M/s. Vardhman Industries, Daman V. The Income Tax Officer, Ward-4, Daman

ITA 1580/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9079 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 19-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NO.1580/AHD/2014 (ASSESSMENT YEAR:2005-06) M/S. VARDHMAN INDUSTRIES, C/O. ROMAN INDUSTRIES LTD. SR. NO. 9/1 & 2. NEAR JAGRUTI TEXTILE, DABHEL, DAMAN 396210 APPELLANT VS. ITO, WARD-4, DAMAN, DEVKA ROAD, DAMAN RE SPONDENT PAN: AADFP7051P /BY ASSESSEE : SHRI HARDIK VORA, A.R. /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /DATE OF HEARING : 07.03.2017 /DATE OF PRONOUNCEMENT : 08.03.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-06 ARISES AGAINST CIT(A), VALSADS EX PARTE ORDER DATED 26.02.2014, P ASSED IN APPEAL NO. CIT(A)/VLS/92/2012-13, REFUSING TO CONDONE FIVE DAY S DELAY IN FILING THEREOF THEREBY CONFIRMING ASSESSING OFFICERS ACTI ON IMPOSING PENALTY OF RS.4,52,400/-, IN PROCEEDINGS UNDER SECTION 271(1)( C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO. 1580/AHD/2014 ( M/S. VARDHMAN INDUSTRIES V S. ITO) A.Y. 2005-06 - 2 - 2. LEARNED COUNSEL REPRESENTING ASSESSEE FIRST OF A LL INVITES OUR ATTENTION TO THE FACT THAT NEITHER THE LOWER APPELLATE ORDER ANYWHERE RECORDS A SPECIFIC FINDING THAT IT HAD NEVER BEEN INTIMATED OR SERVED ABOUT NOTICE OF HEARING NOR DOES IT CONDONE DELAY OF FIVE DAYS AFTER TAKING INT O ACCOUNT ALL MITIGATING CIRCUMSTANCES. SHRI KURIAN VEHEMENTLY OPPOSES THE SAID PLEA BY ARGUING THAT THE ASSESSEE HAS THROUGHOUT BEEN NON CO-OPERATIVE B EFORE THE LOWER AUTHORITIES. HE HOWEVER FAILS TO DISPUTE THE FACT THAT THE CIT(A)S ORDER UNDER CHALLENGE DOES NOT ENSURE THE ASSESSEE TO HAV E BEEN ACTUALLY SERVED ABOUT HEARING OF ITS LOWER APPEAL. THE QUESTION TH EN ARISES BEFORE OUR CONSIDERATION IS AS TO WHETHER THE CASE IS TO BE RE MITTED BACK ONCE AGAIN TO THE CIT(A) OR WE SHOULD OURSELVES DECIDE THE SAME O N MERITS. WE WISH TO OBSERVE HERE THAT MUCH WATER HAS FLOWN DOWN THE STR EAM SINCE THE IMPUGNED ASSESSMENT YEAR 2005-06. WE THEREFORE PROCEED TO A DJUDICATE THE APPEAL ON MERITS BY EXERCISING THE LATTER OPTION. 3. WE NOW ADVERT TO THE RELEVANT FACTS. THE IMPUGN ED PENALTY OF RS.4,52,400/- ARISES FROM THREE DISALLOWANCES / ADD ITIONS OF PRIOR PERIOD EXPENSES OF RS.3,84,176/-, DEPRECIATION OF RS.6,86, 452/- AND IN RESPECT OF EXCLUSION OF OTHER INCOME OF RS.1,65,622/- FOR THE PURPOSES OF COMPUTING SECTION 80IB DEDUCTION; RESPECTIVELY. THE ASSESSIN G OFFICER HAD MADE THE ABOVESTATED DISALLOWANCES/ADDITIONS IN ASSESSMENT O RDER DATED 17.10.2007. HE THEREAFTER INITIATED THE IMPUGNED PENALTY PROCEE DINGS ALLEGING CONCEALMENT AND FURNISHING OF INACCURATE PARTICULAR S. THE CIT(A)S ORDER DATED 04.06.2009 CONFIRMED THE ABOVE DISALLOWANCES / ADDITIONS. LEARNED COUNSEL STATES AT THE BAR THAT THE ASSESSEE THEREAF TER DID NOT PREFER ANY APPEAL. QUANTUM PROCEEDINGS ARE STATED TO HAVE ATTAINED FIN ALITY AT THIS STAGE ITSELF. 4. THE ASSESSING OFFICER TOOK UP THE IMPUGNED PENAL TY PROCEEDINGS. HE HEAVILY RELIED UPON THE ABOVESTATED QUANTUM PROCEED INGS OBSERVATIONS TO CONCLUDE THAT THE ASSESSEES ACT AND CONDUCT THEREI N AMOUNTS TO FURNISHING OF ITA NO. 1580/AHD/2014 ( M/S. VARDHMAN INDUSTRIES V S. ITO) A.Y. 2005-06 - 3 - INACCURATE PARTICULARS AS WELL AS CONCEALMENT OF IN COME QUA THE THREE ABOVESTATED QUANTUM ISSUES. THE CIT(A) HAS REFUSED TO CONDONE DELAY OF FIVE DAYS IN HIS EX PARTE ORDER UNDER CHALLENGE. 5. WE HAVE HEARD BOTH THE PARTIES VEHEMENTLY REITER ATING THEIR RESPECTIVE STANDS. CASE FILE PERUSED. LEARNED REPRESENTATIVE S NOWHERE DISPUTE THE LAW SETTLED BY HONBLE APEX COURT IN CIT VS. RELIANCE P ETROPRODUCTS 322 ITR 158 (SC) THAT QUANTUM AND PENALTY ARE SEPARATE PROCEEDI NGS WHEREIN EACH AND EVERY DISALLOWANCE / ADDITION MADE IN FORMER DOES N OT IPSO FACTO LEAD TO IMPOSITION OF PENALTY IN LATTER PROCEEDINGS. WE KE EP IN MIND THIS FINE DISTINCTION TO REVERT TO THE THREE DISALLOWANCES/AD DITIONS HEREINABOVE. THE FIRST ONE IS OF PRIOR PERIOD EXPENSE. THE ASSESSEE CLAIMED TO HAVE PURCHASED A PVC COMPOUND FROM ITS SISTER CONCERN M/S. ROMAN P LASTIC INDUSTRIES DURING PRECEDING ASSESSMENT YEAR ON THE BASIS OF A BILL DATED 01.09.2004 ISSUED IN THE RELEVANT PREVIOUS YEAR. THE ASSESSIN G OFFICER AS WELL AS THE CIT(A) DISALLOW THE SAID CLAIM BY CONCLUDING THAT T HE SAME IS NOT ALLOWABLE SINCE PERTAINING TO THE PRECEDING ASSESSMENT YEAR. THEY REJECT ASSESSEES CLAIM IN OTHER WORDS THAT THE SAID EXPENDITURE HAD IN FACT CRYSTALLIZED IN THE IMPUGNED ASSESSMENT YEAR SINCE THE RELEVANT BILL WA S ISSUED ON 01.09.2004. ALL THIS MAKES IT CLEAR THAT THE ASSESSEE HAS GOT A VALID REASON SO FAR AS THE IMPUGNED PENALTY PROCEEDINGS ARE CONCERNED SINCE TH E ABOVESTATED BILL PERTAINED TO THE RELEVANT PREVIOUS YEAR ONLY. WE T HUS DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED PENALTY PERTAINING T O THIS DISALLOWANCE. 6. THE SECOND QUANTUM DISALLOWANCE IS THAT OF DEPRE CIATION. THE ASSESSEE CLAIMED DEPRECIATION RELIEF OF RS.25,73,80 6/-. THE ASSESSING OFFICER NOTICED IT AS NOT TO HAVE CLAIMED THE VERY RELIEF FROM ASSESSMENT YEARS 2000-01 & 2001-02 I.E. SINCE COMMENCEMENT OF ITS MA NUFACTURING ACTIVITY RESULTING IN HIGHER CLAIM OF DEDUCTION U/S.80IB OF THE ACT. HE THEREFORE SOUGHT RE-WORKING OF DEPRECIATION FROM ASSESSMENT Y EAR 2001-02. THIS ITA NO. 1580/AHD/2014 ( M/S. VARDHMAN INDUSTRIES V S. ITO) A.Y. 2005-06 - 4 - RESULTED IN REDUCTION IN DEPRECIATION CLAIM TO RS.1 8,87,354/- THEREBY POINTING OUT A DIFFERENTIAL FIGURE OF RS.6,86,452/-. THE AS SESSEES CASE WAS THAT EARLIER YEARS DEPRECIATION COULD NOT BE THRUST UPON. THE ASSESSING OFFICER HOWEVER REJECTED THE SAME BY RELYING UPON ASSESSMENT PROCEE DINGS TRAVELLING RIGHT UP TO THE TRIBUNAL IN THE ABOVE TWO ASSESSMENT YEARS. ALL THESE FACTS SUFFICIENTLY INDICATE THAT THE ASSESSEE HAD ALREADY BEEN CONTEST ING THIS DEPRECIATION ISSUE OF THE EARLIER ASSESSMENT YEARS RIGHT UP TO THE TRI BUNAL. WE OBSERVE IN THIS PECULIAR FACTS THAT IT THEREFORE COMPUTED THE ENTIR E AMOUNT OF DEPRECIATION REDUCED LATTER ON IN ORDER TO KEEP THE ISSUE ALIVE IN EARLIER ASSESSMENT YEARS. THERE IS FURTHER NO DISPUTE THAT IT HAD OTHERWISE F ILED ALL NECESSARY PARTICULARS FORMING THE VERY BASIS OF THE IMPUGNED DISALLOWANCE . WE ACCORDINGLY CONCLUDE THAT THE ASSESSEES ACT AND CONDUCT DOES NOT AMOUNT TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS. ITS PENALTY APPEAL QUA THIS ISSUE ALSO SUCCEEDS. 7. WE ARE NOW LEFT WITH THE THIRD AND FINAL ISSUE O F OTHER INCOME OF RS.1,65,622/- COMPRISING OF INTEREST ON DEPOSITS, A DVANCES, INTEREST ON REFUND OF INCOME TAX AND BALANCE IS WRITTEN BACK IN ASSESS EES P&L ACCOUNT AND CLAIMED AS DEDUCTION U/S.80IB OF THE ACT. THE ASSE SSEES CASE WAS THAT ALL THESE HEADS HAD A VERY STRONG DIRECT NEXUS WITH ITS INDUSTRIAL UNDERTAKING SO AS TO BE TREATED AS ELIGIBLE PROFITS U/S.80IB OF TH E ACT. THE ASSESSING OFFICER QUOTED HONBLE APEX COURTS DECISION IN PANDIAN CHE MICALS LTD. CASE 262 ITR 278 (SC) TO DISALLOW THE SAME AFTER CONCLUDING THAT THESE INCOMES HAD NOT BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING IN QUESTION. WE FIND FROM THE CIT(A)S ORDER IN QUANTUM APPEAL THAT THE ASSES SEE DID NOT EVEN CHALLENGE THE SAME. IT IS THUS CLEAR THAT THE ASSE SSEE HAD NOWHERE FILED INACCURATE PARTICULARS OF INCOME AS THE ABOVE QUANT UM DISALLOWANCE ARISES FROM LEGAL INTERPRETATION OF SECTION 80IB DEDUCTION PROVISION WHEREIN THE ASSESSEE COULD NOT PROVE ITS CASE WHICH RESULTED IN EXCLUSION OF THE OTHER INCOME FOR THE PURPOSE OF ABOVESTATED DEDUCTION. W E CONCLUDE HEREIN AS ITA NO. 1580/AHD/2014 ( M/S. VARDHMAN INDUSTRIES V S. ITO) A.Y. 2005-06 - 5 - WELL THE SAME COULD NOT BE HELD TO BE IN THE NATURE OF EITHER OF THE TWO CATEGORIES OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME U/S.271(1)(C) OF THE ACT. WE THUS ACCEPT AS SESSEES CHALLENGE TO VALIDITY OF THE IMPUGNED PENALTY. 8. THIS ASSESSEES APPEAL IS ALLOWED.. [PRONOUNCED IN THE OPEN COURT ON THIS THE 08 TH DAY OF MARCH, 2017.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD: DATED 08/03/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . / .