ACIT, Jaipur V. M/S S.N. KAPOOR EXPORTS, Jaipur

ITA 1155/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47963 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Capital asset; Depreciation; Wrong claim; Bonafide mistake

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.1155/ JP/2010 ASSESSMENT YEAR: 2006-07 PAN: AADFS 6912 J THE ACIT VS. M/S. S.N. KAPOOR EXPORTS CIRCLE- 5 KHAWAS JI KA BAGH JAIPUR AMER ROAD, JAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI D.K. MEENA ASSESSEE BY : SHRI MAHENDRA GARGIEYA ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)- II, JAIPUR DATED 14-07-2010 FOR THE ASSESSMENT YE AR 2006-07. 2.1 THE GROUNDS OF APPEAL RAISED BY THE REVENUE A RE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- 1. DELETING PENALTY LEVIED U/S 271(1) OF THE ACT WITHOUT APPRECIATING THE SUPREME COURT JUDGEMENT IN CASE OF DHARMENDRA TEXTILE PROCESSORS 295 ITR 244 (SC) WHEREIN IT HAS BEEN HELD THAT PENALTY U/S 271( 1)( C) IS A CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING THIS CIVIL LIAB ILITY. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) H AS ERRED IN NOT COMMENTING WHETHER THE WRONG CLAIM OF DEPRECIATION ON TREADMILL WOULD ATTRACT THE PENALTY OR 2 NOT WITHOUT APPRECIATING THAT IT WAS CLAIMED KNOWIN GLY THAT THE TREADMILL WAS NOT BUSINESS ASSET AND DEPRE CIATION IS NOT ALLOWABLE ON SUCH ASSET. 2.2 THE ASSESSEE FILED THE RETURN SHOWING INCOME OF RS. 44,26,850/- ON 19-06-2006. IN THE RETURN OF INCOME, THE ASSESSEE C LAIMED DEPRECIATION AT THE RATE MENTIONED BELOW AS AGAINST THE RATE ON WHICH D EPRECIATION WAS ALLOWABLE. ITEMS CLAIMED DEPRECIATION ALLOWABLE DEPRECIATION RATE AMOUNT RATE AMOUNT FURNITURE & FIXTURE 15% 1,94,884 19% 1,29,923 PLANT & MACHINERY BLOCK-3 25% 10,46,554 15% 6,27,932 PLANT & MACHINERY BLOCK- 2(V) 20% 12,27,219 15% 9,20,415 AIR CONDITIONER 25% 1,83,197 15% 1,09,918 2.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E ASSESSEE CLAIMED DEPRECIATION ON THE BASIS OF THE DEPRECIATION CHAR T PREPARED BY THE C.A. WHO PREPARED THE TAX AUDIT REPORT . THE DEPRECIATION RA TES WERE CHANGED ONLY FROM THE ASSESSMENT YEAR UNDER REFERENCE AND INADVE RTENTLY, THE DEPRECIATION WAS CLAIMED AT OLD RATES. IT WAS THEREFORE, ARGUED BEFORE THE LD. CIT(A) THAT PENALTY IS NOT LEVIABLE. 2.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE LD. AR DELETED THE PENALTY. 3 2.5 WE HAVE HEARD BOTH THE PARTIES. BEFORE US , THE LD. AR HAS FILED THE PAPER BOOK CONTAINING 38 PAGES. THE CHARTERED ACCOU NTANT, WHO PREPARED THE TAX AUDIT REPORT, PREPARED THE DEPRECIATION CHA RT ON THE BASIS OF THE SOFTWARE AVAILABLE WITH HIM. SINCE THE DEPRECIATION RATES WERE CHANGED BUT THE CHARTERED ACCOUNTANT DID NOT CHANGE THE SOFTWAR E. THE FRESH SOFTWARE WAS PURCHASED ON 30 TH JUNE, 2006 WHILE THE TAX AUDIT REPORT WAS PREPARED ON 19-06-2006. DUE TO THIS, THE ASSESSEE CLAIMED THE W RONG DEPRECIATION. IT IS THEREFORE, CLEAR THAT THERE WAS A BONAFIDE MISTAKE IN MAKING THE CLAIM OF DEPRECIATION. DUE TO WRONG CLAIM OF DEPRECIATION, T HE WRITTEN DOWN VALUE FOR THE SUBSEQUENT YEAR ALSO BECAME LESS. THE DEPRECIAT ION IS A NOTIONAL DEDUCTION FROM THE COST OF THE CAPITAL ASSET AND IS ALLOWED AS A DEDUCTION FOR THE LIFE OF THE ASSETS ON THE BASIS OF THE RATE PRO VIDED IN THE INCOME TAX RULES.. THUS OVERALL DEDUCTION CANNOT BE MORE THAN THE COST OF THE ASSETS. THUS THE PENALTY WAS NOT LEVIABLE IN RESPECT OF DE PRECIATION CLAIMED AT THE RATE WHICH WAS MORE THAN THE RATE ALLOWABLE. FOR TH IS PROPOSITION, WE PLACE RELIANCE ON THE FOLLOWING DECISIONS 1.CIT VS. SKYLINE AUTO PRODUCTS (P) LTD. , 271 IT R 335 (MP) 2. CIT VS. RELIANCE PETROPRODUCTS (P) LTD. , 322 ITR 158 (SC) 3. ACIT VS. CHAMBER FERTILIZERS & CHEMICALS, 44 TW 188 (JP) 4 HENCE NO PENALTY IS LEVIABLE ON ACCOUNT OF WRONG CL AIM OF DEPRECIATION DUE TO WRONG RATS OF DEPRECIATION 2.6 THE ASSESSEE ALSO CLAIMED DEPRECIATION ON TREAD MILL. THE AO IN THE ASSESSMENT ORDER NOTICED THAT TREADMILL WAS PURCHAS ED IN THE NAME OF SHRI VIKRAM KAPOOR, PARTNER OF THE FIRM. A CERTIFICATE W AS ISSUED BY M/S. CARDICO FITNESS, NEW DELHI ON 6 TH MAY, 2005 IN WHICH IT WAS MENTIONED THAT THE GOODS CONSIGNED TO SHRI VIKRAM KAPOOR, JAIPUR I S LIFE FITNESS 95TI TREADMILL PURCHASED BY HIM FOR RS. 4,50,000/- AND I T IS FOR HIS PERSONAL USE AND IS NOT COMMERCIAL PURPOSES. IT HAS BEEN MENTION ED IN THE ASSESSMENT ORDER THAT THE TREADMILL MACHINE HAS NOTHING TO DO WITH THE BUSINESS OF THE ASSESSEE. THIS MACHINE HAS BEEN PURCHASED FOR THE P ERSONAL USE OF THE PARTNER. THE DEPRECIATION ON TREADMILL TO THE EXTEN T OF RS. 67,500/- WAS DISALLOWED. 2.7 BEFORE US, THE LD. AR HAS SUBMITTED THAT WRONG CLAIM OF DEPRECIATION MADE ON TREADMILL WAS A BONAFIDE MISTAKE COMMITTED BY THE TAX AUDITOR AND THEREFORE, PENALTY IS NOT LEVIABLE. THE TREADMILL W AS PURCHASED IN THE NAME OF THE PARTNER AND IT WAS TO BE USED BY HIM FOR PER SONAL PURPOSES. THE PARTNER WAS AWARE OF THE FACT THAT TREADMILL IS BEI NG PURCHASED IN HIS NAME FOR HIS PERSONAL PURPOSES. THE TAX AUDITOR WILL NOT BE ABLE TO VERIFY FROM THE ACCOUNTS BOOKS THAT THE ASSET SHOWN IN THE BALANCE SHEET OF THE FIRM IS IN THE 5 NAME OF THE PARTNER AND IS BEING USED BY HIM FOR PE RSONAL PURPOSES. THE TAX AUDITOR WHILE COMPUTING THE DEPRECIATION HAS TO GIV E THE DETAILS AS MENTIONED IN FROM NO. 14 OF THE TAX AUDIT REPORT. ANY EXPENDITURE OF PERSONAL NATURE IS TO BE GIVEN TO THE TAX AUDITOR. IN CLAUSE 17 OF THE TAX AUDIT REPORT, IT IS MENTIONED BY THE TAX AUDITOR THAT EXP LANATION GIVEN TO HIM WAS THAT NO PERSONAL EXPENSES HAVE BEEN DEBITED TO P & L A/C. HENCE, IT CANNOT BE SAID THAT CLAIM OF DEPRECIATION ON TREADMILL WAS ON ACCOUNT OF ANY BONAFIDE MISTAKE. THE BOMBAY BENCH IN THE CASE OF M ERCK LTD. VS. ACIT, 2011 TIOL-341-ITAT-BOMBAY CONFIRMED THE IMPOSITION OF PENALTY U/S 271(1)( C) OF THE ACT IN A CASE WHERE THE ASSESSEE CLAIMED LOSS ON SALE OF HUNDIES AGAINST SHORT TERM CAPITAL GAIN THOUGH SECT ION 94(7) WAS APPLICABLE AS IN THAT CASE, THE ASSESSEE WAS A REPUTED COMPANY AND WAS ASSISTED BY LEADING COMPANY. THERE IS A DIFFERENCE BETWEEN WRON G CLAIM AND FALSE CLAIM. THE CLAIM OF DEPRECIATION ON TREADMILL IS FA LSE CLAIM AND IT CANNOT BE TREATED AS WRONG CLAIM. HENCE, THE AO WAS JUSTIFIED IN IMPOSING THE PENALTY IN RESPECT OF DEPRECIATION OF CLAIM ON TREADMILL A ND THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THE PENALTY IN RESPECT OF CLA IM OF DEPRECIATION ON TREADMILL. 6 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08-07 -2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 08 /07/2011 *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- 5,JAIPUR 2. M/S. S.N. KAPOOR EXPORTS, JAIPUR 3. THE LD. CIT (A) JAIPUR 4. THE LD. CIT BY ORDER 5. THE LD.DR 6. THE GUARD FILE (ITA NO.1155/JP /10) A.R, ITAT, JAIPUR 7 8