DCIT, CIRCLE - 7(1), KOLKATA, KOLKATA vs. M/S. BENGAL WATERPROOF LTD., KOLKATA

This Revenue’s appeal for A.Y.2004-05 challenges the ld. CIT(A)-16, Kolkata’s order dated 08.02.2017 in Appeal No.613/CIT(A)-16/Kol/2014-15/C-7(1) reversing the Assessing Officer’s action imposing penalty of Rs.32,13,112/- in its order dated 31.07.2014 involving proceedings u/s 271(1)(c) of the Income Tax Act, 1961 (Act).

It emerges at the outset that the Assessing Officer had levied the impugned penalty with respect to three disallowances/additions of unexplained liability, foreign travel expenses and on account of debts/advances written off involving corresponding quantum additions of Rs.50,80,452/-, Rs.9,30,131/- and Rs.29,45,827/-; respectively. The CIT(A)’s quantum lower appellate order dated 27.01.2010 deleted the entire sum of former two disallowances/additions and confirmed only an amount of Rs.10,00,000./- out of Rs.29,45,827/- qua the last head of disallowance/addition written off. The effective quantum addition that survives therefore is only Rs.10,00,000/-as pertaining to the impugned penalty. Learned Departmental Representative fails to dispute this fact. The necessary inference that flows therefrom is that the corresponding penalty in any case would be less than the prescribed threshold tax effect of Rs.10,00,000/- vide CBDT Circular No.21/2015 dated 10.12.201 for the purpose of filing appeals in tribunal.

Learned Departmental Representative vehemently contends on merits that the CIT(A) has erred on law as well as on facts in reversing the impugned penalty. We find from the lower appellate quantum order (supra) that the assessee had claimed to have given the said sum to Life Consortium, Bangalore in September, 2003 followed by the same to have been written off after six months in March, 2004. It therefore could not justify the impugned written off claim. We rely on the decision of the hon’ble apex court in CIT vs Reliance Petro products 322 ITR 158 (SC) settling the law that quantum and penalty proceedings are separate proceedings wherein each and every disallowance/addition made in course of the former does not have ipso facto attract latter penal provision. We keep in mind the said fine distinction to reject the Revenue’s instant argument seeking to revive the impugned penalty as there is no dispute about the fact that the assessee had actually advanced the money in question which did not come back from M/s Life Consortium (supra). The Revenue’s sole grievance is declined.

This Revenue’s appeal is dismissed. Order pronounced in the Court on 22.06.2018.