Alchemie Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 1389/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6812 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 29-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Depreciation; Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 18/04/2011 DRAFTED ON: 18 /04/2011 ITA NO.1389/AHD/2009 ASSESSMENT YEAR : 2003-04 ALCHEMIE PVT.LTD. 705/706, ADITYA MITHAKHALI SIX ROADS ELLISBRIDGE AHMEDABAD VS. ASSTT.CIT CIRCLE-1 AHMEDABAD PAN/GIR NO. : AABCA 7874 Q ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SUNIL TALATI, A.R. RESPONDENT BY: SHRI R.K. DHANESTA, SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -VI, AHMEDABAD DATED 29.01.2009 AGAINST THE CONFIRMATION OF PENA LTY LEVIED U/S.271(1)(C) OF THE I.T.ACT OF RS.69,732/-. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S.271(1)(C) OF THE I.T.ACT DATED 27. 07.2006 AND THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T.ACT D ATED 25.01.2006 FOR ASSESSMENT YEAR 2003-04 WERE THAT THE ASSESSEE- COMPANY IS IN THE BUSINESS OF MANUFACTURING OF CHEMICALS. A RETU RN OF LOSS OF RS.13,97,865/- WAS FILED ON 28.11.2003. THEREAF TER, THROUGH A ITA NO.1389/AHD /2009 ALCHEMIE PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 2 - REVISED STATEMENT OF INCOME, THE DECLARED LOSS WAS RECTIFIED WHICH HAS BEEN NOTICED BY THE AO VIDE PARA-3; REPRODUCED BELOW:- 3. THE FIRST NOTICE U/S.143(2) DTD. 18.10.2004 WA S ISSUED BY THE ACIT, CIRCLE-1, AHMEDABAD SERVED ON 29.10.2004 BY RPAD. FURTHER NOTICE U/S.143(2) DTD. 17.8.2005 ALO NG WITH NOTICE U/S.142(1) & QUESTIONNAIRE TO THE ASSESSEE C OMPANY WAS ISSUED BY THE ITO, WARD-1(1), AHMEDABAD, SERVED BY RPAD. FURTHER NOTICE U/S.143(2) DTD. 21.12.2005 WA S BY THE UNDERSIGNED SERVED UPON THE ASSESSEE ON 22.12.2005. IN RESPONSE TO THE SAID NOTICE, SHRI K.P.SHAH, C.A. AP PEARED ON BEHALF OF THE ASSESSEE COMPANY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY HAS SU O MOTO FILED REVISED STATEMENT OF INCOME TWICE, FIRST ON 4 .10.2005 AND SECOND ON 23.01.2006. DURING THE YEAR, THE ASSESSE E COMPANY HAS SHOWN GROSS PROFIT @ 10.38% AS AGAINST 22.14% O F LAST YEAR. THE REASONS FOR FALL IN GROSS PROFIT ARE GIV EN IN THE SUBMISSION DTD. 4.10.2005 WHICH ARE PLACED ON RECOR D ALONGWITH THE DETAILS FILED FROM TIME TO TIME. THE ASSESSEE COMPANY HAS FILED ITS REPLY DTD. 23.1.2006 IN RESPO NSE TO THIS OFFICE LETTER DTD. 16.1.2006 WHICH IS TAKEN INTO CO NSIDERATION WHILE FINALIZING THE ASSESSMENT. 2.1. THERE WERE THREE REASONS FOR THE SAID REVISION WHICH HAS ALSO BEEN DISCUSSED BY THE AO AS FOLLOWS:- 4.(A) DISALLOWANCE OF PROVISION FOR GRATUITY GRATUITY PROVISION U/S.40A(7) IS NOT ALLOWABLE. I N THIS CONNECTION, THE ASSESSEE COMPANY WAS ASKED TO SHOW CAUSE WHY THIS SHOULD NOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME. THE ASSESSEE COMPANY HAS STATED THAT, THE PROVISION WAS MADE FOR UNPAID GRATUITY OF RS.1,70,0 75/-. ITA NO.1389/AHD /2009 ALCHEMIE PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 3 - THROUGH OVERSIGHT THE SAME WAS NOT ADDED IN THE ORI GINAL RETURN HENCE ON OUR OWN, WE HAD SHOWN RS.1,70,075/- U/S.40A(7) IN THE REVISED COMPUTATION OF INCOME. THE SAME IS THEREFORE DISALLOWED AND ADDED TO THE TOTAL INCO ME. PENALTY PROCEEDINGS U/S.27(1)(C) IS INITIATED SEPARATELY. (DISALLOWANCE RS.1,70,075/-) (B) DISALLOWANCE OF DELAYED PAYMENT TO ESIC ON VERIFICATION OF ANNEXURE-II SHOWING DETAILS OF EMPLOYERS/EMPLOYEES CONTRIBUTION TOWARDS ESIC, IN T HE MONTH OF OCT.2(02 EMPLOYERS CONTRIBUTION OF RS.74 8/- AND EMPLOYEES CONTRIBUTION OF RS.276/- WERE NOT PAID I N THE STIPULATED TIME. THE ASSESSEE COMPANY WAS ASKED TO SHOW CAUSE WHY THE SAME SHOULD NOT BE DISALLOWED AND ADD ED TO THE TOTAL INCOME. THE ASSESSEE COMPANY HAS ACCEPTED IT S MISTAKE AND THE SAME IS THEREFORE DISALLOWED AND ADDED TO T HE TOTAL INCOME. (DISALLOWANCE RS.1,024) (C) DISALLOWANCE OF DEPRECIATION ON RENTED OFFICE DURING THE PREVIOUS YEAR, OFFICE NO.705 WAS GIVEN O N RENT AND WAS NOT USED FOR ASSESSEE COMPANYS BUSINESS PURPOS ES. THEREFORE, DEPRECIATION CLAIMED OF RS.18,649/- ON T HE SAME NOT ALLOWABLE. THE ASSESSEE COMPANY WAS ASKED TO S HOW CAUSE WHY THE DEPRECIATION CLAIMED OF RS.18,649/- S HOULD NOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME. THE C OMPANY IN ITS REPLY STATED THAT, FORMERLY OFFICE NO.705 WAS USED BY THE COMPANY FOR ITS OWN USE. BUT THE SAME WAS GIVEN ON RENT FROM 22.4.2002. WHILE PREPARING DEPRECIATION STATEMENT, THE DEPRECIATION WAS CALCULATED ON THE BASIS OF PREVIOU S YEARS STATEMENT ON THE BASIS OF BONAFIDE BELIEF THAT AS T HE OFFICE IS USED FOR A FEW DAYS DURING THE CURRENT YEAR, THE DE PRECIATION WOULD BE ALLOWED FOR THE WHOLE YEAR. HOWEVER, WHEN WE CAME TO KNOW ABOUT THE CORRECT LEGAL VIEW, WE HAD ITA NO.1389/AHD /2009 ALCHEMIE PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 4 - IMMEDIATELY DISALLOWED THE DEPRECIATION OF RS.18,64 9/- WHICH IS APPARENT FROM OUR REVISED STATEMENT OF INCOME AS REFERRED IN EARLIER PARA. SINCE, THE ASSESSEE COMPANY HAS ACCEPTED ITS MISTAKE AND THE DEPRECIATION OF RS.18,649/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME. PENALTY PROCEEDINGS U/S.271(1)(C) IS INITIATED SEPARATELY. (DISALLOWANCE RS.18,649/-) 2.2. THE AO WAS OF THE VIEW THAT IF THE CASE WAS NO T SELECTED FOR A SCRUTINY, THEN THE IMPUGNED DISCLOSURE COULD NOT HA VE BEEN MADE AND THE INCOME SHOULD HAVE ESCAPED THE ASSESSMENT. IT WAS CONCLUDED BY THE AO THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AS PER THE RETURN ORIGINALLY FILED, THEREFORE, SUBJECT TO LEVY OF PENALTY. CONSEQUENT THEREUPON, A PENALTY OF RS.69,732/- WAS IMPOSED. 3. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS CON TESTED THAT THE STATEMENT OF INCOME WAS REVISED SUO MOTO AND BEFORE ISSUANCE OF ANY NOTICE FROM THE REVENUE DEPARTMENT. HOWEVER, L D.CIT(A) WAS NOT CONVINCED AND IN HIS OPINION, THE DISCLOSURE WA S NOT MADE VOLUNTARILY, HENCE, THERE WAS A CONSCIOUS CONCEALME NT OF INCOME. THE ACTION OF THE AO WAS AFFIRMED. 4. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED T HE ORDERS OF THE AUTHORITIES BELOW. AS PER THE ASSESSMENT ORDER , IT IS APPARENT THAT THERE WAS A DISALLOWANCE OF PROVISION FOR GRAT UITY. THE FACT IN ITA NO.1389/AHD /2009 ALCHEMIE PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 5 - RESPECT OF THE GRATUITY WAS DULY DISCLOSED AS PER T HE AUDIT REPORT VIDE COLUMN NO.11 AND THE SAME WAS OFFERED AS PER T HE REVISED STATEMENT. LIKEWISE, IN RESPECT OF THE ISSUE OF DISALLOWANCE OF ESIC, THAT TOO WAS DULY INFORMED AS PER THE AUDITED ACCOUNTS AND SINCE THE NECESSARY ADJUSTMENTS COULD NOT BE MADE D URING THE COURSE OF COMPUTATION OF INCOME/LOSS, THE SAME WAS RECTIFI ED THROUGH A REVISED STATEMENT OF INCOME. THE THIRD, SUCH ADJUS TMENT WAS IN RESPECT OF DEPRECIATION ON A RENTED OFFICE. IT WAS EXPLAINED TO THE AO THAT IN THE PAST THE PROPERTY IN QUESTION WAS US ED BY THE ASSESSEE-COMPANY FOR ITS BUSINESS PURPOSE AND DEPRE CIATION WAS CLAIMED. DURING THE YEAR UNDER CONSIDERATION, THE PROPERTY WAS RENTED OUT, HENCE, THERE WAS NO QUESTION OF CLAIM O F DEPRECIATION, HOWEVER, INADVERTENTLY THE DEPRECIATION WAS CLAIMED ON THE SAID PROPERTY. THE MISTAKE WAS BONA FIDE UNDER THE IMPR ESSION THAT THE PROPERTY BEING OWNED BY THE ASSESSEE, THEREFORE, EN TITLED FOR CLAIM OF DEPRECIATION. THE NATURE OF INCOME WHICH WAS ALLEGED BY THE REVENUE DEPARTMENT AS CONCEALED INCOME WAS SUCH THA T THE SAME WAS DULY REFLECTED IN THE BOOKS OF ACCOUNT AND IT W AS NOT THE CASE OF THE REVENUE THAT THE SAME WAS UNEARTHED OR DETECTED DURING THE COURSE OF INVESTIGATION. IT IS ALSO NOT THE CASE T HAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION OR THE EXPLANATION WAS OFFERED BY ASSESSEE-COMPANY WAS FOUND TO BE FALSE. THIS IS ALSO NOT THE CASE THAT THE EXPLANATION OFFERED REMAINED UNSUBSTANTIAT ED. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES AND T HE FACTS OF THE ITA NO.1389/AHD /2009 ALCHEMIE PVT.LTD. VS. ACIT ASST.YEAR 2003-04 - 6 - CASE, WE ARE OF THE VIEW THAT THE EXCEPTIONS PRESCR IBED UNDER EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT DESER VES TO BE APPLIED IN THIS CASE. IN THE RESULT, WE REVERSE THE FIND INGS OF THE AUTHORITIES BELOW AND DIRECT TO DELETE THE PENALTY. 5. AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 21 ST APRIL, 2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 21 / 04 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPAR TMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(AP PEALS)-VI, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..18/04/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18/04/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 21.4.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.4.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER