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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI N.K. SAINI & SHRI A.T. VARKEY
(PAN : AAECS3636D) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri G.N. Gupta, ITP REVENUE BY : Smt. Anima Barnwal, Senior DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :
The appeal by the revenue and the cross objection by the assessee are filed against the order of the CIT (Appeals)-XXXIII, New Delhi dated 28.05.2013 for the assessment year 2009-10. penalty of Rs.11,64,041/- levied by AO under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
Brief facts of the case are that the assessee is engaged in manufacturing and sale of sugar in its two units, namely, Upper Doab Sugar Mills & Unn Sugar Complex and Alcoholic Products in two units, namely, Shamli Distillery & Chemical Works & Pilkhani Distillery & Chemical Works and was following mercantile system of accounting and closed its accounts on 31st March, 2009 for the year under consideration. The assessee filed return of income though e-filing u/s 139(1) of the Act on 29.09.2009 declaring an income of Rs.53,41,386/-, however, the taxable income after allowing and set off of brought forward losses was nil. The assessee claimed that no tax was due on returned income and prepaid taxes (TDS) of Rs.1,73,133/- was claimed refundable in the return. The AO completed the assessment u/s 143(3) of the Act on 14.12.2011 determining the income at Rs.95,59,885/-, inter alia, by making the following additions / disallowances :-
(i) Provision of interest on SDF Loan Rs.14,45,710/- (ii) Collection of Dharmada for charitable Purpose and interest accrued on Accumulated fund of Dharmada Rs.30,84,058/- (iii) Hologram written off Rs. 1,69,655/- However, the aforesaid assessed income of Rs.95,59,885/- was set off from brought forward losses and the income was determined at NIL. and again on 07.06.2012 directing the assessee to show cause why an order imposing a penalty be not passed pursuant to order u/s 143(3) of the Act dated 14.12.2011. The assessee submitted the written replies dated 11.01.2012 and 13.06.2012 containing the detailed submissions on each point of addition/ disallowance made in the assessment order. However, the AO, being not satisfied with the submissions, levied a penalty of Rs.15,97,334/- u/s 271(1)(c) of the Act.
Aggrieved, the assessee went in appeal before the ld. CIT (A) who deleted the penalty by observing as under :-
“ I have considered entire judicial pronouncements on this issue cited by Ld. AR and the Assessing Officer. After considering these judicial pronouncement, I am of the opinion that unless a case is made, that the Assessee has filed inaccurate particulars of income or concealed the particulars of income, Penalty u/s 271(1)(C) is not laviable. In order to satisfy either of these two criteria, the court has decided that for levy of penalty u/s 271 (l )(C), either there should be ex-facie bogus claim of expense, deduction by the assessee or there should prima facie no two different opinion on the issue of addition. In the light of above, I would now examine the facts of the case, whether either of these two criteria is satisfied in respect of three item of additions separately:- . 1) Addition on account of provision of Interest on Sugar Development fund (SDF) for Rs. 14,45,710/-. The assessing officer disallowed the interest payable to IFCI under Section 43B of the Act. The Ld. AR has argued that the Sugar Development fund was created by Government of India, Ministry of Consumer Affairs, Food & Public Distribution Department of Food and Public Distribution to provide Loan for modernization of sugar plant. During the appellate proceeding, on the nature of loan, Ld. AR has filed letter no. 4-1I2005- SDF, Government of India, Dt. 1-07-2005, where it is mentioned that loan has been sanctioned to the assessee company after considering its ./2013 CO No.46/Del/2014 application for modernization/ replacement of two numbers of boilers with incidental expansion of crusting capacity of sugarcane. In that loan approval letter, it is mentioned that the amount of loan will be disbursed through financial institution i.e. IFCI in this case. The Assessing Officer on similar issue has accepted the allowance of deduction under section 43B for the A.Y 2000-01. As the loan is from Sugar Development Fund and IFCI is only disbursing agency the assessee was under reasonable belief before the order of ITAT that section 43B is not applicable as the loan is sanctioned by the Government of India. Therefore, his argument that there was prima facie two opinion at the time of filing return of income and it is not a case of ex-facie bogus claim of deduction appears to be convincing. In view of the above and considering entire facts and circumstances of the case, I am of the view that penalty u/s 271(1)(c) is not leviable. 2) Addition on account of Dhrmada collection and interest on accumulated fund:- Ld. AR's main argument against the non levy of penalty u/s 271(1)(c) on this quantum of addition is that at the time of filing of income tax return, there was direct decision on the issue of the Apex Court in the case of CIT Vs. Bijli cotton Mills 116 ITR 60 (SC) where it was held that Dharmade Collection is not a revenue receipt in the hands of the assessee. Further, the appellant has filed appeal against the order of ITAT on this issue and under Rule 16 of I. T.Rule, 1962 read with See 158 A( 1) of the Act, the appellant has filed form no.8 for other years and the Assessing Officer has accepted the same vide order dated 14.12.2011 for A.Y 2003-04, CIT(A) has given the relief to the assessee which was reversed by hon'ble ITAT vide order dt. 4.6.2010. Therefore, on the date of filing of Return of income, there was two opinions available on the tax ability of Dharamda collection. I, therefore, am of the view that considering the facts and circumstances, penalty u/s 271 (1)(c) is not leviable. 3) Addition of Rs. 1,69,655 on account of writing off unused hologram:- Ld. AR's main argument against non leviability of penalty u/s 27l (l)(c) on this addition is that as per UP Excise Rules, the holograms printed and issued for a particular year can only be consumed during the year and the Distilleries have to destroy the same after the end of the year as per rules and guidelines framed by Excise Department. The unused hologram is of no use for business purpose, therefore, its market value is nil. Therefore, the assessee has written off unused hologram at the end of the year consistently. During the instant assessment year, the assessing officer has made addition, at first appellate stage, C1T(A) gave relief to the assessee. ./2013 CO No.46/Del/2014 However, hon'ble IT A T held that unless the hologram is destroyed, the same cannot be written off. Therefore, at the time of filing Income Tax return, the decision of ITA T order was not there. Hence, the appellant was of bonafide belief that writing off of unused hologram is legal at it cannot be used next year. Ld. AR's argument that the present addition cannot be said as ex-facie bogus-appears to be convincing. Accordingly, I am of the view that penalty u/s 271(l)(c) is not leviable on this addition also.”
The revenue, being aggrieved, is in appeal before us against the deletion of penalty u/s 271(1)(c) of the Act.
Ld. DR for the revenue relied on the order of the AO and submitted that the law is very clear that even if there is no concealment of income or furnishing of inaccurate particulars on the ground of disclosure, but it is a claim appears to be ex-facie bogus, it will still attract penalty provisions. He submitted that the AO has rightly levied the penalty which the ld. CIT (A) erred in deleting the same. Therefore, he wants us to set aside the order of the ld. CIT (A) and restore that of the AO.
Ld. AR for the assessee, while relying on the order of the CIT (A), submitted that in the assessee’s own case for AY 2007-08 in dated 14.11.2014, the Tribunal has deleted the penalty levied u/s 271(1)(c) against the similar additions made in this assessment year also. Therefore, he pleaded that the order of the ld. CIT (A) be upheld.
We have heard both the sides and perused the material on record. We note that the AO made the penalty u/s 271(1)(c) of the Act against the following additions / disallowances :-
(i) Provision of interest on SDF Loan Rs.14,45,710/- (ii) Collection of Dharmada for charitable Purpose and interest accrued on Accumulated fund of Dharmada Rs.30,84,058/- (iii) Hologram written off Rs. 1,69,655/- We find that the ITAT in the assessee’s own case for AY 2007-08 (supra) has deleted the penalty wherein also the penalty was levied against the additions of provision of interest on SDF loan and addition on account of Dharmada account. Therefore, the issue against the aforesaid two additions is covered by the aforesaid decision of the Tribunal. We find that in this year, the addition was also made on account of writing off unused hologram. We note that the ld. AR's main argument against non-leviability of penalty u/s 27l (l)(c) on this addition is that as per UP Excise Rules, the holograms printed and issued for a particular year can only be consumed during the year and the Distilleries have to destroy the same after the end of the year as per rules and guidelines framed by Excise Department; and the unused hologram is of no use for business purpose, therefore, its market value is nil. Therefore, the assessee has written off unused hologram at the end of the year consistently.
We find that during the instant assessment year, the AO has made addition and, at first appellate stage, the CIT(A) gave relief to the assessee. However, ITAT held that unless the hologram is destroyed, the same cannot be written off. We find that the ld. CIT (A) observed that at the time of filing Income