M.V. OMNI PROJECTS (INDIA) LTD.,,AHMEDABAD vs. THE DY.CIT(OSD)-1, CIRCLE-4,, AHMEDABAD

This appeal by the Assessee is preferred against the order of the Ld. CIT(A)- VIII, Ahmedabad dated 29.10.2014 pertaining to A.Y. 2010-11.

The roots for the levy of penalty lie in the assessment order dated 22.03.2013 framed u/s. 143(3) of the Act. The returned income of the assessee Rs. 4,43,38,110/- was assessed after making the following additions/disallowances; (i) Gratuity u/s.40A(7) Rs. 6,37,870/- (ii) EPF Rs. 73,667/- (iii) Preliminary Expense Rs. 3,71,660/- (iv) Disallowance u/s. 40(a)(ia) Rs. 24,000/- (e) Excess Claim of Depreciation Rs. 1,33,961/-.

Penalty proceeding were separately initiated.

During the course of the penal proceedings, the assessee was asked to explain why penalty should not be levied u/s. 271(1)(c) of the Act for concealment of its income by furnishing inaccurate particular within the meaning of Section 271(1)(c) of the Act.

Assessee filed a detailed reply claiming that the provision for gratuity was in fact as per and in accordance with the accrual system of accounting regularly employed by the company and the auditor has not pointed out any error or irregularity in creating such provision. The preliminary expenses debited to the profit and loss account was in fact with reference to those expenses which were required to be debited as such and the auditors have not qualified their report. The depreciation has been disallowed by re-calculating the written down value of the depreciable assets and this disallowance is based upon the view taken

The contentions of the assessee did not find any favour with the A.O. who concluded by levying penalty of Rs./ 3,43,043/- u/s. 271(1)(c) of the Act.

Assessee carried the matter before the ld. CIT(A) but without any success.

Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. Per contra, the ld. D.R. strongly supported the findings of the lower authorities.

We have given a thoughtful consideration to the orders of the authorities below. We find in the noted to the accounts, the auditors have clearly mentioned at clause 11 that the company has adopted policy for provision of gratuity payable based on the eligible employees and accordingly Rs. 7,37,870/- has been created under the head provision and charged to the profit and loss account for the year. These financial statements were furnished by the assessee with the return of income. Therefore, it cannot be said that the assessee had concealed or filed inaccurate particulars of income. We find that the auditors have also not found any irregularity in the creation of such provision. Further the excess depreciation disallowed by the A.O. is based upon the re-working of the WDV which was based on the findings given in A.Y. 2006-07. The assessee cannot be expected to know what view would be taken by the A.O. in the preceding assessment years. The assessee had claimed depreciation on the

Insofar as the write off of preliminary expenses is concerned, we find that the auditors in clause 50 of Form 3CD has clearly mentioned the amount of preliminary expenses at Rs. 5,32,860/- as admissible u/s. 35D of the Act. Based upon these observations of these auditors, the assessee claimed the write off of preliminary expenses. Therefore, it cannot be said that the assessee has filed inaccurate particulars of income or has concealed particulars of income.

On the facts of the case mentioned/discussed hereinabove, we do not find this to be a fit case for the levy of penalty u/s. 271(1)(c) of the Act. We, accordingly direct the A.O. to delete the penalty so levied. Appeal filed by the Assessee is allowed.