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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI I.C.SUDHIR & SHRI PRASHANT MAHARISHI
Assessee by : Smt. Renuka Jain Gupta, CIT DR Revenue by: Sh. Pawan Kumar, Adv Sh. Sabajat Walia, Adv Date of Hearing 09/06/2016 Date of pronouncement 05/09/2016 O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A), Noida dated 24.12.2012 for the Assessment Year 2007-08 deleting the penalty u/s 271(1)(c) of the Income Tax Act of Rs. 8.80 crores wherein, following grounds of appeal have been raised: “1. The ld CIT(A) has erred in law and on facts in deleting the penalty of Rs. 8,80,00,000/- by holding that the assessee has debited the amount of Rs. 26,14,06,249/- from the total income due to bona fide intention.
2. The CIT(A) has erred in law and on facts in holding that penalty is not leviable because in the instant case the addition on account of false claim was confirmed by the appellate authority.
3. The CIT(A) has erred in law and on facts in holding that the assessee has not made any false claim by deducting the amount not paid by the assessee in respect of the power purchase.”
2. Though the revenue has raised three grounds of appeal but they relate to single issue of deletion of penalty u/s 271(1)(c) of the Income Tax Act.
3. Brief facts of case are that appellant is a company engaged in business of distribution of power in greater Noida Area. For above assessment year assessee filed its return of income declaring loss of Rs. 176961703/- and book profit u/s 115JB of Rs. 60065825/-. Subsequently, return was revised on 31.03.2009 declaring loss of Rs. 176581620/- and book JCIT V Noida Power Co Limited Page 2 of 4 profit of Rs. 60068535/-. In assessment proceedings an addition of Rs. 261406249/- was made on account of power purchase price, not debited to the profit and loss account , claimed by the assessee as an expenditure in return of income showing it in computation of total income. Ld Assessing Officer disallowed same holding that it is neither an ascertained liability nor provided for in books of account. After disallowance the assessed income in normal computation was Rs. 84824629/- and book profit remain unchanged. Against above addition assessee preferred an appeal before ld CIT(A) who confirmed action of Assessing Officer. Against order of the ld CIT(A) the assessee preferred appeal before ITAT . Vide order dated 19.01.2012 in the appeal of the assessee was dismissed. Against the order of the tribunal the assessee approached Hon’ble Allahabad High Court who while admitting appeal of the assessee passed an interim order on 19.07.2012 and 25/7/2012. The Hon’ble High Court admitted appeal of the assessee on the question of law that whether the liability claimed by the assessee towards purchased price to the extent of Rs. 261406249/- being the difference between the purchase price of electricity bill by UPPCL and the purchase price debited to the profit and loss account by the appellant at rates worked out by UPERC is allowable expenditure in AY 2007-08. Meanwhile, the ld Assessing Officer levied penalty on this amount vide order dated 29.03.2012 of Rs. 8.80 crores holding that the assessee has furnished inaccurate particulars of income to the extent of Rs. 261406289/- by making a false claim of deduction which was apparently, patently, and clearly not allowable. Aggrieved by this order the assessee preferred appeal before the ld CIT(A) who deleted the penalty relying on the decision of the Hon'ble Supreme Court in case of CIT Vs. Reliance Petro Products Ltd and further holding that the disallowance is a purely legal and debatable issue. He further held that in assessee’s own case for earlier years the claim of the deduction of the assessee is allowed by tribunal and in earlier years when the addition is upheld . AO himself have dropped the penalty u/s 271(1) (c) for Ay 2003-04. Therefore, by order of the ld CIT(A) revenue is aggrieved and has preferred the present appeal before us.
4. The ld DR submitted that as the deduction has been concurrently upheld it is not debatable and therefore, penalty levied by the ld AO may be upheld. He relied vehemently on the order of the ld Assessing Officer.
5. The ld AR submitted a paper book wherein the orders of the authorities including the order of the Hon’ble High court dealing the issue are placed on record. He further submitted that the orders of the coordinate benches for the previous years in case of assessee wherein the claim JCIT V Noida Power Co Limited Page 3 of 4 of the deduction is allowed. He further submitted that identical issue in AY 2003-04, the ld Assessing Officer has dropped the penalty on the similar issue.
6. We have carefully considered the rival contentions. The issue is regarding the disallowance of a sum of Rs. 261406249/- being power purchase price which was not debited by the assessee in its books of account as expenditure but claimed as deduction in the computation of the total income. The claim of the assessee for this year is concurrently rejected by all the appellate authorities up to the Tribunal. However, Hon’ble Allahabad High Court has admitted the appeal of the assessee vide order dated 25.07.2012 in of 2009 wherein following questions of law are admitted:-
1.
Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in declining to allow deduction in respect of the differential rate of power purchase (i.e. difference between the rate at which the bills were raised by the UP State Electricity Board/ UP Power Corporation Ltd. and the rates as determined/ recommended by the independent authority?. 2 Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in declining to consider the claim of the appellant (assessee) for exclusion of the amount re-payable to customers as per the minimum consumption guarantee scheme?.
7. Hon’ble Delhi High Court in case of Cit Vs. Liquid Investment and Trading Company in ITA No. 240 of 2009 wherein, it is held that the appeal is admitted and substantial question of law is framed by Hon’ble High Court u/s 260A of the Act it shows that the issue is debatable and no penalty u/s 271(1)(c) can be levied. Hon’ble Bombay High Court in CIT Vs. Nayan Builders and Developers 368 ITR 722 has also held that where High Court admitted substantial question of law in respect of which penalty was levied the impugned order of penalty was to be deleted. Therefore, respectfully following the decisions of Hon’ble High Court we hold that when the issue is admitted by Hon’ble High Court as substantial question of law in the case of the assessee on disallowance of Rs. 261406249/- for power purchase price difference, no penalty u/s 271(1)(c) can be levied. Furthermore, in past years the Tribunal has decided this issue in favour of the assessee that itself makes the issue debatable. Further, in AY 2003-04 on identical issue the Assessing Officer has dropped the penalty proceedings u/s 271(1)(c) in view of the facts of the case, nature of addition and in view of the reply of the assessee. The copy of such order dated 12.03.2008 was placed on the record and same was not contraverted by revenue. We are of the view that consistent approach JCIT V Noida Power Co Limited