DCIT, New Delhi V. M/s. Power Grid Corporation of India Ltd., New Delhi

ITA 189/DEL/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7053 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 14A; 115JB; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACOUNTANT MEMBER ITA NOS. 189 & 191/DEL/2013 ASSESSMENT YEARS: 2006-07 & 2005-06 DCIT, CIRCLE-14(1), VS. M/S POWER GRID CORPORATIO N ROOM NO. 415, 4 TH FLOOR, INDIA LIMITED, C.R. BUILDING, B-9, QUTUB INTERNATIONAL AREA, NEW DELHI KATWARIA SARAI, NEW DELHI-16 (PAN: AAACP02F] (APPELLANT) (RESPONDENT) APPELLA NT BY : SH. R.S. RAWAL, CIT(DR) RESPONDENT BY : SH. VED JAIN, ADV. & SH. ASHISH CHADHA, CA ORDER PER H.S. SIDHU, J.M. 01. THESE ARE THE TWO APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEARS 2006-07 AND 2005-06 RESPECTIVELY AGAINST THE ORDER OF THE LD. CIT(A)-XVII, NEW DELHI DATED 3 0.10.2012 AND 31.10.2012 WHEREIN PENALTY U/S. 271(1)(C) OF TH E I.T. ACT AMOUNTING TO RS. 71,32,55,400/- FOR AY 2006-07 AND RS. 8.06 CRORES /- FOR AY 2005-06 LEVIED BY THE AO WAS DELETED. ISSUES INVOLVED IN BOTH THE APPEAL ARE SIMILAR AND THEREFORE BOTH THE APPEALS ARE DISPOSED OF BY THIS COMMON ORD ER. 2 02. THE GROUNDS OF APPEAL FOR RESPECTIVE ASSESSMENT YE ARS ARE AS UNDER:- ASSESSMENT YEAR : 2006-07 1. 'WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING PENALTY OF RS. 84.06 CRORES U/S 271(1)(C) OF THE I T ACT, 1961. 2. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT AO HAD NO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) IN THE ASSESSMENT ORDER WHILE FRAMING ASSESSMENT. INITIATION OF PENAL TY PROCEEDINGS IS CLEARLY MENTIONED IN THE ASSESSMENT ORDER AND A VALID NOTICE WAS SERVED UPON THE ASSESSEE. 3 WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN APPRECIATING THE THAT THE S HOW CAUSE NOTICE WAS ISSUED BY THE AO HAVING JURISDICTION OVE R THE CASE. THE ASSESSEE CONFIRMED THAT ORDER OF PENALTY WAS TI ME BARRED WITHOUT EXAMINE THE FACTS OF THE CASE AND A MISSTAT ED ARGUMENT OF THE ASSESSEE BEFORE THE AO, THE ASSESSE E NEVER ARGUED ON THIS ISSUE. 4 WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON ACCOUNT OF ADDITIONS ON ADVANCE AGAINST DEPRECIATION WHICH WAS LATER ADMITT ED BY THE ASSESSEE ITSELF IN THE SUBSEQUENT YEARS AND ALSO AS SESSEE HAD 3 WITHDRAWN THE APPEAL FROM HON'BLE ITAT ON THIS GROU ND BY ACCEPTING THE STAND ON THE REVENUE ON THIS GROUND. 5 THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUNDS OF APPEAL AND / OR DELETE OR AMEND ANY OF T HE GROUNDS OF APPEAL.' ASSESSMENT YEAR : 2005-06 1. 'WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING PENALTY OF RS. 8.06 CRORES U/S 271 (1)( C) OF THE I T ACT, 1961. 2. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT AO HAD NO INITIATED PENALTY PROCEEDINGS U/S 271(1) (C) IN THE ASSESSMENT ORDER WHILE FRAMING ASSESSMENT. INITIATION OF PENAL TY PROCEEDINGS IS CLEARLY MENTIONED IN THE ASSESSMENT ORDER AND A VALID NOTICE WAS SERVED UPON THE ASSESSEE. 3. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN APPRECIATING THE THAT T HE SHOW CAUSE NOTICE WAS ISSUED BY THE AO HAVING JURISDICTION OVE R THE CASE. THE ASSESSEE CONFIRMED THAT ORDER OF PENALTY WAS TI ME BARRED WITHOUT EXAMINE THE FACTS OF THE CASE AND A MISSTAT ED ARGUMENT OF THE ASSESSEE BEFORE THE AO, THE ASSESSE E NEVER ARGUED ON THIS ISSUE. 4 4. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT NOT CREDIT OF INCOME IN THE P&L A/C TANTAMOUNT TO CONCE ALMENT OF INCOME. THE APPELLANT HAS TAKEN THE GROUND THAT THE AO DID NOT SPECIFY THE NATURE OF DEFAULT FOR WHICH PENALTY PRO CEEDINGS WERE INITIATED AND ITSELF HAS ADMITTED THAT THE SAM E WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS AS WELL AS CONCEALMENT OF INCOME. 5. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON ACCO UNT OF ADDITIONS ON ADVANCE AGAINST DEPRECIATION WHICH WAS LATER ADMITTED BY THE ASSESSEE ITSELF IN THE SUBSEQUENT Y EARS AND ALSO ASSESSEE HAD WITHDRAWN THE APPEAL FROM HON'BLE ITAT ON THIS GROUND BY ACCEPTING THE STAND ON THE REVENUE O N THIS GROUND. 6. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON AMOU NT OF ADDITION ON ACCOUNT OF SEB AND NER CONSTITUENT WHEN THE ASSE SSEE DID NOT CONTESTED THIS ADDITION EVEN IN QUANTUM APPEAL ON ASSESSMENT COMPLETED UNDER SECTION 143(3). 7. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUNDS OF APPEAL AND / OR DELETE OR AMEND ANY OF T HE GROUNDS OF APPEAL.' 5 03. THOUGH THE REVENUE HAS RAISED 6 EFFECTIVE GROUNDS O F APPEAL IN ASSESSMENT YEAR 2005-06 AND 4 EFFECTIVE GROUNDS OF APPEAL IN ASSESSMENT YEAR 2006-07. ISSUES INVOLVED IN THE SE APPEALS ARE I. WHETHER ON DISALLOWANCE OF ADVANCE AGAINST DEPRECI ATION OF RS. 211.90 CRORES AND RS. 216.10 CRORES IN ASSESSMENT YEAR 2005-06 AND 2006-07 RESPECTIVELY WOULD INVITE PENALTY UNDER SECTION 271(1) OF THE I .T. ACT, 1961 UNDER THE CHARGE OF FURNISHING INACCURATE PARTICULARS OF INCOME. II. WHETHER THE ADDITION TO INCOME OF INCOME TAX RECOVERABLE FROM STATE ELECTRICITY BOARD OF RS. 1.5 3 CRORES AND TRANSMISSION CHARGES OF RS. 12.09 CRORES WOULD INVITE PENALTY U/S 271(1) (C) OF THE ACT UNDE R THE CHARGE OF FURNISHING INACCURATE PARTICULARS OF IN COME. 04. THE BRIEF FACTS OF THE CASE FOR ASSESSMENT YEAR 200 5-06 IS THAT ASSESSEE IS A PUBLIC SECTOR UNDERTAKING ENGAGING IN TRANSMITTING POWER TO STATE ELECTRICITY BOARD FROM GENERATING UNITS. FOR THE YEAR UNDER CONSIDERATION, IT FILED I TS RETURN OF INCOME AT RS. NIL, HOWEVER, PAID TAXES ON THE BOOK PROFIT U/S. 115JB OF THE I.T. ACT, 1961. THE ASSESSMENT UN DER SECTION 143(3) OF THE ACT WAS MADE ON 28.12.2007 WH EREIN AN ADDITION OF RS. 216.10 CRORES WAS MADE ON ACCOUNT O F 6 DISALLOWANCE OF ADVANCE AGAINST DEPRECIATION. SIM ILAR ADDITION WAS ALSO MADE TO THE BOOK PROFIT UNDER SEC TION 115JB OF THE I.T. ACT. BOTH THESE ADDITIONS WERE C ONFIRMED BY THE LD. FIRST APPELLATE AUTHORITY AND BEFORE THE CO ORDINATE BENCH, THE ASSESSEE WITHDREW ITS APPEAL. THEREFOR E, THE PENALTY PROCEEDINGS ORIGINALLY INITIATED WERE ADJUD ICATED UPON BY THE AO VIDE ORDER DATED 27.8.2012 LEVYING THE PE NALTY OF RS. 7,77,18,59,200/-. THE MAIN REASON FOR LEVY OF PENALTY WAS THAT THE ASSESSEE HAD NOT PREFERRED THE APPEAL AND THE AMOUNT HAS BEEN ADDED, HENCE, THE PENALTY IS LEVIAB LE HOLDING THAT ASSESSEE HAS FURNISHED THE INACCURATE PARTICULARS OF ITS INCOME. THE ASSESSEE BEING AG GRIEVED WITH THE ORDER OF THE LD. AO PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AGAINST THE ORDER OF PENALTY. THE LD. CIT(A ) AFTER CONSIDERING THE DECISION OF THE HONBLE SUPREME COU RT OF INDIA IN THE CASE OF NHPC LIMITED VS. CIT 320 ITR 3 74 (SC) DELETED THE PENALTY. WITH RESPECT TO THE OTHER AD DITION OF RS. 1.53 CRORES AND RS. 12.09 CRORES AS TRANSMISSION CH ARGES, IT WAS SUBMITTED BY THE ASSESSEE THAT THESE AMOUNTS WE RE BILLED PURSUANT TO THE ORDER OF THE CERC DATED 6.9 .2004 AND BECAUSE OF THE UNCERTAINTY INVOLVED IN RECEIPT OF T HIS MONEY AS BILLS HAVE BEEN HAVE BEEN PROTESTED BY THOSE COM PANIES. IT WAS FURTHER STATED THAT AS THE ACCRUAL OF THE IN COME IS NOT CERTAIN INCOME WAS NOT RECOGNIZED AND THEREFORE, O N THIS 7 SUM THE PENALTY IS NOT LEVIABLE. HOWEVER, AO LEVIED THE PENALTY ON ALL THESE ADDITIONS/DISALLOWANCES. THE LD. CIT(A) HAS DELETED THE PENALTY ON THESE TWO ADDITIONS ALSO FOR THE REASONS THAT THE SAME HAS BEEN EXPLAINED IN THE AS SESSEES NOTES ON ACCOUNT NO. 14(D) AND 17 AND FURTHER ORDER ED THAT THIS INCOME IN ASSESSMENT YEAR 2007-08, THERE IS N O CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE WITH RESPECT TO THESE TWO INCOME. THEREFORE, HE DELETED THE PENALTY ON THIS FOR THE ASSESSMENT YEAR 2007-08 WIT H RESPECT TO DISALLOWANCE OF RS. 211.19 CRORES BEING ADVANCE THE DEPRECIATION ON WHICH THE PENALTY IS LEVIED AND CO NTESTED. 05. BEFORE US, THE LD. CIT(DR) VEHEMENTLY CONTESTED TH AT WHEN THE ADDITIONS HAVE BEEN CONFIRMED AND ACCEPTED BY T HE ASSESSEE AS THE AMOUNT OF ADVANCE AGAINST DEPRECIAT ION IS NOT DEDUCTIBLE, PENALTY IS CORRECTLY LEVIED. FURTHER, WITH RESPECT TO THE SHORT INCOME TAX RECOVERY AND TRANSMISSION CHARGES RECOVERY, THE ADDITION HAS BEEN MADE IN SUBSEQUENT YEARS AS ACCEPTED BY THE ASSESSEE; THE AO IS CORRECT IN L EVYING THE PENALTY U/S. 271(1) ( C ) OF THE I.T. ACT ON ACCOU NT OF ADJUSTMENT TO THE BOOK PROFIT AS WELL AS TO THE NOR MAL COMPUTATION OF THE TOTAL INCOME. HE FURTHER SUBMITT ED THAT THE ASSESSEE HAS NOT AGITATED THIS ISSUE AT THE HIG HER FORUM AND HAS WITHDRAWN THE APPEAL BEFORE THE TRIBUNAL IT SELF 8 SHOWS THAT ASSESSEE HAS CLAIMED THESE DEDUCTIONS WH ICH HAS INVITED THE PENALTY UNDER SECTION 271(1) ( C ) OF T HE I.T. ACT, 1961. HE THEREFORE, VEHEMENTLY ARGUED THAT LD. CIT( A) HAS ERRONEOUSLY DELETED THE PENALTIES WITHOUT GIVING CO GENT REASONS. 06. LD. A.R. OF THE ASSESSEE SUBMITTED THAT PENALTY CO ULD NOT BE LEVIED ON ADVANCE AGAINST DEPRECIATION, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NHPC VS. CIT 320 ITR 374 (SC) WHEREIN IT HELD THAT ADVANCE AGAINST DEPRECIATION IS NOT AN INCOME. HE, THEREFORE, SUBMI TTED THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY U/S. 271(1)(C) OF THE ACT. HE FURTHER SUBMITTED THAT ON THE INCOME T AX RECOVERABLE, THE LD. CIT(A) HAS HELD THAT AS ASSES SEE HAS DISCLOSED THE FULL FACTS IN THE NOTES ON ACCOUNT, H ENCE, THE PENALTY WAS DELETED. HE FURTHER SUBMITTED THAT MER ELY WITHDRAWAL OF THE APPEAL BY THE ASSESSEE BEFORE THE COORDINATE BENCH DOES NOT ADVANCE OR HAMPER THE CAS E OF THE ASSESSEE AS FAR AS THE ISSUE OF LEVY OF PENALTY IS CONCERNED. HE FURTHER SUBMITTED THAT AFTER THE WITHDRAWAL OF THE APPEAL BY THE ASSESSEE THE HONBLE SUPREME COURT OF INDIA HAS REFERRED THE DECISION IN THE CASE OF NHPC VS. CIT (SUPRA) WH EREIN, IT IS HELD THAT ADVANCE AGAINST DEPRECIATION IS INCOME R ECEIVED IN ADVANCE AND IT IS TIMING DIFFERENCE, HENCE, AAD IS NOT A 9 RESERVE. HE FURTHER STATED THAT COORDINATE BENCH H AS DECIDED THIS ISSUE IN ITA NO. 3013-3015 DATED 309.2014 HAS ALSO HELD THAT AAD IS A LIABILITY AND IS TO BE DISCHARGED IN FUTURE. HE FURTHER STATED THAT SIMILAR DISALLOWANCES WERE MADE IN EARLIER YEARS AND NO PENALTY HAS BEEN INITIATED ON THIS ACCOUNT. WITH RESPECT TO OTHER ADDITIONS, HE SUBMITTED THAT THERE IS A COMPLETE DISCLOSURE OF THESE TWO INCOMES IN THE NO TES ON ACCOUNTS OF THE ASSESSEE. HE FURTHER ADVANCED HI S ARGUMENTS HOLDING THAT THE ASSESSEE IS A PUBLIC SEC TOR UNDERTAKING AND QUESTION OF ANY MALAFIDE CANNOT BE ATTRIBUTED. WITH RESPECT TO THE BOOK ADJUSTMENT, H E REFERRED TO THE DECISION OF THE HONBLE HIGH COURT IN THE CA SE OF CIT VS. NALWA SONS INVESTMENT LTD. 327 ITR 543. IN THE END, HE VEHEMENTLY SUBMITTED THAT ON BOTH THE ADDITIONS, TH E PENALTY CANNOT BE LEVIED UNDER SECTION 271(1) ( C) OF THE I.T. ACT, AS COMPLETE AND CORRECT PARTICULARS OF INCOME WERE FU RNISHED BY THE ASSSESSE AND THEREFORE, THE LD. CIT(A) HAS CORR ECTLY DELETED THE PENALTY LEVIED BY THE AO. 07. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE MAIN DISALLOWANCE ON WHICH THE PENALTY HAS BEEN LEVIED B Y THE AO IS ADVANCE AGAINST DEPRECIATION. IT IS NECESSARY TO UNDERSTAND WHAT THE ADVANCE AGAINST DEPRECIATION IS IN CASE OF ELECTRICITY COMPANY. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF 10 NHPC VS. CIT 320 ITR 374 (SC) VIDE PARA NO. 11 HAS HELD AS UNDER:- 11. SINCE THE AMOUNT OF ADD IS REDUCED FROM SALES, THERE IS NO DEBIT IN THE PROFIT AND LOSS ACCOUNT, T HE AMOUNT DID NOT ENTER THE STREAM OF INCOME FOR THE PURPOSES OF DETERMINATION OF NET PROFIT AT ALL, HE NCE CLAUSE (B) OF EXPLANATION 1 WAS NOT APPLICABLE. FUR THER, RESERVE AS CONTEMPLATED BY CLAUSE (B) OF EXPLANAT ION 1 TO SECTION 115JB OF THE 1961 ACT IS REQUIRED TO BE CARRIED THROUGH THE PROFIT AND LOSS ACCOUNT. AT THIS STAGE, IT MAY BE STATED THAT THERE ARE BROADLY TWO TYPES OF RESER VES, VIZ., THOSE THAT ARE ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT AND THOSE, WHICH ARE NOT, CARRIED VIA THE P ROFIT AND LOSS ACCOUNT, FOR EXAMPLE, A CAPITAL RESERVE SU CH A SHARE PREMIUM ACCOUNT. ADD IS NOT A RESERVE. IT IS NOT AN OPPORTUNITY OF PROFITS. AAD IS NOT MEANT FOR AN UN CERTAIN PURPOSES. AAD IS AN AMOUNT THAT IS UNDER OBLIGATION , RIGHT FROM THE INCEPTION, TO GET ADJUSTED IN THE FU TURE, HENCE, CANNOT BE DESIGNATED AS A RESERVE. AAD IS NO THING BUT AN ADJUSTMENT BY REDUCING THE NORMAL DEPRECIATI ON INCLUDIBLE IN THE FUTURE YEARS IN SUCH A MANNER THA T AT THE END OF THE USEFUL LIFE OF THE PLANT (WHICH IS N ORMALLY 30 YEARS) THE SAME WOULD BE REDUCED TO NIL. THEREFO RE, THE ASSESSEE CANNOT USE THE AAD FOR ANY OTHER PURPO SE (WHICH IS POSSIBLE IN THE CASE OF A RESERVE) EXCEPT TO ADJUST THE SAME AGAINST FUTURE DEPRECATION SO AS TO REDUCE THE TARIFF IN THE FUTURE YEARS. AS STATED AB OVE, AT THE END OF THE LIFE OF THE PLANT AAD WILL BE REDUCE D TO NIL. IN FACT, SCHEDULE XII-A TO THE BALANCE SHEET OF T HE FINANCIAL YEARS 2004-05 ONWARDS INDICATES RECOUPING . IN OUR VIEW, AAD IS INCOME RECEIVED IN ADVANCE. IT I S 11 TIMING DIFFERENCE. IT REPRESENTS ADJUSTMENT IN FUT URE WHICH IS INBUILT IN THE MECHANISM NOTIFIED ON MAY 2 6, 1997. THIS ADJUSTMENT MAY TAKE PLACE OVER A LONG PE RIOD OF TIME. HENCE, WE ARE OF THE VIEW THAT AAD IS NOT A RESERVE. 08. ACCORDING TO THE ABOVE DECISION OF THE HONBLE SUPR EME COURT ADVANCE AGAINST DEPRECIATION IS AN INCOME REC EIVED IN ADVANCE AND THEREFORE, IS NOT HIT BY CLAUSE (B) WH ILE WORKING OUT THE BOOK PROFIT OF THE ASSESSEE FOR THE PURPOS E OF INCOME TAX RETURNS U/S 115JB OF THE ACT. SUBSEQUENTLY, TH E COORDINATE BENCH VIDE ORDER DATED 30.9.2014 DECIDED THE ISSUE WITH RESPECT TO DISALLOWANCE OF THE SAME IN T HE NORMAL COMPUTATION OF TOTAL INCOME. THE RELEVANT FACTS WE RE STATED AT PAR NO. 2 TO PARA NO. 4 OF THAT DECISION AND SU BSEQUENTLY IN PARA NO. 5 WHEREIN IT HAS BEEN HELD BY THE C OORDINATE BENCH THAT IT CANNOT BE ADDED OR DISALLOWED UNDER T HE COMPUTATION OF INCOME UNDER NORMAL METHOD UNDER S ECTION 143(3) OF THE I.T. ACT. THEREFORE, IT IS APPARENT THAT ABOVE TWO JUDICIAL PRECEDENTS HAS CLEARLY ESTABLISHED THAT AD DITION ON ACCOUNT OF ADVANCE AGAINST DEPRECIATION CANNOT BE M ADE EITHER AT THE TIME OF COMPUTATION OF BOOK PROFIT U NDER SECTION 115JB OF THE I.T. ACT OR UNDER THE NORMAL COMPUTATI ON OF TOTAL INCOME. APPARENTLY, IN THE CASE OF THE ASSESS EE THE ADDITION IN BOTH THE METHOD OF COMPUTATION OF TOTAL INCOME 12 THIS AMOUNT HAS BEEN MADE I.E. NORMAL COMPUTATION AS WELL AS COMPUTATION UNDER SECTION 115JB OF THE ACT. WE ARE NOT ON THE ISSUE OF DISALLOWANCE OR ADDITION WHILE DETE RMINING THE INCOME OF THE ASSESSEE, BUT ON THE LEVY OF PENALTY U/S 271(1) (C) OF THE ACT ON THESE DISALLOWANCES ACCEPTED BY THE ASSESSEE. THE ISSUE OF DISALLOWANCE HAS ALREADY RE ACHED FINALITY IN THE HANDS OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS AGAINST THE ASSESSEE. IT IS A SETTLED PRINCI PLE OF LAW THAT WHERE THERE ARE TWO OPINIONS ON ALLOWABILITY OF EXP ENDITURE , IT MAKES IT DEBATABLE AND ON SUCH DISALLOWANCE PEN ALTY U/S 271(1) (C) CANNOT BE LEVIED. THE PRESENT DISALL OWANCE OF ADVANCE DEPRECIATION IS ULTIMATELY SETTLED BY THE H ONBLE SUPREME COURT OF INDIA AND THAT TOO IN FAVOR OF THE ASSESSEE, THEREFORE EVEN IF THE ASSESSEE HAS ACCEPTED THE ADD ITION IN ITS HANDS, IT CANNOT BE SAID THAT ASSESSEE HAS FURN ISHED INACCURATE PARTICULARS OF INCOME. HENCE ON THIS DISALLOWANCE PENALTY U/S 271(1) ( C) CANNOT BE LEVI ED. HON SUPREME COURT IN CASE OF CIT V RELIANCE PETRO PRODU CTS LIMITED [322 ITR 158] (SUPREME COURT ) HAS HELD TH AT 10. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCUR ATE PARTICULARS. IN WEBSTER'S DICTIONARY, THE WORD 'INA CCURATE' HAS BEEN DEFINED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT ; NOT ACCORDING TO TRUTH ; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRA NSCRIPT.' 13 11. WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTICULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SU PPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CO RRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DET AILS SUPPLIED BY THE * [2007] 291 ITR 519 (SC). ** [2008] 306 ITR 277 (S C). ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT O R ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE N O QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MA DE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 12. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A O F THE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THER EFORE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORREC T ; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITH ER OF THE TWO FORMS ; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSE D FRAUDULENTLY ; (II) AN ITEM OF EXPENDITURE MAY BE F ALSELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTE MPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPE S AMOUNT TO CONCEALMENT OF PARTICULARS OF ONE'S INCOME AS WE LL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAIL S OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COU LD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN O R NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, W HICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT T HE PENALTY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTIO N OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAI M MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASO N, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C ). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 13. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT M ADE IN SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 2 3 VST 249 AS REGARDS THE PENALTY ARE APPOSITE. IN THE AFOREME NTIONED DECISION WHICH PERTAINED TO THE PENALTY PROCEEDINGS UNDER THE TAMIL NADU GENERAL SALES TAX ACT, THE COURT HAD FOU ND THAT THE AUTHORITIES BELOW HAD FOUND THAT THERE WERE SOM E INCORRECT STATEMENTS MADE IN THE RETURN. HOWEVER, T HE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNTS OF THE ASSESSEE. THIS COURT, THEREFORE, OBSERVED (PAGE 251) : 14 'SO FAR AS THE QUESTION OF PENALTY IS CONCERNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORPORATED IN THE APPELLANT'S ACCOUNT BOOKS. WHER E CERTAIN ITEMS WHICH ARE NOT INCLUDED IN THE TURNOVER ARE DI SCLOSED IN THE DEALER'S OWN ACCOUNT BOOKS AND THE ASSESSING AU THORITIES INCLUDES THESE ITEMS IN THE DEALER'S TURNOVER DISAL LOWING THE EXEMPTION, PENALTY CANNOT BE IMPOSED. THE PENALTY L EVIED STANDS SET ASIDE.' 09. IN THE PRESENT CASE, THE CLAIM OF THE ASSSESSEE IS NOT AT ALL DISALLOWABLE THEREFORE IT STANDS ON BETTER FOOTING THAN THE CASE DECIDED BY HONOURABLE SUPREME COURT IN ABOVE C ASE. FURTHERMORE, WE DO NOT FIND ANY PROVISIONS UNDER SE CTION 271(1) ( C) WHICH DEPENDS UPON THE FILING OF THE AP PEAL BY THE ASSESSEE BEFORE THE HIGHER FORUM CONTESTING THE A DDITION. THEREFORE, WHETHER THE ASSESSEE FILES AN APPEAL OR DID NOT CONTEST THE ADDITION OR DISALLOWANCE AT HIGHER FOR UMS , IT DOES NOT HAVE ANY BEARING ON THE STATUTORY PROV ISIONS OF SECTION 271(1) ( C) OF THE I.T. ACT, 1961IN VIEW OF THIS, WE DO NOT INCLINE TO UPHOLD THE ORDER OF THE AO ON LEVY OF PENALTY UNDER SECTION 271(1) ( C) OF THE I.T. ACT, ON ADV ANCE AGAINST DEPRECIATION DISALLOWED WHILE COMPUTING THE BOOK PR OFIT UNDER SECTION 115JB OF THE I.T. ACT AS WELL AS UNDE R THE NORMAL COMPUTATION OF TOTAL INCOME. IN VIEW OF TH IS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A) IN CANCELLING THE PENALTY LEVIED BY THE AO. 15 10. WITH RESPECT TO OTHER DISALLOWANCES OF INCOME TAX R ECOVERY AND TRANSMISSION CHARGES, WE ARE OF THE OPINION TH AT BOTH THESE ISSUES WERE AMPLY DISCLOSED IN NOTE NO. 14(D ) AND 17 OF THE AUDITED ACCOUNTS OF THE ASSESEE. THESE NOTES AL SO SHOWS THAT THE SAME HAVE BEEN BASED ON THE ORDER OF THE C ERC AND THE CLAIM HAS BEEN DISPUTED BY THE PAYER. IN VIEW OF THIS, THE INCOME HAVE NOT BEEN SHOWN BY THE ASSESSEE FOR TAX PURPOSES. SUBSEQUENTLY, ON THE SUBMISSION OF THE AS SESSEE, SUM HAVE BEEN ADDED TO THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08. ON THAT BASIS, THE ADDITIO N WAS MADE IN ASSESSMENT YEAR 2005-06. IN THE PRESENT CAS E, THE ACCRUAL OF THE INCOME ITSELF IS IN DOUBT WHEN THE PAYEE HAS PROVIDED THE SAME, BUT THE PAYER HAS NOT ADMITTED T HE LIABILITY. FURTHER, THE ASSESSEE ITSELF HAS BROUGHT ON RECORD BEFORE THE AO THAT AS THE SAME AMOUNTS HAVE BEEN RE CEIVED IN ASSESSMENT YEAR 2007-08, IT CAN BE ADDED IN THE INCOME OF THE CURRENT YEAR AND MAY BE EXCLUDED FROM ASSESSMEN T YEAR 2007-08. THE FULL FACTS OF PARTICULAR DISPUTE AND UNCERTAINTY ARISING ON ACCOUNT OF RECEIPT OF THE INCOME WERE D ISCLOSED AND REASON WHY ASSESSEE DID NOT OFFER IT FOR TAXAT ION WAS ALSO AVAILABLE BEFORE LD AO. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS THERE OF. THEREFORE, WE CONCUR WITH THE VIEW OF THAT LD. CIT(A) IN DELETING THE PENALTY UNDER SECTION 271(1)(C) ON BOT H THESE 16 DISALLOWANCES. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETING THE PENAL TY ON INCOME TAX RECOVERABLE FROM STATE ELECTRICITY BOARD OF RS. 1.53 CRORES AND TRANSMISSION CHARGES OF RS. 12.09 CRORES . 11. IN THE RESULT, WE CONFIRM THE ORDER OF THE LD. CI T(A) DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT FOR AY 2006- 07 AND AY 2005-06. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2017. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 09/01/2017 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR 17