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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2013-14, arises from order of the CIT(A)-1, Ahmedabad dated 27-05-2019, in proceedings under section 271(1)(c) of the Income Tax Act, 1961; in short “the Act”.
Page No 2 M/s. Diamond Textile Mills Pvt. Ltd. vs. ITO
The solitary ground of appeal of the assessee is directed against the order of ld. CIT(A) in sustaining the penalty levied u/s. 271(1)(c) of the act of Rs. 1,38,687/-
3. The fact in brief is that assessment u/s. 143(3) of the act was finalized on 7th March, 2016. During the course of assessment, the Assessing Officer noticed that assessee has claimed process loss of Rs. 45,17,186/-. On query, the assessee explained that it is engaged in the business of processing of fabrics from grey cloth to finished fabrics. It is explained that shrinkage of fabrics takes place at the time of processing depending on the process parameters and any shortage, shrinkage, wastage in the total fabric quantity has to be compensated to the customer. The assessee has further stated that in local sales, shortage and value loss was borne by the party but in case of sales to exporters, the same was borne by assessee. On perusal of the details furnished by the assessee, the Assessing Officer observed that most of the bills were pertained to local sales, therefore, the claim of assessee for process loss of Rs. 45,17,186/- was disallowed and added to the total income of the assessee.
4. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee reiterating the facts stated by the Assessing Officer. The ld. counsel contended that merely if the claim of expenses of the assessee which was not acceptable to revenue that by itself would not attract the penalty u/s. 271(1)(c) of the Act. The ld. counsel has placed reliance on the decision of Hon’ble Jurisdictional High Court of Gujarat High Court in the case of Jayesh J. Shan Vs. CIT-III (2017)
Page No 3 M/s. Diamond Textile Mills Pvt. Ltd. vs. ITO taxmann.com 133 (Guj) and decision of Hon’ble Supreme Court in the case of CIT, Ahd Vs. Reliance Petro Products P. Ltd. (2010) 189 taxman 322 (SC)., On the other hand, the ld. Departmental Representative has supported the order of lower authorities.
Heard both the sides and perused the material on record. The Assessing Officer has levied penalty of Rs. 1,38,687/- u/s. 271(1)(c) of the act for furnishing of inaccurate particulars of income in respect of process loss of Rs. 4,48,825/-. Without reiterating the facts as referred above in this order, the assessee has submitted that wastage was borne by the assessee in case of export sale and in case of local sale it was borne by the parties. In the assessment made u/s. 143(3), the Assessing Officer has made disallowance of processed loss to the amount of Rs. 45,17,186/-. However, the ld. CIT(A) after reducing the sale made from wastage product i.e. chindri, fandrages for Rs. 40,68,361/- restricted the disallowance to the extent of Rs. 4,48,825/-. The Assessing Officer has mainly levied penalty u/s. 271(1)(c) of the act on the basis of unexplained process loss claimed by the assessee of Rs. 4,48,825/-. We have gone through the judicial pronouncement referred by the ld. counsel in the case of CIT, Ahd Vs. Reliance Petro Products P. Ltd. (2010) 189 taxman 322 (SC) supra wherein it is held that mere making of the claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim in the return of income cannot amount to inaccurate particulars of income. In the light of the above facts and findings, we consider that only on the basis of not accepting the claim made by the assessee, the levy of penalty u/s. 271(1)(c) is not appropriate. Accordingly, the Assessing Page No 4 M/s. Diamond Textile Mills Pvt. Ltd. vs. ITO Officer is directed to delete the penalty. Therefore, this ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17-09-2021 Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) VICE PRESIDENT ACCOUNTANT MEMBER Ahmedabad : Dated 17/09/2021 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद