SHYAM NARAYAN & BROS, MUMBAI V. ACIT CIR 21(2), MUMBAI

CO 172/MUM/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5776 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MOHAPATRA
• Assessee Lawyers: C V DHARKAR
• Keywords: Depreciation; Additional depreciation; Revised return; Bonafide mistake

Judgement Text

SHYAMNARAYAN & BROS ASSESSMENT YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI. BEFORE SHRI D.MANMOHAN (VP) AND SHRI R.K.PANDA (AM ) ITA NO.959/M/2010 : ASSESSMENT YEAR:2006-07 SHYAMNARAYAN & BROS, 269/8, NANDAVAN CEMENTARY ROAD, OPP. SION HOSPITAL, SION(W) MUMBAI VS. ACIT RANGE -21(2), BKC, C-10, , MUMBAI. I.T.A. NO.1111/MUM/2010 : ASSESSMENT YEAR: 2006-07 ACIT RANGE -21(2), BKC, C-10, , MUMBAI VS. SHYAMNARAYAN & BROS, 269/8, NANDAVAN CEMENTARY ROAD, OPP. SION HOSPITAL, SION(W) MUMBAI C.O. NO.172/MUM/2010 (ARISING OUT OF ITA NO.1111/MUM/2010) SHYAMNARAYAN & BROS, 269/8, NANDAVAN CEMENTARY ROAD, OPP. SION HOSPITAL, SION(W) MUMBAI VS. ACIT RANGE -21(2), BKC, C-10, , MUMBAI. APPELLANT RESPONDENT ASSESSEE BY : SHRI C.V.DHARKAR REVENUE BY : SHRI S.K.MOHAPATRA ORDER PER BENCH: THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER DATED 13 TH NOVEMBER, 2009 OF THE CIT(A)-32 MUMBAI RELATING TO A.Y.2006-07. THE ASSESSEE HAS ALSO PREFERRED A CROSS OBJEC TION AGAINST THE APPEAL FILED BY THE REVENUE. FOR THE SAKE OF CONVENIENCE, T HE CROSS APPEALS AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE TAKEN UP TOGET HER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. SHYAMNARAYAN & BROS ASSESSMENT YEAR: 2006-07 2 2. THE REVENUE IN ITS APPEAL HAS CHALLENGED THE ORDER OF THE CIT (A) IN DELETING THE PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 IN RESPECT OF DISALLOWANCE OF ` .1,05,50,000 MADE UNDER SECTION 40(A)(IA) OF THE ACT . THE ASSESSEE IN ITS APPEAL HAS CHALLENGED THE ORDER OF T HE CIT (A) IN CONFIRMING THE PENALTY LEVIED BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF ` .46,63,818. THE CROSS OBJECTION FILED BY THE ASSESSEE IS MERELY IN SUPP ORT OF THE ORDER OF THE CIT (A) IN DELETING THE PENALTY IN RESPECT OF DISALLOWANC E UNDER SECTION 40(A)(IA) OF THE ACT. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS AND TRANSPORT BUSINESS. IN THE ASSESSME NT ORDER, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` .1,05,50,000 ON ACCOUNT OF DEDUCTION OF TAX AND NON-PAYMENT OF THE SAME TO THE CREDIT OF THE CENTRA L GOVERNMENT IN TIME THEREBY VIOLATING THE PROVISIONS OF SECTION 40(A)(IA) OF THE A CT. SIMILARLY, HE ALSO MADE AN ADDITION OF ` .46,63,818 FOR EXCESS CLAIM OF DEPRECIATION. 4. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALT Y PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. IT W AS SUBMITTED BY THE ASSESSEE THAT THE PROVISIONS RELATED TO SECTION 40(A)(IA) WERE NEWLY INTRODUCED AND WERE NOT KNOWN, APPRECIATED AND UNDERSTOOD PROPERLY. IT WAS SUBMITTED THAT THE DISALLOWANCE OF ` .1,05,50,000 WAS IN CONSEQUENCE OF A TECHNICAL LAPSE. AS REGARDS DELAY IN PAYMENT OF TDS, IT WAS SUBMITTED THAT THE EX PENSES WOULD STAND ALLOWED AND WERE ALLOWED EARLIER IRRESPECTIVE OF THE TIMING OF TDS PAYMENT. IT WAS SUBMITTED THAT AN EXPENSE WHICH STANDS OTHERWISE ALLOWED CANNOT BE SUBJECT MATTER OF PENALTY AND THE DISALLOWANCE IS OF CONSEQUEN TIAL NATURE AND IS OUTSIDE THE SCOPE OF SECTION 271(1)(C) OF THE ACT. IT WAS FURTHER SUBMITTED THAT ALLOWANCE OR DISALLOWANCE UNDER SECTION 40(A)(IA) ARE OF RELATIVE NATURE AND THE DISALLOWANCE UNDER THE SAID PROVISION IS ALLOWED IN THE SUBSEQUENT YE AR IN WHICH THE TDS IS PAID. THEREFORE, ONCE THE PAYMENT IS ALLOWED AS EXPENDITURE WHETHER IN ITS YEAR OF CLAIM OR OTHER, IT CANNOT BE THE SUBJECT MATTER OF PENALTY . THE ADDITIONS, IF ANY, ARE ONLY OF RELATIVE NATURE AND PENAL PROVISIONS ARE FOR ABSOLUTE DEFAULT. THEREFORE, NO PENALTY IS LEVIABLE UNDER SECTION 271(1)(C) ON ACCOUNT OF DISA LLOWANCE OF ` .1,05,50,000. IT SHYAMNARAYAN & BROS ASSESSMENT YEAR: 2006-07 3 WAS SUBMITTED THAT THE DISALLOWANCE OF ` .1,05,50,000 IS UNDER A DEEMING FICTION AND, THEREFORE, SUCH ADDITIONS ARE ONLY FICTIONAL IN COME AND CANNOT BE CONVERTED OR TREATED LIKE REAL INCOME AND, THEREFORE, PENAL PROV ISIONS ARE NOT ATTRACTED. 5. AS REGARDS THE HIGHER CLAIM OF DEPRECIATION, IT WA S SUBMITTED THAT SAME WAS DUE TO TECHNICAL ERROR SINCE WHILE FEEDING TO THE CO MPUTER, THE RATE OF PRECEDING YEAR WAS INCORPORATED, FOR WHICH THE MISTAKE WAS OCCUR RED. IT WAS ALSO SUBMITTED THAT THE ADDITIONAL DEPRECIATION WAS ALLOWABLE IN RE SPECT OF COMMERCIAL VEHICLES PURCHASED, WHICH VARIES FROM 20% TO 50% OF THE ACTUAL COST. HOWEVER, THE ASSESSEE HAS NOT CLAIMED SUCH ADDITIONAL DEPRECIATION. S INCE THE CLAIM OF DEPRECIATION WAS DUE TO CHANGE OF RATE FROM THE PREC EDING YEAR WHICH STOOD AT 40% ON TRUCKS AND 25% ON PLANT AND MACHINERY AS AGAINST C URRENT YEAR RATE AT 20% ON TRUCKS AND 15% ON PLANT AND MACHINERY, THEREFORE, TH E SAME WAS INADVERTENTLY CLAIMED AND THE AUDITORS ALSO COULD NOT POINT OUT TH E MISTAKE. THEREFORE, SUCH CLAIM BEING BONAFIDE MISTAKE, NO PENALTY UNDER SECTIO N 271(1)(C) IS LEVIABLE. 6. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED BY THE EXPLANATION OFFERED BY THE ASSESSEE AND LEVIED PENALTY UNDER SECTION 271(1)( C) ON ACCOUNT OF BOTH THE ADDITIONS ON THE GROUND THAT THE ASSESSEE HAS COMMITTED A DEFAULT WITHIN THE MEANING OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 7. IN APPEAL, THE CIT (A) DELETED THE PENALTY LEVIE D BY THE AO IN RESPECT OF DISALLOWANCE OF ` .1,05,50,000 MADE UNDER SECTION 40(A)(IA) AND SUSTAIN ED THE PENALTY LEVIED BY THE AO IN RESPECT OF HIGHER CLAIM OF DEPRECIATION, BY OBSERVING AS UNDER:- 4.5 I HAVE CAREFULLY CONSIDERED THE ISSUE. SO FAR AS THE HIGHER CLAIM OF DEPRECATION IS CONCERNED, THE SAME HAS RESULTED FROM PU RELY A WRONGFUL CLAIM. IT IS NOT A CASE WHERE THERE IS AN A MBIGUITY IN CLASSIFICATION OF ASSETS AND THE RESPECTIVE RATES CHARGED FOR DEPRECIATION. IT IS A CASE WHERE WITHOUT ANY SUCH AMB IGUITY OF HIGHER RATE OF DEPRECIATION HAS BEEN CLAIMED FOR NO REASON W HATSOEVER. EVEN IF THE WRONGFUL CLAIM WAS MADE, THE APPELLANT HAD EV ERY OPPORTUNITY TO REVISE THE SAME THROUGH REVISED RETURN. THE AO HAS ACCEPTED THE LOWER CLAIM OF DEPRECIATION ONLY AFTER HIS MISTAKE WA S POINTED OUT BY THE AO. UNDER THE CIRCUMSTANCES, IT IS CORRECT ON THE PART OF THE AO TO HOLD THAT THE APPELLANT ACTED DELIBERATELY IN MAKIN G A HIGHER CLAIM OF SHYAMNARAYAN & BROS ASSESSMENT YEAR: 2006-07 4 DEPRECIATION THAT WHAT IS ALLOWABLE UNDER THE ACT. TO THIS EXTENT, THE PENALTY LEVIED IS REQUIRED TO BE SUSTAINED. 4.6 SO FAR AS THE PENALTY IN RESPECT OF DISALLOWANCE U /S.40(A)(IA) IS CONCERNED, THE APPELLANT IS CORRECT IN SAYING THAT T HE CLAIM OF EXPENSE MADE IS CORRECT AND BY VIRTUE OF THE DEEMING PROVISIO NS U/S.40(A)(IA) ONLY, ALLOWABILITY OF THE CLAIM SHIFTS IN TIME. IN O THER WORDS, TAX SOUGHT TO BE EVADED WORKS OUT TO BE NIL. THE FACT OF THE MATTER IS THAT THE APPELLANT NEVER MADE THE CLAIM IN RESPECT OF THI S EXPENSE IN THE COMPUTATION OF INCOME FOR A.Y. 2007-08 UNTIL THE CL AIM WAS DISALLOWED IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 . THE DATE OF ASSESSMENT ORDER U/S.143(3) FOR A.Y. 2006-07 IS 8 .12.2008 WHEREAS THE APPELLANT HAS CLAIMED THIS EXPENSE BY FILIN G THE REVISED RETURN FOR A.Y. 2007-08 ON 25.2.2009. THIS CLEARLY SHOWS THAT THE APPELLANT DID NOT CLAIM THE EXPENSE IN THE TWO YEARS. IT WAS CLAIMED IN THE ASSESSMENT YEAR 2006-07 AND ONLY AFTER THE SAME W AS NOT ALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(IA), TH E CLAIM OF EXPENSE WAS MADE IN THE SUBSEQUENT YEAR THROUGH FILING OF REVISED RETURN. THIS CLEARLY ESTABLISHES THAT THE APPELLANT H AS NO INTENTION OF EVADING THE TAX BY MAKING THE WRONGFUL CLAIM OF EXP ENDITURE. CONCEALMENT PENALTY IN RESPECT OF THIS INCOME CAN, TH EREFORE, NOT BE SUSTAINED. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), BOTH THE SIDES ARE IN APPEAL BEFORE US. 9. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE AO AND CIT (A). REFERRIN G TO THE DECISION OF THE TRIBUNAL IN THE CASE OF BANSAL PARIVAHAN (INDIA) (P) LTD V. ITO, 43 SOT 619(MUM), HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S HELD THAT AMENDMENT TO PROVISIONS OF SECTION 40(A)(IA) BY THE FINANCE ACT, 20 10 IS RETROSPECTIVE W.E.F. 1.4.2005. IT HAS FURTHER BEEN HELD THAT IF THE ASSESSE E HAS PAID THE AMOUNT OF TAX DEDUCTED AT SOURCE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1), IN THE LIGHT OF AFORESAID AMENDMENT, THE DISA LLOWANCE MADE BY THE AUTHORITIES BELOW HAS TO BE DELETED. SINCE IN THE IN STANT CASE, THE ASSESSEE HAS DULY PAID THE TAX SO DEDUCTED BEFORE THE DUE DATE OF FILI NG THE RETURN OF INCOME, THEREFORE, NO PENALTY UNDER SECTION 271(1)(C) IS ATTR ACTED ON ACCOUNT OF SUCH ADDITION. SO FAR AS THE ADDITION ON ACCOUNT OF HIGH ER DEPRECIATION IS CONCERNED, HE SUBMITTED THAT SAME WAS A TECHNICAL ERROR DUE TO CHANG E IN THE RATE OF DEPRECIATION AND IT WAS A BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE WHICH EVEN COULD NOT BE SHYAMNARAYAN & BROS ASSESSMENT YEAR: 2006-07 5 DETECTED BY THE AUDITORS. HE, ACCORDINGLY, SUBMITTE D THAT THE CIT (A) SHOULD HAVE DELETED THE PENALTY LEVIED ON BOTH THE COUNTS. 10. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE, WHILE SUPPORTING THE ORDER OF THE AO SUBMITTED THAT IN VIEW OF THE DE CISION OF THE TRIBUNAL IN THE CASE OF BANSAL PARIVAHAN (INDIA)PVT.LTD (SUPRA), THE ORDER OF THE CIT(A) IN DELETING THE PENALTY ON ACCOUNT OF DISALLOWANCE OF ` .1,05,50,000 MAY BE CORRECT. HOWEVER, SO FAR AS THE PENALTY SUSTAINED ON ACCOUNT OF DISALLOWAN CE OF HIGHER DEPRECIATION IS CONCERNED, HE SUBMITTED THAT DESPITE BEING ASSISTED BY THE AUDITORS, THE ASSESSEE HAS MADE HIGHER CLAIM OF DEPRECIATION AND ALSO NOT FI LED THE REVISED RETURN. THEREFORE, THE CIT (A) WAS JUSTIFIED IN CONFIRMING T HE PENALTY SO LEVIED ON ACCOUNT OF ADDITION OF HIGHER CLAIM OF DEPRECIATION. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BO OK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECISION CITED B EFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE AO HAS MADE THE ADDITION OF RS.1,05,50,000 ON THE GROUND THAT THE ASSESSEE HAS FAILED TO DEPOSIT THE TAX DE DUCTED AT SOURCE IN DUE TIME. HE, THEREAFTER, LEVIED PENALTY UNDER SECTION 271(1)( C) ON ACCOUNT OF ADDITION OF RS.1,05,50,000. SIMILARLY DUE TO CLAIM OF HIGHER DE DUCTION OF DEPRECIATION BY THE ASSESSEE AMOUNTING TO RS.46,63,818, THE AO LEVIED THE PE NALTY ON THIS AMOUNT ALSO. WE FIND THAT ALTHOUGH THE CIT (A) CANCELLED THE PEN ALTY ON ACCOUNT OF ADDITION OF RS.1,05,50,000, HE SUSTAINED THE PENALTY ON ADDITION ON ACCOUNT OF HIGHER CLAIM OF DEPRECIATION OF ` . 46,63,818. SO FAR AS THE DELETION OF LEVY OF PENA LTY ON ACCOUNT OF ADDITION OF ` . 1,05,50,000 IS CONCERNED, WE FIND THE SAME IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE C ASE OF BANSAL PARIVAHAN (INDIA) PVT.LTD. (SUPRA), WHEREIN, IT HAS BEEN HELD T HAT WHERE THE ASSESSEE HAS PAID THE AMOUNT BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME UNDER SECTION 139(1), NO DISALLOWANCE CAN BE MADE, IN THE LIGHT OF AMENDME NT MADE BY THE FINANCE ACT, 2010 TO PROVISIONS OF SECTION 40(A)(IA). SO FAR AS TH E PENALTY LEVIED ON ACCOUNT OF ADDITION ON HIGHER DEPRECIATION IS CLAIMED, WE ARE O F THE CONSIDERED OPINION THAT THE SAME WAS A TECHNICAL ERROR COMMITTED BY THE ASSESSEE. AD MITTEDLY, THE RATE OF DEPRECIATION OF TRUCKS AND PLANT AND MACHINERY WAS 40 % AND 25%, RESPECTIVELY SHYAMNARAYAN & BROS ASSESSMENT YEAR: 2006-07 6 DURING THE ASSESSMENT YEAR 2005-06, WHICH WAS REDUCED TO 30% AND 15%, RESPECTIVELY DURING A.Y. 2006-07. WE FIND FORCE IN THE SUBMISSIONS OF LEARNED COUNSEL THAT THE OLD RATES WERE INADVERTENTLY FED TO THE COMPUTER DUE TO WHICH, THE MISTAKE OCCURRED AND THE HIGHER CLAIM OF DEPRECIATI ON WAS CLAMED AND EVEN REMAINED UNDETECTED BY THE AUDITORS. FOR THIS PROP OSITION, RELIANCE IS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT LTD., (2010) 322 ITR 158 (SC), WHEREIN, IT WAS H ELD THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WIL L NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEE . WE FIND THAT IN THE CASE BEFORE US, THE ASSESSEE HAS INADVERTENTLY INCORPORATED TH E HIGHER RATE OF DEPRECIATION AND IT IS A TECHNICAL ERROR ONLY. THER EFORE, NO PENALTY IS LEVIABLE. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF T HE ACT. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE CROSS OBJECTION FILED BY THE ASSESSEE IS RENDERED INFRUCTUOUS AND, ACCORDINGLY, DISMISSED. ORDER PRONOUNCED ON 30 TH , MARCH, 2011. SD/ SD/- (D.MANMOHAN) VICE PRESIDENT R.K.PANDA) JACCOUNTANT MEMBER MUMBAI, DATED: 30 TH , MARCH, ,2011. PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), 32 MUMBAI. 4. THE CIT, MUMBAI CITY -21. 5. THE DEPARTMENTAL REPRESENTATIVE, E ITAT MUMBAI. BY ORDER DY./ASSISTANT REGISTRAR ITAT MUMBAI BENCHES