ITO, New Delhi V. M/s. Lord Shiva Construction Co. Pvt. Ltd., New Delhi

ITA 1302/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0492 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Keywords: Depreciation; Bonafide belief; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES D: NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO. 1302/DEL/2010 ASSESSMENT YEAR: 2004-05 INCOME TAX OFFICER, VS. LORD SHIVA CONSTRUCTION C O. P. LTD., WARD 4(4), 66, BLOCK, H-34, SECTOR-3. NEW DELHI. ROHINI, NEW DELHI. AAACL2040G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. MONGA, DR RESPONDENT BY : SHRI R. S. SINGHVI, CA ORDER PER I.P. BANSAL, J.M. THIS APPEAL IS FILED BY THE REVENUE. IT IS DIREC TED AGAINST THE ORDER OF CIT(A) DATED 4.1.10 FOR A.Y. 2004-05. GRO UNDS OF APPEAL READ AS UNDER: - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND CO NTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS. 2,1 1,576/- LEVIED BY THE AO U/S 271(1)(C) OF THE I.T. ACT. 2.1THE CIT(A) IGNORED THE FACTS THAT THE ASSESSEE H AS FURNISHED INACCURATE PARTICULARS OF HIS INCOME BY CLAIMING DE PRECIATION ON MACHINERY @ 40% AS AGAINST 25% ALLOWED BY LAW. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. ITA NO. 1302/D/10 2 2. THE ASSESSEE IS A CIVIL CONTRACTOR. IT FILED I TS RETURN OF INCOME AT RS. 8,11,130/- ON 30 TH OCTOBER, 2004. ASSESSEE CLAIMED DEPRECIATION @ 40% ON FOLLOWING ASSETS: - A) DUMPER RS. 7,86,802/- B) JCB RS. 3,19384/- C) ROAD ROLLER RS. 2,81,616/- D) TAR BOILER RS. 72,384/- E) TROLLEY RS. 1,12,500 /- RS. 15,72,686 /- 3. ACCORDING TO AO, 40% DEPRECIATION WAS NOT ALLOW ABLE ON THESE ASSETS AS ACCORDING TO INCOME TAX RULES THE R ATE OF DEPRECIATION @ 40% WAS ALLOWABLE ONLY IN RESPECT OF HEAVY MACHIN ERY WHICH IS EITHER USED FOR HIRE PURPOSES OR HEAVY VEHICLES WHICH ARE PLIED ON HIRE FOR TRANSPORTATION OF GOODS. THE ABOVE MACHINES WERE U SED BY THE ASSESSEE IN ITS BUSINESS ACTIVITY AND HENCE WAS TO BE CATEGORIZED AS PLANT AND MACHINERY FOR WHICH DEPRECIATION RATE O F 25% IS ELIGIBLE. ACCORDINGLY, HE REDUCED THE CLAIM OF DEPRECIATION O F THE ASSESSEE FROM RS. 25,70,286/- TO RS. 19,80,528/- BY MAKING DISALL OWANCE OF RS. 5,89,758/-. PENALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED. IN RESPONSE TO SHOW-CAUSE NOTICE ISSUED AGAINST LEVY O F PENALTY THE ASSESSEE HAS FILED A REPLY DATED 23.3.09. THE AO B ASED ON THE OPINION THAT IT WAS CLEAR FROM THE RULES THAT THE DEPRECIAT ION @ 40% COULD BE ALLOWED ONLY ON VEHICLES PLIED ON HIRE AND AS THE S AID MACHINERY WAS USED FOR THE PURPOSE OF OWN BUSINESS OF THE ASSESSE E, HAS HELD THAT ITA NO. 1302/D/10 3 DEPRECIATION @ 40% WAS NOT ELIGIBLE. SUCH CLAIM OF HIGHER DEPRECIATION IS TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME ON WHICH PENALTY IS LEVIABLE AND THUS, HE HAS IMPOSED MINIMU M PENALTY LEVIABLE WHICH HAS BEEN CALCULATED AT 100% OF THE TAX SOUGHT TO BE EVADED AMOUNTING TO RS. 2,11,576/-. THE LEVY OF PENALTY W AS CONTESTED BY THE ASSESSEE BEFORE CIT(A). 4. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS AN D AFTER TAKING INTO ACCOUNT THE FACTUAL ASPECT HAS OBSERVED THAT P ENALTY PROCEEDINGS ARE DIFFERENT FROM THOSE IN QUANTUM PROCEEDINGS. L EVY OF PENALTY IS NOT AUTOMATIC AND IT IS NOT ENOUGH FOR LEVYING THE PENA LTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME AND CIRCUMSTANCES MUST SHOW THAT THERE WAS CONSCIOUS CONCEALMENT OR ACT OF FURNISHING INAC CURATE PARTICULARS ON THE PART OF THE ASSESSEE. FROM THE APPELLANTS CON DUCT AND EXPLANATION OFFERED, IT APPEARS THAT THERE WAS NO CONSCIOUS OR INTENTIONAL ACT OF THE ASSESSEE TO CONCEAL OR FURNISH INACCURATE PARTICULA RS OF INCOME. THE ASSESSEE DID NOT FURNISH INACCURATE PARTICULARS OF ITS INCOME. THERE WAS ONLY DIFFERENCE OF OPINION ON THE RELEVANT ISSUE. REFERENCE WAS MADE TO VARIOUS JUDICIAL PRONOUNCEMENTS AND IT HAS BEEN CON CLUDED THAT ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS AND HAD R AISED A LEGAL CLAIM WHICH, EVEN IF, ULTIMATELY FOUND TO BE LEGALLY UNAC CEPTABLE, CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF I NCOME AND IN THIS MANNER PENALTY OF RS. 2,11,576/- HAS BEEN DELETED. THE DEPARTMENT IS AGGRIEVED, HENCE IN APPEAL. ITA NO. 1302/D/10 4 5. AFTER NARRATING THE FACTS AND RELYING UPON THE PENALTY ORDER, IT WAS PLEADED BY LD. DR THAT BY CLAIMING EXCESS DEPR ECIATION, THE ASSESSEE HAS SUBMITTED INACCURATE PARTICULARS OF IT S INCOME, HENCE, AO WAS RIGHT IN LEVYING THE PENALTY AND LD. CIT(A) HAS WRONGLY DELETED THE SAME. LD. DR PLACED RELIANCE ON THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOO COMMUNICATION PVT. LTD. 327 ITR 510 (DEL.) TO CONTEND THAT PENALTY WAS RIGHTLY LEVIED A ND IT SHOULD BE CONFIRMED. HE PLEADED THAT ORDER OF CIT(A) IN THIS REGARD SHOULD BE SET ASIDE AND THAT OF AO BE RESTORED. 6. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR T HAT ALL THE MACHINERY UPON WHICH THE ASSESSEE HAS CLAIMED DEPRE CIATION @ 40% IS HEAVY MACHINERY BASED UPON BONAFIDE BELIEF THAT SUC H HEAVY MACHINERY IS ENTITLED FOR HIGHER DEPRECIATION, THE ASSESSEE H AD CLAIMED DEPRECIATION @ 40%. HE SUBMITTED THAT BEFORE AO, I T WAS SUBMITTED THAT SINCE WDV IS ACCORDINGLY REDUCED, THE HIGHER CLAIM OF DEPRECIATION DOES NOT RESULT INTO ANY BENEFIT TO THE ASSESSEE AS IN T HE LATER YEARS LESS DEPRECIATION WAS ACCORDINGLY CLAIMED BY THE ASSESSE E. HE SUBMITTED THAT IT WAS ONLY DUE TO BONAFIDE VIEW TAKEN BY THE ASSESSEE THE CLAIM WAS MADE. HE SUBMITTED THAT LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY. LD. AR ALSO PLACED RELIANCE UPON THE DECISION OF HO NBLE SC IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 230 CT R 320 AND THUS, HE PLEADED THAT THE ORDER OF CIT(A) SHOULD BE UPHELD. ITA NO. 1302/D/10 5 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE LIST OF HEAVY VE HICLES ON WHICH DEPRECIATION @ 40% HAS BEEN CLAIMED HAS ALREADY BEE N REPRODUCED IN THE ABOVE PART OF THIS ORDER. IT IS IN THE NATURE OF DUMPER, JCB, ROAD ROLLER, TAR BOILER AND TROLLEY ETC. FROM THE NATUR E OF THE ASSETS STATED THEREIN, IT CAN BE SEEN THAT IT IS HEAVY MACHINERY AND IT IS NOT GENERAL MACHINERY. STRICTLY SPEAKING, THE CLAIM OF THE ASS ESSEE MAY NOT BE IN ACCORDANCE WITH LAW, BUT THERE COULD BE A BONAFIDE BELIEF TO THE ASSESSEE ACCORDING TO WHICH IT MAY BE ENTITLED FOR HIGHER RATE OF DEPRECIATION ON THESE OBJECTS AND IT IS A NATURAL P HENOMENA THAT THESE TYPES OF ASSETS DEPRECIATE FASTLY. IT IS NOT THE C ASE OF THE REVENUE THAT ASSESSEE HAS NOT FURNISHED THE CORRECT FACTS. IT A LSO APPEARS THAT IT IS NOT EVEN THE CASE OF THE AO THAT ASSESSEE WITH A VI EW TO SHOW LESSER INCOME HAS CLAIMED SUCH DEPRECIATION AS IT CAN BE S EEN FROM THE FOLLOWING OBSERVATIONS OF THE AO WHILE MAKING THE A DDITION: - 1. DEPRECIATION: IN THE STATEMENT OF COMPUTATION OF INCOME FILED, THE ASSESSEE COMPANY CLAIMED DEPRECIATION AS PEER THE INCOME TAX RULES AT RS. 25,70,286/-. ON PERUSAL OF THE CHART FILED IN THIS REGARD, IT IS NO TICED THAT THE ASSESSEE CLAIMED DEPRECIATION @ 40% AS MENTIONED AGAINST EACH OF THE FOLLOWING FIXED ASSET S: A) DUMPER RS. 7,86,802/- B) JCB RS. 3,19,384/- C) ROAD ROLLER RS. 2,81,616/- ITA NO. 1302/D/10 6 D)TAR BOILER RS. 72,384/- E) TROLLEY RS. 1,12,500 /- RS.15,72,686 /- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS SPECIFICALLY ASKED TO SHOW-CAUSE VIDE LETTER DATED 9.1.06, AS TO WHY ITS CLAIM OF DEPRECIATION SHOULD NOT BE RESTRICTED TO 25% I.E. T HE CORRECT RATE OF DEPRECIATION ALLOWABLE AS PER THE INCOME TAX RULES AS PROVIDED UNDER THE HEAD PLANT & MACHINERY AS AGAINST ITS EXCESSIVE CLAIM OF DEPRECIATION @40%. IT HAS BEEN EXPLAINED BY THE ASSESSEE VIDE LETTER DATED 20.1.06, THAT THE MACHINERY AS MENTIONED ABOVE IS A HEAVY MACHINERY USED IN THE CONSTRUCTION BUSINESS AND AS PER THE INCOME TAX RULES, DEPRECIATION IS ALLOWABLE @ 40% AND THE SAME HAS RIGHTLY BEEN CLAIMED. THE SUBMISSIONS OF THE ASSESSEE ARE NOT ACCEPTED. AS PER THE INCOME TAX RULES, THE RATE OF DEPRECIATION @ 40% IS ALLOWABLE ONLY IN RESPECT OF HEAVY MACHINERY WHICH IS EITHER USED FOR HIRE PURPOSES OR HEAVY VEHICLE WHICH ARE PLIED ON HIRE F OR TRANSPORTATION OF GOODS. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND ANY HEAVY MACHINERY USED BY IT IS FOR THE CARRYING ON O F ITS BUSINESS ACTIVITIES IS CATEGORIZED UNDER THE HEAD PLANT & MACHINERY FOR THE ASSESSEE COMPANY ON WHICH DEPRECIATION @ 25% IS ONLY ALLOWABLE. THE WORD PLANT & MACHINERY HAS BEEN ELABORATELY DISCUSSED IN SAMPATH IYENGARS LAW OF INCOME TAX WHEREIN IT HAS BEEN MENTIONED THAT THE MACHINERY & PLANT WHICH IS USED BY AN ASSESSEE FOR THE CARRYING ON OF ITS BUSINESS ACTIVITIES IS COVERED UNDER THE HEAD ITA NO. 1302/D/10 7 PLANT & MACHINERY AND AS SUCH DEPRECIATION ON THE SUCH ASSETS IS ALLOWABLE @25% AS PER THE INCOME TAX RULES. IN VIEW OF THESE FACTS, THE EXCESSIVE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE ON THE ABOVE ITEMS IS DISALLOWED AND ONLY DEPRECIATION @25% AS I S ALLOWABLE IN RESPECT OF PLANT & MACHINERY IS ALLO WED TO THE ASSESSEE COMPANY. A DISALLOWANCE OF RS. 5,89,758/- IS, THEREFORE, MADE OUT OF ASSESSEES CL AIM OF DEPRECIATION. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT ARE BEING INITIATED SEPARATELY FOR EXCESSIVE CLAIM OF DEPRECIATION. 8. IT CAN BE SEEN FROM ABOVE OBSERVATIONS THAT AO HAD INITIATED THE PENALTY PROCEEDING ON ACCOUNT OF EXCESSIVE CLAI M OF DEPRECIATION. THE ARGUMENT OF THE ASSESSEE THAT IT WAS A BONAFIDE CLAIM HAS NOT BEEN ASSAILED BY BRINING ANY MATERIAL ON RECORD TO SUGGE ST THAT SUCH CLAIM OF THE ASSESSEE WAS INCORRECT OR FRAUDULENT. IN OUR V IEW, THE CASE OF THE ASSESSEE IS SUPPORTED BY THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. ( SUPRA), WHEREIN IT HAS BEEN HELD THAT MERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION OF INTEREST EXPENDITURE WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE, PENALTY U/S 271(1)(C) IS NOT ATTRACTED; MERELY MAKI NG OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOU NT TO FURNISH INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. THE DECISION OF DELHI HIGH COURTS IN THE CASE OF CIT VS. ZOOM COMMUNICATI ON LTD. (SUPRA) WILL NOT APPLICABLE ON THE FACTS OF THE PRESENT CAS E AS IN THE SAID CASE ASSESSEE HAD CLAIMED RETURN OF EQUIPMENTS WORTH RS. 13,24,539/- AND ITA NO. 1302/D/10 8 HAD ALSO CLAIMED ANOTHER SUM OF RS. 1 LAKH BEING IN COME TAX PAID AND IT WAS CLAIMED BY THE ASSESSEE THAT DUE TO OVER SIGHT THOSE AMOUNTS WERE NOT ADDED BACK IN THE COMPUTATION OF INCOME. IT WA S OBSERVED BY HONBLE HIGH COURT THAT IN THE CASES, WHERE CLAIMS ARE MADE WHICH ARE WHOLLY UNSUSTAINABLE IN LAW AND HAS ABSOLUTELY NO F OUNDATION ON WHICH IT CAN BE MADE, IT CANNOT BE CLAIMED BY THE ASSESSEE T HAT IT IS NOT LIABLE FOR IMPOSITION OF PENALTY EVEN IF HE WAS ACTING BONAFID E WHILE CLAIMING A CLAIM OF SUCH NATURE. THE FACTS OF THAT CASE ARE T OTALLY DIFFERENT FROM THE PRESENT CASE AS ASSESSEES CLAIM IN THE PRESENT CAS E CANNOT BE SAID TO BE A CLAIM WHICH IS WHOLLY UNSUSTAINABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION FOR MAKING IT. IN VIEW OF ABOVE DISCUSS ION, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) VIDE WHICH IMPUGNE D PENALTY HAS BEEN DELETED. WE DECLINE TO INTERFERE. 9. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 28.1.11 SD/- SD/- (K.G. BANSAL) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER * KAVITA DATED: ITA NO. 1302/D/10 9 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT