ION EXCHANGE INDIA LTD, MUMBAI V. ACIT 6(1), MUMBAI

ITA 1535/MUM/2010

• Counselvise Citation: 153519914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2002-2003
• Appeal Filed On: 25-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA SGAR
• Keywords: Depreciation; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1535/M/2010 (ASSESSMENT YEAR: 2002-03) M/S. ION EXCHANGE INDIA LTD. ACIT - 6(1) ION HOUSE, 4TH FLOOR ROOM NO. 563, 5TH FLOOR DR. E. MOSE ROAD, MAHALAKSHMI VS. AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400011 MUMBAI 400020 PAN - AAACI 1726 L APPELLANT RESPONDENT APPELLANT BY: SHRI P.R.V. RAGHAVAN RESPONDENT BY: SMT. VANDANA SGAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS AGAINST THE ORDER OF TH E CIT(A)-XIV, MUMBAI DATED 22.12.2008 CONFIRMING PENALTY ON ONE ISSUE WH ILE DELETING THE PENALTY LEVIED ON ANOTHER ISSUE. 2. ASSESSEES CONTENTION IS ON THE ISSUE OF CONFIRMATI ON OF PENALTY ON THE DISALLOWANCE MADE TOWARDS DEPRECIATION ON LAND AT ` 8,62,863/-. 3. BRIEFLY STATED, ASSESSEE PURCHASED A BUSINESS PREMI SES IN A COOPERATIVE SOCIETY AND CLAIMED DEPRECIATION ON THA T PROPERTY. THE PROPERTY WAS PURCHASED ON 09.07.1996 AND ON 21.02.1997. THE A.O. OBSERVED THAT ASSESSEE HAS NOT EXCLUDED THE COST OF LAND COMPRISI NG COST OF ACQUISITION OF THE PREMISES FOR WORKING OUT DEPRECIATION AND COST OF SUPER STRUCTURE WAS TAKEN AT 20% OF THE TOTAL COST OF ACQUISITION AND D EPRECIATION WAS ACCORDINGLY REDUCED. ASSESSEE WAS CONTESTING THE IS SUE FROM A.Y. 1997-98 ONWARDS AND IN THE IMPUGNED YEAR CLAIMED DEPRECIATI ON ON THE ACTUAL COST AS PER ITS BOOKS OF ACCOUNT. IN THE ASSESSMENT PROC EEDINGS, RELYING ON THE EARLIER YEARS ORDERS THE DEPRECIATION WAS SCALED DO WN AND AN AMOUNT OF ` 8,62,863/- WAS DISALLOWED. ASSESSEE CONTESTED THE I SSUE BEFORE THE CIT(A) WHO FOLLOWING EARLIER YEAR ORDERS UPHELD THE ORDER OF THE A.O. THE A.O. ITA NO. 1535/M/2010 M/S. ION EXCHANGE INDIA LTD. 2 CONSIDERED THIS DISALLOWANCE FOR LEVY OF PENALTY AL ONGWITH ANOTHER DISALLOWANCE OF INTEREST ON ADVANCES MADE TO SISTER CONCERNS. THAT ISSUE WAS SET ASIDE TO THE FILE OF THE A.O. IN THE QUANTU M PROCEEDINGS BY THE ITAT. PENALTY ON THAT PORTION WAS CANCELLED BY THE CIT(A) WHEREAS HE UPHELD THE LEVY OF PENALTY ON THE DISALLOWANCE ON THE CLAIM OF DEPRECIATION ON THE REASON THAT ASSESSEE WAS WELL WITHIN THE KNOWLEDGE THAT THE VALUE OF OFFICE BUILDING WAS SCALED DOWN OVER A PERIOD OF TIME AND ASSESSEE WAS NOT ELIGIBLE FOR DEPRECIATION ON LAND. IT IS FURTHER HELD BY HIM THAT ASSESSEE WAS FULLY AWARE THAT SIMILAR DISALLOWANCE HAS BEEN MADE AND A LSO CONFIRMED FOR LAST SEVERAL YEARS AND ASSESSEE SHOULD NOT HAVE MADE SUC H CLAIM IN THE RETURN OF INCOME. THIS ACTION ON THE PART OF THE ASSESSEE DEFINITELY SHOWS THE DELIBERATE AND CONSCIOUS ATTEMPT TO FURNISH INACCUR ATE PARTICULARS. BY HOLDING THUS THE CIT(A) CONFIRMED THE PENALTY AND A LSO RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS AND ORS IN CIVIL APP EAL NO. 3527 OF 2009. 4. THE ASSESSEE IS CONTESTING THE FINDINGS OF THE CIT( A) ABOUT WILFUL CONCEALMENT AND FURNISHING OF INACCURATE PARTICULAR S AND IS IN APPEAL BEFORE US ON LEVY OF PENALTY ON THE AMOUNT DISALLOWED IN T HE IMPUGNED ASSESSMENT YEAR. THE LEARNED COUNSEL REFERRED TO THE ORDERS OF THE ITAT IN ITA NO. 2024/2133/MUM/2002 DATED 24.11.2005. IT WAS SUBMITT ED THAT THE ASSESSEE WAS CONTESTING THE SCALING DOWN OF DEPRECI ATION ON THE PROPOSED LAND VALUE WHEN THE ASSESSEE PURCHASED FLOOR SPACE IN THE UPPER BUILDING IN WHICH OTHER TENANTS/OWNERS WERE ALSO THERE. IT WAS SUBMITTED THAT THE HON'BLE ITAT CONFIRMED THE ACTION OF THE A.O. VIDE ORDER DATED 24.11.2005 AND BY THIS TIME ONLY THE ISSUE CAN BE STATED TO HA VE BEEN CRYSTALLISED IN APPELLATE PROCEEDINGS AND TILL THAT TIME INCLUDING FOR THE IMPUGNED YEAR ASSESSEE WAS CARRYING THE MATTER IN APPEAL BEFORE T HE CIT(A) AND ITAT. HE THEN SUBMITTED THAT THE RETURN FOR A.Y. 2002-03 WAS FILED ON 29.10.2001 BY WHICH TIME THE APPEALS IN EARLIER YEARS WERE PENDIN G AND ASSESSEE BEING AGGRIEVED WAS CONTESTING THE ISSUE OF SCALING DOWN OF DEPRECIATION. 5. IT WAS SUBMITTED THAT THE FINDINGS OF THE CIT(A) TH AT ASSESSEE WAS AWARE ABOUT THE DISALLOWANCE BEING MADE AND CONFIRM ED FOR LAST SEVERAL YEARS CANNOT BE ACCEPTED IN VIEW OF THE FACT THAT I SSUES WERE DISPUTED NOT ITA NO. 1535/M/2010 M/S. ION EXCHANGE INDIA LTD. 3 ONLY AT THE TIME OF FILING THE RETURN BUT ALSO BY T HE TIME ORDERS ARE PASSED UNDER SECTION 143(3) DATED 15.03.2005. THE LEARNED COUNSEL RELIED UPON THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 TO SUB MIT THAT MERELY BECAUSE THE PARTICULAR CLAIM WAS DISALLOWED IT DOES NOT LEA D TO LEVY OF PENALTY. 6. THE LEARNED D.R., HOWEVER, SUPPORTED THE ORDER OF T HE CIT(A) AND POINTED OUT THAT IN FORM NO. 35 BEFORE THE CIT(A) F ILED IN APRIL 2008 ASSESSEE HAS NOT STATED THAT THE MATTER WAS FINALIS ED BY THE ITAT VIDE ORDER DATED NOVEMBER 2005, THEREFORE THE ASSESSEE HAS FUR NISHED INACCURATE PARTICULARS EVEN AS LATE AS APRIL, 2008, THEREFORE THE ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS IN CL AIMING EXCESS DEPRECIATION SO AS TO REDUCE TAXABLE INCOME. 7. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE RECO RD ASSESSEE FILED RETURN AS EARLY AS OCTOBER 2002 AND ASSESSMENT UNDE R SECTION 143(3) DISALLOWING DEPRECIATION BY SCALING DOWN THE ACTUAL COST WAS PASSED ON 15.03.2005. AT THAT TIME THE ISSUE, EVENTHOUGH WAS HELD AGAINST BY THE CIT(A), WAS PENDING BEFORE THE ITAT AND THE APPEALS FILED IN THE YEAR 2002 WERE FINALISED BY THE ORDER DATED 24.11.2005, WHICH WAS SUBSEQUENT TO THE DATE OF ASSESSMENT THE ORDER IN THIS CASE. THEREFOR E, IT CANNOT BE STATED THAT ASSESSEE KNEW VERY WELL THAT THE CLAIM WAS HELD AGA INST HIM. WHEN THE MATTER WAS STILL PENDING FOR ADJUDICATION IT CANNOT BE STATED THAT ASSESSEE WAS FULLY AWARE THAT SIMILAR DECISIONS WERE CONFIRM ED IN EARLIER YEARS. THE CLAIMS AT BEST ARE DISPUTED AT THAT POINT OF TIME A ND FINALITY HAS REACHED ONLY AFTER NOVEMBER 2005 AS FAR AS ORDERS OF THE IT AT ARE CONCERNED. THE LEARNED COUNSEL FAIRLY ADMITTED THAT SUBSEQUENT TO THE ORDERS OF THE ITAT ASSESSEE HAS REVISED ITS CLAIM AND IS NOT CLAIMING HIGHER DEPRECIATION IN THE RETURNS FILED SUBSEQUENTLY. THEREFORE, WE ARE OF TH E OPINION THAT THE FINDINGS OF THE CIT(A) ARE NOT FACTUALLY CORRECT. 8. IT IS ALSO SEEN THAT THE A.O. HAS CONSIDERED THE VA LUE OF THE PROPERTY AND BIFURCATED THE SAME INTO LAND COST AND SUPER ST RUCTURE COST WHEN THE ASSESSEE HAS PURCHASED THE UPPER FLOORS IN THE BUIL DING FOR OFFICE PREMISES. AS FAR AS ASSESSEE IS CONCERNED THERE IS NO DISPUTE THAT FULL AMOUNT WAS ITA NO. 1535/M/2010 M/S. ION EXCHANGE INDIA LTD. 4 PAID FOR PURCHASE OF OFFICE PREMISES AND DEPRECIATI ON CLAIMED ACCORDINGLY. JUST BECAUSE THAT THE COST WAS NOT ACCEPTED BY THE A.O. IT CANNOT BE STATED THAT ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OR CONCEALED INCOME. RESPECTFULLY FOLLOWING THE PRINCIPLES ESTAB LISHED BY THE HON'BLE SUPREME COURT IN THE CASES OF CIT VS. RELIANCE PETR OPRODUCTS PVT. LTD. 322 ITR 158 MERE DISALLOWANCE OF A CLAIM DOES NOT LEAD TO PENALTY UNDER SECTION 271(1)(C). THEREFORE THE PENALTY IS CANCELLED. 9. THE LEARNED D.R. VEHEMENTLY ARGUED THAT THE ASSESSE E HAS NOT FURNISHED COMPLETE DETAILS EVEN AT THE TIME OF PREF ERRING APPEAL IN APRIL 2008. 10. AS SEEN FROM THE STATEMENT OF FACTS ATTACHED TO FOR M NO. 35 DATED APRIL 2008 ASSESSEE WAS ONLY CONTESTING THE APPEAL FOR A.Y. 2002-03 SO PENDING AND THE ENTIRE MATTER WAS DISPUTED BEFORE T HE ITAT MUMBAI FOR THE CURRENT YEAR AND EARLIER YEARS ALSO. THE ABOVE STAT EMENT OF FACTS PLACED ON RECORD BY THE ASSESSEE ALONGWITH THE APPEAL MEMO DO ES NOT INDICATE ANY FURNISHING OF INCORRECT PARTICULARS AS SOUGHT OUT B Y THE LEARNED D.R. THE ISSUE IN THAT APPEAL WAS ONLY WITH REFERENCE TO THE APPEAL FOR AY 2002-03 WHICH WAS IN FACT PENDING BEFORE THE ITAT FOR FINAL ISATION. THEREFORE, RELYING ON THE STATEMENT OF FACTS FOR A.Y. 2002-03 FILED BE FORE THE CIT(A) IN APRIL 2008 DOES NOT ESTABLISH THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS AT THE TIME OF FILING THE RETURN. SINCE THE ISSUE W AS A DISPUTED ONE AND ASSESSEE WAS CONTESTING BEFORE THE ITAT AND ONLY AF TER NOVEMBER 2005 THE MATTER WAS DECIDED AGAINST THE ASSESSEE, IT CANNOT BE STATED THAT ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS AT THE TIM E OF FILING RETURN OR EVEN AT THE TIME OF COMPLETING THE ASSESSMENT BY THE A.O . THE ARGUMENT OF THE LEARNED D.R. IS REJECTED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH APRIL 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 27 TH APRIL 2011 ITA NO. 1535/M/2010 M/S. ION EXCHANGE INDIA LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIV, MUMBAI 4. THE CIT VI, MUMBAI CITY 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.