Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 0522 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 3 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-11-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
25-05-2016
Assessment Year
2007-2008
Appeal Filed On
18-07-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! # $% , & ' BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ( / ITA NO. 1464/PN/2014 ) * +* / ASSESSMENT YEAR : 2007-08 DRILBITS INTERNATIONAL PVT. LTD., PLOT NO. 66, MIDC ESTATE, SATPUR, NASHIK-422007 PAN : AACCD1726B ....... / APPELLANT ) / V/S. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK / RESPONDENT ASSESSEE BY : SHRI NIRAJ SETH REVENUE BY : SHRI P.L. KUREEL / DATE OF HEARING : 09-08-2016 / DATE OF PRONOUNCEMENT : 04-11-2016 , / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 30-05 -2014 FOR THE ASSESSMENT YEAR 2007-08 WHEREBY THE PENALTY OF ` 14,50,240/- LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CONFIRMED. 2 ITA NO. 1464/PN/2014, A.Y. 2007-08 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF R OCK ROLLER DRILBITS. THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 27-10-2007 DECLARING TOTAL INCOME AS NIL. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATIO N ON LEASE HOLD LAND. THE ASSESSING OFFICER INTER ALIA DISALLOWED THE CLAIM OF DEPRECIATION ON LEASE HOLD LAND AND INITIATED PENALTY PROCE EDINGS FOR MAKING WRONG CLAIM. THEREAFTER, THE ASSESSING OFFICER VIDE OR DER DATED 18-03-2013 LEVIED PENALTY OF ` 14,50,240/- IN RESPECT OF ADDITIONS MADE DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE FILED AP PEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AGAINST THE ORDER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. THE COMMISSIONER OF INCOM E TAX (APPEALS) VIDE IMPUGNED ORDER REJECTED THE CONTENTIONS OF THE ASSESSEE AND CONFIRMED THE LEVY OF PENALTY. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE ORDER CONFIRMING LEVY OF PENALTY. 3. THE GROUNDS RAISED BY THE ASSESSEE IN APPEAL ARE AS UNDER : GROUND NO. 1 ON VALIDITY OF ORDER PASSED U/S. 271(L)(C) OF THE I . T. ACT, 1961 BY THE DCIT AND CONFIRMED ON APPEAL BY LD. CIT(A) ON FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE ORDER U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961 PASSED B Y THE DEPUTY COMMISSIONER OF INCOME-TAX (A.O.) AND CONFIRMED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS INVALID, UNL AWFUL AND WITHOUT JURISDICTION ON THE GROUND OF UNCERTAINTY A S TO THE EXACT CHARGE AT THE TIME OF INITIATION PROCEEDINGS AND LE VY OF CHARGE ON THE PART OF THE A.O. AND AT THE TIME OF CONFIRMING THE ORDER SO PASSED BY THE ID. CIT(A) IN APPEAL PROCEEDINGS. 3 ITA NO. 1464/PN/2014, A.Y. 2007-08 GROUND NO. 2 ON MERITS OF THE CASE, IT WAS LEGAL CLAIM MADE BY T HE APPELLANT FOR DEPRECIATION U/S. 32(L)(II) OF THE INCOME TAX A CT ON LEASEHOLD RIGHTS IN INDUSTRIAL LAND BELONGING TO MIDC AS AN I NTANGIBLE ASSET BEING BUSINESS RIGHT WAS TREATED BY THE AO AS WRONG CLAIM AND THEREBY HOLDING THAT CORRECT INCOME WAS NOT DISCLOS ED AND ACCORDINGLY PASSED AN ORDER LEVYING PENALTY U/S. 27 1(L)(C) WITHOUT ESTABLISHING CONCEALMENT OF PARTICULARS OF INCOME O R FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THE SAME OR DER WAS CONFIRMED BY THE ID. CIT(A) ON THE GROUND OF MALAFI DE CLAIM WITHOUT CONSIDERING THE BONAFIDE EXPLANATIONS OFFER ED BY THE APPELLANT WHICH WERE ALSO SUBSTANTIATED ON FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE ORDER U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961 PASSED B Y THE DEPUTY COMMISSIONER OF INCOME-TAX AND CONFIRMED BY THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) IS UNJUST AND U NLAWFUL SINCE FULL PARTICULARS RELATING TO ITS CLAIM FOR DEP RECIATION ON LEASEHOLD RIGHTS IN LAND WERE FURNISHED BY THE APPE LLANT NOT ONLY DURING THE COURSE OF ASSESSMENT BUT ALSO IN THE RET URN OF INCOME AND IN THE AUDITED ACCOUNTS WHICH WERE NOT FOUND FA LSE EITHER BY THE A.O. OR BY THE ID. CIT(A) AND THAT THE APPELLAN T DID SUBSTANTIATE ITS EXPLANATION AND ALSO PROVED ITS BO NAFIDE. 4. SHRI NIRAJ SETH APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED AT THE OUTSET THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2006-07 THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS UPHELD THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT IN RESP ECT OF DISALLOWANCE OF CLAIM OF DEPRECIATION ON LEASE HOLD RIGHTS OF LAN D. THE LD. AR SUBMITTED THAT EVEN THOUGH THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS CONFIRMED THE LEVY OF PENALTY IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE CASE OF THE ASSESSEE HAS MERIT ON VARIOUS OTHER GROUNDS WHICH WERE NOT AGITATED/RAISED BEFORE THE TRIBUN AL AT THE TIME OF HEARING OF PENALTY APPEAL FOR ASSESSMENT YEAR 2006-07. 4 ITA NO. 1464/PN/2014, A.Y. 2007-08 4.1 THE LD. AR SUBMITTED THAT THE NOTICE ISSUED U/S. 274 R.W.S. 271 OF THE ACT DOES NOT SPECIFICALLY STATES, WHETHER THE PENA LTY IS LEVIED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE IRRELEVANT CLAUSE IN THE NOTICE HAS NOT BEEN STRIKED OF BY THE ASSESSING OFFICER AT THE TIME OF ISSUANCE OF NOTICE. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER IN PARA 07.3 O F THE ASSESSMENT ORDER HAS OBSERVED THAT THE ASSESSEE HAS MADE WRONG CLAIM OF DEPRECIATION. HOWEVER, IN THE PENULTIMATE PARAGRAPH (PARA 08.9) OF THE ASSESSMENT ORDER THE ASSESSING OFFICER CONCLUD ED BY OBSERVING : THE ASSESSEE HAS BY CLAIMING DEPRECIATION FOR WHICH IT IS NOT ENTITLED TO HAS CONCEALED ITS INCOME AND HAS FILED INACCURATE PART ICULARS THEREOF . IN THE ORDER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT THE ASSESSING OFFICER IN PARA 10 HAS OBSERVED : THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS IN RESPECT OF ABOVE INCOME ADDED BY THE ASSESSING OFFICER BY NOT DISCLOS ING CORRECT INCOME IN HIS RETURN OF INCOME. THUS, THE ASSESSING OFFICER AT THE TIME OF RECORDING SATISFAC TION AS WELL AS ISSUANCE OF NOTICE U/S. 274 R.W.S. 271 OF THE ACT WAS NOT CLEAR, WHETHER THE PENALTY IS TO BE LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS ONLY A T THE TIME OF PASSING OF THE PENALTY ORDER THE ASSESSING OFFICER HAS OBS ERVED THAT PENALTY IS LEVIED FOR FURNISHING OF INACCURATE PARTICULARS OF INC OME. THE LD. AR SUBMITTED THAT THE PENALTY IS LIABLE TO BE SET ASIDE ON THIS GROUND ALONE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLAC ED RELIANCE ON THE FOLLOWING DECISIONS OF THE TRIBUNAL : 5 ITA NO. 1464/PN/2014, A.Y. 2007-08 I. SANJOG TARACHAND LODHA VS. INCOME TAX OFFICER IN ITA NOS . 688 & 689/PN/2014 FOR ASSESSMENT YEARS 2007-08 & 2008-0 9 DECIDED ON 31-08-2015. II. S.L.K. PROPERTIES VS. ITO IN ITA NO. 140/PN/2014 FOR ASSESS MENT YEAR 2006-07 DECIDED ON 18-03-2016. III. THE DY. COMMISSIONER OF INCOME TAX VS. SHRI NANDLAL S. BOTHR A IN ITA NO. 1672/PN/2013 FOR ASSESSMENT YEAR 2007-08 DE CIDED ON 30-03-2016. 4.2 THE LD. AR CONTENDED THAT THE PENALTY IS FURTHER LIA BLE TO BE SET ASIDE ON THE GROUND THAT THE ISSUE ON WHICH THE PENALTY IS SOUGHT TO BE LEVIED IS DEBATABLE. THE ASSESSEE HAD CLAIMED DEPRECIATIO N U/S. 32(1)(II) OF THE ACT ON LEASE HOLD RIGHTS IN LAND. THE ASSESS ING OFFICER DISALLOWED THE SAME. AGAINST THE SAID DISALLOWANCE, THE ASS ESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE FINDINGS OF ASSESSING OFFICER. THEREAFTER, THE ASSESSEE DID NO T AGITATE THIS ISSUE BEFORE THE TRIBUNAL. HOWEVER, THERE ARE SEVERA L DECISIONS WHEREIN DEPRECIATION ON LEASE HOLD LAND HAS BEEN ALLOWED BY THE VARIOUS BENCHES OF THE TRIBUNAL. IN SUPPORT OF HIS SUBMIS SIONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I. NMDC LTD. VS. JOINT COMMISSIONER OF INCOME TAX, 56 TAXMANN.COM 396 (HYDERABAD-TRIB.). II. PIAGGIO VEHICLES (P.) LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX, 37 TAXMANN.COM 133 (PUNE-TRIB.). III. M/S. HINDOOSTAN SPINNING & WEAVING MILLS LTD. VS. DY. COMMISSIONER OF INCOME TAX IN ITA NOS. 3822 & 3823/M/200 3 FOR ASSESSMENT YEARS 1996-97 & 1997-98 DECIDED ON 30-06-2016 . 6 ITA NO. 1464/PN/2014, A.Y. 2007-08 4.3 THE LD. AR CONTENDED THAT ALTHOUGH AT THE TIME OF CLA IMING DEPRECIATION ON LEASE HOLD RIGHTS IN LAND, THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF JOINT COMMISSIONER OF INCOME TAX VS . MUKUND LTD. REPORTED AS 106 ITD 231 (MUM) HAD DECIDED THE ISSU E IN FAVOUR OF THE DEPARTMENT. HOWEVER, THEREAFTER, MUCH WATER HAS FLO WN AND THE TRIBUNAL HAS BEEN ALLOWING DEPRECIATION CLAIM ON LEASE HOLD LA ND. IT IS AN ISSUE WHERE TWO POSSIBLE DIVERGENT VIEWS HAVE BEEN TA KEN. THE ASSESSEE HAS FOLLOWED ONE OF THE VIEWS. IN SUCH CIRCUMSTA NCES EVEN IF THE CLAIM OF THE ASSESSEE HAS BEEN DISALLOWED, PENALTY CAN NOT BE LEVIED. IN SUPPORT OF HIS CONTENTIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF IN COME TAX VS. PRADEEP AGENCIES JOINT VENTURE REPORTED AS 349 ITR 477. THE LD. AR PLACED ON RECORD A COPY OF THE ORDER OF HON'BLE BOM BAY HIGH COURT IN THE CASE OF OWENS CORNING (INDIA) LTD. VS. THE COMMISSIONE R OF INCOME TAX IN INCOME TAX APPEAL NO. 2445 OF 2011 DATED 5 TH MARCH, 2013 WHEREIN THE HON'BLE HIGH COURT ADMITTED THE ISSUE R ELATING TO ALLOWABILITY OF CLAIM OF DEDUCTION IN RESPECT OF ANNUALIZED WRITE OFF OF THE AMOUNT PAID TO MAHARASHTRA INDUSTRIAL DEVELOPMENT C ORPORATION (MIDC). THE TRIBUNAL HAD DISALLOWED THE CLAIM OF ASSESSEE. T HE LD. AR FURTHER DRAWS SUPPORT FROM THE DECISION OF HON'BLE BOMBA Y HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. NAYAN BUILDE RS & DEVELOPERS REPORTED AS 56 TAXMANN.COM 335 TO CONTEND THAT WHERE HIGH COURT HAS ADMITTED SUBSTANTIAL QUESTION OF LAW NO PEN ALTY IS TO BE LEVIED IN RESPECT OF SUCH ISSUE. 4.4 THE LD. AR FURTHER SUBMITTED THAT PENALTY HAS BEEN LE VIED BY INVOKING THE PROVISIONS OF EXPLANATION 1. THE EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT RELATES TO CONCEALMENT OF INCOME, WHEREA S THE 7 ITA NO. 1464/PN/2014, A.Y. 2007-08 PENALTY IN THE PRESENT CASE HAS BEEN LEVIED U/S. 271(1)(C) FO R FURNISHING INACCURATE PARTICULARS OF INCOME. THE LD. AR TO REINFORCE HIS CONTENTIONS PLACED RELIANCE ON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TRISTAR INTECH (P) LTD. VS. ACIT IN ITA NO. 1457/DEL/2010 FOR ASSESSMENT YEAR 2006-07 DECIDED ON 07-09-2 015. 5. ON THE OTHER HAND SHRI P.L. KUREEL REPRESENTING THE D EPARTMENT SUBMITTED THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL ON IDENTICAL SE T OF FACTS HAS CONFIRMED THE LEVY OF PENALTY U/S. 271(1)(C) OF THE A CT IN THE ASSESSMENT YEAR 2006-07 IN ASSESSEES OWN CASE. THE LD. DR FURTHER CONTENDED THAT THE INTENTION OF ASSESSEE IS TO BE SEEN WHEN THE CLAIM IS MADE. IT IS ASESSEES OWN ADMISSION THAT WHEN THE CLAIM OF DEPRECIATION ON LEASE HOLD RIGHTS WAS MADE, THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF JOINT COMMISSIONER OF INCOME TAX VS . MUKUND LTD. (SUPRA) HAD DECIDED THE ISSUE AGAINST THE ASSESSEE. DESPITE THE FACT THAT THE ISSUE RELATING TO CLAIM OF DEPRECIATION ON LEAS E HOLD ASSETS WAS AGAINST THE ASSESSEE, YET THE ASSESSEE CLAIMED DEPR ECIATION ON LEASE HOLD RIGHTS OF LAND. THE LD. DR PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE BY PLACING HEAVY RELIANCE ON THE ORDER O F TRIBUNAL IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. 6. WE HAVE HEARD THE EXTENSIVE SUBMISSIONS OF THE LD. AR AND THE LD. DR. THE LD. AR HAS ASSAILED THE ORDER LEVYING PENALTY B Y RAISING SEVERAL ARGUMENTS WHICH PURPORTEDLY WERE NOT RAISED BE FORE THE CO- ORDINATE BENCH OF THE TRIBUNAL WHEN THE PENALTY APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 WAS ADJUDICATED. IT IS AN ADMITTED FACT THAT THE PENALTY IN ASSESSMENT YEAR UNDER APPEAL HAS B EEN LEVIED ON SAME SET OF FACTS AS WAS LEVIED IN ASSESSMENT YEAR 2006- 07. THE CO- 8 ITA NO. 1464/PN/2014, A.Y. 2007-08 ORDINATE BENCH OF THE TRIBUNAL UPHELD THE LEVY OF PENALTY BY HOLDING AS UNDER : 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON DENIAL OF CLAIM OF DEPRECIATION ON LEASEHOLD RIGHTS IN LAND ACQUIRED BY THE ASSESSEE AS PART OF THE ACQUISITION OF A RUNNING UNIT DURING THE YEAR. PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT IS LEVIABLE WHERE THE ASSESSEE CONCEALS ITS INCOME OR FURNISHES IN-ACCURATE PARTICULARS OF INCOME. THE EXPLANATION 1 TO SECT ION 271(1)(C) OF THE ACT FURTHER PROVIDES THAT WHERE IN RESPECT OF THE FACTS MATERIAL TO THE COMPUTATION TO TOTAL INCOME OF ANY PERSON UNDER THE ACT, SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANAT ION WHICH IS FOUND TO BE FALSE OR SUCH PERSON OFFERS AN EXPLANATION WHICH HE HAS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONAFIDE, THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING TOTAL I NCOME OF SUCH PERSON AS RESULT THEREOF, SHALL FOR THE PURPOSES OF CLAUSE (C) TO SECTION 271(1) OF THE ACT BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. MEANING OTHERWISE , IN CASES GOVERNED BY EXPLANATION 1, WHERE THE EXPLANATION OFFERED B Y THE PERSON IS FOUND TO BE FALSE, NOT BONAFIDE OR WHERE THE EXPLANATION HAS NOT BEEN SUBSTANTIATED WITH AND IN CASES WHERE THE PERSON FA ILS TO OFFER ANY EXPLANATION, ARE THE CASES WHERE THE PERSON IS HELD TO HAVE CONCEALED PARTICULARS OF HIS INCOME AND IS LIABLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 11. NOW, COMING TO THE FACTS OF THE PRESENT CASE, T HE ASSESSEE HAD ACQUIRED A RUNNING UNIT OF GREAVES COTTON LIMITED, S ITUATED AT NASHIK, WHICH IN TURN, WAS ENGAGED IN THE MANUFACTURING OF DRILLING EQUIPMENT FOR OIL FIELDS, BLAST HOLE DRILLING (MINING) AND WA TERWAY DRILLING APPLICATION. AS PER THE AGREEMENT, ALL THE MOVABLE AND IMMOVABLE PROPERTIES OF THE SAID UNIT WERE ACQUIRED BY THE AS SESSEE. THE UNIT WAS SITUATED ON A LEASEHOLD LAND, WHICH WAS TAKEN FROM MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION. AT THE TIME OF ENTERING INTO THE AGREEMENT, THE ASSESSEE HAD VALUED THE LEASEHOLD RI GHTS IN THE SAID LAND AT RS.4,18,17,600/-. THE ASSESSEE CLAIMED DEPRECIA TION ON SUCH LEASEHOLD LAND. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE PLEA OF THE ASSESSEE WAS THAT THE LEASEHOLD RIGHTS WERE INTANGIBLE ASSETS ON WHICH DEPRECIATION WAS ALLOWABLE UNDER SECTION 32(1 )(II) OF THE ACT. THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSES SING OFFICER AND THE DEPRECIATION WAS DISALLOWED. THE TRIBUNAL VIDE ORD ER DATED 23.08.2011 CONFIRMED THE ORDER OF ASSESSING OFFICER AND DISMIS SED THE CONTENTION OF 9 ITA NO. 1464/PN/2014, A.Y. 2007-08 ASSESSEE. PURSUANT TO WHICH, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED AT RS.16,11,372/- HOLDING THAT THE ASSES SEE HAD FURNISHED IN-ACCURATE PARTICULARS IN RESPECT OF THE INCOME AN D DID NOT DISCLOSE THE CORRECT INCOME IN THE RETURN OF INCOME. THE SAID O RDER OF THE ASSESSING OFFICER WAS UPHELD BY THE CIT(A). 12. THE CLAIM OF THE ASSESSEE BEFORE US WAS THAT IT HAD CLAIMED THE DEPRECIATION ON THE SAID LEASEHOLD RIGHTS ON LAND, AS THE SAME WERE INTANGIBLE ASSETS AND ELIGIBLE FOR DEDUCTION UNDER SECTION 32(1)(II) OF THE ACT. THE SAID SECTION PROVIDES THAT DEPRECIATION O N INTANGIBLE ASSETS I.E. KNOW-HOW, PATENTS, COPY RIGHTS, TRADE MARKS, LICENS ES, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER 01.04.1998. THE FIRST ASPECT TO BE NOTED IN THE PRESENT CASE IS THE CLAIM MADE BY THE ASSESSEE IN THE RETURN OF INCOME. THE PERUSAL OF THE COMPUTATION OF INCOM E PLACED AT PAGES 8 AND 9 OF THE PAPER BOOK REFLECTS THE CLAIM OF DEPREC IATION UNDER THE INCOME TAX ACT AT RS.2,57,96,236/-. THE DETAILS OF THE SAID DEPRECIATION CHART AS PER THE INCOME TAX ACT ARE AVAILABLE AT PA GE 10 OF THE PAPER BOOK, IN WHICH DEPRECIATION @ 10% HAS BEEN CLAIMED AT BUILDING, WHERE THE TOTAL VALUE OF THE BUILDING IS RS.6,97,77,990/- . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY P OINTED OUT THAT THE SAID VALUE OF THE BUILDING INCLUDES THE VALUE OF LA ND I.E. RS.4,18,17,600/- WHICH IS THE LAND IN DISPUTE. THE PERUSAL OF THE S AID DEPRECIATION CHART FURTHER REFLECTS THAT THE ASSESSEE HAD CLAIMED DEPR ECIATION ON VARIOUS BLOCKS OF ASSETS I.E. (1) BUILDING, (2) FURNITURE A ND FITTINGS, (3) MACHINERY & PLANT AND (4) INTANGIBLE ASSETS @ 25%. AS PER TH E SCHEDULE D ATTACHED TO THE BALANCE SHEET ALSO, THE LEASEHOLD LAND AND T HE FACTORY BUILDING AND THE OFFICE BUILDINGS WERE SHOWN SEPARATELY ON W HICH DEPRECIATION WAS CLAIMED AS PER THE COMPANIES ACT. THE SAID DEP RECIATION CHART IS PLACED AT PAGE 4 OF THE PAPER BOOK. THE ASSESSEE C LAIMS THAT IT HAD REVISED ITS CLAIM OF DEPRECIATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALLEGING THAT IT WAS ENTITLED TO THE DE PRECIATION @ 25% ON THE VALUE OF LEASEHOLD LAND AS DEPRECIATION WAS ALLOWAB LE UNDER SECTION 32(1)(II) OF THE ACT. THE TRIBUNAL WHILE DECIDING QUANTUM APPEAL, VIDE ORDER DATED 23.08.2011 HAD HELD THAT THE DEPRECIATI ON EVEN IN THE AMENDED SECTION 32(1)(II) OF THE ACT WAS ALLOWABLE ON THE RESTRICTED CATEGORIES OF TANGIBLE ASSETS OR INTANGIBLE ASSETS, WHICH ARE IN SPECIFICALLY ENUMERATED IN THE SECTION. 13. THE TRIBUNAL FURTHER HELD THAT THE PROVISIONS O F THE ACT CANNOT BE INTERPRETED TO MEAN THAT LEASEHOLD RIGHTS GRANTING SUCH TYPE OF OWNERSHIP OVER LAND, ETC. WOULD ALSO QUALIFY AS INT ANGIBLE ASSETS FOR THE 10 ITA NO. 1464/PN/2014, A.Y. 2007-08 PURPOSE OF DEPRECIATION UNDER THE ACT. ACCORDING T O THE TRIBUNAL, THIS WOULD LEAD TO A CONFLICTING SITUATION WHERE LAND AC QUIRED ON FREEHOLD BASIS WOULD NOT BE ELIGIBLE FOR DEPRECIATION BUT SI MILAR LAND ACQUIRED ON LEASEHOLD BASIS WOULD BE ELIGIBLE FOR DEPRECIATION THAT TOO AT A HIGHER RATE. IN THE FACTS AND THE CIRCUMSTANCES OF THE CAS E, THE TRIBUNAL CONFIRMED THE ACTION OF THE AO IN DISALLOWING THE C LAIM OF DEPRECIATION ON LEASEHOLD RIGHTS OVER THE LAND TREATING THE SAME AS INTANGIBLE ASSET U/S 32(1)(II) OF THE ACT. 14. IN VIEW THEREOF, WHERE THE TRIBUNAL HAS COME TO A FINDING THAT THE ASSESSEE IS NOT ENTITLED TO THE DEPRECIATION EVEN U NDER SECTION 32(1)(II) OF THE ACT IN RESPECT OF LEASEHOLD RIGHTS OF LAND, THE CONTENTION OF THE ASSESSEE THAT IT WAS NOT CLAIMING DEPRECIATION ON LA ND PERSE BUT WAS CLAIMING DEPRECIATION ON LEASEHOLD RIGHTS IN LAND W HICH WERE BUSINESS OR COMMERCIAL RIGHTS AND THEREFORE, INTANGIBLE ASSETS UNDER SECTION 32(1)(II) OF THE ACT, DOES NOT STAND THE TEST OF TIME. WHERE THE EXPLANATION TENDERED BY THE ASSESSEE IN RESPECT OF ITS CLAIM ON DEPRECIATION ON THE LEASEHOLD RIGHTS OF LAND WAS FOUND TO BE UNTENABLE, EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT IS CLEARLY ATTRACTED A ND THE ASSESSEE IS EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. EVEN OTHERWISE, THE PERUSAL OF THE RECORD REFLECTS THAT THE ASSESSEE IN THE RETURN OF INCOME HAD CLAIMED THE DEPRECIATION ON LA ND PERSE AND NOT ON INTANGIBLE ASSETS. THE SAID CLAIM WAS AGAINST THE PROVISIONS OF THE ACT AND WAS THUS NOT BONAFIDE CLAIM MADE BY THE ASSESSE E. ON THIS ACCOUNT ALSO, THE ASSESSEE IS LIABLE TO LEVY OF PENALTY UND ER SECTION 271(1)(C) OF THE ACT. 15. ANOTHER CONTENTION RAISED BY THE ASSESSEE WAS T HAT MERELY BECAUSE THE CLAIM BY IT HAD BEEN HELD TO BE NOT COR RECT, WOULD NOT AMOUNT TO FURNISHING OF IN-ACCURATE PARTICULARS OF INCOME. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAID DOWN BY TH E HONBLE SUPREME COURT IN PRICE WATERHOUSE COOPERS VS. CIT & ANOTHER (2012) 348 ITR 306 (SC). THE SAID PLEA OF THE ASSESSEE DOES NOT STAND BECAUSE IT IS UNDISPUTED THAT THE CLAIM MADE BY THE ASSESSEE, WAS NOT BONAFIDE. THE CLAIM OF THE ASSESSEE IN ANY CASE, WAS NOT SUSTAINA BLE IN LAW AND IN VIEW OF THE ABOVE, WHERE THE EXPLANATION OF THE ASS ESSEE IS NOT FOUND TO BE BONAFIDE, THE ASSESSEE IS LIABLE TO LEVY OF PENA LTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE UPHOLD THE O RDER OF CIT(A) IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. 11 ITA NO. 1464/PN/2014, A.Y. 2007-08 7. THE LD. AR HAS FAIRLY CONCEDED THAT FACTS IN THE ASSE SSMENT YEAR 2006-07 AND 2007-08 ARE IDENTICAL. IN SUCH CIRCUMSTANC ES JUDICIAL PROPRIETY DEMANDS THAT THE ORDER OF CO-ORDINATE BENCH SHOULD BE FOLLOWED. ACCORDINGLY, WE FOLLOW THE ORDER OF CO-ORDINATE BEN CH OF THE TRIBUNAL IN CONFIRMING THE LEVY OF PENALTY FOR SIMILAR REASONS. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS DISMISSED AND T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IS UPHELD. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 04 TH DAY OF NOVEMBER, 2016. SD/- SD/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 04 TH NOVEMBER, 2016 RK ,-#./0+. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. # # $ () / THE CIT(A)-I, NASHIK 4. # # $ / THE CIT-I, NASHIK 5. '() *+ , # *+ , , ,-. , / DR, ITAT, B BENCH, PUNE. 6. )/0 12 / GUARD FILE. // ' // TRUE COPY// #3 / BY ORDER, 4 *. / PRIVATE SECRETARY, # *+ , / ITAT, PUNE
