THE DCIT, Visakhapatnam V. M/s Brandix India Apparel City Pvt.,Ltd., Visakhapatnam

ITA 14/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9639 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R GOVINDHA RAJAN
• Keywords: Depreciation; Wrong claim; Difference of opinion
• Section: 143(3); 27

Judgement Text

ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.14/VIZAG/2015 ( / ASSESSMENT YEAR: 2010-11) DCIT, CIRCLE - 5(1), VISAKHAPATNAM VS. M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VISAKHAPATNAM [PAN: AACCB8865P ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI R. GOVINDHARAJAN, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 23.11.2016 / DATE OF PRONOUNCEMENT : 23.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOMETAX (APPEALS), VISAKHAPATNAM DATED 30-10-2014 AND IT PERTAINS TO THE A.Y. 2010-11. ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY ENGAGED IN THE BUSINESS OF ESTABLISHMENT INTEGRATED TEXTILE PARK IN THE SPECIAL ECONOMIC ZONE AT VISAKHAPATNAM. THE ASSESSE E FILED RETURN OF INCOME FOR THE A.Y. 2010-11, DECLARING LOSS OF RS. 43,52,78,405/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 8-2-2013 DET ERMINING THE TOTAL LOSS OF RS. 38,31,47,099/- BY DISALLOWING EXC ESS DEPRECIATION CLAIMED ON WATER TREATMENT PLANT AND ITS EQUIPMENTS . 3. THEREAFTER, THE A.O. INITIATED PENALTY PROCEEDIN GS U/S 271(1)(C) OF THE ACT, AND ASKED TO EXPLAIN AS TO WHY PENALTY SHA LL NOT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS BY CLAIMING 100% DEPRECIATION ON WATER TREATMENT PLANT AND EQUIPMENTS. THE A.O. OBSE RVED THAT THE ASSESSEE HAS CLAIMED 100% DEPRECIATION ON WATER SUP PLY AND DISTRIBUTION EQUIPMENTS AND WATER TREATMENT PLANT, WHEREAS IT IS ELIGIBLE FOR NORMAL RATE OF 15% DEPRECIATION APPLICABLE TO G ENERAL PLANT AND MACHINERY, THEREFORE OPINED THAT THE ASSESSEE HAS F URNISHED INACCURATE PARTICULARS WHICH ATTRACTS PENALTY U/S 271(1)(C) OF THE ACT. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FURNISHED DE TAILED WRITTEN SUBMISSION AND RELIED UPON CERTAIN JUDICIAL PRECEDE NTS. THE ASSESSEE SUBMITTED THAT IT HAS DISCLOSED ALL MATERIAL FACTS IN THE RETURN AND IT HAS CLAIMED 100% DEPRECIATION ON THE BONAFIED BELIEF TH AT IT WAS ELIGIBLE FOR 100% DEPRECIATION, AS IT WAS DEVELOPED INFRASTRUCTU RE PROJECT BY ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 3 ESTABLISHING INTEGRATED TEXTILE PARK IN THE SPECIAL ECONOMIC ZONE. THE ASSESSEE FURTHER SUBMITTED THAT DISALLOWANCE OF EXC ESS CLAIM OF DEPRECIATION WAS DEBATABLE AND WAS ON ACCOUNT OF DI FFERENCE OF OPINION AND AS SUCH IT DID NOT AMOUNTS TO CONCEALMENT OF IN COME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE DEPRECIATION CLAIM WAS MADE ON BONAFIED BELIEF AND BASED ON SOUND LEGAL CONTENTION AND THAT THERE WAS NO FRAUDULENT MOTIVE TO EVADE TAX AS IT HAS RETURNE D LOSS FOR THE YEAR AND EVEN AFTER DISALLOWANCE OF DEPRECIATION, LOSS I S REDUCED AND IT DID NOT TURNED INTO INCOME. IT WAS FURTHER CONTENDED TH AT IT HAD ACCEPTED DISALLOWANCE MADE IN THE ASSESSMENT TO AVOID FURTHE R LITIGATION AND ALSO TO PURCHASE PEACE WITH THE DEPARTMENT AND HENCE IT CANNOT BE CONSIDERED AS A CASE OF DELIBERATE CONCEALMENT OF P ARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME TO E VADE PAYMENT OF TAX WHICH WARRANTS LEVY OF PENALTY. 4. THE A.O. AFTER CONSIDERING EXPLANATION OF THE AS SESSEE LEVIED PENALTY U/S 271(1)(C) OF THE ACT, BY HOLDING THAT T HE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME BY CLAIM ING 100% DEPRECIATION ON WATER TREATMENT PLANT AND EQUIPMENT , EVEN THOUGH IT IS NOT ELIGIBLE FOR SUCH CLAIM. THE A.O. FURTHER HELD THAT THE ASSESSEE FAILS TO MAKE OUT A CASE THAT ITS CLAIM IS A BONAFIED MIS TAKE AS IT WAS ADVISED BY EXPERT TAX CONSULTANTS AND ALSO THE LAW IS VERY CLEAR IN AS MUCH ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 4 100% DEPRECIATION IS ELIGIBLE FOR THOSE ASSESSEE WH ICH CLAIMS DEDUCTION U/S 80IA(4)(I), WHEREAS THE ASSESSEE HAD CLAIMED DE DUCTION U/S 80IAB. THE A.O. FURTHER HELD THAT PENALTY IS A CIVIL LIABI LITY AND WILLFUL CONCEALMENT OR AN ATTEMPT TO EVADE TAX IS NOT A PRE -REQUISITE FOR ATTRACTING PENALTY. EVAN WRONG CLAIM OR EXCESS CLAI M OF DEPRECIATION LEADING TO ADMISSION LESSER INCOME OR HIGHER LOSS T ANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SEC. 271(1)(C) OF THE ACT. IN SUPPORT OF HIS FINDINGS RE LIED UPON PLETHORA OF JUDGMENTS, INCLUDING HONBLE SUPREME COURT, IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSOR (SC) 306 ITR 277. 5. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSION ALONG WITH CERTAIN JUDICIAL PREC EDENTS. THE CIT(A), FOR THE DETAILED DISCUSSION, DELETED PENALTY LEVIED BY THE A.O. BY HOLDING THAT IN VIEW OF EXPLANATION TO SEC. 271(1)(C), EVEN IF CLAIM MADE BY THE ASSESSEE IS UNSUSTAINABLE IN LAW, THE ASSESSEE WOUL D NOT BE LIABLE FOR LEVY OF PENALTY, IF THE EXPLANATION FURNISHED THOUG H NOT SUBSTANTIATED IS FOUND TO BE BONAFIED AND ALL THE MATERIAL FACTS HAV E BEEN DISCLOSED IN THE RETURN. AGGRIEVED BY THE CIT(A) ORDER, THE REVE NUE IS IN APPEAL BEFORE US. ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 5 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATER IALS ON RECORD. THE FACTS MATRIX WHICH LEADS TO LEVY PENALTY U/S 27 1(1)(C) OF THE ACT, ARE THAT THE ASSESSEE ENGAGED IN DEVELOPMENT OF INTEGRA TED TEXTILE PARK IN THE SPECIAL ECONOMIC ZONE VISAKHAPATNAM, INSTALLED WATER SUPPLY AND TREATMENT PLANT FOR THE BENEFIT OF USERS AND CLAIME D 100% DEPRECIATION ON SUCH WATER TREATMENT PLANT AND EQUIPMENTS. DURIN G ASSESSMENT PROCEEDINGS, THE A.O. DISALLOWED EXCESS DEPRECIATIO N WHICH RESULTS INTO ADDITION OF RS. 5,21,31,306/- TO THE RETURNED LOSS AND AS A RESULT THE TOTAL LOSS RETURNED IS REDUCED. THE A.O. OBSERVED T HAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WHICH AT TRACTS PENALTY U/S 271(1)(C ) OF THE ACT. THE A.O. AFTER RELIED UPON C ERTAIN JUDICIAL PRECEDENTS, HAS GIVEN HIS OWN REASONS FOR COMING TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O F ITS INCOME. IT IS THE CONTENTION OF ASSESSEE THAT ITS CLAIM IS BONAFIED A ND IT HAS DISCLOSED ALL MATERIAL FACTS IN THE RETURN OF INCOME. THE ASSESSE E FURTHER CONTENDED THAT THERE IS NO ULTERIOR MOTIVE BEHIND EXCESS CLAI M OF DEPRECIATION AND ITS CLAIM IS SUPPORTED BY SOUND LEGAL CONTENTION AN D ALSO IT WAS ADVISED BY EXPERT TAX CONSULTANTS WHO CERTIFIED THE CLAIM I N THE TAX AUDIT REPORT. 7. THE FACTS RELATING TO DISCLOSURE OF ALL MATERIAL FACTS IN THE RETURN OF INCOME IS NOT IN DOUBTFUL. IN FACT, THE A.O. COULD NOT BRING ON RECORD ANY FACTUAL FINDINGS OF CONCEALMENT OF INCOME OR FURNIS HING INACCURATE ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 6 PARTICULARS OF INCOME. THE A.O. WAS OF THE OPINION THAT EXCESS CLAIM OF DEPRECIATION TANTAMOUNT TO FURNISHING INACCURATE PA RTICULARS OF INCOME AS SUCH IT ATTRACTS PENALTY U/S 271(1)(C ) OF THE A CT. WE DO NOT FIND ANY MERITS IN THE FINDINGS OF THE A.O., FOR THE REASON THAT THE ASSESSEE HAS PROVED WITH FACTS THAT ITS CLAIM IS BONAFIED AND IT DOES NOT HAVE ANY INTENTION TO EVADE TAX PAYMENT, BECAUSE EVEN AFTER DISALLOWANCE OF EXCESS DEPRECIATION ITS TAXABLE INCOME CONTINUED TO BE LOSS AND IT DOES NOT RESULTS INTO TAX PAYMENT. THE ASSESSEE ALSO PRO VED WITH FACTS THAT IT HAS DISCLOSED ALL MATERIAL FACTS RELATING TO CLAIM OF DEPRECIATION IN THE RETURN OF INCOME WHICH WAS CERTIFIED BY THE TAX AUD ITOR. THEREFORE, WE ARE OF THE VIEW THAT EXCESS CLAIM OF 100% DEPRECIAT ION ON WATER TREATMENT PLANT AND EQUIPMENT IS A BONAFIED CLAIM S UPPORTED BY SOUND LEGAL CONTENTION IN AS MUCH THE ISSUE OF 100% DEPRE CIATION ON WATER TREATMENT PLANT IS DEBATABLE AND WAS ON ACCOUNT OF DIFFERENCE OF OPINION. THIS IS BECAUSE THE ACT, SPECIFIES 100% DE PRECIATION ON PLANT AND MACHINERY INSTALLED IN A WATER SUPPLY PROJECT O R WATER TREATMENT SYSTEM AND WHICH IS PUT TO USE FOR THE PURPOSE OF P ROVIDING INFRASTRUCTURE FACILITY AS DEFINED IN SECTION 80IA( 4)(I) OF THE ACT. THE EXPLANATION PROVIDED TO SECTION EXPLAINED INFRASTRU CTURE FACILITY TO INCLUDE A WATER SUPPLY PROJECT, WATER TREATMENT SYS TEM ETC. WHETHER THE ASSESSEE IS DEVELOPING EXCLUSIVE INFRASTRUCTURE FAC ILITY OF WATER ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 7 TREATMENT PLANTS IS ELIGIBLE FOR 100% DEPRECIATION OR PROVIDING IN HOUSE WATER SUPPLY PROJECT OR WATER TREATMENT PLANT IN A INTEGRATED INFRASTRUCTURE FACILITY BEING TEXTILE PARK IN SPECI AL ECONOMIC ZONE IS A DEBATABLE ISSUE WHICH INVOLVES TWO POSSIBLE VIEWS. THE ASSESSEE HAD TAKEN ONE OF THE POSSIBLE VIEW WHICH WAS SUPPORTED BY SOUND LEGAL CONTENTION AND ALSO CERTIFIED BY THE TAX AUDITOR CA NNOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH IN THE MEANING EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT. MOREOVE R, EVEN AFTER DISALLOWANCE OF EXCESS DEPRECIATION, THE RETURNED L OSS CONTINUED TO BE IN LOSS AND WHICH DOES NOT RESULTS INTO TAXABLE IN COME, SO AS TO CLAIM THAT THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION T O EVADE PAYMENT OF TAX. 8. COMING TO THE CASE LAWS RELIED UPON BY THE PARTI ES. THE A.O. RELIED UPON THE DECISION OF SUPREME COURT, IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSOR (SC) 306 ITR 277 AND O BSERVED THAT PENALTY IS A CIVIL LIABILITY AND WILLFUL CONCEALMEN T OR AN ATTEMPT TO EVADE TAX IS NOT A PRE-REQUISITE FOR ATTRACTING PENALTY. EVAN WRONG CLAIM OR EXCESS CLAIM OF DEPRECIATION LEADING TO ADMISSION L ESSER INCOME OR HIGHER LOSS TANTAMOUNT TO FURNISHING INACCURATE PAR TICULARS OF INCOME WHICH ATTRACTS PENALTY WITHIN THE MEANING OF SEC. 2 71(1)(C). IN THIS REGARD, IT IS RELEVANT TO NOTE THAT THE HONBLE SUP REME COURT, IN THE CASE ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 8 OF UNION OF INDIA VS. RAJASTHAN SPINNING MILLS LTD. , HELD THAT IT CANNOT BE SAID THAT DHARMENDRA TEXTILE HAS HELD THAT EVERY CA SE OF NON-PAYMENT OR SHORT-PAYMENT OF DUTY WILL RESULT IN PENALTY AND THAT PENALTY IS LEVIABLE ONLY WHEN THE CONDITIONS PRESCRIBED IN THE STATUTE ARE SATISFIED. A SIMILAR ISSUE AROSE BEFORE THE ITAT, DELHI IN THE CASE OF MAGIC INTERNATIONAL PVT. LTD. VS. ITO, IN ITA. NO. 29222, WHEREIN THE ITAT HELD THAT DEPRECIATION CLAIM AS PER COMPANIES ACT, INSTE AD OF I.T. ACT IS INADVERTENT MISTAKE WHICH DOES NOT FALL IN THE CATE GORY OF FURNISHING INACCURATE PARTICULARS. 9. IN THIS VIEW OF THE MATTER AND ALSO RESPECTFULLY FOLLOWING THE RATIO OF CASE LAWS DISCUSSED ABOVE, WE ARE OF THE VIEW TH AT EXCESS DEPRECIATION CLAIM MADE BY THE ASSESSEE IS A BONAFI ED CLAIM WITHOUT ANY FRAUDULENT INTENTION TO EVADE TAX, WHICH DOES NOT T ANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME WARRANT S LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE CIT(A), AFTER CONSIDERING RELEVANT FACTS, RIGHTLY DELETED PENALTY LEVIED BY THE A.O. WE DO NOT SEE ANY REASONS TO INTERFERE WITH ORDER OF THE CIT(A). THEREFORE, WE U PHELD THE CIT(A) ORDER AND DISMISSED APPEAL FILED BY THE REVENUE. ITA NO.14/VIZAG/2015 M/S. BRANDIX INDIA APPAREL CITY (P) LTD., VSKP 9 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 RD DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 23.12.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-5(1), VISAKHAPA TNAM 2. / THE RESPONDENT M/S. BRANDIX INDIA APPAREL CITY (P) LTD., PUDIMADAKA ROAD, ATCHUTHAPURAM, VISAKHAPATNAM 3. + / THE CIT-1, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM