DCIT(IT)-3(3)(2), MUMBAI vs. PENFORD ISRAEL LTD.(INDIA BRANCH), MUMBAI

The grounds of appeal read as under: 1. " Whether on facts and in circumstances of the case and in Law, the Ld. CIT(A) was justified in holding that penalty u/s. 271(l)(c) is not attracted with reference to addition/disallowance made under normal provisions ". 2. "Whether on facts and in circumstances of the case and in Law, the Ld. CIT(A) was justified that the Assessing Officer has erred in levying penalty u/s. (A.Y. 2004-05) M/s. Penford Israel Ltd. (India Branch) 271(l)(c) of the Act on addition made of a sum of Rs.37,20,610/- being depreciation claimed u/s. 32(1) of the Act". 3. The Appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored.

Brief facts of the case are that the Assessing Officer during the course of assessment found that the assessee’s claim of depreciation was not acceptable as the asset was not put to use during the year. On this penalty u/s. 271(1)(c) of the Act was also levied.

Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) accepted the assessee’s contention that the claim of depreciation cannot be said to be fraudulent claim or concealed matter. He held that the facts were available and disallowance has been made by the Assessing Officer only after interpretation of the statute. Hence, he agreed with the assessee that its case is covered by the decision of Hon’ble Apex Court decision in the case of Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC).

The ld. Commissioner of Income Tax (Appeals) also deleted the penalty on account of the ratio emanating from the Hon'ble Delhi High Court decision in the case of CIT vs. Nalwa Sons Investment Ltd. 327 ITR 543 (Del) and CBDT Circular No. 25/2015 dated 31.12.2015 issued in this regard. The ld. Commissioner of Income Tax (Appeals) held as under:

Further the issue is also covered by the Circular of CBDT which has been clarified in view of the Delhi High Court judgment in the case of CIT vs. Nalwa Sons Investments Ltd. (327 ITR 543 (Del)) referred supra and (A.Y. 2004-05) M/s. Penford Israel Ltd. (India Branch) substitution of Explanation 4 of section 271 of the Act with prospective effect. The legal position is now settled that prior to 01.04.2016, where the income tax payable on the total income computed with normal provisions of the act is less than the tax payable on book profits, then penalty u/s.271(1)(c) is not attracted with reference to addition/disallowance made under normal provisions. Therefore for both the reasons discussed above, I am of the considered opinion that the facts of the case do not merit levy of penalty u/s. 271(1)(c) of the I. T. Act.

Against the above order the Revenue is in appeal before us.

We have heard both the counsel and perused the records. The ld. Departmental Representative fairly agreed that the issue is covered in favour of the assessee in view of the decision of Hon'ble Delhi High Court in Nalwa Sons Investment Ltd. (supra) and CBDT Circular No. 25/2015 dated 31.12.2015 which has directed that Explanation 4 to section 271(1)(c) is prospective in effect and hence he submitted that the penalty has rightly been deleted.

In the result, this appeal by the Revenue stands dismissed. प�रणामतः राज�व क� अपील खा�रज क� जाती है । Order pronounced in the open court on 01.03.2018 Sd/- Sd/- (Amarjit Singh) (Shamim Yahya) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 01.03.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,