DCIT CIR 6(1)(2), MUMBAI vs. ASIAN ELECTRONICS LTD, MUMBAI

सुनवाई क" तार"ख / Date of Hearing 16/08/2016 01/09/2016 आदेश क" तार"ख /Date of Order: आदेश / O R D E R The Revenue is aggrieved by the impugned order dated 26/03/2015 of the Ld. First Appellate Authority, Mumbai. The Revenue has challenged deletion of penalty of Rs.42,92,178/- imposed u/s 271(1)(c) of the Income 2 M/s Asian Electronics Ltd. Tax Act, 1961 (hereinafter the Act) holding that the addition is debatable issue, therefore, penalty is not leviable.

2.1. I have considered the submissions of the ld. DR and perused the material available on record. The facts, in brief, are that the assessee declared income of Rs.20,52,640/- in its return filed on 30/12/1999. The assessment was completed u/s 143(3) of the Act determining the total income as returned by the assessee. The assessee company is having two units i.e. unit 1 and Unit 2 at Silvasa, eligible for deduction to the extent of 100% of their profit u/s 80IA of the Act. The assessee claimed that units at Silvasa had in addition to the switch automatic load monitoring systems and energy saving devices for tube light. The new products had no relation with the old units. The Assessing Officer observed that ALMS is nothing but assembly of switch operators along 3 M/s Asian Electronics Ltd. with some other software which is merely a value addition to the item and the thus ingredients of ALMS is same item for which royalty should be charged. He notionally charged royalty at the rate of 5% on the total volume of sales of switch capacitors and ALMS charges notionally as an expenditure to Unit-1 and Unit-2. The royalty was worked out to Rs.1,42,63,365/- i.e. 5% of net amount of sales of ALMS of Rs.26,41,15,050/- and switch operators of Rs.12,11,52,52,245/- was reduced from profits eligible for deduction u/s 80IA of the Act. The Assessing Officer levied penalty of Rs.49,92,178/- u/s 271(1)(c) on the amount of Rs.1,42,63,365/-.

2.2. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the factual matrix was considered and held that mere addition cannot lead to inference that there was concealment or furnishing of inaccurate particulars. Placing reliance upon the decision in CIT vs Reliance Petro Products ltd. 322 ITR 158 (SC), CIT vs Nalin P. Shah (HUF) (40 taxman.com 86)(Bom.),Sesa Resources Ltd. vs ACIT (219 taxman 92)(Bom.), DIT vs Adminstrator of the Estate of Late Mr. E.F. Dinshaw (218 taxman 125)(Bom.), CIT vs Aditya Birla Nuvo Ltd. (ITA No.3899 of 2010) (Bom.), CIT vs Gujrat Insecticides Ltd. 218 taxman 130 (Guj.), Harsha H. Javeri vs DCIT 53 SOT 59 (Mum.), Narangs International Hotels Pvt. Ltd. vs DCIT 22 taxman.com 147 (TM)(Mumbai Tribunal) held that 4 M/s Asian Electronics Ltd. penalty is not leviable, more specifically when the issue is debatable. The Revenue is aggrieved and is in appeal before this Tribunal.

2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, considering the factual matrix, case laws relied upon by the CIT(A) and explanation-1 to section 271(1)(c) of the Act, the decision on the issue being debatable, judicial pronouncement in CIT vs Krishna Maruti Ltd. 330 ITR 547, CIT vs Gurdaspur Cooperative Sugar Mills Ltd. 354 ITR 27 (P & H), CIT vs H. M. A. Udyog Pvt. Ltd. 195 taxman 394 (Del.), Bennet Coleman & Co. Ltd. vs ACIT 144 ITD 45 (Mum.), I find that neither there is concealment of income nor furnishing of inaccurate particulars of income, therefore, the penalty is not leviable. Even otherwise, if a wrong claim, if any, is made by the assessee that itself does not tantamount to furnishing of inaccurate particulars as was held by Hon'ble Apex Court in CIT vs Reliance Petro Products Pvt. Ltd. 322 ITR 158 (SC) and various other decisions discussed (supra). In the absence of any contrary material, I find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal). It is affirmed.

5 M/s Asian Electronics Ltd. Finally, the appeal of the Revenue is dismissed.