EGLE BURGAMANN INDIA P. LTD, MUMBAI V. ADDL CIT RG 5(1), MUMBAI

ITA 1117/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9014 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 11-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: O P UPASANI
• Keywords: Depreciation; Wrong claim

Judgement Text

1 ITA NO.1117/MUM/2010 I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH E EE E MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI R R R R K PANDA, AM K PANDA, AM K PANDA, AM K PANDA, AM & SMT ASHA VIJAYARAGHAVAN, JM & SMT ASHA VIJAYARAGHAVAN, JM & SMT ASHA VIJAYARAGHAVAN, JM & SMT ASHA VIJAYARAGHAVAN, JM ITA NO. ITA NO. ITA NO. ITA NO. 1117/MUM/2010 1117/MUM/2010 1117/MUM/2010 1117/MUM/2010 (ASST YEAR 2005-06) EGLE BURGAMANN INDIA P LTD GAZEBO HOSE 52 GULMOHOR ROAD OPP CROSS ROAD NO.7 NDP SCHEME, VILE PARLE (E) MUMBAI 49 VS THE ADDL. COMMR OF INCOME TAX RANGE 5(1), MUMBAI (APPELLANT) (RESPONDENT) PAN PAN PAN PAN AABCS5287P AABCS5287P AABCS5287P AABCS5287P ASSESSEE BY: SHRI O P UPASANI REVENUE BY: SHRI SURENDRA KUMAR O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 15.12.2009 OF THE CIT(A) - 9, MUMBAI RELATING TO A SSESSMENT YEAR 2005-06. 2 THE ONLY GROUND RAISED BY THE ASSESSEE READS AS U NDER: THE LD CIT(A) ERRED IN CONFIRMING THE PENALTY LEVI ED BY ACIT U/S 271(1)( C) ON THE DISALLOWANCE OF ` . 62,75,187/- BEING DEDUCTION U/S 80IA OF THE I T ACT. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE SET UP A WIND MILL (UNIT) IN THE ASSESSMENT YEAR 2002-03 IN SATARA DISTRICT, WHI CH WAS THE THIRD YEAR OF OPERATION OF THIS UNIT. PROFITS OF THE UNIT ARE EL IGIBLE FOR DEDUCTION U/S 80IA OF THE I T ACT. THE ASSESSEE HAS NOT OPTED TO CLAIM ANY DE DUCTION U/S 80IA IN THE ASSESSMENT YEAR 2002-03 AND IN THE ASSESSMENT YEAR 2003-04. THE CURRENT YEAR IS THE FIRST YEAR OF MAKING CLAIM U/S 80IA OF THE I T ACT. THE ASSESSEE CLAIMED DEDUCTION OF ` 62,75,187/- ON THE PROFITS OF THIS UNIT. WHILE COM PUTING 2 ITA NO.1117/MUM/2010 THE PROFIT ELIGIBLE FOR DEDUCTION U/S 80IA, THE ASS ESSEE HAS NOT TAKEN INTO CONSIDERATION LOSSES OF THE UNIT FOR ASSESSMENT YEA RS 2002-03 AND 2003-04. THE ASSESSING OFFICER, WHILE FRAMING THE ASSESSMENT HEL D THAT LOSSES OF THIS UNIT IN THE EARLIER YEARS HAVE TO BE TAKEN INTO CONSIDERATI ON TO COMPUTE THE DEDUCTION AVAILABLE TO THE ASSESSEE U/S 80IA OF THE I T ACT. AFTER TAKING INTO CONSIDERATION LOSSES OF EARLIER YEARS, THE DEDUCTION U/S 80IA COM ES TO ` NIL AND ACCORDINGLY, ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE FOR DEDUCTION U/S 80IA OF THE I T ACT. THE ACTION OF THE ASSESSING OFFICER WA S UPHELD BY THE CIT(A). 2.2 THE ASSESSING OFFICER THEREAFTER INITIATED PENA LTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. IT WAS SUBMITTED BY THE ASSE SSEE THAT IT HAS FURNISHED ALL THE DETAILS AS CALLED FOR BY THE ASSESSING OFFICER FROM TIME TO TIME. IT WAS SUBMITTED THAT IT HAS NEITHER FURNISHED ANY INACCUR ATE PARTICULARS NOR HAS CONCEALED ANY PARTICULARS OF INCOME THEREOF. THER EFORE, NO PENALTY U/S 271(1) (C) CAN BE LEVIED. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND LEVIED PENALT Y U/S 271(1)(C) ON ACCOUNT OF DISALLOWANCE OF DEDUCTION OF ` 62,75,187/-. 2.3 BEFORE THE CIT(A), IT WAS SUBMITTED THAT CLAIM OF THE ASSESSEE WAS BASED ON CERTAIN OPINION GIVEN THAT BEFORE DEDUCTION, DEP RECIATION OF THAT YEAR SHOULD BE CONSIDERED. SUCH FACT WAS MENTIONED IN THE AUDI T REPORT SUBMITTED ALONG WITH THE RETURN OF INCOME. EVEN DURING THE ASSESSM ENT PROCEEDINGS, THIS FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER. THERE WAS NO EXCESSIVE CLAIM MADE AS IT WAS BASED ON THE OPINION GIVEN AT THAT T IME AND ON THE INTERPRETATION OF THE LANGUAGE OF THE SECTION. MOREOVER, PROPER D ISCLOSURE WAS MADE IN THE 3 ITA NO.1117/MUM/2010 RETURN OF INCOME AND DURING ASSESSMENT PROCEEDINGS ALSO FROM TIME TO TIME, TILL THE ASSESSMENT WAS COMPLETE. 2.4 HOWEVER, THE CIT(A) WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE ASSESSING OFF ICER IN LEVYING PENALTY ON ACCOUNT OF DISALLOWANCE OF DEDUCTION. WHILE DOING S O, HE NOTED THAT THE ASSESSEE IS BOUND TO COMPUTE THE PROFITS OF THE UNIT ON STAN DALONE BASIS. THE ASSESSEE HAS NOT FURNISHED ANY BONAFIDE EXPLANATION ON THIS ISSUE EXCEPT STATING THAT THE CLAIM WAS BASED ON CERTAIN OPINION. THE ASSESSEE DI D NOT FILE ANY COPY OF THE OPINION TO SUPPORT ITS CLAIM. SINCE THE ASSESSEE, I N THE IMPUGNED CASE HAS CLAIMED EXCESSIVE DEDUCTION U/S 80IA WITHOUT ANY BO NAFIDE REASON; THEREFORE, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S DHARMENDRA TEXTILES PROCESSORS AND OTHERS REPOR TED IN 166 TAXMAN 65, THE CIT(A) HELD THAT PENALTY IS LEVIABLE IN THIS CASE. 3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE US. 4 THE LD COUNSEL FOR THE ASSESSEE, AT THE OUTSET, S UBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DE CISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2004-05 WHERE UNDER SIMILAR FACTS, PENALTY LEVIED BY THE AS SESSING OFFICER AND SUSTAINED BY THE CIT(A) HAS BEEN DELETED BY THE TRIBUNAL. 4 ITA NO.1117/MUM/2010 4.1 THE LD DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE CIT(A), FAIRLY CONCEDED THAT PENALTY LEVIED BY THE ASSESSI NG OFFICER AND UPHELD BY THE CIT(A) HAS BEEN DELETED BY THE TRIBUNAL. 5 AFTER HEARING BOTH THE PARTIES, WE FIND SIMILAR I SSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEE OWN CASE AND THE TRIBUNAL VIDE ITA NO.6606/MUM/2008 ORDER DATED 14.1.2010 FOR THE ASSESSMENT YEAR 2004- 05 DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER AND UPHELD BY THE C IT(A) ON THIS ISSUE. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL AT PA RS 6 & 7 READ AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD OF THE CASE. BEFORE WE PROCEED FURTHER TO EXAMINE THE ISSUE ON MERITS, WE MAY POINT OUT THAT THE PENALTY CAN BE LEVIED ONLY W HEN IT IS ESTABLISHED THAT THE ASSESSEES CLAIM WAS NOT BONAFIDE. IF THE CLAIM MADE BY THE ASSESSEE IS HIGHLY ARGUABLE, WHICH MAY REQUIRE DETA ILED DELIBERATION BY THE COURT, THEN, IT CANNOT BE SAID THAT BELIEF ENTE RTAINED BY THE ASSESSEE THAT ITS CLAIM WAS IN ACCORDANCE WITH LAW, COULD NO T BE SAID TO BE MALAFIDE OR UNREASONABLE. IT ALL DEPENDS ON THE FACTS AND C IRCUMSTANCES OF EACH CASE, WHETHER THE ASSESSEES CLAIM IS BONAFIDE OR N OT. IT IS WELL SETTLED LAW THAT IF A LEGAL CLAIM IS ADVANCED BY THE ASSESSEE, MERELY BECAUSE THE SAME HAS NOT BEEN ACCEPTED, IT DOES NOT IMPLIY THAT THE CLAIM PER SE WAS WRONG. IF TWO OPINIONS ARE POSSIBLE IN REGARD TO A PARTICULAR CLAIM THEN IF THE ASSESSEE DOES NOT ADVANCE THAT CLAIM IN ITS RET URN OF INCOME THEN THERE IS FAIR POSSIBILITY THAT THE CLAIM MIGHT BE F OREGONE EVEN WITHOUT BEING CONSIDERED BY THE COURT. ADMITTEDLY, IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD GIVEN A NOTE IN WHICH, IT HAD CLEA RLY STATED THAT DEDUCTION U/S. 80 IA WAS CLAIMED WITHOUT TAKING INT O ACCOUNT THE BROUGHT FORWARD LOSS. MERELY BECAUSE THE ASSESSEE HAD NOT SPECIFICALLY STATED THAT CARRIED FORWARD DEPRECIATION IS NOT CONSIDERED, IT WOULD NOT IMPLY THAT ASSESSEES DISCLOSURE WAS MALAFIDE AND DOES NOT AMO UNT TO DISCLOSURE OF NECESSARY FACTS. HOWEVER, IT IS TO BE SEEN WHETHER THE ASSESSEES CLAIM AT ALL WAS BONAFIDE OR IT WAS A FRIVOLOUS CONTENTION T AKEN MERELY FOR THE PURPOSE OF AVOIDING LIABILITY TO PAY TAX. THE ASSE SSEE, IN ITS WRITTEN SUBMISSIONS, HAS STATED THAT THE CLAIM WAS BASED ON CERTAIN OPINIONS THAT DEPRECIATION OF THAT YEAR SHOULD BE CONSIDERED. NO SUCH OPINIONS HAVE BEEN FILED BEFORE US. 7. HOWEVER, THE ASSESSEE HAS RELIED ON THE DECISION IN THE CASE OF MOHAN BREWERIES & DISTILLERIES LTD V. ACIT, (SUPRA) , WHEREIN, IT HAS BEEN HELD THAT DEPRECIATION AND LOSS OF EARLIER YEARS C ANNOT BE NOTIONALLY 5 ITA NO.1117/MUM/2010 CARRIED FORWARD TO BE SET OFF AGAINST INCOME OF THA T YEAR FOR COMPUTING DEDUCTION U/S. 80 IA. IT HAS BEEN HELD THAT SECTION DOES NOT MANDATE THAT FIRST YEAR OF 10 CONSECUTIVE ASSESSMENT YEAR SHOULD ALWAYS BE THE FIRST YEAR OF SET UP OF ENTERPRISE. IT WAS FURTHER HELD THAT SECTION 80IA(5) IS APPLICABLE ONLY WHEN ASSESSEE CHOOSES TO CLAIM DEDU CTION U/S. 80 IA. THIS DECISION REFERS ONLY TO NOTIONAL BROUGHT FORWARD LO SSES AND DEPRECIATION BUT NOT TO DEPRECIATION BEING CARRIED FORWARD. HO WEVER, IT HAS BEEN HELD IN THIS CASE THAT IN THE FIRST YEAR WHEN THE ASSESS EE DECIDES TO CLAIM DEDUCTION U/S. 80 IA THEN HE HAS TO TREAT THE UNDER TAKING AS A SEPARATE SOLE SOURCE OF INCOME WITHIN THE MEANING OF SECTION 80 IA(5). THUS, IT CANNOT BE SAID THAT ON THIS ISSUE, THE POSITION WAS CRYSTAL CLEAR AND THE ASSESSEE HAD NO OPTION BUT TO SET OFF CARRIED FORWA RD DEPRECIATION BEFORE CLAIMING DEDUCTION U/S. 80 IA. ADMITTEDLY, THE ASS ESSEE HAD DISCLOSED THE MATERIAL FACTS IN THIS REGARD IN THE COMPUTATION OF INCOME AND AFTER DISCUSSION WITH THE AO DECIDED TO FOREGO ITS CLAIM AND FILED THE REVISED STATEMENT ACCORDINGLY. THIS CANNOT BE SAID TO BE A MALAFIDE ACTION OF THE ASSESSEE BECAUSE ITS CLAIM CANNOT BE SAID TO BE AN ENTIRELY FRIVOLOUS OR WRONG CLAIM. THE ASSESSEES ORIGINAL RETURN CANNOT BE BRANDED AS FALSE ON THE GROUND OF A DEBATABLE CLAIM BEING ADVANCED B Y IT. WE, ACCORDINGLY, SET ASIDE THE ORDER OF LD CIT (A) ON T HIS COUNT AND ALLOW THE ASSESSEES APPEAL. 6. SINCE FACTS OF THE IMPUGNED APPEAL ARE IDENTICAL TO THE FACTS INVOLVED IN ASSESSMENT YEAR 2004-05; THEREFORE, RESPECTFULLY FO LLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF A NY DISTINGUISHABLE FEATURES BROUGHT BEFORE US, WE SET ASIDE THE ORDER OF THE CI T(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY. 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THE 7TH, DAY OF JAN 2011. SD/- SD/- ( (( ( SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN SMT ASHA VIJAYARAGHAVAN ) )) ) JUDICIAL MEMBER ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 7 TH , JAN 2011 RAJ* 6 ITA NO.1117/MUM/2010 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI