O/TAXAP/165/2015 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 165 of 2015 PRINCIPAL COMMISISONER OF INCOME TAX-I Appellant(s) Versus DHARMENDRA INDUSTRIES LTD. Opponent(s) Appearance: MRS MAUNA M BHATT, ADVOCATE for Appellant(s) No. 1 CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 17/03/2015 ORAL ORDER (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. Feeling aggrieved and dissatisfied with impugned judgment and order passed by learned Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as learned Tribunal ) dated 31.10.2014 passed in ITA No.1410/Ahd/2011 for AY 2004-2005, by which learned Tribunal has dismissed appeal preferred by revenue and has confirmed order passed by learned CIT (Appeals) deleting penalty imposed under section 271(1) (c) of Income Tax Act (for short Act ), appellant revenue has preferred present tax appeal with following proposed questions of law. [A] Whether Appellate Tribunal has substantially erred in law in deleting penalty of Rs.1,21,13,136/- levied u/s 271(1)(c) of Act? Page 1 of 5 O/TAXAP/165/2015 ORDER [B] Whether Appellate Tribunal has substantially erred in law in not appreciating fact that penalty was levied by AO on basis of disallowance of claim of assessee for depreciation rate difference and sundry balance written off as it could not substantiate these claims? [C] Whether Appellate Tribunal has substantially erred in law in not appreciating fact that assessee failed to discharge onus cast upon him with regard to such claim as envisaged in clause (B) of Explanation 1 of section 271(1)(c) of Act. 2. That assessee company is dealing in business of trading of caster oil and who, at relevant time was sick company and closed company before BIFR, filed return of income for AY 2004-2005 declaring loss of Rs.9,44,65,930/-. That case was selected for scrutiny by issuing notice u/s 143(2) of Act. That assessee claimed depreciation of Rs.98,88,019/- during year which include depreciation of machinery and electric installations. That Assessing Officer disallowed claim of depreciation to extent of Rs.74,39,345/-, however, directed to issue notice under section 271(1)(c) for furnishing incorrect particulars of income/concealment of income. That thereafter, by order dated 29.6.2007, Assessing Officer imposed penalty under section 271(1)(c) of Act to extent of Rs.1,21,13,136/- mainly on ground that though company was closed and was before BIFR, company claimed depreciation on machinery and electric installation. Page 2 of 5 O/TAXAP/165/2015 ORDER 3. That feeling aggrieved and dissatisfied with order of penalty imposed under provisions of section 271(1)(c) of Act, assessee preferred appeal before learned CIT (A). Learned CIT (A) allowed said appeal and set aside order of penalty imposed under section 271(1)(c) of Act by observing that claim of assessee for depreciation was bona fide and therefore, deleted penalty levied under section 271(1)(c) of Act. 4. Feeling aggrieved and dissatisfied with order passed by learned CIT (A) deleting penalty under section 271(1)(c) of Act, revenue preferred appeal before learned ITA being No.1410/Ahd/2011 and by impugned judgment and order, learned Tribunal has dismissed appeal preferred by revenue confirming order passed by learned CIT (A) deleting penalty levied under section 271(1)(c) of Act by observing in para 7 as under: 7. After considering totality of facts and circumstances of case, we are of view that in situation when machinery was used in past and kept for ready use for year under consideration; therefore, assessee was under bonafide impression to claim depreciation for year under consideration; although due to sick unit there was no manufacturing activity as informed by assessee. It is not case of Revenue that claim of depreciation was false or manipulated by assessee. There was no dispute about quantum of claim of depreciation but dispute was legal in nature that whether under such circumstance when assessee company was under BIFR proceedings then whether entitled for claim of depreciation? Likewise, we have also noted that disallowance of rate of interest of commodities was not held as frivolous or bogus Page 3 of 5 O/TAXAP/165/2015 ORDER claim. Because of non-payment by parties, assessee had no option, but to debit rate difference. From side of Revenue, there is no allegation that inaccurate particulars have been furnished by assessee, rather on particulars as furnished by assessee view was taken by AO. Thus, under totality of this facts and circumstances of case, we hereby affirm factual as well as legal finding of learned CIT (A) and dismiss this ground of Revenue. 5. Feeling aggrieved and dissatisfied with impugned judgment and order passed by learned Tribunal, revenue has preferred present tax appeal with aforesaid proposed questions of law. 6. We have heard Mrs. Bhatt, learned advocate appearing on behalf of appellant revenue and considered in detail original order passed by Assessing Officer levying/ imposing penalty under section 271(1)(c) of Act as well as orders passed by learned CIT (A) as well as learned Tribunal deleting penalty. 7. After appreciation of evidence/facts, it was found that claim of assessee claiming depreciation on machinery and electric plant was bona fide and it was case of revenue that claim of depreciation was false or manipulated by assessee and thereafter, when learned CIT (A) has deleted penalty, which has been confirmed by learned Tribunal, it cannot be said that learned CIT (A) and/or learned Tribunal have committed any error. No substantial questions of law arise in present appeal. Page 4 of 5 O/TAXAP/165/2015 ORDER 8. Under circumstances, present appeal deserves to be dismissed and is accordingly dismissed. (M.R.SHAH, J.) (S.H.VORA, J.) shekhar Page 5 of 5 Principal Commissioner of Income-tax-I v. Dharmendra Industries Ltd