MADHU SILICA PVT. LTD.,BHAVNAGAR V. THE DY.CIT, CIRCLE-1, BHAVNAGAR

ITA 702/AHD/2024

AI Insights

Madhu Silica Pvt. Ltd. filed two appeals against the orders of the National Faceless Appeal Centre (NFAC), Delhi, concerning the assessment year 2014-15. The primary contention was regarding the penalty imposed under section 271(1)(c) for alleged furnishing of inaccurate particulars of income. The Assessing Officer had disallowed a deduction under section 32AC, leading to a penalty. The Tribunal examined whether the penalty was justified, considering the procedural lapses in the notice issued and the substantive issues regarding the claim under section 32AC, which was pending before the High Court. The Tribunal's decision emphasized the need for precise specification in penalty notices and clarified that mere disallowance of a tax claim does not automatically lead to a penalty under section 271(1)(c).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315667 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158, CIT vs. Emerald Meadows 73 taxmann.com 248
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRATHVI RAJ MEENA
• Assessee Lawyers: TUSHAR HEMANI; PARIMALSINH B. PARMAR
• Keywords: Depreciation; Tax effect; Bonafide belief; Principle of natural justice; Rectification of order
• Section: 143(3); 154; 271(1)(c); 14A; 115JB

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before Dr. BRR Kumar, Vice President And Ms. Suchitra Kamble, Judicial Member Madhu Silica Pvt. Ltd., Plot No. 147, GIDC Indl. Estate, Vartej, Bhavnagar, Gujarat-364060 PAN: AABCM4381J (Appellant) Vs The Dy. CIT, Circle-1 Bhavanagar (Respondent) Assessee by: Shri Tushar Hemani, A.R. & Shri Parimalsinh B. Parmar, A.R. Revenue by: Shri Prathvi Raj Meena, CIT-D.R. Date of hearing : 17-04-2025 Date of pronouncement : 13-05-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member: These two appeals are filed against the order dated 15- 02-2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2014-15 2. The grounds of appeals are as under:- ITA No. 701/Ahd/2024 “1. The Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in initiating and levying penalty u/s. 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order. 2. The Ld. CIT(A) has erred both in law and on the facts of the case in confirming the penalty of Rs.5,46,79,979/- (rectified amount Rs.4,92,24,537/-) levied u/s. 271(1)(c) of the Act. ITA Nos. 701 & 702/Ahd/2024 Assessment Year 2014-15 I.T.A Nos. 701 & 702/Ahd/2024 Madhu Silica Pvt. Ltd., A.Y. 2014-15 2 3. In any case, quantification of the penalty is erroneous and excessive. 4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The Appellant craves leave to add, amend, alter, edit, delete, modify, or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. Total tax effect Rs.5,46,79,979/-(rectified amour Rs.4,92,24,537)” ITA No. 701/Ahd/2024 “1. The Ld. CIT(A) has erred in law and on facts of the case in not rectifying the mistake apparent on record in the order u/s. 271(1)(c) of the Act dated 19.03.2019 u/s. 154 of the Act. 2. The Ld. CIT(A) has erred in law and on facts of the case in partly rectifying the incorrect computation of penalty made by the Ld. AO. 3. Both the lower authorities have erred in quantifying the penalty amount which is erroneous and excessive. 4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 5. The Appellant craves leave to add, amend, alter, edit, delete, modify, or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. Total tax effect Rs.4,92,24,537/-” 3. The assessee filed return of income for assessment year 2014-15 on 25-09-2014 declaring total income at Rs. 36,02,12,530/- and tax was paid u/s. 115JB on income to Rs. 83,90,46,530/-. The assessment was completed u/s. 143(3) and additions were made to the total normal income by disallowing deduction u/s. 32AC of Rs. 16,08,70,789/- and disallowance u/s. 14A of Rs. 32,11,000/-. The Assessing Officer initiated penalty proceedings u/s. 271 I.T.A Nos. 701 & 702/Ahd/2024 Madhu Silica Pvt. Ltd., A.Y. 2014-15 3 after recording satisfaction by making addition of Rs. 16,08,70,789/- u/s. 32AC for furnishing the inaccurate particulars of income. The Assessing Officer issued show cause notice u/s. 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961 dated 20-10-2016. The assessee did not file any reply and therefore the Assessing Officer imposed penalty of Rs. 5,46,79,979/- for furnishing inaccurate particulars of income . 4. Being aggrieved by the penalty order, the appeal filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. A.R. submitted that the notices issued u/s. 274 r.w.s 271(1)(c) of the Income Tax Act, 1961 dated 20- 10-2016 has not categorically mentioned under which limb of section 271(1)(C) the penalty was imposed. The ld. A.R. further submitted that the assessee claimed deduction of Rs. 16,08,70,789/- u/s 32AC while filing the return of income. One of the items was pollution control equipments of Rs. 10,80,64,368/- which are eligible for depreciation at 100%. However, since the pollution control equipments were acquired after 30-09-2013, the depreciation was claimed at half rate i.e. 50%. The Assessing Officer denied claim u/s. 32AC on the ground that new asset for purpose of section 32AC will not include any plant and machinery, whole of actual cost of which is allowed as deduction (whether by deprecation or otherwise) in computing the income chargeable under the head profits and gains of I.T.A Nos. 701 & 702/Ahd/2024 Madhu Silica Pvt. Ltd., A.Y. 2014-15 4 business or profession. Thus, the assessee is not eligible u/s. 32AC of the Act and the same was denied by the Assessing Officer which was later confirmed by the CIT(A) as well as ITAT. The ld. A.R. submitted that this issue has been admitted by the Hon’ble High Court and is pending before the Hon’ble High Court. The ld. A.R. submitted that merely rejecting the claim of the assessee cannot be the ground for levy of penalty, as this will not be termed inaccurate furnishing of particulars of income u/s. 271(1)(c). The ld. A.R. relied upon the decision of Hon’ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158. The ld. A.R. submitted that the quantification of penalty is also substantially higher side in view of the book profit u/s. 115JB of the Act. 6. The ld. D.R. relied upon the assessment order and the order of the CIT(A). 7. We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the notice u/s. 274 r.w.s 274(1)(c) of the Income Tax Act, 1961 dated 20-10-2016 has not at all specified under which limb section 271(1)(c) has been invoked. Thus, the decision of Hon’ble Apex Court in case of CIT vs. Emerald Meadows 73 taxmann.com 248 and 73 taxmann.com 241 is squarely applicable in the present case. Besides this, the mere disallowance of the claim which otherwise genuine and under bonafide belief, claimed by the assessee, cannot be the criteria for levying penalty I.T.A Nos. 701 & 702/Ahd/2024 Madhu Silica Pvt. Ltd., A.Y. 2014-15 5 u/s. 271(1)(c). Mere rejection of claim cannot be the ground for levying penalty u/s. 271(1)(c) as held by the Hon’ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158. Thus, the penalty imposed u/s. 271(1)(c) of the Act does not survive. Hence, the ITA No. 701/Ahd/2024 filed by the assessee is allowed. 8. As relates to ITA No. 702/Ahd/2024, the assessee has challenged the order of the CIT(A) in respect of rectification order dated 25-04-2019 passed u/s. 154 in consonance with the rectification application of the assessee regarding the penalty order itself. Thus, it is consequential to the present penalty year. Hence, ITA No. 702/Ahd/2024 is dismissed as infructuous. 9. In the result, appeal being ITA No. 701/Ahd/2024 filed by the assessee is allowed and ITA No. 702/Ahd/2024 is dismissed. Order pronounced in the open court on 13-05-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 13/05/2025 आदेश क\u0006 \u0007\bत ल प अ\u000fे षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, I.T.A Nos. 701 & 702/Ahd/2024 Madhu Silica Pvt. Ltd., A.Y. 2014-15 6 उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद "