The DCIT, Circle-4, Ahmedabad V. India Gelatine & Chemicals Ltd., Ahmedabad

ITA 1120/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6623 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-04-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 15-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: J P SHAH
• Keywords: Depreciation; Bonafide belief; Wrong claim; Bonafide mistake
• Section: 271(1)(c); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 07/04/2010 DRAFTED ON:07/04/20 10 ITA NO.1120/AHD/2007 ASSESSMENT YEAR : 2001-2002 THE DCIT, CIR-4, AHMEDABAD, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD. VS. INDIA GELATINE & CHEMICALS LTD., 703-704, SHIP BUILDING, C.G.ROAD, AHMEDABAD. PAN/GIR NO. : AAACJ 3676F (APPELLANT) .. (RESPONDENT) APPELLANT BY : SMT. NEETA SHAH SR. D.R. RESPONDENT BY: SHRI J.P.SHAH O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-VIII, A HMEDABAD, DATED 20.12.2006. 2. THE SOLE GROUND TAKEN IN THIS APPEAL BY THE REVE NUE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED I N LAW AND ON FACTS OF THE CASE IN CANCELLING THE PENALTY OF RS.32,65,2 16/- LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS AFTER LEARNED COMMISS IONER OF INCOME TAX(APPEALS) CONFIRMED THE DISALLOWANCE UNDER SECTI ON 80HHC FOR RS.64,05,282/- AND EXCESS DEPRECIATION CLAIMED ON S TAFF QUARTERS AT - 2 - RS.18,50,638/- AND AFTER CONSIDERING THE ASSESSEE S EXPLANATION LEVIED PENALTY OF RS.32,65,216/- HOLDING THAT THE ASSESSEE COMMITTED DEFAULT OF CONCEALING INCOME BY A WRONG CLAIMS WHICH WAS DELIB ERATE AND WILLFUL. 4. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS), THE ASSESSEE VEHEMENTLY ARGUED THAT THE DEDUCTION UNDER SECTION 80HHC WAS CLAIMED AS THERE WAS A FAVOURABLE DECISION OF THE J URISDICTIONAL TRIBUNAL AND HENCE THE ASSESSEE HAD BONAFIDE BELIEF TO ITS E NTITLEMENT FOR THE SAID CLAIM. IT WAS ALSO SUBMITTED THAT IT WAS A CONTROV ERSIAL ISSUE BEING AGITATED BEFORE VARIOUS FORUMS AND THEREFORE IT WAS CONTENDED THAT NO PENALTY COULD BE LEVIED ON DEBATABLE ISSUES. THE A SSESSEE RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CAS E OF CIT VS. HARSHVARDHAN CHEMICALS AND MINERAL LTD. 133 TAXMAN 320, WHERE IT WAS HELD THAT AN ADDITION MADE ON DEBATABLE ISSUE CANNO T LEAD TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HELD THAT HE AGREED WITH THE CONTENTION OF THE ASSESSEE ON THE I SSUE OF DEDUCTION UNDER SECTION 80HHC WHICH WAS SUBJECT TO DIFFERENT JUDICIAL VIEWS. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF IP CA LABORATORIES WAS PRONOUNCED AND SETTLED BY WAY OF AMENDMENT TO SECTI ON 80HHC(3). IN THIS PERSPECTIVE, THERE IS NO CASE FOR LEVY OF PENA LTY ON DISALLOWANCE UNDER SECTION 80HHC. 6. WITH REGARD TO THE DISALLOWANCE ON DEPRECIATION ON STAFF QUARTERS, THE ASSESSEE CLAIMED THAT IT WAS BROUGHT TO THE NOT ICE OF THE LEARNED ASSESSING OFFICER, DURING THE COURSE OF THE ASSESSM ENT PROCEEDINGS ABOUT ADOPTING HIGHER RATE OF DEPRECIATION OF 20% AGAINST 5% FOR BIG QUARTERS AT THE RELEVANT TIME. AS THIS WAS A BONAFIDE MISTAKE ON ACCOUNT OF TWO RATS - 3 - OF DEPRECIATION PRESCRIBED FOR SMALLER QUARTERS NOT EXCEEDING FOR 80SQ. METERS AND FOR LAGER QUARTERS, IT WAS A BONAFIDE MI STAKE AND THE ASSESSEE VIDE ITS LETTER DATED 31.07.2003 REQUESTED THE LEAR NED ASSESSING OFFICER TO RECTIFY THE MISTAKE AND TO ALLOW CORRECT RATE OF 5% AS AGAINST 20%. IT WAS CONTENDED THAT THE BONAFIDE OF THE APPELLANT WA S NOT IN DOUBT AND LEARNED ASSESSING OFFICER COULD NOT HAVE INITIATED PENALTY PROCEEDINGS FOLLOWING THE WISER COUNSEL AND THE NORMS OF SUPREM E COURT JUDGEMENT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF O RISSA 83 ITR 26. 7. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT THE ASSESSEE COMPANY REQUESTED THE LEARNED ASSESSING OFFICER TO RECTIFY THE MISTAKE IN DEPRECIATION RATE DURING THE COURSE OF ASSESSMENT P ROCEEDINGS PRIOR TO BEING CORNERED BY THE LEARNED ASSESSING OFFICER WAS EVEN NOTED IN THE PENALTY ORDER IN PARA.7. THE ASSESSEE RIGHTLY CONTE NDED RELIED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. UNION ELECTRIC CORPORATION 281 ITR 266, AND THAT HE WAS CONVINCED, IT WAS A BONAFIDE MISTAKE AND THE ASSESSEE ESTABLISHED ITS BONAFIDE B Y SUO MOTO REQUESTING THE LEARNED ASSESSING OFFICER FOR RECTIFICATION AND ALLOWANCE OF THE CORRECT RATE AND HENCE, HE HELD THAT NO PENALTY IS LEVIABLE ON A FAIR APPRECIATION OF THE FACTS AND JUDICIAL VIEWS IN THI S REGARD. HE THEREFORE, CANCELLED THE LEVY OF PENALTY OF RS.32,65,216/-. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDER OF THE LEARNED ASSESSING OFFICER AND THE LEARNED AUTHO RISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). - 4 - 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80HHC AT RS.64,05,282/- IGNORING THE LOSS FOR COMPUTATION OF DEDUCTION UNDER SECTION 80HHC IN THE RETURN OF INCOME FILED ON 31.1 0.2001 RELYING ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL WHERE I T WAS HELD THAT PROFITS OF THE BUSINESS WILL DENOTE A SURPLUS ONLY AND NOT DEFICIT. REGARDING THE EXCLUSION OF EXCISE DUTY AND SALES TA X FROM THE TOTAL TURNOVER, THE ASSESSEE WAS OF THE VIEW THAT AS THE SAME DID CONTAIN ANY ELEMENT OF PROFIT, IT WAS TO BE EXCLUDED FROM THE T OTAL TURNOVER. WE FIND THAT THE ISSUE OF COMPUTING DEDUCTION UNDER SECTION 80HHC IGNORING THE LOSS WAS HIGHLY DEBATABLE AND WAS FINALLY SETTLED B Y THE DECISION OF THE HON'BLE SUPREME COURT ON 11.03.2004 IN THE CASE OF IPCA LABORATORIES LTD. 266 ITR 521(SC) AND THEREFORE, THE ASSESSEE CA NNOT BE MADE LIABLE TO PENALTY FOR THE SAME FOR FURNISHING INACCURATE PART ICULARS OF INCOME. FURTHER, REGARDING EXCLUSION OF EXCISE DUTY AND SAL ES TAX FROM THE TOTAL TURNOVER FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80HHC, WE FIND THAT THE VIEW OF THE ASSESSEE FINDS SUPPORT FROM THE DEC ISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LAXMI MACHINE WORKS (2007) 290 ITR 667 (SC), WHEREIN IT WAS HELD THAT EXCISE DUTY AND SALES TAX ARE NOT INCLUDIBLE IN TOTAL TURNOVER IN THE FORMULA CONTAIN ED IN SECTION 80HHC(3). THEREFORE, THE ASSESSEE CANNOT BE HELD LIABLE FOR P ENALTY ON THIS GROUND ALSO. AS REGARDS THE CLAIM OF DEPRECIATION @ 20% I N PLACE OF 5%, WE FIND THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) HAS OBSERVED THAT THE ASSESSEE SUO MOTO DURING THE COURSE OF ASSESSME NT PROCEEDING POINTED OUT THE MISTAKE IN CLAIMING DEPRECIATION AT HIGHER RATE AT 20% IN PLACE OF 5% ON STAFF QUARTERS TO THE LEARNED ASSESS ING OFFICER AND ALSO EXPLAINED THE CIRCUMSTANCES UNDER WHICH THE DEPRECI ATION WAS CLAIMED AT A HIGHER RATE. WE FIND THAT NO MATERIAL HAS BEEN BR OUGHT ON RECORD BY THE - 5 - REVENUE TO CONTROVERT THE ABOVE FINDING OF THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS) OR TO SHOW THAT THE CLAIM OF DE PRECIATION IN THE RETURN WAS NOT A BONAFIDE MISTAKE ON THE PART OF TH E ASSESSEE. THEREFORE, THE ASSESSEE CANNOT BE MADE LIABLE FOR PENALTY UNDE R SECTION 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. WE THE REFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IT IS CONFIRME D AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 09/04/2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/04/2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VIII, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD