DCIT 3(3)(2), MUMBAI vs. UNIVERSAL CHEMICALS & INDUSTRIES P. LTD, MUMBAI

ORDER

PER N.K. PRADHAN, AM

filed by the Revenue read as under: i. Whether of the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of Rs.67,08,064/- levied u/s 271(1)(c) of the I.T. Act, 1961 without appreciating the fact that the Universal Chemical assessee had understated his income by furnishing inaccurate particulars of its income and concealed particulars of income, which were detected during the course of assessment proceedings only and hence, provisions of section 271(1)(c) is clearly attracted in this case. ii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of Rs.67,08,064/- levied u/s 271(1)(c) of the I.T. Act, 1961 without appreciating the fact that the claims made is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such claim is not found to be bona fide; triggering Explanation 1 to section 271(1)(c) of the I.T. Act, 1961 as held by Hon’ble Delhi High Court in the case of Zoom Communications Pvt. Ltd., 40 DTR 249 (2010).

3. Briefly stated, the facts of the case are that the assessee-company filed its return of income for the assessment year (AY) 2010-11 on 14.10.2010 declaring current year loss at Rs.11,30,84,832/-. In the assessment made u/s 143(3) dated 28.03.2013, the Assessing Officer (AO) made the following additions/disallowances: S.N. Particulars Amount (Rs.) i. Addition of income earned on sale of goods 8,55,17,656 generated on ‘trial run’ ii. Addition of ‘interest income’ under the head of 6,96,185 ‘income from other sources’ iii. Addition of income on mutual funds 7,48,736 transactions under the head of ‘Short Term Capital Gain’ iv. Disallowance of Additional depreciation 1,86,64,853 v. Disallowance u/s 14A of the Act 11,104 Thereafter, the AO held that the assessee had furnished inaccurate particulars of its income in respect of items at serial No. (ii), (iii) and (iv) and thereby levied a minimum penalty of Rs.67,08,604/- on addition/disallowance of Rs.2,01,09,774/-.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). In the appellate order dated 04.09.2017, the Ld. CIT(A), relying on the decision in CIT v. Reliance Petroproducts (P.) Ltd. 322 ITR 158 (SC), CIT v. Nalin P. Shah (HUF) 40 taxmann.com 86 (Bom), Sesa Resources Ltd. v. ACIT 219 Taxman 92 (Bom), DIT v. Administrator of the Estate of Late Mr. E.F. Dinshaw 218 Taxman 125 (Bom), CIT v. M/s Aditya Birla Nova Ltd. (ITA No. 3899 of 2010) of Bombay High Court, CIT v. Dalmia Dyechen Industries Ltd. (ITA No. 1396 of 2013) of Bombay High Court, CIT v. Gujarat Insecticides Ltd. 218 Taxman 130 (Guj), Harsha H. Jhaveri v. DCIT 53 SOT 59, Narangs International Hotels (P.) Ltd. v. DCIT 22 taxmann.com, deleted the penalty of Rs.67,08,064/- on the ground that the appellant cannot be said to not have given an explanation nor the explanation was found as false nor can it be said it could not be substantiated.

5. Before us, the Ld. DR relies on the order of the AO, whereas the Ld. counsel of the assessee relies on the order of the Ld. CIT(A). 6. We have heard the rival submissions and perused the relevant materials on record. The AO has levied the penalty on addition/disallowance of (i) additional depreciation of Rs.1,86,64,853/-, (ii) income from interest of Rs.6,96,185/- and (iii) capital gains of Rs.7,48,736/-. We begin with the additional depreciation of Rs.1,86,64,853/-. A perusal of the assessment order clearly indicates that the assessee has apportioned a sum of Rs.21,78,04,109/- being the ‘pre-operative capitalized’ to its various assets such as building, plant and machinery