N.K.Pharma Industries (Now known as NKP Pharma Pvt. Ltd., ), Ahmedabad V. The ACIT, Circle-6, Ahmedabad

ITA 1575/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8317 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-09-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHWIN C SHAH AR
• Keywords: Depreciation; Bonafide mistake

Judgement Text

\ , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1575/AHD/2014 ( / ASSESSMENT YEAR : 2001-02) N.K. PHARMA INDUSTRIES (NOW KNOWN AS NKP PHARMA PVT.LTD.) 1814/B, PHASE-II, GIDC ESTATE, VATVA AHMEDABAD / VS. ASSTT.CIT-VI CIRCLE-6 AHMEDABAD # ./ ./ PAN/GIR NO. : AACFN 2912 L ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI ASHWIN C.SHAH, AR '#& )( / RESPONDENT BY : SHRI MUDIT NAGPAL, SR.DR *+ ), / DATE OF HEARING 23/09/2017 -./0 ), / DATE OF PRONOUNCEMENT 09/10/2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL IS DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE APPELLATE COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD [CIT(A) IN SHORT] DATED 24/02/2014 ARISING IN RESPECT OF THE PENALTY ORDER PASSED BY A SSESSING OFFICER (AO) ITA NO.1575/AHD /2014 N.K. PHARMA INDUSTRIES (NOW KNOWN AS NKP PHARMA P. LTD.) VS. ACIT ASST.YEAR 2001-02 - 2 - UNDER S.271(1)(C) OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS 'THE ACT') DATED 17/09/2012 RELEVANT TO ASSESSMENT YEAR (AY) 2001-02. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS TOWA RDS CONFIRMATION OF PENALTY UNDER S.271(1)(C) OF THE ACT ON EXCESS CLAI M OF DEPRECIATION OF RS.11,26,823/- IN THE ASST.YEAR 2001-02. 3. THE LD.AR FOR THE ASSESSEE AT THE OUTSET SUBMITT ED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMAC EUTICAL PLANT AND MACHINERIES. IT HAS UNDERTAKEN FORWARD INTEGRATION PROJECT FOR MANUFACTURING OF PHARMACEUTICAL DRUGS AND HAS SET U P ANOTHER UNIT DURING THE YEAR. AS COROLLARY, THE SAID UNIT FOR MANUFACTURING OF PHARMA DRUGS WAS CLAIMED AS AN EXTENSION OF SAME BUSINESS. THE ASSESSEE THUS INTER ALIA CLAIMED DEPRECIATION ALLOWANCE OF RS.22.53 LAKHS F OR THE FULL YEAR ON THE MACHINERIES INSTALLED. IT WAS THEREAFT ER SUBMITTED THAT IN THE COURSE OF QUANTUM PROCEEDINGS BEFORE THE ITAT, THE ASSESSEE ITSELF VOLUNTARILY CONCEDED THAT THE DEPRECIATION CLAIM ON SUCH ASSETS SHOULD BE RESTRICTED TO 50% OF THE AMOUNT CALCULATED AS THE A SSET WERE PUT TO USE IN THE SECOND HALF OF THE FINANCIAL YEAR ON 15/03/2001 WHICH IS LESS THAN STIPULATED PERIOD OF 180 DAYS. THE LD.AR ACCORDING LY CONTENDED THAT THE MISTAKE COMMITTED TOWARDS EXCESS CLAIM OF DEPRECIAT ION WAS OFFERED WITHOUT THERE BEING ANY FINDING OR ENQUIRY BY THE LOWER AUTHORITIES IN THIS REGARD. THE LD.AR EXHORTED THAT THE AO OR THE CIT(A) AT NO STAGE HAD PIN-POINTED THAT ASSET WAS PUT TO USE FOR LESS THAN 180 DAYS. THE ITA NO.1575/AHD /2014 N.K. PHARMA INDUSTRIES (NOW KNOWN AS NKP PHARMA P. LTD.) VS. ACIT ASST.YEAR 2001-02 - 3 - DISALLOWANCE OF DEPRECIATION CLAIMED TOGETHER WITH OTHER INCIDENTAL EXPENSES TOWARDS BUSINESS WERE MADE BY REVENUE ON A N ALTOGETHER DIFFERENT FOOTING I.E. ANOTHER UNIT IS DISTINCT UND ERTAKING AND NOT AN EXTENSION OF THE EXISTING UNDERTAKING. THE LD.AR T HUS SUBMITTED THAT NOTWITHSTANDING THE FACT THAT DEPRECIATION CLAIM WA S WRONGLY MADE FOR THE ENTIRE YEAR, THE MISTAKE COMMITTED IS BONAFIDE AND CALLS FOR BENIGN VIEW. 4. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF THE CIT(A). 5. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. THE MAINTAINABILITY OF LEVY OF PENALTY UNDER S.271(1)(C ) ON WRONG AND EXCESS CLAIM OF DEPRECIATION ALLOWANCES IS IN QUESTION. I T IS THE CASE OF THE ASSESSEE THAT A BONAFIDE ERROR COMMITTED BY THE ASS ESSEE WAS VOLUNTARILY CORRECTED WITHOUT BEING NOTICED BY THE REVENUE. T HE DEPRECIATION OUGHT TO HAVE BEEN CLAIMED AT HALF OF THE FULL YEARS DEPR ECIATION ELIGIBLE TO THE ASSESSEE SINCE THE ASSET WAS PUT TO USE IN THE SECO ND HALF OF THE FINANCIAL YEAR. THE REVENUE, ON THE OTHER HAND, CONTENDS THA T SUCH WRONGFUL CLAIM OF THE DEPRECIATION IN CONTRAVENTION OF THE STATUTO RY PROVISIONS IS SUSCEPTIBLE TO PENALTY PROCEEDINGS. WE FIND OURSEL VES IN AGREEMENT WITH THE PLEA RAISED ON BEHALF OF THE ASSESSEE THAT THE MISTAKE COMMITTED WAS IN THE REALM OF A BONAFIDE MISTAKE. THE DEPRECIATI ON ON THE ASSETS HAVE BEEN CLAIMED FOR THE FULL YEAR WITHOUT TAKING COGNI ZANCE OF THE DATE ON ITA NO.1575/AHD /2014 N.K. PHARMA INDUSTRIES (NOW KNOWN AS NKP PHARMA P. LTD.) VS. ACIT ASST.YEAR 2001-02 - 4 - WHICH ASSET WAS PUT TO USE. THE MISTAKE WAS RATIFI ED EVENTUALLY WITHOUT ANY EXERTION OF THE REVENUE. COUPLED WITH THIS, WE ALSO FIND THAT THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING LOSS OF RS.12.30 LAKHS. THEREFORE ABSENCE OF ANY APPARENT MOTIVE TOWARDS T AX SAVING BY CLAIM OF EXCESSIVE DEPRECIATION APPEARS ABSENT. NOTICE ABLY, ANY EXCESSIVE CLAIM OF DEPRECIATION IN ONE YEAR FINALLY GETS NEUT RALIZED AND NULLIFIED OVER A PERIOD OF TIME. THUS, WE DO NOT SEE ANY ATT RIBUTES OF FALSITY IN THE CLAIM PER SE . IN VIEW OF AFORESAID MITIGATING CIRCUMSTANCES, T HE PENALTY UNDER S.271(1)(C) OF THE ACT ON EXCESS CLAIM OF DEP RECIATION DESERVES TO BE CANCELLED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 09/ 10 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/ 10 /2017 4..*,.*../ T.C. NAIR, SR. PS ITA NO.1575/AHD /2014 N.K. PHARMA INDUSTRIES (NOW KNOWN AS NKP PHARMA P. LTD.) VS. ACIT ASST.YEAR 2001-02 - 5 - !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-XI, AHMEDABAD 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 28.9.17 (DICTATION-PAD 10- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.9.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.9.10.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9.10.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER