DHANUKA AGRITECH LTD,NEW DELHI vs. ACIT, CENTRAL CIRCLE-2, NEW DELHI

1That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the penalty order passed in utter disregard to the provisions of the Act and hence, was illegal and void ab initio.

0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in sustaining the penalty imposed_u/s 270A of the Act for disallowance of claim of leave encashment without considering the fact that it was claimed on provisional basis after relying on various judicial pronouncements including that from juri ictional ITAT.

0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty u/s 270A of the Act without considering the fact that the allowability of leave encashment expenditure on provisional basis was a debatable issue and therefore, no penalty should have been imposed.

0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty u/s 270A of the Act without considering the fact that a substantial question of law was involved in the appellant's claim.

0That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in sustaining the imposition of penalty u/s 270A of the Act without considering the fact that the appellant adequately disclosed its claim of leave encashment expenditure wherever required.

0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty u/s 270A of ITA No.-1794/Del/2023

0Without prejudice to the above, that on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in upholding the levy of penalty equal to two hundred percent of the amount of tax payable on under-reporting of income in consequence of misreporting, without considering the fact that the appellant's case does not fall under any clause of Section 270A(9) of the Act.

0That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the grounds stated here-in- above, either before or at the time of hearing of this appeal.”

The brief facts of the case are the assessee company, engaged in the business of manufacturing and trading of Power & Energy, had filed its return of income declaring a total income of Rs. 118,61,64,030 by claiming refund of Rs. 6,35,89,969/- and the same was processed u/s 143(1) of the Act, on 16.03.2019. 2.1 Thereafter the case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and the assessment was completed u/s 143(3) of the Act, for the A.Y. 2017-18 on 23.12.2019 at an assessed income of Rs. 1,23,48,92,320/- after making the following additions, by disallowing the claim of leave encashment and imposed penalty u/s 270A:

Heard rival submissions and carefully perused the material available on record. Reiterated the grounds of appeal, the Learned AR submitted that the Ld. AO disallowed the claim of leave encashment without considering the fact that it was claimed on provisional basis after relying on various judicial pronouncement including the juri ictional ITAT. Further, he submitted that the allowability of leave encashment expenditure on provisional basis is a debatable issue and therefore, no penalty should have been imposed and the Hon’ble Supreme Court, while imposing stay on the decision of Exide Industries Ltd. vs. Union of India [2007] 2923 ITR 470 (high court of Calcutta), simultaneously entitled the assessee to make claim of leave encashment expenditure in its return. The assessee adequately disclosed its claim of leave encashment expenditure wherever required and the Ld. CIT-(A) erroneously upheld the levy of penalty equal to two hundred percent of the amount of tax payable on under-reporting of income in ITA No.-1794/Del/2023

As per section 270A(6)(a) of the Act, the under reported income shall not include the amount of income in respect of which the assessee offers bona fide explanation and disclosed all the material facts to substantiate the explanation offered. The Learned AR emphatically argued that the Learned CIT(A) erroneously concluded that the assessee had suppressed the facts and so the case of the assessee falls u/s 270A(9) of the Act, which is quite contrary to facts available on record. It is also submitted that the both lower authorities nowhere specifically denied that the assessee has offered a bona fide explanation for under reported or misreported income in it's reply. It is also submitted that despite adequate disclosure in the annual accounts regarding the leave encashments, the Learned CIT(A) declined to accept without any strong reasons by quoted it incorrect and fallacious. The Learned AR contended that the Learned CIT(A) however, inferred that there was no reasonable cause for making the claim but there is no any single whisper in the ITA No.-1794/Del/2023