Indoswe Engineers Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 120/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9180 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL
• Keywords: Depreciation; Deemed to accrue or arise in india
• Section: 115JB; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 12 0 /P U N/201 5 / ASSESSMENT YEAR : 20 07 - 08 INDOSWE ENGINEERS PVT. LTD. PLOT NO.4, MIDC, BHOSARI, PUNE 411026 . / APPELLANT PAN: AAACI3918C VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE . / RESPONDENT / APPELLANT BY : SHRI KISHOR PHADKE / RESPONDENT BY : SHRI VIVEK AGGARWAL / DATE OF HEARING : 10 .0 7 . 2017 / DATE OF PRONOUNCEMENT: 12 . 0 7 .201 7 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - V , PUNE , DATED 27.10.2014 RELATING TO ASSESSMENT YEAR 20 07 - 08 AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT ) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1 THE CIT(A) - V, PUNE ERRED IN LAW AND ON FACTS IN SUSTAINING LEVY OF PENALTY U/S 271(1)(C) IN VIEW OF FACT THAT THE ASSESSEE COMPANY HAS NOT CONCEALED PARTICULARS OF INCOME, AND ALSO HAS NOT FURNISHED INACCURATE PARTICULARS OF INCOME . ITA NO. 12 0 /P U N/20 1 5 INDOSWE ENGINEERS PVT. LTD. 2 2 THE LEARNED CIT(A) - V, PUNE & THE LEARNED AO ERRED IN LAW IN NOT APPRECIATING THAT CONCEALMENT PENALTY OF RS.15,13,000 LEVIED U/S 271(1)(C) IS BAD IN LAW FOR THE REASON THAT THE PROVISIONS OF SECTION 271(1)(C ) ARE NOT APPLICABLE TO DEEMED INCOME U/S 115JB. 3 THE CONCEALMENT PENALTY LEVIED IS ALSO BAD IN LAW FOR THE REASON THAT WHILE PASSING THE ORDER U/S 143(3), NO SATISFACTION AS TO FURNISHING OF INACCURATE PARTICULARS IS REACHED. THE MERE DIRECTION FOR ISS UE OF NOTICE U/S 271(1)(C) CAN'T BE EQUATED TO ANY CONSPICUOUS SATISFACTION, WHICH OUGHT TO HAVE DISCERNED FROM THE MAIN BODY OF THE ASSESSMENT ORDER. 4 THE LEARNED CIT(A) - V, PUNE & THE LEARNED AO ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT SECTIO N 271(1)(C) READ WITH EXPLANATION - 3,4,5, & 7 APPLIES TO NORMAL INCOME AS PER ITA, 1961 AND NOT TO DEEMED INCOME (I.E. BOOK PROFITS) U/S 115JB. 5 THE LEARNED I - T AUTHORITIES ERRED IN LEVYING CONCEALMENT PENALTY WITHOUT APPRECIATING THAT, TAX COLLECTED US 115JB, IS ALLOWED TO BE CARRIED FORWARD AS MAT CREDIT & ALLOWED TO BE ADJUSTED AGAINST FUTURE TAX LIABILITY. THE LEARNED I - T AUTHORITIES, THUS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THERE IS NO ANY EFFECTIVE TAX LIABILITY THAT IS SOUGHT TO BE E VADED, AND HENCE, THERE IS NO ANY EFFECTIVE CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS. 6 THE LEARNED I - T AUTHORITIES ERRED IN LEVYING CONCEALMENT PENALTY WITHOUT APPRECIATING THAT, THE TAX LIABILITY U/S 115JB HAS ARISEN AS THE APPLICATIO N OF CLAUSE (IIA) AND (IIB) TO SECTION 115JB WAS PRESUMED TO BE RETROSPECTIVE IN NATURE; WHEREAS THE ASSESSEE WAS IN GENUINE BELIEF THAT IT WAS ELIGIBLE TO CLAIM SETOFF OF DEPRECIATION ON REVALUED ASSETS FOR YEARS PRIOR TO AY 2007 - 08, AS CLAUSE (IIA) AND ( IIB) TO SECTION 115JB WERE EFFECTIVE FROM A.Y. 2007 - 08. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT NIL AFTER ADJUSTING BROUGHT FORWARD LOSSES. AS PER THE PROFIT AND LOSS ACCOUNT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD WORKED OUT THE BOOK PROFIT AT RS.1,01,41,261/ - FOR THE YEAR ENDING 31.03.2007. THE ASSESSEE HAD CLAIMED THE SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AS WELL AS DEPRECIATION LOSSES FOR THE EARLIER YEARS AS PER THE BOOKS. THE DETAILS OF BROUGHT FORWARD LOSSES AND DEPRECIATION LOSSES AS PER THE BOOKS ARE TABULATED AT PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSIN G OFFICER HELD THAT FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 , THE ASSESSEE HAD REDUCED THE PROVISIONS OF REVALUATION RESERVES OF RS.33,55,463/ - AND RS.33,52,454/ - ITA NO. 12 0 /P U N/20 1 5 INDOSWE ENGINEERS PVT. LTD. 3 AGGREGATING TO RS.66,07,917/ - IN THE RESPECTIVE YEARS, WHILE COMPUTING THE TOTAL INCOME. AFT ER ADJUSTING THE SAID POSITIVE INCOME AGAINST BROUGHT FORWARD DEPRECIATION LOSSES, THERE WERE NO DEPRECIATION LOSSES TO BE CARRIED FORWARD FOR THE YEAR AS ON 01.04.2006, AS PER BOOKS OF THE ASSESSEE. IN VIEW THEREOF, BROUGHT FORWARD DEPRECIATION LOSSES AS PER BOOKS WORKED OUT TO NIL AND ONLY BUSINESS LOSSES AS PER TABLE WORKED OUT WAS AVAILABLE WERE SET OFF AGAINST SUBSEQUENT YEAR S WHILE COMPUTING BOOKS PROFITS UNDER SECTION 115JB OF THE ACT. IN VIEW OF SECTION 115JB(III) OF THE ACT, BUSINESS LOSSES OR DE PRECIATION LOSSES, WHICHEVER IS LESS, IS TO BE SET OFF AGAINST CURRENT YEAR BOOK PROFITS. IN VIEW OF ADJUSTED LOSSES WERE TAKEN AT NIL AND THE TAXES WERE COMPUTED ON THE INCOME UNDER SECTION 115JB OF THE ACT AT RS.1,01,41,261/ - . THE PERUSAL OF ASSESSMENT ORDER FROM PARAS 1 TO 3 REFLECTS THE ADDITION HAVE MADE IN THE HANDS OF ASSESSEE, BUT HOWEVER, AFTER MAKING THE AFORESAID ADDITIONS, NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF T HE ACT. AT THE CLOSE OF THE ASSESSMENT, HOWEVER, THE ASSESSING OFFICER HAS DIRECTED TO ISSUE THE NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICER THEREAFTER, WHILE PASSING THE ORDER LEVYING PENALTY UNDER SECTION 271(1)(C) OF TH E ACT, HAS HELD AS UNDER: - 6. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS CLEAR THAT ASSESSEE HAS DELIBERATELY CONCEALED THE BOOK PROFIT BY ADOPTING INCORRECT B/F LOSSES WHICH ARE NOT IN EXISTENCE AND FURNISHED INACCURATE PARTICULARS OF INCOME WIT HIN THE MEANING OF THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. THEREFORE, PENALTY U/S. 271(1)(C) OF THE I.T. ACT, 1961 IS CLEARLY ATTRACTED IN THE INSTANT CASE. THE WORKING OF THE PENALTY IS AS UNDER: - 6.1 WORKING OF PENALTY TAX O N INCOME INCLUDING CONCEALED INCOME RS.15,13,995/ - TAX ON INCOME EXCLUDING CONCEALED INCOME RS. NIL DIFFERENCE RS.15,13,995/ - PENALTY AT 100% RS.15,13,995/ - PENALTY AT 300% RS.45,41,985/ - 6.2 ON CONSIDERATION OF OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND THE GRAVITY OF THE ISSUES INVOLVED, I LEVY A PENALTY OF RS.15,13,995/ - , WHICH IS THE MINIMUM PENALTY IMPOSABLE IN THE CASE, U/S 271(1)(C) OF THE I.T. ACT, 1961. ITA NO. 12 0 /P U N/20 1 5 INDOSWE ENGINEERS PVT. LTD. 4 5. THE CIT(A) HAS UPHELD THE LEVY OF PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE TOOK US THROUGH VARIOUS ASPECTS OF COMPUTATION OF BOOK PROFITS AND ALSO THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AS TO NOT BEING A TTRACTED WHEN THE ADDITION, IF ANY, IS MADE WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. HOWEVER, AT THE END, IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT NO SATISFACTION HAS BEEN RECORDED BY THE ASSESS ING OFFICER WHILE INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND ALSO AS TO WHICH LIMB OF SAID SECTION IS ATTRACTED IN THE CASE. IT IS ALSO NOTED THAT PENALTY HAS BEEN LEVIED FOR BOTH THE LIMBS I.E. FOR CONCEALING THE BOOK PROFITS A ND ALSO FOR FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, STRONGLY OPPOSED THE ARGUMENTS OF THE LEARNED AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE POINTING OUT THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE. FURTHER , THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEAL AGAINST VARIOUS ASPECTS OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT BUT THE FIRST ISSUE RAISED BY THE ASSESSEE IS AGAINST PENALTY LEVIED FOR CONCEALING THE PARTICULARS OF INCOME AND ALSO HAVING NOT FURNISHING INACCURATE PARTICULARS OF INCOME. THE BASIC ASPECT WHICH NEEDS TO BE ADDRESSED IN THE CASE IS NON - RECORDING OF SATISFACTION BY THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT IN THE HANDS OF ITA NO. 12 0 /P U N/20 1 5 INDOSWE ENGINEERS PVT. LTD. 5 ASSESSEE. THE ASSES SING OFFICER HAD NOT ALLOWED ADJUSTMENT OF BROUGHT FORWARD LOSSES / DEPRECIATION LOSSES AGAINST BOOK PROFITS DETERMINED BY THE ASSESSEE AS THE DEPRECIATION LOSSES WERE COMPUTED AT NIL. THE PROVISIONS OF SECTION 115JB(III) OF THE ACT WERE APPLIED TO DETERM INE THE BOOK PROFIT OF ASSESSEE AT RS.1,01,41,261/ - AS AGAINST THE CLAIM OF ASSESSEE AT NIL AFTER ADJUSTMENT OF DEPRECIATION LOSSES. THEREAFTER, THE ASSESSING OFFICER HAS NOT RECORDED SATISFACTION FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER HAS ALSO NOT RECORDED ANY SATISFACTION AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT IS NOT SATISFIED BY THE ASSESSEE. WHILE PASSING THE ORDER, THE ASSESSING OFFICER ONLY DIRECTED ISSUE OF NOTICE UNDER SECTION 274 R. W.S. 271(1)(C) OF THE ACT. THE SECOND ASPECT TO BE CONSIDERED IN THE CASE IS PENALTY ORDER PASSED BY THE ASSESSING OFFICER, WHEREIN HE HAS HELD THE ASSESSEE TO HAVE CONCEALED ITS INCOME AND ALSO FURNISHED I NACCURATE PARTICULARS OF INCOME, IN THE FINAL ANA LYSIS OF LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT RS.15,13,995/ - . THE CIT(A) HAS UPHELD THE ORDER OF ASSESSING OFFICER. WE FIND THAT THE SAID ORDER SUFFERS FROM BASIC AMBIGUITY OF NON - RECORDING OF SATISFACTION FOR INITIATING PENALTY PROCEEDI NGS IN THE FIRST INSTANCE. SECONDLY, IT ALSO SUFFERS FROM INFIRMITY IN NOT SHOW CAUSING THE ASSESSEE TO EXPLAIN AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT IS NOT SATISFIED. 9. WE FIND THAT SIMILAR ISSUE OF NON - RECORDING OF SATISFACTION AND CONSEQUE NTLY PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT AROSE BEFORE THE TRIBUNAL IN KANHAIYALAL D. JAIN VS. ACIT IN ITA NOS.1201 TO 1205/PN/2014, RELATING TO ASSESSMENT YEARS 2003 - 04 TO 2007 - 08, ORDER DATED 30.11.2016. THE TRIBUNAL IN SIMILAR CIRCUM STANCES, HAS DELETED PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT VIDE PARAS 13 TO 27 OF THE ORDER. THE ISSUE ITA NO. 12 0 /P U N/20 1 5 INDOSWE ENGINEERS PVT. LTD. 6 ARISING IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN KANHAIYALAL D. JAIN VS. ACIT (SUPRA) AND APPLYING THE SAID RAT IO, WE HOLD THAT WHERE THE ASSESSING OFFICER HAS FAILED TO RECORD SATISFACTION FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND ALSO NOT RECORDING SATISFACTION AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS BEEN VIOLATED BY T HE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 10 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 12 TH DAY OF JU LY , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 12 TH JU LY , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPEL LANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - V , PUNE ; 4. / THE CIT - V , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDE R , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE