Derby Clothing Pvt. Ltd. Vs ITO (ITAT Chennai)
Material Facts: The assessee, a company engaged in manufacturing men’s garments, filed its return of income for Assessment Year 2015–16 declaring nil income. The original assessment under Section 143(3) was completed on 30.06.2017 accepting the returned income.
Subsequently, it was noticed that the assessee had received Rs.14,05,456 from Royal Sundaram Alliance Insurance Company Ltd. on 28.11.2014 towards full and final settlement of a fire insurance claim. The Profit and Loss Account showed a debit of Rs.13,72,954 towards loss due to fire damage to stocks and interiors at its commercial premises at Velachery, Chennai. A notice under Section 148 was issued on 20.08.2019 on the ground that the insurance compensation had not been offered to tax. As the assessee did not comply with the notices, the Assessing Officer completed the reassessment under Sections 147, 144 and 144B by adding Rs.14,05,456 under Section 45(1A).
Procedural History
The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, sustained the addition, but treated the insurance compensation as taxable under Section 28 instead of Section 45(1A). The assessee challenged both the quantum addition and the penalty levied under Section 271(1)(c) before the Income Tax Appellate Tribunal.
Legal Issues
- Whether the insurance compensation received for fire loss was liable to separate addition after the assessee had adjusted it against the actual loss in its accounts.
- Whether the addition made under Section 45(1A) and sustained under Section 28 was sustainable.
- Whether the penalty under Section 271(1)(c) could survive if the quantum addition was deleted.
Relevant Statutory Provisions
