Zenara Pharma Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-17(2), Hyderabad

ITA 1607/Hyd/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4859 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 20-11-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 30-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y V S T SAI
• Assessee Lawyers: PRADEEP KASTHALA
• Keywords: Depreciation; Difference of opinion
• Section: 271(1)(c); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1607/HYD/2018 ASSESSMENT YEAR: 2014 - 15 M/S. ZENARA PHARMA PRIVATE LIMITED, HYDERABAD - 051. PAN: AABCD 9399 K VS. DCIT, CIRCLE - 17(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI PRADEEP KASTHALA REVENUE BY: SRI Y.V.S.T. SAI, CIT - DR DATE OF HEARING: 20/11/2019 DATE OF PRONOUNCEMENT: 18 /02/2020 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) - 5, HYDERABAD IN APPEAL NO. 0052/2017 - 18/CIT(A) - 5, DATED 26/04/2019 PASSED U/S. 271(1)(C) R.W.S 250(6) OF THE ACT FOR THE AY 2014 - 15. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LD. CIT (A) HAS ERRED IN UPHOLDING THE LEVY OF PENALTY U/S. 271(1)( C) OF THE ACT BY THE LD. AO. 3. AT THE OUTSE T, THE LD. AR SUBMITTED BEFORE US THAT THERE IS A DELAY OF 20 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, LD. 2 AR DREW OUR ATTENTION TO THE AFFIDAVIT FILED BY THE ASSESSEE SEEKING CONDONATION OF DELAY. RELEVANT PORTION OF THE SAID AFFID AVIT IS EXTRACTED HEREINBELOW FOR REFERENCE: IN THIS REGARD, WE HAVE WAITED FOR THE CONSEQUENTIAL ORDER FROM THE DCIT, CIRCLE - 17(2), HYDERABAD AGAINST CIT (A) ORDER AND HAVE APPROACHED THE DCIT FOR THE ISSUANCE OF SUCH CONSEQUENTIAL ORDER TO FILE THE APPEAL BEFORE THE HONBLE INCOME TAX APPELLATE TRI BUNAL. IN THE COURSE, WE LEARNT THAT AS OUR APPEAL BEFORE CIT (A) - 5 WAS DISMISSED, THE DCIT DOES NOT ISSUES THE CONSEQUENTIAL ORDER. THEREFORE, THE DELAY IN FILING THE APPEAL OF 20(SIC) DAYS HAPPENED. HENCE THE DELAY IS NEITHER INTENTIONAL NOR DUE TO NEG LIGENCE. 4. THOUGH WE DO NOT APPRECIATE THE REASONS SUBMITTED BY THE ASSESSEE FOR THE DELAY IN FILING THE APPEAL, CONSIDERING THE ISSUES INVOLVED IN THE APPEAL, IN THE INTEREST OF JUSTICE, WE ARE OF THE CONSIDERED VIEW THAT THE DELAY IN FILING THE APPEAL BY THE ASSESSEE IS REQUIRED TO BE CONDONED IN ORDER TO ADJUDICATE THE APPEAL ON MERITS. ACCORDINGLY, WE HEREBY CONDONE THE DELAY AND PROCEED TO ADJUDICATE THE APPEAL ON MERITS. 5 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS O F MANUFACTURING PHARMACEUTICALS FILED ITS RETURN OF INCOME ON 30/11/2014 ADMITTING LOSS OF RS. 9,35,81,926/ - . THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND FINALLY ASSESSMENT WAS COMPLETED ON 30/12/2016 WHEREIN THE LD. AO DISALLOWED THE CLAIM OF R & D EXPENDITURE U/S. 35 OF THE ACT TO THE TUNE OF RS. 86,56,730/ - BECAUSE IT WAS NOT SUPPORTED BY CERTIFICATE ISSUED BY DSIR IN FORM - 3CL OF THE RULES. THE CONTENTION OF THE ASSESSEE WAS THAT SINCE THE ASSESSEE HAD INCURRED THE EXPENDITURE IF IT IS NOT ALLOWED U/S. 35 OF THE ACT THE SAME 3 MAY BE ALLOWED U/S. 37 OF THE AC T. HOWEVER, THE LD.AO DISALLOWED THE CLAIM OF EXPENDITURE U/S. 37 ALSO. THEREAFTER, THE LD. AO INVOKED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND LEVIED MINIMUM PENALTY I.E., 100 % OF TAX SOUGHT TO BE EVADED WHICH WORKS OUT TO RS. 25,97,019/ - (30% OF 86,56,730/ - ) ON THE GROUND THAT THE ASSESSEE HAD FAILED TO OFFER EXPLANATION IN RESPECT OF THE MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME AND ALSO FAILED TO PROVE THAT ALL THE FACTS RELATING TO THE MATERIAL TO THE COMPUTATION OF INCOME HAVE BEEN DI S CLOSED BY IT . ON APPEAL, THE LD. CIT (A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE CONFIRMED THE PENALTY LEVIED BY THE LD.AO AGREEING WITH HIS VIEW. 6 . BEFORE US THE L D . AR SUBMITTED THAT THE EXPENDITURE INCURRED TOWARDS SCIENTIFIC RESEARCH WAS DISCLOSED IN THE TAX AUDIT REPORT UNDER CLAUSE 19 AND THEREFORE IT CANNOT BE PRESUMED THAT THE ASSESSEE HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. FURTHER, THE LD. AR RELIED IN THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL REPORTED IN 30 SOT 254 IN THE CASE ACIT VS. VIP INDUSTRIES LIMITED AND PLEADED FOR DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. THE LD. DR ON THE OTHER HAND VEHEMENTLY ARGUED IN SUPPORT OF THE OR DERS OF THE LD. REVENUE AUTHORITIES. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE HAD DISCLOSED THE SCIENTIFIC AND RESEARCH EXPENDITURE INCURRED 4 BY IT BEF ORE THE LD. REVENUE AUTHORITIES. FURTHER, THE ASSESSEE WAS ALSO UNDER BONA FIDE BELIEF THAT THE EXPENSES INCURRED IF NOT ALLOWABLE U/S. 35 OF THE ACT , IT WOULD BE ALLOWABLE U/S. 37 OF THE ACT. THEREFORE, AT THE MOST THE CLAIM OF DEDUCTION U/S. 35 OF THE ACT MADE BY THE ASSESSEE CAN BE ONLY CONSIDERED AS AN INCORRECT CLAIM BUT THE SAME CANNOT BE TREATED AS FURNISHING OF INCORRECT PARTICULARS OF INCOME IN ORDER TO INVOKE THE PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT . THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT LTD REPORTED IN 322 ITR 158 HAS CATEGORICALLY HELD THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BE ITSELF, WILL NOT AMOUNT TO FURNISHING INCORRECT PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. FURTHER, THE DECISION RELIED BY THE ASSESSEE IN THE CASE ACIT VS. VIP INDUSTRIES LIMITED CITED SUPRA ALSO SUPPORTS THE CASE OF THE ASSESSEE WHEREIN IT WAS HELD AS FOLLOWS: ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THE ASSESSEE HAD BONA FIDELY MADE A CLAIM FOR DEDUCTION U/S. 35 IN RESPECT OF COST OF CAR PURCHASED FOR THE PURCHASE OF R & D ACTIVITY BY DISCLOSING ALL THE NECESSARY PARTICULARS IN THE AUDIT REPORT. THE FACTS THAT THE CAR WAS PURCHASED BY THE ASSESSEE AND ALSO USED FOR THE PURPOSE OF THE BUSINESS HAVE NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER. FURTHER, THE GRANTING OF DEPRECIATION AT 20 PER CENT INSTEAD OF HUNDRED PERCENT DEDUCTION CLAIMED BY TH E ASSESSEE SHOWS THAT THERE WAS A GENUINE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER ON THIS ASPECT OF THE MATTER. IT CANNOT BE SAID THAT THE ASSESSEE, UNDER SUCH CIRCUMSTANCES, HAS CONCEALED HIS INCOME AND IS CAUGHT WITHIN THE F OUR CORNERS OF SECTION 271(1)(C). WE, THEREFORE, HOLD THAT THE LD CIT (A) HAS RIGHTLY NOT IMPOSED PENALTY ON THIS ADDITION. 5 8 . CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE BEFORE US AND THE DECISIONS CITED HEREINABOVE, WE ARE OF T HE CONSIDERED VIEW THAT THE BONA FIDE CLAIM MADE BY THE ASSESSEE WHICH IS DISALLOWED DUE TO LACK OF COMPLIANCE SHALL NOT LEAD TO CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME FOR THE PURPOSE OF LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. THEREFORE, WE HEREBY DIRECT THE LD. AO TO DELETE THE PENALTY LEVIED BY THE LD. AO FOR RS. 25,97,019/ - IN THE CASE OF THE ASSESSEE. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2020 . SD/ - SD/ - (P. MADHAVI DEVI) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 18 TH FEBRUARY, 2020. OKK COPY TO: - 1) M/S. ZENARA PHARMA PRIVATE LIMITED, PLOT NO.87 - 95, PHASE - III, IDA CHERLAPALLY, HYDERABAD - 500051, TELANGANA. 2) THE DCIT, CIRCLE - 17(2), HYDERABAD. 3) THE CIT (A) - 5, HYDERABAD. 4) THE PRINCIPAL COMMISSIONER OF INCOME TAX - 5, HYDERABAD. 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE