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Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD
Before: SHRI PRAMOD KUMAR & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the assessee against the order of the Commissioner of Income Tax(Appeals)-III, Baroda, dated 28/10/2014 for the Assessment Year (AY) 2003-04, on the following Grounds: i. Ld. CIT(A) erred in law and on facts in confirming action of AO levying penalty of Rs.28,71,100/- invoking provisions of Sec 271(1)(c) of the Act. Ld. CIT(A) ought to have delete penalty levied by AO when appellant neither concealed income nor furnished inaccurate of income. It be so held now. ii. Ld. CIT(A) erred in law and on facts in confirming penalty levied on disallowance of claim made by the appellant discharging initial onus cast under law by submitting detailed explanation
ITA No.225/Ahd/2015 Newton Engg. & Chemicals Ltd. vs. ACIT Asst.Year –2003-04 - 2 - with documentary evidence. Ld. CIT (A) ought not to have held Explanation 1 to section applicable to facts of the case for confirming penalty. It be so held now. iii. Ld. CIT(A) erred in law and on facts in confirming penalty levied not appreciating that claim disallowed due to non acceptance of explanation of the appellant cannot be subjected to automatic levy of penalty in absence of cogent evidence of concealment of income brought on record by AO. Ld. CIT (A) ought to have deleted penalty levied by AO. It be so held now. iv. Ld. CIT (A) erred in law and on facts in not appreciating that disallowance u/s 35D due to different method adopted, addition of interest omitted in computation, addition of estimated interest & mobilization advance treated as contractual receipt by AO need not make appellant guilty of furnishing inaccurate particulars or concealing income. 2. The relevant facts as culled out from the materials on record are as under:- In this case, assessee had filed its return of income on 01.12.2013 declaring total loss at Rs.3,33,11,290/-. Thereafter, the case was selected for scrutiny and an assessment was finalized u/s.143(3) of the Act vide order dated 31.03.2006 determining the total loss at Rs.1,92,58,800/-. In the assessment, the Assessing Officer has initiated penalty proceedings on following additions/disallowance: i. Excess claim u/s.35D of Rs.83,560/-. ii. Suppression of other income of Rs.10,25,700/-. iii. Non-disclosure of trading income of Rs.10,000/-. iv. Suppression of Contract receipts of Rs.66,93,121/-.
Thereafter, penalty notice u/s.274 r.w.s. 271(1)(c) of the I.T. Act was issued to the ld. AO on 31.03.2006. On further appeal before the ld.
ITA No.225/Ahd/2015 Newton Engg. & Chemicals Ltd. vs. ACIT Asst.Year –2003-04 - 3 - CIT(A), the ld. CIT(A) vide his order dated 13.06.2011 upheld the following additions on which penalty proceedings were initiated. i. Excess claim u/s.35D of Rs.83,560/-. ii. Suppression of other income of Rs.10,25,700/-. iii. Non-disclosure of trading income of Rs.10,000/-. iv. Suppression of Contract receipts of Rs.66,93,121/-.
Accordingly, the assessee was given an opportunity of being heard by the AO for levying of penalty and assessee filed its reply as under: “we have already submitted our contentions in writing to your kind office on 20th March, 2012, we are once again submitting a copy of the same for your reference.”
But ld. AO was not convinced with the reply filed by the assessee, hence, he levied the penalty.
Against the said order assessee preferred appeal before the ld. CIT(A) who confirmed the action of the ld. AO.
We have gone through the relevant record and impugned order. So far as excess claim u/s.35D of Rs.83,560/- is concerned. In the assessment, the AO had disallowed excess claim of deduction u/s.35D of amounting to Rs.83,560/- after noting that, "The assessee has claimed an amount of Rs.2,67,760/- u/s.35D of the IT Act, under the head preliminary expenses written off. In this regard, the Assessing Officer in his order u/s.143(3) dated 29.03.2005 relating to A.Y 2002-03 has quantified the deduction admissible u/s.35D of the Act at Rs.1,04,200/-. A perusal of-the balance sheet shows that the capital employed by the
ITA No.225/Ahd/2015 Newton Engg. & Chemicals Ltd. vs. ACIT Asst.Year –2003-04 - 4 - assessee company is of Rs.7,36,80,249/- the bifurcation of which is as under: Equity Shares Rs.3,88,81,000/- Secured Loans Rs.3,47,99,249/- Rs.7,36,00,249/-
The assesses has incurred preliminary expenses prior to the period 01.04.1998 hence, the qualifying amount for deduction u/s.35D is restricted to 2.5% of capital employed i.e. 2.5% of Rs.7,36,80,250/- which works out to Rs.18,42,006/-. This is to be allowed over of period of ten years in equal amount Rs.1,84,200/-. Therefore, the excess claim of Rs.83,560/- is disallowed and added back to the total income of the assessee company."
Since the assessee had not pressed this Ground before the ld. CIT(A) therefore, an amount of Rs.83,560/- added back to the total income of the assessee. In the light of the order passed by the CIT(A), as ground was not pressed before him meaning thereby, assessee has accepted the addition of Rs.83,560/-. Therefore, we are not incline to interfere in the order passed by the ld. CIT(A) for confirming the addition of Rs.83,560/-. In the result, penalty of Rs.83,560/- is confirmed.
So far as suppression of other income of Rs.10,25,700/- is concerned. During assessment proceedings, TDS certificate attached with the return of income, the Assessing Officer observed that had received interest of Rs.20,27,050/- from the banks on FDRs, however in P&L A/c. The assessee had shown interest income of Rs.12,16,456/-. The assessee
ITA No.225/Ahd/2015 Newton Engg. & Chemicals Ltd. vs. ACIT Asst.Year –2003-04 - 5 - had submitted details of Rs.12,16,456/- and after verifying the details, Assessing Officer had found that, the assessee has not shown interest of Rs.10,15,050/- in return of income. During the course of assessment proceedings assessee has voluntarily accepted on its first submission the mistake of omission to offer as income the interest amount earned on the fix deposit and NSCs as appearing in the financial statement. In the case of K.C. Builders vs. Asstt. CIT(2004) 265 ITR 562, 569 (SC) Hon’ble Apex Court held: “mere omission from the return of an item of accrued receipt does not amount to concealment nor deliberate furnishing inaccurate particulars on income” In view of the Supreme Court Judgment, we delete the penalty of Rs.10,25,700/-.
So far as non-disclosure of Trading Income of Rs.10,000/- is concerned. The assessee had furnished that during the year, there is no sale of investment and hence, there is no capital gain and Assessing Officer had estimated the profit on sale of unquoted shares of Rs.10,000/- . Since assessee has accepted the addition of Rs.10,000/- and has not pressed before the ld.CIT(A). Thus, we confirm the penalty of Rs.10,000/-.
So far as suppression of contract receipts of Rs.66,93,121/- is concerned. Ld.AR cited an order of this Coordinate Bench in ITA No.2124/Ahd/2011 in quantum proceedings in assessee’s own case. This matter was set aside by the Co-ordinate Bench and sent back to the AO. Therefore, we send this matter back to the file of the AO and AO will decide the penalty along with quantum proceedings.
ITA No.225/Ahd/2015 Newton Engg. & Chemicals Ltd. vs. ACIT Asst.Year –2003-04 - 6 -
In the result, appeal of the assessee is partly allowed. This Order pronounced in Open Court on 24/11/2017
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Ahmedabad; Dated 24/11/2017
Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-III, Baroda. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 13/11/2017 (dictation-pad 4 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …14/11/2017 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………