GMW PRIVATE LIMITED,VADODARA V. THE DY.CIT, CIRCLE-1(1)(1), VADODARA

ITA 1850/AHD/2024

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GMW Private Limited appealed against the penalty imposed by the Deputy Commissioner of Income Tax, which was confirmed by the National Faceless Appeal Centre (NFAC). The penalties were related to additions made during the assessment year 2017-18, including non-payment of EPF & ESI within due dates, additional depreciation on machinery, and penalty charges for delays in contract execution. The Tribunal examined the justifications for each penalty and found that the penalties were either not properly initiated or were based on bona-fide mistakes and contractual obligations rather than legal infractions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473897 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: SURENDRA MODIANI
• Keywords: Depreciation; Additional depreciation

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 1850/Ahd/2024 (Ǔनधा[रण वष[ / Assessment Year : 2017-18) GMW Private Limited 885, G.I.D.C. Estate, Makarpura, Vadodara, Gurarat - 390010 बनाम/ Vs. Deputy Commissioner of Income Tax Circle-1(1)(1), Vadodara èथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACCG4508Q (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri Surendra Modiani, A.R. Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Rignesh Das, Sr. DR Date of Hearing 19/12/2024 Date of Pronouncement 03/01/2025 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi, (in short ‘the CIT(A)’), dated 30.09.2024 for the Assessment Year 2017-18 in the matter of penalty under Section 270A of the Income Tax Act, 1961 (in short ‘the Act’). 2. The brief facts of the case are that the return of income for A.Y. 2017-18 was filed on 31.10.2017 declaring total income of Rs.3,04,10,180/-. The assessment was completed u/s.143(3) of the Act on 05.12.2019 at total income of Rs.3,32,12,219/-. In the course of assessment, the AO had made addition of Rs.24,38,562/- in respect of EPF & ESI not paid within due date. Further, additional depreciation of Rs.1,95,737/- on machinery ITA No. 1850/Ahd/2024 [GMW Private Limited vs. DCIT] A.Y. 2017-18 - 2 – and penalty charge of Rs.1,67,740/- was also disallowed and added to income. The AO had initiated penalty proceedings u/s.270A of the Act while completing the assessment. Thereafter, a separate penalty order u/s.270A of the Act dated 28.06.2021 was passed imposing penalty of Rs.4,32,915/- in respect of the above mentioned three additions. 3. Aggrieved with the penalty order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided vide the impugned order and the appeal of the assessee was dismissed. 4. Now, the assessee is in second appeal before us. The following grounds have been taken by the assessee in this appeal: “1. Learned Commissioner (Appeals) erred in confirming penalty of Rs.432915 under Section 270A of the income Tax Act. 2. Your Appellant submits that the penalty is not justified and prays that the same deleted.” 5. Shri Surendra Modiani, the Ld. AR appearing for the assessee explained that in the assessment order the AO did not initiate penalty u/s.270A of the Act in respect of addition of Rs.24,38,562/- made in respect of belated payment of EPF & ESI. He submitted that the relevant facts regarding payment to EPF & ESI were already disclosed in the Tax Audit Report by the assessee itself and, therefore, the penalty was not justified even on merits. Regarding second addition of additional depreciation on purchase of used machinery, the Ld. AR explained that there was a bona-fide mistake by the assessee in this regard and this fact was brought to the notice of the AO in the case of assessment proceedings. The Ld. AR further submitted that the claim for ITA No. 1850/Ahd/2024 [GMW Private Limited vs. DCIT] A.Y. 2017-18 - 3 – depreciation was otherwise also allowable in subsequent years and, therefore, there was no intention of the assessee to claim any excess or additional depreciation. As regarding third issue of addition of Rs.1,67,740/- in respect of penalty charges, the Ld. AR explained that the assessee was engaged in the business of executing contracts for power plants. Such contracts normally stipulated penalty for delay in execution of contract. The Ld. AR explained that the penalty amount debited to the account was penalty for delay in execution of contracts and it was not for infraction of any law. Therefore, no penalty u/s.270A of the Act was called for in respect of such addition. 6. Per contra, Shri Rignesh Das, Ld. Sr. DR relied upon the orders of the AO and the CIT(A). 7. We have carefully considered the rival submissions. As regarding first addition of belated payment of EPF & ESI is concerned, it is found from the assessment order that no penalty u/s. 270A of the Act was initiated by the AO in respect of this addition. The initiation of penalty is sine qua non for levy of penalty and the AO could not have levied the penalty without initiating the penalty proceeding in respect of this addition. In the show cause notice also for the penalty as issued by the AO, no mention of penalty in respect of addition of Rs.24,38,562/- in respect of belated payment of EPF & ESI is mentioned. Therefore, the penalty imposed in respect of this addition is liable to be quashed. 8. As regards the addition of Rs.1,95,737/- in respect of additional depreciation, the AO has reproduced the submission of ITA No. 1850/Ahd/2024 [GMW Private Limited vs. DCIT] A.Y. 2017-18 - 4 – the assessee in this regard in the assessment order. The assessee had categorically admitted that additional depreciation on old and used machinery was claimed due to oversight. As explained by the assessee, this was a bona-fide mistake admitted by the assessee and there was no intention on the part of the assessee to misreport its income. Therefore, levy of penalty in respect of this addition was also not justified. 9. With regard to third addition of penalty charges, the penalty debited by the assessee to its account was not for infraction of any law. The contractual penalty paid by the assessee cannot be equated with penalty for an offence which is prohibited by law. Merely because the assessee has not disputed this addition, this cannot be a ground to levy the penalty. 10. Considering the explanation of the assessee and the facts of the case, we are of the considered opinion that no levy of penalty u/s.270A of the Act was called for in this case. In view of above facts and discussions, the order of the AO levying penalty of Rs.4,32,915/- u/s.270A of the Act, is cancelled. 11. In the result, the appeal of the assessee is allowed. This Order pronounced on 03/01/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 03/01/2025 S. K. SINHA True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned CIT 4. आयकर आयुÈत(अपील) / The CIT(A)- ITA No. 1850/Ahd/2024 [GMW Private Limited vs. DCIT] A.Y. 2017-18 - 5 – 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad "