ECHJAY FORGINGS P.LTD,MUMBAI vs. DCIT CEN CIR 45, MUMBAI

Brief facts of the case are that the assessee is a company engaged in manufacturing of Steel Forgings and Automobile Parts, filed Return of Income for relevant assessment year 26.09.2008 declaring total income of Rs.9,86,73,480/-. The assessment was completed on 24.12.2010 u/s.143(3) of the Act. The Assessing Officer while passing the assessment order made the disallowance of claim ‘fixed assets written off’ of Rs.17,87,602/- and initiated penalty. The Assessing Officer issued notice dated 15.06.2010 u/s.274 r.w.271(c) of the Act. The assessee filed its reply vide reply dated 20.06.2011. In the reply, the assessee contended that the assessee has neither concealed income nor furnished inaccurate particulars. The addition on account of fixed assets written-off remained to be disallowed in the computation of income due to inadvertence and omission. 2.1 The contention of the assessee was not accepted by the Assessing Officer. The Assessing Officer concluded that the original return of income was filed on 29.06.2008 which was revised later on 31.03.2010, but, the assessee has not taken care to add back the addition on account of fixed asset written off. When the assessee was confronted the assessee filed letter dated 31.12.2010 and the assessee offered the same. The Assessing Officer levied the penalty @ 100% of tax sought to be evaded. The Assessing Officer worked out the penalty of Rs.6,07,606/- vide order dated 30.06.2011. On appeal before the Ld.CIT(A), the order of Assessing Officer was confirmed. Further, aggrieved by the order of CIT(A), the assessee has filed the present appeal before us.

We have heard Ld.AR of the assessee and Ld. DR for the Revenue and perused the material available on record. The Ld.AR of the assessee argued that the assessee voluntarily offered fixed assets written off value during the assessment; the assessee has paid tax on the addition. The assessee has not concealed income nor furnished inaccurate particulars of income. The fixed asset written off was remained to be disallowed in computation due to omission. There was no deliberate act on the part of the assessee. In support of his submissions the ld AR relied on the decision in Price Waterhouse Coopers Pvt Ltd Vs CIT (2012) 348 ITR 306(SC). On the other hand, the Ld. DR for the Revenue supported the order of Authorities below. The Ld. DR for the Revenue relied upon the decision of Delhi High Court in case of CIT vs. Zoom Communication Private Ltd. (2011) 191 Taxman 179 (DELHI).

We have considered the rival contentions of the parties and have gone through the orders of Authorities below and the material available on the record. During the assessment proceedings, the Assessing Officer made an addition of Rs.17,87,602/- on account of fixed assets written off. The Assessing Officer initiated the penalty proceedings u/s.271(1)(c) of the Act. We have noted that the Assessing Officer while initiating penalty has not specified under which limb of section 271(1) (c) of the Act, the penalty was initiated. The Assessing Officer simply noted ‘penalty proceedings u/s.271(1)(c) is being initiated’. The Assessing Officer, again, while passing order of penalty has not specified the limb under which penalty is levied, if it was concealment of income or for furnishing inaccurate particulars. In our view the AO has not applied his mind while initiating the penalty proceedings under section 271(1)(c) of the Act. The Hon’ble Apex Court in the case of T. Ashok Pai v. CIT reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of CIT v. Manu Engineering Works reported in [1980] 122 ITR 306 (Guj) and the Delhi High Court in the case of CIT v. Virgo Marketing P. Ltd. reported in [2008] 171 Taxman 156 (Delhi), has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Hence the ground of appeal raised by the assessee is allowed.