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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI B.R.R KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI B.R.R KUMAR, ACCOUNTANT MEMBER
I.T.A. No.2536/DEL/2015 Assessment Year: 2007-08
Hindustan Fertiliser vs. DCIT, Circle-11(2), Corporation Limited, New Delhi. PDIL Bhawan, A-14, Sector-1, NOIDA. TAN/PAN: AAACH 0907N (Appellant) (Respondent)
Appellant by: Shri Praveen, CA Respondent by: Shri N.K. Bansal, Sr.D.R. Date of hearing: 17 09 2019 Date of pronouncement: 06 12 2019
O R D E R PER AMIT SHUKLA, JM:
The aforesaid appeal has been filed by the assessee against the impugned order dated 13.03.2015 passed by Commissioner of Income Tax (Appeals)-IV, New Delhi, in relation to penalty proceedings initiated u/s.271(1)(c) for the Assessment Year 2007-08. The appellant-assessee is aggrieved by levy of penalty of Rs. 24,69,668/-.
The facts in brief are that the appellant-assessee is a Government of India Undertaking engaged in the business of manufacturing and marketing of fertilizers. Return of income was filed declaring loss of Rs.338943167/- after set-off of Short Term Capital Gain of Rs.24,93,280/- on 29.10.2007.
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The income was assessed by the Assessing Officer u/s. 143(3) on a net business loss of Rs.25,62,66,601/- and income under the head ‘Capital Gain’ of Rs.24,93,280/- after making following disallowance/additions: a) Disallowance of 4/5th of Expenditure claimed under VSS Rs.7,95,70,400/- b) Addition of Account of Prior Period expenses Rs.5,94,000/- c) Disallowance of Depreciation claimed Rs.50,05,446/- d) Income under the Head Capital Gain Rs.24,93,280/-
In the first appeal, the disallowance of 4/5th expenditure claimed under the VSS and income under the head ‘capital gain’ was deleted. However, the Tribunal has upheld the addition in so far as the disallowance of 4/5th of the expenditure claimed under VSS. However, the disallowance of depreciation claimed was deleted. Ld. Assessing Officer has levied the penalty of Rs.2,69,83,337/- on the following two additions for furnishing of inaccurate particulars of income:- a) Addition on payment of Voluntary Separation Scheme Rs.7,95,00,000/-. b) Addition of prior period expenses: Rs.5,94,000/-
However, the Ld. CIT (A) has deleted the penalty on the disallowance of payment made to employees under VSS. However, with regard to the prior paid expenses amounting to Rs.5,49,000/- which had attained finality in the quantum proceedings, the Ld. CIT (A) has enhanced the disallowance of
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prior paid expenses to Rs.24.92 lacs instead of Rs.5.94 lacs, which disallowance attained finality in the quantum proceedings. In his observation, he has held that while passing the assessment, Assessing Officer has not examined the details of prior paid expenses as assessee has taken the net amount after adjusting the prior paid expenditure which was not correct, and therefore, correct disallowance should be Rs.24,69,668/- and on this disallowance, he has levied penalty. The relevant conclusion of the Ld. CIT (A) in this regard reads us under:
“6.12 I find that, while passing the assessment order, the ld. Assessing Officer has not examined the details of prior period expenses and has taken the net amount after adjusting the prior period income against the prior period expenditure. Since, it has been well settled that penalty proceedings are independent of assessment proceedings, therefore for ascertaining the exact quantum of income in respect of which inaccurate particulars were filed by the appellant, I shall not be restricted to the finding given by the AO, which, evidently was not based on perusal of the ledger account of prior period expenditure. Therefore, I intend to adopt the extent of 'inaccurate particulars' on the basis of correct facts as ascertained during the appellate proceedings, which shows that the appellant had filed inaccurate particulars of income to the extent of Rs. 24,69,668/-. Keeping in view the above, penalty @ of 100% of tax sought to be evaded is to be levied on the amount of Rs.24,69,668/- only.”
After hearing both the parties and on perusal of the impugned order, we find that only issue on which penalty has been levied is disallowance of prior period expenses. The
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Assessing Officer in the assessment order passed u/s.143(3) has made the disallowance of Rs. 5,94,000/- on the ground that thought the details were furnished but the justification for the allowability was not furnished. In the first appellate proceedings in quantum proceedings, the Ld. CIT (A) though has not given the specific findings despite ground was raised which inter alia leads to the inference that the said addition stood confirmed. Accordingly in the quantum proceedings, the disallowance of Rs. 5,94,000/- had attained finality. The Assessing Officer too has levied the penalty on disallowance of Rs.5,94,000/- only. Now, once in the assessment proceedings, the quantum of disallowance stood confirmed at Rs. 5,94,000/- which has attained finality and Assessing Officer has initiated and levied the penalty on the same very amount, then the Ld. CIT(A) in the penalty proceedings cannot enhance the quantum of disallowance. Such an enhancement could have been only done in the course of appellate proceedings against the order passed u/s. 143(3), i.e., in the quantum proceedings. Such an enhancement of quantum of disallowance cannot be made in the penalty proceedings. Accordingly, the penalty levied on the enhanced disallowance is deleted.
In so far as levy of penalty u/s. 271(1)(c) for the disallowance of Rs. 5,94,000/- on account of prior paid expenses is concerned, from the perusal of the assessment order, it is seen that assessee had furnished the entire details of such expenses but has not given any justification for the
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allowability. The incomes for prior paid expenses were as under: Insurance claim: Rs. 1,45,219, being the insurance premium adjusted by LIC towards the previous years in the financial year 2006-07. As suggested by the auditor, rectified by charging as prior period expenses during the year 2006-07. Depreciation: Rs.21,793, being the rectification of depreciation charged in the financial year 2005-06. As suggested by the auditor, rectified by charging as prior period during 2006-07. Misc. Expenses: Rs.7,00,000/- booked by Barauni Plant during the year. TDS written off: Rs.16,24,349/- As per AO order under Section 143(3) the amount was adjusted for the Assessment year 2004-05. 7. The assessee’s contention was that though those expenses relate to prior paid but have been utilized in the current assessment year, which were duly certified by the auditors and also by the statutory auditors appointed by the CAG of India. In the P&L account, the assessee has taken net amount of prior paid expenditure after setting of ex gratia VSS receipt of Rs.18.98 lacs and only net prior paid expenditure was debited amounting to Rs.5,94,000/-. Looking to the explanation and reasons given by the auditors, it cannot be held that assessee has furnished any inaccurate particulars
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of income so as to warrant penalty u/s.271(1)(c). Thus, the penalty of Rs.5,94,000/- also is not sustainable and same is directed to be deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 6th December, 2019.
Sd/- Sd/- [B.R.R. KUMAR] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 6th December, 2019 PKK: