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Income Tax Appellate Tribunal, “E”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN, JM
O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A)- Mumbai, dated 6-2-2003, for the assessment years 2001-02, in the matter of imposition of penalty u/s.271(1)(c) of the I.T.Act.
Rival contentions have been heard and record perused. Brief facts of the care are that the assessee is engaged in the business of manufacturing, export and sale of gold. During the year under consideration originally the assessment was framed u/s.143(3), thereafter the AO reopened the assessment and disallowed the expenditure incurred on administrative and interest on the plea that manufacturing activity did not commence during the year, therefore, expenditures are in the nature of pre-operative expenses. It was contended before the AO 2 that assessee was already in the business of gold and even during the year under consideration the company had turnover of Rs.18.98 lakhs, hence, it cannot be said that business was not commenced and that reassessment was framed after change of opinion. Even during the preceding year the assessee had returned substantial income, therefore, it cannot be said that assessee had incurred administrative and interest expenses before commencement of business. However, the AO did not agree with the assessee’s contention for levy of penalty which was confirmed by the CIT(A).
It was further submitted that in this case loss is reduced to NIL income and therefore under Explanation 4 to Section 271(1)(c), no penalty can be levied u/s.271(1)(c) in the present case for A.Y.2001-02, as the amendment is effective from 01.04.2003 i.e. from A.Y.2003-04 and as held by the Hon’ble Supreme Court in the case of Virtual Soft Systems Ltd., 289 ITR 83. Ld. AR also placed on record order of the Tribunal in assessee’s own case for the assesmsnet year 2007-08, wherein similar disallowance was deleted and the order of the Tribunal was confirmed by the Hon’ble Bombay High Court in ITA No.2607/2011, dated 13-3-2013.
We have considered rival contentions and found from the record that during the year under consideration the assessee has filed its return of income at a loss of Rs.84.16 lakhs. Scrutiny assessment order was framed u/s.143(3), thereafter assessment was reopened and income was assessed at Nil. With respect to the disallowance of expenses, the AO levied penalty u/s.271(1)(c). When there is no tax leviable with respect to the addition made, no penalty is leviable in terms of decision of the