MADHU SILICA PVT. LTD.,BHAVNAGAR vs. THE DY.CIT, CIRCLE-1, BHAVNAGAR

Both the lower authorities have erred in quantifying the penalty amount which is erroneous and excessive.

Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.

The Ld. A.R. submitted that the notices issued u/s. 274 r.w.s 271(1)(c) of the Income Tax Act, 1961 dated 20- 10-2016 has not categorically mentioned under which limb of section 271(1)(C) the penalty was imposed. The ld. A.R. further submitted that the assessee claimed deduction of Rs. 16,08,70,789/- u/s 32AC while filing the return of income. One of the items was pollution control equipments of Rs. 10,80,64,368/- which are eligible for depreciation at 100%. However, since the pollution control equipments were acquired after 30-09-2013, the depreciation was claimed at half rate i.e. 50%. The Assessing Officer denied claim u/s. 32AC on the ground that new asset for purpose of section 32AC will not include any plant and machinery, whole of actual cost of which is allowed as deduction (whether by deprecation or otherwise) in computing the income chargeable under the head profits and gains of & 702/Ahd/2024 Madhu Silica Pvt. Ltd., A.Y. 2014-15 business or profession. Thus, the assessee is not eligible u/s. 32AC of the Act and the same was denied by the Assessing Officer which was later confirmed by the CIT(A) as well as ITAT. The ld. A.R. submitted that this issue has been admitted by the Hon’ble High Court and is pending before the Hon’ble High Court. The ld. A.R. submitted that merely rejecting the claim of the assessee cannot be the ground for levy of penalty, as this will not be termed inaccurate furnishing of particulars of income u/s. 271(1)(c). The ld. A.R. relied upon the decision of Hon’ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158. The ld. A.R. submitted that the quantification of penalty is also substantially higher side in view of the book profit u/s. 115JB of the Act.

The ld. D.R. relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the notice u/s. 274 r.w.s 274(1)(c) of the Income Tax Act, 1961 dated 20-10-2016 has not at all specified under which limb section 271(1)(c) has been invoked. Thus, the decision of Hon’ble Apex Court in case of CIT vs. Emerald Meadows 73 taxmann.com 248 and 73 taxmann.com 241 is squarely applicable in the present case. Besides this, the mere disallowance of the claim which otherwise genuine and under bonafide belief, claimed by the assessee, cannot be the criteria for levying penalty & 702/Ahd/2024 Madhu Silica Pvt. Ltd., A.Y. 2014-15 u/s. 271(1)(c). Mere rejection of claim cannot be the ground for levying penalty u/s. 271(1)(c) as held by the Hon’ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158. Thus, the penalty imposed u/s. 271(1)(c) of the Act does not survive. Hence, the filed by the assessee is allowed. the assessee has challenged the order of the CIT(A) in respect of rectification order dated 25-04-2019 passed u/s. 154 in consonance with the rectification application of the assessee regarding the penalty order itself. Thus, it is consequential to the present penalty year. Hence, is dismissed as infructuous.