OBSERVER (INDIA) LTD, MUMBAI V. ITO WD 4(3)(1), MUMBAI

ITA 1602/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5795 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-09-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHEELA CHITLANGIA
• Keywords: Depreciation; Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 1602 TO 1604/M/2012 ASSESSMENT YEAR S : 2002 - 03 TO 2004 - 05 M/S. OBSERVER (INDIA) LTD. COURT HOUSE, 4 TH FLOOR, LOKMANYA TILAK MARG, DHOBI TALAO, MUMBAI 400 002 PAN: AAACOO671N VS. ITO WD 4(3)(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. SHEELA CHITLANGI A REVENUE BY : SHRI SANJEEV JAIN, D.R. DATE OF HEARING : 04.12. 201 3 DATE OF PRONOUNCEMENT : 16.01.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEALS FILED BY THE ASSESSEE RELE VANT TO THREE DIFFERENT ASSESS MENT YEARS ARE DIREC TED AGAINST THE IMPUGNED ORDERS OF THE CIT(A) , ALL DATED 18.1.2012 VIDE WHICH HE HAS CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER UPON THE ASSESSEE UNDER SECTION 271(1) (C) OF THE I NCOME T AX A CT IN RELATION TO A.Y. 2002 - 03 TO 2004 - 05. 2. AS THE F ACTS OF THE CASE AND THE ISSUE INVOLVED IN ALL THE ABOVE NOTED APPEALS ARE COMMON AND FURTHER THE APPEALS ARE RELATED TO THE SAME ASSESSEE, HENCE FOR THE SAKE OF CONVENIENCE, THE SAME ARE DISPOSED OF WITH THIS COMMON ORDER. T HE FACTS ARE TAKEN FROM ITA N O. 1602/M/2012 RELEVANT TO A.Y 2002 - 03 . ITA NO .1602/M/2012 FOR A.Y. 2002 - 03 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO DIS ALLOWED THE DEPRECIATION OF RS. 9 , 01 , 484/ - ON ACCOUNT OF NON UTILIZATION OF THE ASSETS DUE TO ITA NO .1602 - 1604/M/2012 M/S. OBSERVER (INDIA) LTD. 2 SUSPENSION OF BUSINESS DURING T HE YEAR UNDER CONSIDERATION. THE DISALLOWANCE WAS CONFIRMED UPTO THE LEVEL OF ITAT. THE AO ALSO IN ITIATED PENAL TY PROCEEDINGS. THE AO DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE THAT THE BUSINESS WAS TEMPORARILY SUSPENDED BUT THE ASSESSEE CONTINUED ITS OTHER ACTIVITIES AND THAT THE ASSETS I.E. PLANT AND MACHINERY OF THE PUBLISHING BUSINESS OF THE ASSESSEE REMAINED INTACT AND READY FOR THE USE AND AS SUCH EVEN THE DISALLOWANCE ON THE PLANT AND MACHINERY WAS NOT JUSTIFIED. THE AO HELD THAT SINCE THE AS SETS WERE NOT USED DURING THE YEAR FOR THE BUSINESS PURPOSE OF THE ASSESSEE, HENCE THE ASSESSEE BY CLAIM ING DEPRECIATION ON THE ASSETS HAD FURNISHED INACCURA TE PARTICULARS OF ITS INCOME. THUS HE LEVIED MINIMU M PENAL TY ON THE INCOME CONCEALED OF RS. 6 , 55 , 38 0/ - WHICH WAS WORKED OUT AT RS.2 , 33 , 971/ - . 4. THE LD. C IT (A) OBSERVED THAT THE ASSESSEE HAD NOT VOLUNTARILY OFFERED THE DISALLOWANCE FOR TAXATION AND EVEN THE EXPLANATION GIVEN BY IT WAS FALSE AND NOT BONAFIDE, HE THEREFORE CONFIRMED THE PENALTY. THE ASS ESSEE IS THUS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORD. 6. THE ASSESSEE HAD CLAIMED THE DEPRECIATION ON THE GROUND OF TEMPORARY SUSPENSION OF THE BUSINESS WH E REAS THE AO DISALLOWED THE CLAIM OBSERVING THAT THE BUSINESS WAS SUSPENDED SINCE DECEMBER 2000 ON ACCOUNT OF LOSSES INCURRED AND THE SAME WAS NOT REVIVED AS ON THE DATE OF ASSESSMENT ORDER. THE LD.AR HAS CONTENDED THAT IN FACT THE BUSINESS WAS TEMPORARILY SUSPENDED AND THE ASS ESSEE COMPANY WAS LOOKING OUT AND CONTEMPLATING THE VARIOUS OPTIONS FOR REVIVAL OF THE BUSINESS. THE MAKING OF CLAIM OF DEPRECIATION DURING THE RELEVANT ASSESSMENT YEAR WAS NOT ONLY JUSTIFIED BUT ITA NO .1602 - 1604/M/2012 M/S. OBSERVER (INDIA) LTD. 3 BONAFIDE ALSO AS THERE WAS NO INTENTION OF THE ASSESSEE AT T HAT TIME TO CLOSE THE BUSINESS PERMANENTLY. ON THE OTHER HAND THE LD. DR HAS RELIED UPON AUTHORITIES BELOW. 7 . I N OUR CONSIDERED VIEW, THE LEVY OF PENALTY IN THE CASE IN HAND WAS NOT JUSTIFIED. THOUGH THE DEPRECIATION CLAIM ON ASSETS OF THE ASSESSEE HAD BEEN DISALLOWED AND THE SAID DISALLOWANCE HA D BEEN CONFIRMED BY THE HIGHER AUTHORITIES, BUT THAT ITSELF CAN NOT BE A GROUND FOR MANDATORY LEVY OF PENALTY. THE LEVY OF PENALTY IS A PENAL ACTION AGAINST THE ASSESSEE FOR HIS WRONGFUL ACT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME. EVERY CASE OF CONFIRMATION OF DISALLOWANCE CAN NOT BE REGARDED AS A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. IF THE ASSESSEE OFFERS REASONABLE EXPLANATIO N OF MAKING THE CLAIM UNDER BONA FIDE BELIEF, THEN EVEN THOUGH, THE AO OR THE OTHER IT AUTHORITIES MAY OR MAY NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSEE UNDER BONAFIDE BELIEF , T HE LEVY OF PENALTY UNDER SUCH CIRCUMSTANCES CAN NOT BE HELD TO BE JUSTIFIED. HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. [(2010) 322 ITR 158 (SC)] HAS HELD THAT SIMPLY FOR THE REASON THAT THE ASSESSING OFFICER DID NOT FIND THE CLAIM OF THE ASSESSEE TO BE SUSTAINABLE IN LAW UP TO A CERTAIN EXTENT, IT CAN NOT BE A CASE FOR PENALTY U/S.271(1)(C) , MORE SO WHEN THE PARTICULARS FURNISHED BY THE ASSESSEE WERE NOT INACCURATE. 8 . IN THE CASE IN HAND, THE ASSESSEE THOUGH HAD SUSPENDED THE BUSINESS, BUT IT HAD NOT DECIDED ON THE DATE OF FILING THE RETURN OF INCOME TO CLOSE THE SAME AND WAS LOOKING OUT FOR POSSIBILITIES TO REVIVE AND CONVERTING THE SAME INTO A PROFIT MAKING VENTURE, THOUGH IT COULD NOT SUCCEED IN DOING SO. MOREOVER , THE ASSESSEE WAS ALREADY RUNNING INTO LOSSES. IF THE INTENTION OF THE ASSESS EE HAD NOT BEEN TO REVIVE THE BUSINESS, THERE COULD NOT HAVE BEEN EITHER ANY REASON OR ANY OCCASION FOR THE ASSESSEE TO WRONGLY CLAIM THE DEPRECIATION AS ULTIMATELY ITA NO .1602 - 1604/M/2012 M/S. OBSERVER (INDIA) LTD. 4 THE ASSESSEE COULD NOT HAVE GOT ANY BENEFIT OF SHOWING INCREASE IN THE LOSS AND ITS SUBSEQU ENT SET OFF AS THERE WOULD NOT BE ANY POSSIBILITY OF INCOME BECAUSE OF ULTIMATE CLOSE OF BUSINESS. THE CLAIM OF DEPRECIATION, IN OUR VIEW, WAS MADE BY THE ASSESSEE UNDER BONAFIDE BELIEF AND ALL THE MATERIAL PARTICULARS WERE DISCLOSED IN THE RETURN OF INCO ME AND IT WAS NOT THE CASE OF CONCEALMENT OF INCOME OR FURNISHING OF WRONG PARTICULARS OF ITS INCOME. MERELY BECAUSE THE ADJUDICATING AUTHORITIES WERE NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE OR EVIDENCE GIVEN BY THE ASSESSEE IN THE QUANTUM PROCE EDINGS/APPEALS, THAT ITSELF IS NOT SUFFICIENT TO HOLD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS TO CONCEAL HIS INCOME. 9 . IN VIEW OF OUR ABOVE OBSERVATIONS, W E DO NOT FIND IT A FIT CASE FOR LEVY OF PENALTY, HENCE THE PENALTY CONFIRMED BY THE IMPUGNED ORDER UNDER APPEAL IS HEREBY ORDERED TO BE SET ASIDE. ITA NO.1603/M/2012 FOR A. Y. 2003 - 04 & ITA N O . 1604/M/2012 F OR A . Y .2004 - 05 1 0 . IN VIEW OF OUR FINDINGS GIVEN ABOVE, THESE APPEALS ARE ALSO ALLOWED AND THE PENAL TY LEVIED IN RELATION TO ABOVE AS SESSMENT YEARS IS ALSO HEREBY ORDERED TO BE SET ASIDE. 1 1 . IN THE RESULT, ALL THE THREE APPEALS FILED BY THE ASSES S EE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.01. 201 4 . SD/ - SD/ - ( P.M. JAGTA P) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16.01. 201 4 . * KISHORE ITA NO .1602 - 1604/M/2012 M/S. OBSERVER (INDIA) LTD. 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT . REGISTRAR, ITAT, MUMBAI.