ALPHA FOAM LIMITED,PUNE vs. DY. COMMISSIONER OF INCOME TAX, CIRCLE -8, PUNE

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ITA 1122/PUN/2019Status: DisposedITAT Pune16 November 2022AY 2010-113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a disallowance in quantum proceedings does not automatically attract penalty proceedings. The failure to prove the machine was put to use on the specific date does not, in itself, make the assessee liable for penalty.

What were the facts?

The assessee claimed depreciation on a vacuum foaming machine installed and put to use on March 31, 2010. The Assessing Officer disallowed this claim for failure to prove installation and use. Consequently, a penalty under Section 271(1)(c) was imposed.

What were the issues?

Whether a penalty under Section 271(1)(c) can be imposed solely based on a disallowance in quantum proceedings without establishing concealment of income or furnishing inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “A”

Before: SHRI S.S.GODARA & SHRI INTURI RAMA RAO

For Appellant: Shri Nikhil S Pathak – AR
For Respondent: Shri Ramnath P Murkunde – DR
Hearing: 07/09/2022Pronounced: 16/11/2022

ORDER

Per S.S.Godara, JM:

1.

This assessee’s appeal for Assessment Year 2010-11 is directed against the Commissioner of Income Tax(Appeal)-6, Pune’s in case no.PN/CIT(A)-6/10040/2018-19 dated 12.06.2019, in proceedings u/s.271(1)(c) of the Income Tax Act, 1961 [in short “the Act”]. Heard both the parties. Case file perused.

2.

It emerges at the outset with the able assistance of both the parties that the assessee’s sole substantive grievance raised herein challenges correctness of section 271(1)(c) penalty amounting to Rs.3,41,940/- imposed by the Assessing Officer in his order dated 30.03.2018 regarding four folded disallowances of depreciation,

A.Y. 2010-11 (A) Alpha Foam Limited sales promotion, section 40A(i) and legal professional expenses involving varying sums, which stand upheld to the extent of depreciation disallowance amounting of Rs.3,30,500/- as per the CIT(A)’s lower appellate discussion.

3.

We further find that the Assessing Officer had framed his assessment on 31.01.2013 disallowing the assessee’s quantum claim of having installed its vaccum foaming machine on 31st March of 2010 and that the same had also been put up to use on the very date. The Assessing Officer held in page 2, para 4 of his assessment order that the assessee could not prove to have installed / put to use the said machine and therefore, he disallowed the same in issue of Rs.3,32,500/-. It is, in this factual backdrop that the learned lower authorities have imposed the impugned corresponding penalty which leaves the assessee aggrieved.

4.

We have given our thoughtful consideration to vehement rival submissions and find merit in assessee’s stand. There could hardly be any dispute about the hon’ble apex court having settled the law that quantum and penalty proceedings are parallel in nature wherein any disallowance or addition made in the course of former does not ipso-facto attract the latter provision as per CIT vs. Reliance Petro- Products in 322ITR 158 (SC). We keep in mind that this fine distinction and note that the mere fact of the assessee having failed to A.Y. 2010-11 (A) Alpha Foam Limited prove its vaccum foaming machine having been put to use on 31.03.2010 for the purpose of raising depreciation claim would not make it liable for the impugned penalty. This is in view of the fact that the assessee’s books had duly claimed to have installed / put to use the above stated asset which ultimately could not be proved. Faced with this situation, we delete the impugned penalty. Ordered accordingly.

5.

This assessee’s appeal is allowed.

Order pronounced in the open Court on 16th November, 2022.

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