Cit v. Shree Rama Multi Tech Ltd.

A.L Gehlot, A.M:— This is an appeal by the Revenue. The assessment involved in this appeal is 1998-1999. The appeal is instituted against the order of the CIT(A)-XIV, Ahmedabad, dated 28-12-2005. This appeal arises out of the penalty order u/s 271(1)(c) of the Income-tax Act, 1961. Ground reproduced as under:—

“1. The Id. CIT(A) has erred in law and on facts in reducing the penalty u/s. 271(1)(c) of the Act levied by the A.O of Rs. 1,15,41,646/- to Rs. 49,72,446/- thereby granting the relief of Rs. 65,62,200/-.”

2. The brief facts of the case are that case the Assessing Officer levied penalty u/s. 271(1)(c) of Rs. 1,15,41,646/- on account of total addition to the income of Rs. 3,26,76,132/- detailed as under:—

“1) Purchase of HDPE fabrics quoted on both sides at higher rate which were sold at a lower rate - Rs. 1,42,06,989/-

2) Interest attributable to interest bearing borrowings diverted as interest fee advances for non-business purpose - Rs. 68,40,000/-

3) Share and debenture issue expenses-54,71,162/-

4) Interest income reduced from pre-operative expenses - Rs. 35,54,409/-

5) Excess deduction of 29,03,572/- disallowed u/s 80IA claimed on other income of Rs. 96,78,575/-”

The Ld. CIT (Appeals) partly allowed the assessee's appeal upholding the penalty addition in respect of addition of Rs. 1,42,06,989/- and cancelled the penalty on other additions. The Revenue is in appeal against cancellation of penalty by the Ld. CIT(A).

3. We have heard the Ld. Representative of the parties. We notice that in quantum matter the assessee preferred appeal against the order of Ld. CIT (Appeals) before ITAT and ITAT vide its order even dated has decided the issue as deleted the addition of Rs. 35,54,409/- made by Assessing Officer in respect of set off the interest income. In respect of addition of Rs. 68.40 crores out of interest excess the issue has been sent back to the file of Assessing Officer by the ITAT. The issues relating to disallowance of Rs. 54,71,162/- and Rs. 68.40 crores have also been sent back to the file of Assessing Officer. Therefore, penalty u/s. 271(1)(c) is not sustainable. The penalty in respect of disallowance of deduction u/s. 80IA we find that this ground is squarely covered in favour of the assessee by the judgment of Hon'ble apex court in the case of CIT v. Reliance Petroproduct Pvt. Ltd. (2010) 322 ITR 174 (SC). Following the above judgment of the Hon'ble apex court we find that penalty for disallowance of deduction u/s 80IA is not sustainable. In the light of above discussion, we do not find any infirmity in the order of Ld. CIT (Appeals) in respect of cancellation of penalty for which the Revenue is in appeal, the order of the Ld. CIT (Appeals) to that extent is confirmed.

5. In the result, Revenue's appeal is dismissed.