Re: DISPUTED DIS-ALLOWANCE AMORTISED LEASE PREMIUM

O is a company and subsidiary of PSU It is implementing a project and recently started production. It claimed the amortisation of lease premium over he lease period on time basis amounting to about 20 crores pertaining to current AY 2017-18. The AO disallowed the claim and the loss is reduced in assessment. Penalty proceedings are initiated for mis-statement/ understatement of income. The company is in appeal before CIT(A).
Now the revenue authorities are pressurising the co to make a declaration under the scheme and pay tax and penalty as provided under the scheme. The appeal is pending before the CIT(A).
Should the co opt for the scheme? I strongly feel that the company has good chance of success in appeal. Your considered opinion is sought.

 From our understanding of your query, there is an quantum appeal pending before CIT(A) & penalty proceedings are only initiated. All particulars are provided in the return of income .Loss was reduced due to change of opinion . The assessee has a fair chance of succeeding in appeal before ITAT in respect  of penalty matter. It may be desirable to contest in appeal . One may refer    CIT .v. Indusind  Bank Ltd ( 2014) 369 ITR 682/ (2015) 231 Taxman 690  (Bom.)(HC)  held that 

The assessee entered into lease transactions. The AO disallowed the claim of depreciation on the ground that the lease transactions were not genuine and levied the penalty. Appellate authorities found that there was no concealment of particulars of income nor furnishing of inaccurate particulars of income, accordingly deleted the penalty. On appeal by revenue dismissing the appeal the Court held that all materials were before the revenue hence deletion of penalty by the Tribunal was held to be justified.

 

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