The Tax Publishers2015 TaxPub(DT) 4235 (Jp-Trib)div class=Section1>

 

Chambal Fertilisers & Chemicals Ltd. v. ACIT

 

INCOME TAX ACT, 1961

--Penalty under section 271(1)(c)--LeviabilityRetrospective amendment in law--The assessee was a Public Limited Company which was engaged in the manufacture and sale of Fertilizers, Textile, Software, Food Processing and also trading of DAP and allied products at its industrial units at Gadepan (Distt. Kota), Baddi, Chennai & Sonepat. On the basis of the revised return, the AO made various disallowances/additions and completed the assessment under section 143(3). Being aggrieved, assesse preferred first appeal on merits of additions. CIT(A) passed order partly allowing the assessee's appeal. Being aggrieved, both the parties preferred second appeal. ITAT passed the consolidated order in which both the appeals were partly allowed. In the meanwhile, the AO issued penalty notice under section 271(1)(c) and the assessee in response thereto, filed the written reply. Assessee's reply did not find favour with AO who imposed the penalty of Rs. 8,64,76,559 under section 271(1)(c) on the basis of CIT(A)'s order on merits. The ITAT order on merit was passed subsequently, therefore, CIT(A) passed the impugned order after considering ITAT order and reduced the penalty against which both the parties are before Tribunal. Held: It was clear that two of the additions, i.e.' diminution in value of equity shares' and 'provisions for deferred taxation” were made originally and contested by the assessee in appeal. By the time the appeal reached the ITAT level, a retrospective amendment was introduced by Finance Act, 2009 w.e.f. 1-4-2001 which retrospectively covers the impugned assessment year, i.e., 2002-03. The ITAT upheld the addition keeping in view the retrospective amendment. In these facts and circumstances, the assessee could not be penalized for claims which were not disallowable by any express provision on the statute book at the relevant time. Once the book profits are computed on the basis of the audited accounts then the AO cannot interfere in the book profits calculations. Besides, there was merit in the arguments of the Counsel for the assessee that the decision of Supreme Court in the case of CIT v. Reliance Petro Products (P) Ltd. (supra) was applicable to the assessee's case as all the relevant facts and information were filed along with return of income. It lays down that penalty is impossible on the basis of information furnished in the return. If the assesse had furnished all the relevant details and information along with the return, then disallowance of any claim by AO was not exigible to penalty. Besides, a judicial debate existed on the issue about AO's power to interfere with audit statement in calculating book profits under section 115J. Apropos addition on account of IMACID deposit, the assessee had given proper explanation in this behalf, which had been overlooked by CIT(A). The mistake was bona fide, the entries were made as per regular accounting policy in this behalf. Besides, all the relevant particulars for this accounting of IMACD had been filed along with return of income. In view thereof, the penalty retained by the CIT(A) was deleted. Thus, the appeal of the assessee was allowed. In the result, assessee's appeal was allowed and revenue's appeal was dismissed.

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