Arvind Murjani Brands Pvt.Ltd, Ahmedabad V. Dy. Commissioner of Income Tax,Circle-1, Ahmedabad

ITA 1295/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8240 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 13-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VARTIK R CHOKSI
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 1295/AHD/2015 (ASSESSMENT YEAR: 2008-09) ARVIND MURJANI BRANDS PVT. LTD. (NOW KNOWS AS TOMMY HILFIGER ARVIND FASHION PVT. LTD.) ARVIND MILLS PREMISES, NARODA ROAD, AHMEDABAD-380025 V/S DCIT,CIRCLE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAECA 3768J APPELLANT BY : SHRI VARTIK R. CHOKSI, AR RESPONDENT BY : SHRI PRASOON KABRA, SR. D.R. ( )/ ORDER DATE OF HEARING : 01-11-2017 DATE OF PRONOUNCEMENT : 15 -11-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-1, AHMEDABAD DATED 09.03.2015 PERTAINING TO A.Y. 2008- 09. ITA NO. 1295 /AHD/2015 . A.Y. 2008-09 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN UPHOLDING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASSESS MENT ORDER DATED 09.12.2010 FRAMED U/S. 143(3) OF THE ACT. THE RETURNED LOSS OF RS. 1,24,66,539/- WAS ASSESSED AT A TOTAL LOSS OF RS. 1,07,96,129/- AFTER MAKING THE FOLLOWING ADDITIONS/ DISALLOWANCES:- (I)EMPLOYEES CONTRIBUTION TO PROVIDENT FUND RS. 3,34,815/- (II) DISALLOWANCE OF COMMISSION U/S. 40(A)(IA) RS . 2,22,827/- (III) CAPITALIZATION OF DESIGN EXPENSES RS. 5,61 ,441/-. (IV) PROVISION FOR CESS ON ROYALTY RS. 5,51,327/ -. 4. PENALTY PROCEEDINGS WERE SEPARATELY INITIATED. 5. DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE A SSESSEE WAS ASKED TO EXPLAIN WHY PENALTY SHOULD NOT BE LEVIED FOR FURNISHING INA CCURATE PARTICULARS OF INCOME. THE ASSESSEE FILED A DETAILED REPLY DENYING ITS LIABILITY TOWARDS THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT BUT DID NOT FI ND ANY FAVOUR WITH THE A.O. WHO PROCEEDED BY LEVYING PENALTY OF RS. 4,49,562/-. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT ALL THE DETAILS RELATING TO THE CLAIM OF IMPUGNED EXPENDITURE WERE FURNISHED AL ONG WITH THE RETURN OF INCOME AND THEREFORE IT CANNOT BE SAID THAT THE ASS ESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. ITA NO. 1295 /AHD/2015 . A.Y. 2008-09 3 8. INSOFAR AS THE CAPITALIZATION OF DESIGN EXPENSES IS CONCERNED, THE LD. COUNSEL EXPLAINED THAT INADVERTENTLY THE SAME REMAINED TO B E CAPITALIZED WHEREAS OTHER EXPENSES INCURRED ON CONSTRUCTION, FURNITURE AND FI TTINGS WERE CAPITALIZED. THE LD. COUNSEL STATED THAT THE A.O. HAS HIMSELF HAS CA PITALIZED THE EXPENDITURE AND HAS ALLOWED THE DEPRECIATION AS PER THE RATES PRESC RIBED UNDER THE INCOME TAX RULES. THE LD. COUNSEL FURTHER POINTED OUT THAT THE PROVISION FOR CESS ON ROYALTY WAS OFFERED AS INCOME IN SUBSEQUENT YEARS A ND THEREFORE THERE IS NO ESCAPEMENT OF INCOME. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. THE LEVY OF PENALTY, AFTER THE APPELLATE ORD ER HAS TO BE CONSIDERED IN THE LIGHT OF THE TWO SURVIVING ADDITIONS/DISALLOWANCES NAMELY (A) CAPITALIZATION OF DESIGN EXPENSES RS. 5,61,441/- AND (B) PROVISION FO R CESS ON ROYALTY RS. 5,51,327/-, WE FIND THAT THE A.O. HAD NOT ONLY ACCE PTED THE CONTENTION OF THE ASSESSEE REGARDING THE CAPITALIZATION OF EXPENDITUR E BUT HAS ALSO ALLOWED DEPRECIATION ON THE SAME. THEREFORE, IT CANNOT BE S AID THAT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION. WE FURTHER FIND THAT ALL T HE DETAILS WERE FURNISHED IN THE RETURN OF INCOME ITSELF, THOUGH INADVERTENTLY T HE AMOUNT OF RS. 5,61,441/- REMAINED TO BE CAPITALIZED ALONG WITH OTHER EXPENSE S ON CONSTRUCTION, FURNITURE AND FITTINGS. IN OUR CONSIDERED OPINION, THE ASSESS EE CANNOT BE HELD LIABLE FOR FURNISHING INACCURATE PARTICULARS OF INCOME ON THE GIVEN SET OF FACTS AND THEREFORE, NOT LIABLE FOR PENALTY U/S. 271(1)(C) OF THE ACT IN RESPECT OF THE DISALLOWANCE ON ACCOUNT OF CAPITALIZATION OF DESIGN EXPENSES. 10. INSOFAR AS THE PROVISION FOR CESS ON ROYALTY IS CO NCERNED, WE FIND THAT THE TRIBUNAL IN ITA NO. 2382/AHD/2011 WHILE SUSTAINING THE ADDITION OF RS. ITA NO. 1295 /AHD/2015 . A.Y. 2008-09 4 5,51,327/- HAS HELD THAT THE ASSESSEE IS AT LIBERTY TO PUT UP THE PROPER CLAIM IN THE YEAR IN WHICH THE PROVISIONS IS REVERSED AND TH E INCOME IS OFFERED. 11. A PERUSAL OF THE FACTUAL MATRIX SHOWS THAT THE ASSE SSEE WAS UNDER A BONA FIDE BELIEF THAT THE LIABILITY HAS ACCRUED AND ACCORDING LY THE PROVISION WAS CREATED FOR THE YEAR UNDER CONSIDERATION. REALIZING THAT TH E LIABILITY HAS NOT ACCRUED IN THE SUBSEQUENT YEAR, THE PROVISION WAS REVERSED AND THE INCOME WAS OFFERED FOR TAXATION IN A.Y. 2009-10. IN OUR CONSIDERED OPINION , THIS IS AN INADVERTENT ERROR AND THEREFORE THE ASSESSEE CANNOT BE VISITED WITH P ENAL CONSEQUENCES ONLY BECAUSE THE ASSESSING OFFICER HAS PROPOSED TO DISAL LOW THE EXPENDITURE DURING THE ASSESSMENT PROCEEDINGS. IN OUR CONSIDERED OPIN ION, PENALTY CANNOT BE LEVIED U/S. 271(1)(C) OF THE ACT FOR FILING INACCUR ATE PARTICULARS OF INCOME ON THIS ACCOUNT ALSO. WE, ACCORDINGLY DIRECT THE A.O. TO DELETE THE PENALTY SO LEVIED U/S. 271(1)(C) OF THE ACT. APPEAL FILED BY T HE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 15 - 11- 20 17 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY A CCOUNTANT MEMBER AHMEDABAD: DATED 15 /11/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD