, the Assessing Officer did not accept the assessee's explanation and was of the view that the claim of depreciation on the assets which was not used by the assessee due to suspension of work in the mill and the claim of pond filling expenditure is clearly capital in nature and also the assessee had knowledge that the amount of travelling expenses is in excess of Rule 6D, therefore, the assessee has concealed his particulars of income and accordingly liable to penalty under section 271(1)(c) and, therefore, he levied a penalty at Rs. 27,97,517 being 100 per cent of the tax sought to be evaded. The assessee preferred first appeal before the Ld. CIT(A). The Ld. CIT(A) after examining the facts of the case held that the claim made by the assessee remains a claim and cannot be equated with supplying inaccurate particulars of income or concealing particulars of income, therefore, the provisions of section 271(1)(c) is not applicable and accordingly, deleted the penalty imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was claimed as the assessee kept itself always ready to start the operation of the mill and for that purpose, the infrastructure including the plant and machinery had to be maintained and kept ready. He further submits that although the functioning of the mill was temporarily suspended but the company had to meet up various establishments and other expenses to keep the mill ready for the use and hence, it cannot be said that the mill was closed, more so, when it restarted after a few years. The Ld. Counsel for F the assessee on the proposition that in such situation the depreciation is allowable on plant and machinery relied on the decisions in CIT v. Vayithri Plantations Ltd. [1981] 128 ITR 675 (Mad.), CIT v. India Tea Timber Trading Co. [1996] 221 ITR 857 (Gauhati), CIT v. Geo Tech Construction Corpn. [2000] 244 ITR A 452 (Ker.) and Capital Bus Service (P.) Ltd. v. CIT [1980] 123 ITR 404 (Delhi) and further submits that the decision of Hon'ble jurisdictional High Court in CIT v. Oriental Coal Co. Ltd. [1994] 206 ITR 682 (Cal.) holding that where the factory of the assessee remained under lockout throughout two previous years relevant to assessment years 1983-84 and 1984-85 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1973] 88 ITR 192 (SC). He, therefore, submits that the order passed by the Ld. CIT(A) in deleting the penalty be upheld. 7. We have carefully considered the rival submissions of the parties and perused the material available on record. We find that the facts are not in dispute. We further find that the assessee has filed annual report of the company disclosing complete facts including the financial statement of the company for the year ended 31-3-1992. We further find that the depreciation was claimed by the assessee-company on the passive use of the plant and machinery on the ground that the assessee-company kept itself always ready to start the operation of the mill and in order to keep the mill ready the assessee-company has incurred expenses including establishment, repairs and maintenance expenses. It is not the case of the revenue that the expenses claimed by the assessee are bogus or have not been incurred on the maintenance and repair of plant and machinery. We further find that the pond filling expenses were also claimed by the assessee keeping in view of the ratio of the decision of Hon'ble Bombay High Court in Teksons (P.) Ltd v. CIT [1979] 120 ITR 745. We furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te particulars of income or that it had concealed particulars of income. As claim of deductions may be allowable or disallowable. However, such claim cannot be said to be giving inaccurate particulars of income or concealing the particulars of income as it remains a claim only, to be allowed or disallowed depending on the facts of the case. In addition, a debatable issue cannot lead to a conclusion that inaccurate particulars of income or concealment had taken place. The Honourable Kerala High Court in the case of CIT v. Santhosh Financiers [2001] 247 ITR 742 had held that a wrong claim by itself does not warranty penalty. After carefully considering the facts and circumstances of the case and the ruling of the Honourable Kerala High Court, I am of the firm view that a claim remains a claim and cannot be equated with supplying inaccurate particulars of income or concealing particulars of income. In this view of the matter, the provision of section 271(1)(c) is not applicable and the penalty levied by the Assessing Officer is accordingly vacated. 8. In CIT v. Bijay Iron Stores [2001] 252 ITR 408 (Cal.) relied on by the Ld. Departmental Representative, the addition had been made on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd by the revenue against the finding of the ld. CIT(A) and keeping in view that the assessee was under the bona fide belief that depreciation, pond filling expenses and traveling expenses are allowable and such bona fide belief of the assessee was not found to be false at any stage, we are of the view that the assessee has not concealed the particulars of his income or furnished inaccurate particulars of such income. 13. We further find that there is no dispute that the assessee had filed its return of income showing loss at Rs. 46,95,467 and the assessing authority has finally assessed the assessee's income at nil, therefore, following the decision of Hon'ble Supreme Court in Prithipal Singh Co.'s case, the penalty is not leviable. This view also finds support from the recent decision of Hon'ble Allahabad High Court in CIT v. Zam Zam Tanners [2005] 279 ITR 197 in which it has been held that clause (iii) of Explanation 4 to section 271(1)(c) as amended by Finance Act, 2002, are applicable prospectively and do not apply the relevant assessment year 1985-86 and, therefore, in the absence of positive assessed income penalty under section 271(1)(c) was not leviable. Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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