M/s Amartex Industries Ltd., Chandigarh V. ACIT, Chandigarh

ITA 1373/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6820 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDER KANTA
• Keywords: Depreciation; Bonafide belief; Proportionate interest; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.1373/CHD/2016 ASSESSMENT YEAR: 2010-11 M/S AMARTEX INDUSTRIES LTD. VS. ASST.CIT SCO 18-19, SECTOR 9-D CIRCLE 1(1) CHANDIGARH CHANDIGARH PAN NO. AABCA2243H (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. PARIKSHIT AGGARWAL REVENUE BY : SMT. CHANDERKANTA DATE OF HEARING : 01/08/2017 DATE OF PRONOUNCEMENT : 28/09/2017 ORDER PER B.R.R. KUMAR A.M.: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A)- 2, AMRITSAR CAMP AT CHANDIGARH DT. 02/09/2016. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE WORTHY CIT (APPEALS) IN APPEAL NO. 460/2U13-14 DATED 16.09.2013 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF PRO VISIONS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION O F LD. AO. OF LEVYING PENALTY U/S 271(L)(C) ON ADDITION OF RS. 4,56,830/- ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST IN RESPECT O F CAPITAL WORK IN PROGRESS BY INVOKING THE PROVISIONS OF PROVISO TO S EC 36(1) (IN) OF THE ACT. 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO. W AS NOT JUSTIFIED IN LEVYING PENALTY U/S 271I I (C) ON ADDITION OF RS. 3 7,312/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF ASSETS OF BADDI UNI T WHICH WAS NON FUNCTIONAL DURING THE YEAR BUT THE UNIT AS WELL AS THE SAID ASSETS WERE IN REGULAR USE IN PRECEDING YEARS AND THE QUANTUM ADDI TION ON THIS ISSUE HAS BEEN DELETED BY HON'BLE ITAT IN ITA NO. 808/CHD/2013 DTD. 24.07.201 4 AT PARA 27 AT PAGE 10. 3. GROUND NO. 1 IS GENERAL IN NATURE AND HENCE NEED S NO ADJUDICATION. 4. GROUND NO. 2 RELATES TO LEVY OF PENALTY ON ACCOU NT OF DISALLOWANCE OF INTEREST. 2 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S RAISED BOTH SECURED AND UNSECURED LOANS DURING THE YEAR UNDER CONSIDERATION AND WAS PAYING INTEREST ON THESE LOANS. THE ASSESSING OFFICER FOUND THAT TH E CAPITAL WORK IN PROGRESS WAS RS. 57.98 CRORES WITH THE OPENING CAPITAL WORK IN P ROGRESS OF RS. 56.24 CRORES. THE DETAILS OF UTILIZATION OF SECURED LOANS REVEAL THAT INVESTMENT IN PURCHASE OF FIXED ASSETS WAS RS. 62.40 CRORES. THE ASSESSING OFFICER CAPITALIZED THE INTEREST ON MONTHLY BALANCES OF CAPITAL WORK IN PROGRESS OF RS. 4,56,830/- AND ADDED BACK TO TOTAL INCOME UNDER SECTION 36(1)(III). ACCORDING LY PENALTY PROCEEDING WERE INITIATED. 6. THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED. 7. DURING THE PROCEEDINGS BEFORE US LD. AR SUBMITTE D THAT THE DISALLOWANCE WAS ON NOTIONAL AND ON ESTIMATE BASIS. HE ARGUED TH AT DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF TH E ACT WAS ALWAYS A DEBATABLE ISSUE AND THEREFORE THE LEVY OF THE PENALTY UNDER S ECTION 271(1)(C) WAS TOTALLY UNWARRANTED. THE AR RELIED ON THE FOLLOWING CASE L AWS: (I) CIT VS INDERSONS LEATHER P LTD. 328 ITR 167 (P &H) (II) CIT VS. RAJ OVERSEAS 336 ITR 211 (P&H) (III) CIT VS. BHARAT LAL DAGAR (HUF) 336 ITR 345 ( P&H) (IV) CIT VS. RELIANCE PETRO PRODUCTS P. LTD. 322 IT R 158 (S.C.) 8. THE LD. DR ARGUED THAT THIS IS A CASE WHERE THE INTEREST WAS INCURRED ON THE CAPITAL EXPENDITURE AND HENCE OUGHT TO BE NOT T AKEN AS A REVENUE EXPENDITURE AND HENCE AMOUNTS TO FURNISHING OF INAC CURATE PARTICULARS OF INCOME AND THUS PENALTY LEVIED NEEDS TO BE CONFIRME D. 9. THE LD. AR SUBMITTED THAT THE CLAIM WAS UNDER A BONAFIDE BELIEF THAT THE DEDUCTION OF INTEREST WAS AN ELIGIBLE CLAIM THOUGH THE ASSESSING OFFICER HAS REFUTED SUCH CLAIM AND DISALLOWED THE INTEREST. 10. WE HAVE GONE THROUGH THE RECORDS AVAILABLE BEFO RE US. IT WAS FOUND THAT THE PENALTY WAS LEVIED ON THE DISALLOWANCE UNDER SE CTION 36(1)(III). THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. BUDHWELL COOPERATIVE SUGAR MILLS HAS HELD THAT WHEN ASSESSEE MADE A BONAFIDE C LAIM ON THE BASIS OF THE LAW LAID DOWN BY VARIOUS COURTS THEN PENALTY WOULD NOT BE LEVIED UPON SUCH AN ASSESSEE MERELY ON THE GROUNDS THAT THE CLAIM WAS D ISALLOWED. IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN CIT VS. RELIANCE PE TROPRODUCTS P. LTD. [2010] 322 ITR 158 (SC); [2010] 230 CTR 320, THE LEGAL POSITIO N TO THIS EFFECT HAS BEEN REITERATED. IF THE ASSESSEE HAS MADE FULL DISCLOSUR E IN THE RETURN, THE CLAIM FOR DEDUCTION CANNOT BE HELD TO BE GIVING OF INACCURATE PARTICULARS. HENCE, 3 KEEPING IN VIEW THE TOTALITY OF THE ISSUE AND BONAF IDE OF THE ASSESSEE THE PENALTY LEVIED ON THIS GROUND IS HEREBY DELETED. 11. GROUND NO. 3 RELATES TO LEVY OF PENALTY ON ACCO UNT OF DISALLOWANCE OF DEPRECIATION. 12. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 37,312/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON THE ASSETS OF BADDI UNIT WHICH WAS NOT FUNCTIONAL DURING THE YEAR. SINCE NO WORK WAS CARRIED OUT THE CLAIM OF DEPRECIATION WAS DISALLOWED AND PENALTY WA S LEVIED CONSEQUENTLY. 13. THE LD. CIT(A) CONFIRMED THE PENALTY, NOTWITHST ANDING THE ARGUMENT BY THE ASSESSEE THAT THE SAID DISALLOWANCE HAS BEEN DE LETED BY THE COORDINATE BENCH OF ITAT, CHANDIGARH IN ASSESSES OWN CASE FOR THE SAME YEAR. THE CIT(A) CONFIRMED THE ADDITION OWING TO NON SUBMISSION OF T HE ORDER OF THE HONBLE ITAT BY THE ASSESSEE. 14. WE HAVE GONE THROUGH THE ORDER OF THE ITAT IN I TA NO. 808/CHD/2013 FOR THE RELEVANT ASSESSMENT YEAR IN 2010-11 AND FOUND THAT THE DISALLOWANCE MADE ON ACCOUNT OF DEPRECIATION ON FIXED ASSETS STANDS D ELETED VIDE PARA NO. 27 PAGE NO. 10 OF THE ORDER. HENCE, WE DELETE THE PENA LTY LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS. 37,312/-. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (B.R.R.KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28/09/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR