ITO 3(3)(1), MUMBAI V. RISHIROOP RUBBER INTERNATIONAL TD, MUMBAI

ITA 1145/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3628 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D P SHARMA
• Keywords: Business income; Depreciation; Deemed to accrue or arise in india; Difference of opinion; Change of opinion
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.: 1145/MUM/2012 ASSESSMENT YEAR: 2007-08 ITO 3(3)(1), VS. RISHIROOP RUBBER INTERNATIONAL LTD, MUMBAI. 65 ATLANTA NARIMAN POINT, MUMBAI- 400 021. PAN: AABCR1789B (APPELLANT) (RESPONDENT) APPELLANT BY : MR. D P SHARMA RESPONDENT BY : MR. JAYESH DADIA DATE OF HEARING : 20.02.2013 DATE OF PRONOUNCEMENT : 19.04.2013 ORDER PER SANJAY GARG, JM : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF THE LEARNED CIT(A) DATED 24.10.2011 DELETING THE PENALTY OF RS. 53,71,722 LEVIED BY THE AO ON THE ASSESSEE U/S. 271(1)(C) OF THE I.T ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED ITS RETURN OF INCOME PERTAINING TO A.Y. 2007-08 DECLARING TOTAL I NCOME AT RS.2,06,577. THE RETURN WAS PROCESSED U/S. 143(3) OF THE IT ACT AND THE AO COMPUTED THE TOTAL INCOME AT RS.84,44,683 UNDER PROVISIONS OF SECTION 115JB OF T HE I.T ACT AS AGAINST THE RETURNED INCOME OF RS.2,06,577. THE LEARNED CIT(A), VIDE HI S ORDER DATED 21.12.2009, CONFIRMED THE SAID ADDITIONS/DISALLOWANCES. PENALT Y PROCEEDINGS U/S. 217(1)(C) WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF DISALLOWANCE OF ITA NO. 1145/MUM/2012 AY: 2007-08 2 DEPRECIATION OF RS.21,06,747, ASSESSING INTEREST IN COME OF RS.1,47,760 AS OTHER INCOME, ADDITION OF RS.4,82,213 ON ACCOUNT OF WRITE OFF OF STOCK TO NORMAL INCOME AS WELL AS TO BOOK PROFIT U/S. 115JB AND ADJUSTMENT OF DEPRECIATION ON DISCARDED ASSETS OF RS. 1,00,28,206. THE AO IN THE PENALTY ORDER OB SERVED THAT THE ASSESSEE WRONGLY CLAIMED DEPRECIATION ON DISCARDED ASSETS. DURING T HE AY 2006-07 THE ASSESSEE HAD WITHDRAWN ITS CLAIM OF DEPRECIATION ON DISCARDED AS SETS HOWEVER, DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE DID NOT WITHDRAW I TS CLAIM OF DEPRECIATION ON SUCH ASSETS AND AS SUCH THE ASSESSEE HAD FILED INACCURAT E PARTICULARS OF INCOME DELIBERATELY. THE AO FURTHER OBSERVED THAT THE ASS ESSEE WRONGLY CLAIMED INTEREST INCOME AS BUSINESS INCOME WHEREAS IN THE ASSESSME NT ORDER THE SAME WAS TREATED AS INCOME FROM OTHER SOURCES. IT WAS FURTHER OBS ERVED THAT REGARDING WRITE OFF OF STOCKS, THE INVENTORY WAS NOT ACTUALLY DISPOSED OFF BUT REMAINED IN POSSESSION OF THE ASSESSEE. EVEN THE PERMISSION OF THE EXCISE AUTHORI TIES TO DISPOSE OFF THE MATERIAL WAS NOT TAKEN, CONSEQUENT TO WHICH THE INVENTORY BE ING STOCK REMAINED WITH THE ASSESSEE IN HIS PREMISES. THE ASSESSEE THUS WRON GLY CLAIMED DEDUCTION OF RS.4,82,213 ON ACCOUNT OF WRITE OFF OF STOCKS, WHIC H CLAIM WAS NOT BONA FIDE. THE AO THUS FOUND THAT THE ASSESSEE SOUGHT TO EVADE THE TOTAL TAX OF RS.35,81,148. THE AO LEVIED PENALTY @150% ON THE TAX SOUGHT TO BE EVA DED WHICH CAME TO RS.53,71,722. THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(A) AGAINST THE ABOVE SAID LEVY OF PENALTY. THE LEARNED CIT(A) DEL ETED THE PENALTY OBSERVING AS UNDER: 10. I HAVE CONSIDERED THE AOS ORDER AS WELL AS A PPELLANTS SUBMISSION. I FIND THAT HE APPELLANT COMPANY HAS M ADE THE CLAIM OF DEPRECIATION IN ITS BOOKS OF ACCOUNTS WHILE PREPARI NG ITS ACCOUNTS OF TRANSACTIONS AS PER PART II & III OF SCHEDULE VI OF THE COMPANIES ACT AND HAVE COMPLIED WITH THE ACCOUNT STANDARD PRESCRI BED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE A PPELLANT COMPANY IS A PUBLIC LIMITED COMPANY AND IT WAS NECESSARY FOR T HE APPELLANT COMPANY TO PREPARE ITS ACCOUNTS AS PER PART II AND III OF THE COMPANIES ACT, WHEREIN, THE DEPRECIATION WAS ALLOWE D ON THE ASSETS IN THE EARLIER YEAR. THE ASSETS REMAINED IN THE BALAN CE SHEET OF THE APPELLANT COMPANY AND HENCE DEPRECIATION HAS TO BE PROVIDED BY THE ITA NO. 1145/MUM/2012 AY: 2007-08 3 APPELLANT COMPANY ON SUCH ASSETS AS PER COMPANIES A CT. THE CLAIM OF DEPRECIATION WAS MADE IN THE APPELLANT COMPANYS BO OKS OF ACCOUNT, WHILE PREPARING ITS ANNUAL ACCOUNTS, WHICH WAS CERT IFIED BY THE AUDITORS OF THE APPELLANT COMPANY AS WELL AS APPROVED BY THE SHAREHOLDERS AND REGISTRAR OF COMPANIES. I DO NOT FIND ANY INFIRMIT Y IN THE CLAIM OF SUCH DEDUCTION OF DEPRECIATION BY THE APPELLANT COMPANY IN ITS BOOKS OF ACCOUNTS AS IT WAS WARRANTED ON THE PART OF THE APP ELLANT COMPANY TO PREPARE ITS BOOKS OF ACCOUNTS IN ACCORDANCE WITH TH E COMPANIES ACT AS IT IS ENVISAGED THEREIN. IN MY CONSIDERED VIEW, TH E APPELLANT COMPANY WAS COMPLETELY JUSTIFIED IN ITS ACTION WHILE SHOWIN G THE DEDUCTION OF DEPRECIATION AS PER BOOKS OF ACCOUNT ON THE AFORESA ID ASSETS ONCE IT WAS APPEARING IN THE BALANCE SHEET OF THE APPELLANT COMPANY. HENCE IN MY CONSIDERED VIEW, IMPOSITION OF PENALTY BY THE AO ON SUCH ADDITION WAS COMPLETELY INCORRECT AND UNJUSTIFIED I N VIEW OF THE AFORESAID FINDING OF FACTS AND PROVISIONS OF LAW. FURTHER TO THAT, IT IS ALSO A FACT ON RECORD THAT ALL THE NECESSARY DETAIL S WERE DISCLOSED BY THE APPELLANT COMPANY IN ITS AUDITED ACCOUNTS FOR C LAIM OF SUCH DEPRECIATION. IT WAS NOT THE CASE THAT THE APPELLA NT COMPANY HAS CONCEALED ANY PARTICULARS OF SUCH DEDUCTION OR THE AO FOUND THAT SUCH DEDUCTIONS WERE MADE WITHOUT ANY BASIS. FURTHER TO THAT ALSO I FIND THAT MY PREDECESSOR CIT(A) IN THE APPELLANTS OWN C ASE FOR AY 2006-07 HAS DELETED THE PENALTY LEVIED BY THE AO U/S. 271(1 )(C) ON SIMILAR NATURE OF ADDITION OF CLAIM OF DEPRECIATION VIDE HI S ORDER NO. CIT(A)- 7/DCIT 3(3)/IT-482/09-10 DATED 29-04-2010. FURTHER , TO THAT IT IS ALSO FACT ON RECORD THAT THE APPELLANTS CLAIM WAS MADE AS PER ACCOUNTING STANDARDS AND PART II & III OF SCHEDULE VI OF THE C OMPANIES ACT. THEREFORE, I HAVE NO HESITATION TO HOLD THAT THE AO WAS NO CORRECT ON FACTS WHILE IMPOSING PENALTY ON HIS ADDITION OF BOO K PROFITS. IN MY CONSIDERED VIEW THERE IS NO CASE OF ANY CONCEALMENT , HENCE PENALTY LEVIED ON THIS ACCOUNT IS CANCELLED. 13. FURTHER TO THAT, THE PENALTY WAS ALSO LEVIED ON ADDITION OF RS.4,82,213/- ON ACCOUNT OF WRITE OFF OF STOCK AND ALSO ON AN INTEREST INCOME OF RS.1,47,760/- WHICH WAS TAKEN BY THE APPE LLANT AS BUSINESS INCOME AS THE SAME WAS ASSESSED BY THE AO AS INTERE ST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. IN MY CONSID ERED VIEW BOTH THESE ADDITIONS WERE MADE BY THE AO ON CHANGE OF OP INION. BESIDES THIS, ALL THE FACTS ON THIS ISSUE WERE DISCLOSED BY THE APPELLANT IN THE RETURN OF INCOME AND MERELY CHANGE OF OPINION WILL NOT LEAD TO IMPOSITION OF PENALTY AS ALL THE RELATED FACTS OF T HE AFORESAID INCOME WERE DISCLOSED BY THE APPELLANT COMPANY THROUGH ITS TRADING, PROFIT & LOSS ACCOUNT. IT WAS MERELY A CASE THAT THE AO DID NOT AGREE WITH THE ITA NO. 1145/MUM/2012 AY: 2007-08 4 CLAIM MADE BY THE APPELLANT COMPANY BUT IT WILL NOW HERE AMOUNTS TO CONCEALMENT OF INCOME AND HENCE PENALTY LEVIED BY T HE AO ON THESE ADDITIONS ALSO CANNOT DESERVE TO BE UPHELD. HENCE THE PENALTY SO LEVIED ON SUCH ADDITIONS DESERVES TO BE CANCELLED. ACCORDINGLY, THE PENALTY LEVIED ON THESE ADDITIONS IS ALSO CANCELLED . AS A RESULT, THE PENALTY ORDER PASSED BY THE AO IS HEREBY CANCELLED. 3. THE ACCOUNTS OF THE ASSESSEE COMPANY WERE AUDITE D BY THE AUDITORS AND CERTIFICATE TO WHICH EFFECT WAS ALSO ISSUED. THE A SSETS REMAINED IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AND, HENCE, THE DEPRECIATIO N WAS CLAIMED BY THE COMPANY ON SUCH ASSETS. THE ASSESSEE COMPANY HAS NOT CONCE ALED ANY PARTICULARS OF SUCH DEDUCTION. THE ASSESSMENT OF INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AGAINST THE CLAIM OF THE ASSESSEE AS INCO ME FROM BUSINESS CANNOT BE SAID TO BE A CASE OF FURNISHING INACCURATE PARTICULARS O R CONCEALMENT OF INCOME. IT MAY ALSO BE OBSERVED THAT THE COMPUTATION OF TAX IN THE ASSESSMENT ORDER WAS MADE U/S. 115JB OF THE ACT AND TOTAL TAX CLAIMED DURING THE A SSESSMENT PROCEEDINGS WAS RS. 8,44,468. THE INTEREST INCOME FROM OTHER SOURCES A MOUNTING TO RS.1,47,760 WAS COMPUTED BY THE AO UNDER NORMAL COMPUTATION. HOWEV ER, THE SAID FIGURE DOES NOT FIND MENTION UNDER THE COMPUTATION U/S. 115JB OF TH E ACT. SINCE THE INCOME COMPUTED U/S 115JB OF THE ACT WAS MORE THAN THE INC OME COMPUTED UNDER NORMAL PROVISIONS, ASSESSMENT OF INCOME WAS MADE U/S. 115J B OF THE ACT. THE AO THUS CALCULATED THE TOTAL TAX SOUGHT TO BE EVADED AT RS. 35,81,148 AGAINST ACTUAL TAX CLAIMED IN THE ASSESSMENT ORDER AT RS.8,44,468. AS PER LAW, PENALTY CAN BE IMPOSED ON THE AMOUNT OF TAX SOUGHT TO BE EVADED WHICH WAS ASSESSED OR CLAIMED AS PER COMPUTATION MADE IN THE ASSESSMENT ORDER WHICH IN C ASE IN HAND IS RS.8,44,468. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NALWA SONS INVESTMENTS LTD . IN ITA NO. 1420/2009 DATED AUGUST 26, 2010, HAS HELD THAT WHEN THE ASSESSMENT AS PER NORMAL PROCEDURE HAS NOT BEEN ACT ED UPON BUT THE BASIS OF ASSESSMENT IS MADE ON THE DEEMED INCOME ASSESSED U/ S. 115JB OF THE ACT BEING HIGHER OF THE TWO AND THE TAX IS THUS PAID ON THE I NCOME ASSESSED U/S. 115JB OF THE ACT, ANY CONCEALMENT OF INCOME FOUND UNDER NORMAL C OMPUTATION HAS NO ROLE TO PLAY ITA NO. 1145/MUM/2012 AY: 2007-08 5 AND SUCH CONCEALMENT DID NOT LEAD TO TAX EVASION AT ALL. AS PER LAW LAID DOWN BY THE HONBLE HIGH COURT, PENALTY CANNOT BE IMPOSED ON TH E TAX SOUGHT TO BE EVADED UNDER NORMAL COMPUTATION WHEN THE NORMAL COMPUTATIO N WAS IN FACT NOT ACTED UPON WHILE ASSESSING THE INCOME OF THE ASSESSEE. IN THE CASE IN HAND, THE AO WRONGLY CLUBBED THE INCOME SOUGHT TO BE EVADED UNDER NORMAL COMPUTATION AS WELL AS THAT ASSESSED U/S. 115JB OF THE ACT. HOWEVER, AS OBSERV ED ABOVE, EVEN ON MERITS IT CANNOT BE SAID THAT THE ASSESSEE COMPANY HAS TRIED TO CONCEAL INCOME OR HAS FURNISHED INACCURATE PARTICULARS INVITING PENALTY U NDER THE ACT. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND TH E SAME IS HEREBY UPHELD. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S HEREBY DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF APRIL 2013. SD/- SD/- (B RAMAKOTAIAH) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 19 TH APRIL, 2013 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. CONCERNED MUMBAI 4. CIT (A) CONCERNED MUMBAI 5. THE DR, D - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI