ASPEE SONS,SOLAN V. INCOME TAX OFFICER, PARWANOO, PARWANOO

ITA 1167/CHANDI/2024

AI Insights

The case involves M/s ASPEE SONS, a partnership firm, which filed an appeal against the order of the Ld. CIT(A), NFAC, Delhi, pertaining to the Assessment Year 2014-15. The firm had declared NIL income and claimed a significant deduction under Section 80-IC of the Income Tax Act, 1961, which was partially disallowed by the Ld. AO. The primary contention revolves around the disallowance of deductions claimed on certain receipts and the consequential imposition of a penalty under Section 271(1)(c) for furnishing inaccurate particulars of income. The ITAT found that the Ld. CIT(A) had not adequately addressed the penalty issue and remanded the matter for a comprehensive review.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712325 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: PARIKSHIT AGGARWAL; C.A
• Keywords: Opportunity of being heard; Depreciation; Additional depreciation; Principle of natural justice; Assessment record
• Section: 143(3); 271(1)(c)

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 1167/Chd/ 2024 िनधाŊरण वषŊ / Assessment Year : 2014-15 Aspee Sons Village Kuranwala, Barotiwala, Solan, Himachal Pradesh-174103 बनाम The ITO Parwanoo, Himachal Pradesh ˕ायी लेखा सं./PAN NO: AAQFA1827R अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Parikshit Aggarwal, C.A राजˢ की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 16/07/2025 उदघोषणा की तारीख/Date of Pronouncement : 29/07/2025 आदेश/Order PER KRINWANT SAHAY, AM: This is an appeal filed by the Assessee against the order of the Ld. CIT(A), NFAC, Delhi dt. 20/09/2024 pertaining to Assessment Year 2014- 15. 2. In the present appeal Assessee has raised the following grounds: 1. That on the facts, circumstances and legal position of the case, Worthy CIT(A), NFAC in Appeal No. CIT (A), NFAC/2013-14/10103805 has erred in passing order dtd. 20.09.2024 in contravention of provisions of S. 250 of the Income Tax Act, 1961 (hereinafter referred to as \"Act\"). 2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of imposition of penalty u/s 271(1)(c) of Rs. 5,66,616/- in respect of denial of deduction u/s 80IC on interest income. 3. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of imposition of penalty u/s 271(1)(c) of Rs. 5,66,616/ on account of receipt alleged to be not directly derived from manufacturing activities of the industrial undertaking and allegedly wrongly declared to be not eligible for deduction u/s 80-IC. Printed from counselvise.com 2 4. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of levying penalty of Rs. 5,66,616/- u/s 271(1)(c) even when the initiation of penalty and its imposition thereof is completely vague without specification of limb of s. 271(1)(c) for which the same has been initiated and also finally imposed. 5. That on facts, circumstances and legal position of the case, the impugned penalty order passed by the Ld. AO u/s 271(1)(c) and then confirmed by Worthy CIT(A) deserves to be quashed since the same have been passed without affording reasonable opportunity of being heard to the appellant. 6. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same. 3. Briefly the facts of the case are that the assessee, M/s ASPEE SONS, a partnership firm, filed its return of income for A.Y. 2014-15 declaring NIL income and claiming deduction of Rs. 4,10,11,784/- under Section 80-IC of the Income Tax Act, 1961. The case was selected for scrutiny and assessment was completed under Section 143(3) on 18.11.2016, wherein the Ld. AO made two disallowances: (i) Rs. 18,33,710/- towards ineligible profits from insurance claims and foreign exchange fluctuation not derived from manufacturing activity, and (ii) Rs. 9,86,497/- for excess deduction on additional depreciation. Penalty proceedings under Section 271(1)(c) were initiated for furnishing inaccurate particulars of income. While the assessee contested the depreciation disallowance and succeeded before the CIT(A) and ITAT, it did not challenge the disallowance of Rs. 18,33,710/-, which the AO treated as final and uncontroverted. The assessee failed to provide satisfactory explanations or supporting documents despite repeated notices, relying only on unsubstantiated judicial citations. Holding that the assessee furnished inaccurate particulars and invoking Explanation 1(A) to Section 271(1)(c), the AO levied a penalty of Rs. 5,66,616/-, being 100% of the tax sought to be evaded on the unchallenged Printed from counselvise.com 3 addition, concluding that the assessee’s conduct fell squarely within the ambit of penal provisions under Section 271(1)(c) of the Act. 4. Aggrieved by the AO’s order, the appellant preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the submissions of the assessee and the assessment records, upheld the AO’s findings in part. The Ld. CIT(A) concurred with the AO that the receipts in question did not fully qualify as income derived from manufacturing activities, as the appellant failed to substantiate the direct nexus between the receipts and its manufacturing operations. However, the Ld. CIT(A) did not explicitly address the penalty imposed under Section 271(1)(c), leaving the issue unresolved in the appellate order. The Ld. CIT(A) dismissed the appeal on the disallowance of the deduction but remained silent on the penalty aspect, thereby necessitating further adjudication. 5. Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal. 6. During the course of hearing the Ld. AR contended that the AO erred in disallowing the deduction claimed on the receipts, asserting that the said receipts were indeed derived from the appellant’s manufacturing activities. The AR argued that the receipts were integral to the business operations and fulfilled the conditions for eligibility under the relevant provisions of the Income Tax Act. The AR further submitted that the AO’s imposition of penalty under Section 271(1)(c) was unjustified, as there was no deliberate concealment or furnishing of inaccurate particulars by the appellant. The AR emphasized that the claim was made in good faith, based on a bona fide interpretation of the law, and supported by disclosures in the return of income and accompanying documents. The AR also pointed out that the Ld. CIT(A) Printed from counselvise.com 4 failed to adjudicate on the penalty issue, rendering the appellate order incomplete and necessitating a remand for proper consideration. 7. Per contra, the Ld. DR relied on the orders of the lower authorities. 8. We have heard the rival contention of both the parties and perused the material available on the record. In the present case the primary issue before us pertains to the disallowance of deductions claimed on certain receipts and the consequential imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961. On the issue of disallowance, we note that the AO and the Ld. CIT(A) have taken a consistent view that the receipts do not qualify as income derived from manufacturing activities. However, the assessee has raised substantial arguments regarding the nature of the receipts, which require deeper examination in light of the provisions of the Act and relevant judicial precedents. Regarding the penalty under Section 271(1)(c), we observe that the Ld. CIT(A) has not provided any specific findings on this issue, despite it being a critical ground of appeal. The imposition of penalty involves a serious allegation of concealment or furnishing of inaccurate particulars, which necessitates a thorough examination of the assessee’s conduct, the disclosures made, and the bona fides of the claim. The absence of reasoned findings by the Ld. CIT(A) on this aspect renders the appellate order deficient and incomplete. In view of the above, we deem it fit and proper to remand the matter back to the file of the Ld. CIT(A) for fresh adjudication. The Ld. CIT(A) is directed to examine the issue of disallowance of the deduction afresh, considering the submissions of the assessee, the nature of the receipts, and the relevant provisions of the Income Tax Act. Further, the Ld. CIT(A) shall specifically adjudicate on the imposition of penalty under Section 271(1)(c), providing reasoned Printed from counselvise.com 5 findings on whether the assessee’s actions constituted concealment or furnishing of inaccurate particulars. The appellant shall be afforded a reasonable opportunity of being heard in accordance with the principles of natural justice. 9. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 29/07/2025 Sd/- Sd/- लिलत क ुमार क ृणवȶ सहाय (LALIET KUMAR) (KRINWANT SAHAY) Ɋाियक सद˟ /JUDICIAL MEMBER लेखा सद˟/ ACCOUNTANT MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "