The ITO, Ward-2(2)(4), Surat V. M/s. Umapati Synthetics P. Ltd., Surat

ITA 3049/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2120 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 21-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K CHANDANI
• Assessee Lawyers: MANISH R MALPAN I
• Keywords: Business income; Difference of opinion; Capital receipt
• Section: 271(1)(c)

Judgement Text

UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 1 OF 15 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.2640/AHD/2016 / A.Y.:2011-12 M/S. UMAPATI SYNTHETIC PVT. LTD. , 302-A 3 RD FLOOR CENTRE POINT RING ROAD SURAT 395002 PAN:AAACU 6139P V S . DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 2(1)(1) SURAT APPELLANT /RESPONDENT . . ./ I.T.A NO.3049/AHD/2016 / A.Y.:2011-12 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 2(1)(1) SURAT VS. M/S. UMAPATI SYNTHETIC PVT. LTD. , 302-A 3 RD FLOOR CENTRE POINT RING ROAD SURAT 395002 PAN:AAACU 6139P APPELLANT /RESPONDENT /ASSESSEE BY SHRI MANISH R. MALPANI, CA /REVENUE BY SHRI J. K. CHANDANI, SR. D.R. / DATE OF HEARING: 26.04.2018 /PRONOUNCEMENT ON 18. 05.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THESE ARE CROSS APPEALS BY THE ASSESSEE AND REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED OF COMMISSIONER OF INCOME TAX (APPEALS)-2, SURAT (IN SHORT THE CIT (A)) DATED 11.08.2016 PERTAINING TO ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 2 OF 15 FROM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME- TAX, CIRCLE - 2(1)(2) SURAT (IN SHORT THE AO) DATED UNDER SECTION 271(1)(C) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. ASSESSEE GROUNDS OF APPEAL ARE AS UNDER : 3. GROUND NO. 1 STATES THAT THE LD. CIT (A) ERRED IN SUSTAINING PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF DISALLOWANCE OF LOSS IN TRADING FABRIC OF RS. 57,92,598 WHEREAS LOSS SUSTAINED IN QUANTUM PROCEEDING WAS 45% OF TOTAL LOSS AND 4. GROUND NO. 2 STATES THAT CIT (A) ERRED IN NOT QUASHING PENALTY PROCEEDINGS IN LAW ON THE GROUND THAT THERE WAS NO SPECIFIC MENTION AS TO WHICH OF THE DEFAULTS ( I.E. CONCEALMENT OF INCOME OF FURNISHING OF INACCURATE PARTICULARS OF INCOME ) WAS COMMITTED BY THE APPELLANT WAS MENTIONED IN THE SHOW CAUSE NOTICE. 5. REVENUE`S GROUNDS OF APPEAL ARE AS UNDER: 6. GROUND NO.1 & 2 OF REVENUE IS AGAINST THE DELETION OF PENALTY CONSIDERING THE REBATE /EXEMPTION ON ELECTRICITY DUTY ON THE GROUND THAT THIS ADDITION IS LEGAL ONE WITHOUT APPRECIATING THAT HAT REBATE/ EXEMPTION AROSE IN THE YEAR UNDER CONSIDERATION AND IT WAS RECEIVED FROM GEB IN A.Y. 2011-12. 7. GROUND NO. 3 OF REVENUE IS AGAINST THE DELETION OF PENALTY ON INTEREST SUBSIDY RECEIVED ON INTEREST SUBSIDY WITHOUT APPRECIATING THAT SUBSIDY WAS IN THE NATURE OF REVENUE RECEIPT AND THE ASSESSEE WAS ENTITLED FOR THE SUBSIDY UNDER CONSIDERATION ON ACCOUNT OF PAYMENT OF INTEREST ON LOAN, AND THEREFORE, THE ASSESSEE`S FAILURE TO INCLUDE SAME INTO TOTAL INCOME AMOUNTED CONCEALMENT OF INCOME. 8. THE ABOVE GROUNDS ARE BEING DEAL WITH TOGETHER. 9. SUCCINCT FACT ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CRIMP YARN FROM TEXTURING YARN AND POY AND TRADING IN FABRIC. THE ASSESSEE HAS SHOWN LOSS OF UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 3 OF 15 RS.1,28,72,440 IN TRADING ACTIVITIES TO BE CARRY FORWARD DURING THE YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE BY WHICH IT CAN PROVE THAT THE THERE WAS TRADING LOSS IN FABRIC. THEREFORE, SAME WAS DISALLOWED ON WHICH PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. SIMILARLY, THE ASSESSEE HAS CLAIMED DURING THE YEAR EXEMPTION OF RS. 52,99,02 AND INTEREST SUBSIDY OF RS. 10,87,000 RECEIVED WHICH WERE HELD TO BE BUSINESS INCOME UNDER SECTION 28(IV),FOR WHICH THE ASSESSEE FAILED TO DISCLOSED IN RETURN OF INCOME. HENCE, PENALTY PROCEEDINGS WERE ALSO INITIATED ON THIS POINT ALSO. IN APPEAL, CIT (A) HAS REDUCED THE LOSS BY 45% TO RS. 57,92,598 CONSIDERING THE FACTS THAT CASH SALES CONSTITUTED 32.53% OF TOTAL SALES. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS CLAIMED THAT THE DISALLOWANCE WERE MADE ON ESTIMATE BASIS, HENCE, PENALTY IS NOT LEVIABLE, IN THE LIGHT OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. WHITELINE CHEMICALS UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 4 OF 15 [2013] 32 TAXMANN.COM 192 (GUJARAT). HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE LOSS BY PRODUCING SALE BILLS / VOUCHERS AND CIT (A) BY TAKING HOLISTIC VIEW HAS RESTRICTED THE DISALLOWANCE TO 45% OF LOSS OF CASH SALES. THEREFORE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF TRADING LOSS SUSTAINED WHICH WAS NOT VERIFIABLE HENCE, CASE LAWS DONT COVER THE CASE OF THE ASSESSEE. WITH REGARD TO THE YEAR EXEMPTION OF RS. 52,99,402 OF ELECTRICITY REBATE, THE AO HELD THAT THE ASSESSEE HAS OFFERED IT IN NEXT YEAR BUT AS THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, IT SHOULD HAVE BEEN OFFERED IN CURRENT YEAR, HENCE, HELD THAT THIS IS FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C). FURTHER, THE CLAIM OF INTEREST SUBSIDY OF RS.10,87,000 IS CAPITAL RECEIPT IS NOT CORRECT AS THESE RECEIPT ARE OF REVENUE IN NATURE AND THE PURPOSE FOR WHICH SUBSIDY RECEIVED IS TO BE CONSIDERED. IN VIEW OF THESE FACTS, THE AO WAS SATISFIED THAT THIS IS A FIT CASE FOR CONCEALMENT OF INCOME AND FURNISHING OF UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 5 OF 15 INACCURATE PARTICULARS OF INCOME. ACCORDINGLY THE AO LEVIED PENALTY OF RS. 40,45,560 BEING 100% OF TAX SOUGHT TO BE EVADED AMOUNT ON THE ABOVE STATED AMOUNT. 10. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE CIT (A) NOTED THAT IT WAS HELD IN APPELLATE PROCEEDINGS THAT IN ABSENCE OF VERIFICATION OF CASH SALES, THE CLAIM OF THE APPELLANT TO THE EXTENT OF 55% WAS CONSIDERED A SAME AS GENUINE BUT 45% OF THE CASH SALES WAS HELD TO BE NON VERIFIABLE, HENCE, ADDITION WAS CONFIRMED FOR FAILURE TO FURNISH SUPPORTING DOCUMENTS. THEREFORE, THE CIT (A) VIEWED THAT THE CONTENTION OF THE APPELLANT THAT PENALTY CANNOT BE MADE ON ESTIMATE BASIS IS DEVOID OF FACTS AND MERITS AS ESTIMATION IS BASED ON UNSUPPORTED CASH SALES. THEREFORE, THE CIT (A) HAS CONFIRMED THE PENALTY ON THIS COUNT. WITH REGARD INTEREST SUBSIDY OFFER 10,87,000, THE CIT (A) HELD THAT ISSUE IS DEBATABLE ONE AS THE SUBSIDY IS CAPITAL RECEIPT OR REVENUE RECEIPT, HENCE, DELETED THE PENALTY ON THIS COUNT. SIMILARLY, PENALTY ON ELECTRICITY DUTY UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 6 OF 15 EXEMPTION OF RS. 52,99,402 WAS DELETED BY OBSERVING THAT IT IS LEGAL ISSUE OF DISPUTE FOR WHICH YEAR IS TO BE TAXED AND DUE TO DISPUTE BETWEEN THE ASSESSEE AND GEB, THE APPELLANT INCLUDED THIS AMOUNT IN A.Y. 2012-13 WHEN THE DISPUTE WAS FINALLY SETTLED. HENCE, PENALTY ON THIS QUANTUM WAS DELETED. 11. BEING, AGGRIEVED THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL AGAINST THE SUSTAINING THE PENALTY ON DISALLOWANCE TRADING LOSS OF WHEREAS THE REVENUE HAS AGITATED AGAINST THE DELETION OF PENALTY ON ACCOUNT OF ELECTRICITY DUTY EXEMPTION AND INTEREST SUBSIDY. 12. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ASSESSEE HAS PURCHASED 322133 PIECES OF FABRIC AND SAREE FOR RS. 5.41 CRORES WHICH WERE SOLD FOR RS. 4.13 CRORES RESULTING INTO LOSS OF RS. 1.28 CRORES. THE BILLS AND VOUCHERS OF SAME WERE MISPLACED DUE TO SHIFTING OF OFFICE TO NEW PREMISES IN F.Y. 12-13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE CORRESPONDING RECEIPTS AND PAYMENTS WERE DULY REFLECTED IN THE BANK UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 7 OF 15 STATEMENT. THE LEARNED COUNSEL FOR THE ASSESSEE TOOK US THROUGH ORDER OF TRIBUNAL WHEREIN IT WAS OBSERVED BY TRIBUNAL THAT IN SUCH CASE LEDGER ACCOUNT OF THE PURCHASE /SALES PARTIES ALSO AVAILABLE WHICH COULD HAVE BEEN VERIFIED BY THE AO. THE LD. CIT (A) HAS HELD THAT THERE WAS CASH SALES OF 32.53% OF THE TOTAL SALES, WHICH WAS MADE ON CASH BASIS. THEREFORE, THE TRIBUNAL HAS OBSERVED THAT LOSS TO THE EXTENT OF 32.53% WAS NOT VERIFIABLE DUE TO CASH SALES. HOWEVER, THE LD. CIT (A) HAS DISALLOWED THE LOSS TO 45% TO THE EXTENT OF RS. 57,92,598. AFTER; CONSIDERING THE FINDINGS OF CIT (A), TRIBUNAL OBSERVED THAT THE AVERAGE SALES AND CHEQUES SALES/PURCHASE MADE THROUGH CHEQUES WERE REFLECTED IN THE BANK ACCOUNT, THEREFORE, DISALLOWANCE OF LOSS OF 32.53% WAS APPROPRIATE AND LOGICAL SINCE THE SALE WERE NOT VERIFIABLE, ACCORDINGLY DISALLOWANCE WERE RESTRICTED TO 32.53% AS AGAINST 45% SUSTAINED BY CIT (A). THUS, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT DISALLOWANCE MADE @ 100% BY THE AO WERE REDUCED TO 45% BY CIT (A) AND FURTHER REDUCED TO 32.53% BY UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 8 OF 15 TRIBUNAL. THEREFORE, IT IS CASE OF ESTIMATION OF INCOME ON BY MAKING ARITHMETICAL CALCULATION AND NOT A POSITIVE CONCEALMENT OF INCOME, HENCE, PENALTY IS NOT EXIGIBLE ON SUCH DISALLOWANCE OF LOSS WHICH WAS DISALLOWED DUE TO BILLS WERE NOT AVAILABLE WHEREAS LEDGER ACCOUNT IS AVAILABLE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED IN THE CASE OF GOYAL INDUSTRIES LTD. V. DCIT [I.T.A. NO. 1122/AHD/2012 DTD. 27.07.2012 WHEREIN IT WAS HELD WHERE THE ADDITION IS SUSTAINED ON ESTIMATION BASIS NO PENALTY IS JUSTIFIED UNDER SECTION 271(1)(C). SIMILARLY, HON`BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. NORTON ELECTRONIC SYSTEMS (P) LTD. HELD THAT WHERE PENALTY IMPOSED ON ADDITIONS OUT OF WHICH PARTLY DELETED BY CIT (A) AND PARTLY DELETED BY TRIBUNAL , PENALTY IS NOT SUSTAINABLE IN LAW. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) WAS ISSUED WITHOUT STRIKING OUT ANY OF THE TWO LIMBS I.E. FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, HENCE, THE AO WAS NOT SURE UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 9 OF 15 FOR WHICH DEFAULT PENALTY IS INITIATED, HENCE, INITIATION OF PENALTY IS NOT VALID AS HELD IN THE CASE OF CIT V. WHITEFORD INDIA LTD. [2013] 38 TAXMANN.COM 15 (GUJARAT) WHEREIN IT WAS HELD THAT IN ABSENCE OF CLEAR FINDING OF THE ASSESSING OFFICER WHETHER ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OF FURNISHING OF INACCURATE PARTICULARS OF INCOME, PENALTY LEVIED UNDER SECTION 271(1)(C) CANNOT BE SUSTAINED. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE IN THE CASE OF CIT V. SSA`S EMERALD MEADOWS [2016] 242 TAXMAN 180 : [2016] 73 TAXMANN.COM 248 (SC) [2016] 8 TMI 1145 (SC), CHANDRA PRAKASH BUBNA V. ITO [2015] 64 TAXMANN.COM 155 (KOL) WHEREIN IT WAS HELD THAT PENALTY PROCEEDINGS INITIATED AND LEVIED, WITHOUT SPECIFYING CHARGE AS TO WHETHER PENALTY IS INITIATED OR LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, IS INVALID AND NOT SUSTAINABLE IN LAW. 13. WITH REGARD TO CONTENTION OF REVENUE THAT CIT (A) ERRED IN DELETING PENALTY ON ACCOUNT OF DUTY EXEMPTION OF ELECTRICITY AND UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 10 OF 15 INTEREST SUBSIDY, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT (A). IT WAS CONTENDED THAT DUTY EXEMPTION WAS UNDER DISPUTE WITH GEB AND WHEN IT WAS FINALISED, THEREFORE, RECEIPTS WERE DISCLOSED IN THE YEAR IN WHICH IT WAS FINALISED. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED IN THE CASE OF CIT V. SHREE BALAJI ALLOYS [2017] 80 TAXMANN.COM 239(SC) WHEREIN IT WAS HELD THAT EXCISE REFUND AND INTEREST SUBSIDY RECEIVED BY THE ASSESSEE IN PURSUANCE OF INDUSTRIAL POLICY OF GOVERNMENT FOR STATE WOULD BE CAPITAL RECEIPT. THEREFORE, THIS ISSUE IS OF DEBATABLE IN NATURE ON WHICH NO PENALTY IS THEREFORE, LEVIABLE. 14. PER CONTRA, THE LD. SR. DR SUBMITTED THAT THE CIT (A) HAS RIGHTLY SUSTAINED PENALTY OF DISALLOWANCE OF LOSS AS THE ASSESSEE HAS FAILED TO ADDUCE ANY EVIDENCE REGARDING GENUINENESS OF CASH SALES. EVEN IN ESTIMATION PENALTY CAN BE LEVIED DUE TO OMISSION ON THE PART OF THE ASSESSEE TO MAINTAIN BOOKS OF ACCOUNTS. THEREFORE, CIT (A) WAS CORRECT IN UPHOLDING THE PENALTY ON THIS SCORE. WITH REGARD TO DELETION OF PENALTY ON EXEMPTION OF RS. UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 11 OF 15 52,99,409 BEING DUTY EXEMPTION, THE LD. SR. DR CONTENDED THAT THE ASSESSEE HAS FAILED TO ACCOUNT THE SAME EVEN THOUGH IT FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE, RECEIPTS SHOULD HAVE BEEN ACCOUNTED ON ACCRUAL BASIS. WITH REGARD TO INTEREST SUBSIDY OF RS. 10,87,000, THE LD. SR. DR SUBMITTED THAT SAME IS RECEIPT OF REVENUE IN NATURE HENCE, SHOULD HAVE BEEN INCLUDED IN ITS TOTAL INCOME. FAILURE TO INCLUDE AMOUNTS FURNISHING OF INACCURATE PARTICULARS OF INCOME. HENCE, THE CIT (A) WAS NOT JUSTIFIED IN DELETING THE PENALTY ON THIS ACCOUNT. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE AO DISALLOWED 100% CASH PURCHASES FOR NON PRODUCTION OF PURCHASES BILLS, HOWEVER, THE CORRESPONDING RECEIPTS AND PAYMENTS WERE DULY REFLECTED IN THE BANK STATEMENT. FURTHER, TRIBUNAL OBSERVED THAT IN SUCH CASE LEDGER ACCOUNT OF THE PURCHASE /SALES PARTIES ALSO AVAILABLE WHICH COULD HAVE BEEN VERIFIED BY THE AO. WE FIND THAT UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 12 OF 15 THE CIT (A) HAS RESTRICTED THE DISALLOWANCE TO 45% OF PURCHASES WHEREAS THE TRIBUNAL HAS FURTHER RESTRICTED TO 32.53% OF THE TOTAL CASH SALES MEANING THEREBY THAT ADDITION SO MADE IS ENTERTAINMENT ONLY AND THE DIFFERENT AUTHORITIES HAVE INTERPRETED ESTIMATE IN THEIR OWN WAY. IT IS ALSO NOTICED THAT TRIBUNAL OBSERVED THAT THE AVERAGE SALES AND CHEQUES SALES/PURCHASE MADE THROUGH CHEQUES WERE REFLECTED IN THE BANK ACCOUNT, THEREFORE, DISALLOWANCE OF LOSS OF 32.53% WAS APPROPRIATE AND LOGICAL SINCE THE SALE WERE NOT VERIFIABLE, ACCORDINGLY DISALLOWANCE WERE RESTRICTED TO 32.53% AS AGAINST 45% OF SUSTAINED BY CIT (A). THUS, IT IS CASE OF ESTIMATE ON ARITHMETICAL CALCULATION AND NOT A POSITIVE CONCEALMENT OF INCOME, HENCE, PENALTY IS NOT EXIGIBLE ON SUCH DISALLOWANCE OF LOSS ONLY DISALLOWED DUE TO BILLS WERE NOT AVAILABLE WHEREAS LEDGER ACCOUNT IS AVAILABLE. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED IN THE CASE OF GOYAL INDUSTRIES LTD. V. DCIT [I.T.A. NO. 1122/AHD/2012 DTD. 27.07.2012 WHEREIN IT WAS HELD THAT UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 13 OF 15 ADDITION SUSTAINED ON ESTIMATION BASIS NO PENALTY IS JUSTIFIED UNDER SECTION 271(1)(C). SIMILARLY, HON`BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. NORTON ELECTRONIC SYSTEMS (P) LTD. HELD THAT WHERE PENALTY IMPOSED ON ADDITIONS OUT OF WHICH PARTLY DELETED BY CIT (A) AND PARTLY DELETED BY TRIBUNAL , PENALTY IS NOT SUSTAINABLE IN LAW. COMING TO DELETION OF PENALTY ON EXEMPTION DUTY REBATE BY GEB, WE FIND THAT THE ASSESSEE HAS NOT CONCEALED THE PARTICULAR OF INCOME, IT IS A CASE OF TAXABILITY AS TO WHICH YEAR IT WAS TO BE TAXED. SINCE THE FINAL SETTLEMENT OF DISPUTE IS TAKEN IN NEXT YEAR THEREFORE, THE ASSESSEE HAS OFFERED THE SAID REBATE / EXEMPTION IN NEXT YEAR WHEREAS THE AO HAS TAXED THE SAME FOR THE YEAR UNDER CONSIDERATION. THUS, THIS IS A DIFFERENCE OF OPINION ON THE FACTS AS DISCLOSED IN THERE RETURN OF INCOME , THEREFORE, NO PENALTY UNDER SECTION 271(1)(C) IS LEVIABLE ON THIS ISSUE AND LD. CIT (A) WAS PERFECTLY IN ORDER TO DELETE THE PENALTY ON THIS ISSUE. WITH REGARD TO INTEREST SUBSIDY RECEIVED BY THE ASSESSEE , THE ISSUE IS DEBATABLE AS VARIOUS COURTS HAVE UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 14 OF 15 INTERPRETED THE SAID TO BE CAPITAL RECEIPT . THE HON`BLE SUPREME COURT IN THE CASE OF SHREE BALAJI ALLOYS [2017] 80 TAXMANN.COM 239 (SC) HELD THAT EXCISE REFUND AND INTEREST SUBSIDY RECEIVED BY THE ASSESSEE IN PURSUANCE OF INDUSTRIAL POLICY OF GOVERNMENT FOR STATE WOULD BE CAPITAL RECEIPT. THEREFORE, THE ISSUE WHICH IS DEBATABLE IN NATURE , NO PENALTY FOR CONCEALMENT OF INCOME IS EXIGIBLE. HENCE, THE CIT (A) WAS RIGHT IN DELETING THE SAME. 16. WE MAY FURTHER OBSERVE THAT PENALTY SHOW-CAUSE NOTICE WAS WITHOUT ANY SPECIFIC CHARGE ONE, HENCE, SUFFERED FROM VIRUS AS THE AO WAS NOT SURE ON WHICH LIMB THE PENALTY IS TO BE LEVIED. THE LEARNED COUNSEL RELIED ON VARIOUS DECISION IN THIS REGARD LIKE CIT V. SSA`S EMERALD MEADOWS [2016] 73 TAXMANN.COM 248 (SC) [2016] 8 TMI 1145(SC) , CIT V. MANU ENGG. WORKS [1980] 122 ITR 306 (GUJ) WHEREIN IT WAS LAID DOWN THAT PENALTY PROCEEDINGS INITIATED WITHOUT APPLICATION OF MINED, NO PENALTY IS LEVIABLE. FURTHER, THE HON`BLE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF CIT V. WHITEFORD INDIA LTD. [2013] 38 TAXMANN.COM 15 UMAPATI SYNTHETIC PVT. LTD. V. DCIT-2(1)(1)SURAT /I.T.A. NO.2640 & 3049/AHD/2016/A.Y.:11-12 PAGE 15 OF 15 (GUJARAT) HELD THAT IN ABSENCE OF CLEAR FINDING OF THE ASSESSING OFFICER WHETHER ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OF FURNISHING OF INACCURATE PARTICULARS OF INCOME, PENALTY LEVIED UNDER SECTION 271(1)(C) CANNOT BE SUSTAINED. IN THE LIGHT OF THESE FACTS AND CIRCUMSTANCES, WE FIND THAT THE PENALTY SUSTAINED ON ACCOUNT OF LOSS SUSTAINED BY THE CIT (A) IS NOT TENABLE IN LAW, HENCE, SAME IS DELETED AND ORDER OF LD. CIT (A) IN DELETING THE PENALTY ON THE ISSUE OF EXEMPTION OF ELECTRICITY DUTY AND INTEREST SUBSIDY IS UPHELD. IN VIEW OF THIS MATTER, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THAT THE APPEAL OF REVENUE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED IN I.T.A. NO. 2640/AHD/2016 AND APPEAL OF REVENUE IN I.T.A. NO. 3049/.AHD/2016 IS DISMISSED. 18. ORDER PRONOUNCED IN THE OPEN COURT ON 18-05-2018. SD/- SD/- ( . . ) /(C.M. GARG) ( . . ) /(O.P.MEENA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER / SURAT: / DATED : 18 TH MAY, 2018/OPM COPY SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT