Dy.CIT, Cir-2(3), Hyderabad V. M/s Gennex Laboratories Limited, Hyderabad

ITA 1804/HYD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69773 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R LAXMAN
• Assessee Lawyers: LAXMINIVAS SHARMA
• Keywords: Bogus purchase; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A ', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1804/HYD/12 : ASSESSMENT YEAR 2003 - 04 DY. COMMISSIONER OF INCOME - TAX CIRCLE 2(3), HYDERABAD V/S. M/S. GENNEX LABORATORIES LTD., HYDERABAD (PAN AABCP 3078 M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.LAXMAN RESPONDENT BY : SHRI LAXMINIVAS SHARMA DATE OF HEARING 3.09.2013 DATE OF PRONOUNCEMENT 13.09.2013 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) III HYDERABAD DATED 27.9.2012 CANCELLING THE PENALTY OF RS.13,06,635 LEVIED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2008 - 09. 2. FACTS OF THE CA S E IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY WHICH DERIVES INCOME FROM THE BU S IN E SS OF MANUFACTURING OF BULK DRUGS AND INTERMEDIATES. IT FIL E D RETURN O F INCOME FOR THE ASSESSMENT YEAR 2003 - 04 ON 1.12.2003, DECLARING LOSS OF R S .40,67,140. THE ASSESSING OFFICER, WHILE COMPLETING THE ASSESSMENT UNDER S.143(3 ) VIDE ORDER DATED 23.3.2006 , DISALLOWED THE ASSESSEES CLAIM FOR DEPRECIATION ON COMPUTERS OF R S .35,55,470 AND ON BUILDIN G OF RS .1,25,000, AND DETE R MIN E D THE TOTAL LO S S AT R S .3,86,671. TR E ATING THE EXCESS CLAIMED DEPRECIATION ON COMPU TE RS AND BUILDING AS THE CONCEALED INCOME O F TH E ASSESSEE , THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS FO R LEVY OF PENALTY UNDER S.271( 1 )(C) AND NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE IN RESPONSE TO THE PENALTY NOTICE, AND AFTER CONSIDERING THE VARIOUS ITA NO. 1804 / HYD/201 2 M/S. GENNEX LABORATORIES, LTD., HYDERABAD 2 CONTENTIONS OF THE ASSESSEE AGAINST THE PENALTY PROPOSED, THE ASSESSING OFFICER ULTIMATELY IMPOS ED PENALTY OF RS. 13,06,635, VIDE ORDER OF PENALTY DATED 31.3.2010 PASSED UNDER S.271(1)(C) OF THE ACT. 3. ON APPEAL, THE CIT(A), IN THE FIRST PLACE NOTED THAT THE ADDITION ON THE GROUND OF BOGUS PURCHASE OF COMPUTERS WAS ORIGINALLY MADE IN THE ASSESS MENT YEAR 2002 - 03 AND NOT IN THE Y E AR UNDER APPEAL, AND CONSEQUENTLY, PE N ALTY FOR CONCEALMENT, IF ANY, IS REQUI R ED TO BE MADE IN TH E ASSESSMENT YEAR 2002 - 03 AND NOT IN THE YEAR UNDER APPEAL. FURTHER, HE HELD THAT MERELY BECAUSE THE ASSESSEE STRUCK TO HIS STAND AS TO THE G ENUINE NATURE OF THE PURCHASE OF COM P UTERS, AND CONSEQUENTLY CL A IMED DEPRECIATION THEREON IN THE SUBSEQUENT YEAR ALSO, IN ORDER NOT TO FORGO HIS CLAIM IN VIEW OF THE ONGOING LITIGATION ON THAT ISSUE, IT CANNOT B E SAID THAT THERE IS CO N CE A LMENT AND FILING OF INACCURATE PARTICULARS IN THE YE A R UNDER APPEAL. IN CASE THE ASSESSEE ULTIMATELY LOSES ITS CLAIM IN TH E FINAL LITIGATION FOR ASSESSMENT YEAR 20 0 2 - 03, THEN THE DEPRECIATION CLAIM S FOR ALL THE SUBSEQUENT YEARS WILL AUTOMATICALLY STAND TO REVISION, BUT PENALTY FOR CONCEALMENT MADE IN ONE YE AR CANNOT AUTOMATICALLY TRAVERSE THE BOUNDARIES OF THAT ASSESSMENT YEAR AND APPLY FOR SUBSEQUENT YEARS. WITH TH E SE OBSER V A T IONS, THE CIT(A) F OUN D NO JUSTIFICATION FOR THE PENALTY FOR CONCE A LMENT IMPOSED FOR THE YEAR UNDER APPEA L , AND ACCORDINGLY DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER , ALLOWING THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THERE IS NO PROVISION FOR RE - LEVY OF PENALTY FOR ASSESSMENT YEAR 2003 - 04 IN CASE REVENUE WINS THE FINAL LITIGATION FOR ASSESSMENT YEAR 2002 - 03 . A S SUCH THE ASSESSIN G OFFICER IS JUSTIFIED IN LEVYING THE PENALTY SOON AFTER ITA NO. 1804 / HYD/201 2 M/S. GENNEX LABORATORIES, LTD., HYDERABAD 3 PASSING THE ASSESSMENT , MAKING THE RELEVANT ADDITION DISALLOWING THE CLAIM FOR INCORRECT DEPRECIATION CLAIMED EVEN IN RELATION TO THE COMPUTERS PURCHASED IN THE PRECEDING YEAR, FINDING WHICH AS BOGUS , ADDITION WAS MADE IN THE PRECEDING Y E AR . 6 . THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES, STRONGLY SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN LEVYING THE PENALTY FOR CONCEALMENT IN THE YEAR UNDER APPEAL, IN RELATION TO THE DISALLOWANCE OF DEPRECIATION MADE, JUST RELYING ON THE CORRESPONDING DISALLOWANCE MADE IN THE EARLIER YEARS. HE FURNISHED BEFORE US A COPY OF THE ORDER OF THE T RI BUNAL FOR ASSESSMENT YEARS 20 0 1 - 02 AND 2002 - 03 IN ITA NOS.674 & 730/HYD/2008 DATED 30 TH OCTOBER, 2009, AND SUBMITTED THAT THE ROOT CAUSE OF THE IMPUGNED PENALTY, VIZ. ADDITION MADE IN THE PRECEDING YEAR ALLEGING THE PURCHASE OF COMPUTERS AS BOGUS, HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS FOR FRESH DECISION , AND AS SUCH THE MATTER HAS NOT YET ATTAINED FINALITY. THE ASSESSEE, PER FORCE, HAS TO STICK TO TRUTH AND ITS PLEA AS TO THE GENUINENESS OF THE CLAIM WITH REGA RD TO THE PURCHASE OF COMPUTERS, AS OTHERWISE, ITS CASE FOR THE RELEVANT YEAR, VIZ. PRECEDING YEAR WOULD BE DEFEATED BY VIRTUE OF ITS FORGOING THE CLAIM FOR DEPRECIATION. FURTHER, WHEN THE ASSESSEES PLEA STANDS ACCEPTED ULTIMATELY, WHEN THE ISSUE ATTAINS FINALITY IN THE QUANTUM PROCEEDINGS, IT CANNOT AT THAT STAGE CLAIM FOR DEPRECIATION FOR THE YEAR UNDER APPEAL, IF IT DOES NOT CLAIM THE SAME IN THE ORDINARY COURSE WHILE FILING THE RETURN FOR THE YEAR UNDER APPEAL. IN THAT VIEW OF THE MATTER, WHILE THE A DDITION MADE BY THE ASSESSING OFFICER BY DISALLOWING DEPRECIATION CLAIMED FOR THE YEAR UNDER APPEAL OR EVEN THE SUSTENANCE OF SUCH ADDITION BY THE APPELLATE FORUM, IN THE QUANTUM PROCEEDINGS MAY BE JUSTIFIED JUST ON ACCOUNT OF THEIR OWN LIMITATIONS TO STIC K TO THE VIEW TAKEN BY THEM IN THE PROCEEDINGS FOR EARLIER YEARS, THE SAME CANNOT BE SAID IN RELATION TO PENALTY. ITA NO. 1804 / HYD/201 2 M/S. GENNEX LABORATORIES, LTD., HYDERABAD 4 7. WE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY, IT WAS THE ALLEGED BOGUS PURCHASE OF COMPUTERS IN THE ASSESSMENT YEAR 2002 - 03, WHICH ATTRACTED ADDITION IN THAT YEAR, AND CLAIM OF THE ASSESSEE FOR DEPRECIATION ON SUCH COMPUTERS IN THE YEAR UNDER APPEAL, WHICH ATTRACTED NOT ONLY DISALLOWANCE IN THE SCRUTINY ASSESSMENT MADE, BUT ALSO IN THE LEVY OF PENALTY FOR CONCEALMENT UNDER S.271(1)(C) OF THE ACT. WHILE THE ADDITION MADE BY DISALLOWING CLAIM FOR DEPRECIATION IN THE QUANTUM PROCEEDINGS FOR THE YEAR UNDER APPEAL MAY BE JUSTIFIED, SUCH ADDITION PER SE CANNOT LEAD TO THE INFERENCE OF FURNISH ING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. MORE PARTICULARLY SO, BECAUSE WHEN IT IS CLAIMED THAT THE ISSUE RELATING TO THE BOGUS NATURE OF PURCHASE OF COMPUTERS IN THE ASSESSMENT YEAR 2002 - 03 HAS NOT ATTAINED FINALITY, THE PARTIES CANNOT DEVI ATE FROM THE STANDS TAKEN IN RELATION TO THE PURCHASE OF COMPUTERS FOR THE ASSESSMENT YEAR 2002 - 03. OTHERWISE, THEIR CASE BEFORE THE APPELLATE FORA FOR THAT YEAR MAY BECOME WEAK ON ACCOUNT OF SUCH DEVIATION FROM THE STAND TAKEN EARLIER, AS SUCH DEVIATION M AY BE VIEWED CONCEDING THE POINT IN FAVOUR OF THE OTHER SIDE. IN THIS VIEW OF THE MATTER, THE CIT(A), IN OUR CON S I D ERED OPINION, IS JUSTIFIED IN CANCELLING THE PENALTY LEVIED BY THE ASSESSING OFFICER. WE ACCORDINGLY UPHOLD THE IMPUGNED ORDER OF THE CIT(A ), AND REJECT THE GROUNDS OF THE REVENUE IN THIS APPEAL. 8 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 13.09.2013 SD/ - SD/ - (CHANDRA POOJARI) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/ - 13 TH SEPTEMBER , 2013 ITA NO. 1804 / HYD/201 2 M/S. GENNEX LABORATORIES, LTD., HYDERABAD 5 COPY FORWARDED TO: 1 M/S. GENNEX LABORATORIES LTD., 144, IV FLOOR, SRINAGAR COLONY, HYDERABAD - 500 073 2 DY. COMMISSIONER OF INCOME - TAX CIRCLE 2(3), HYDERABAD 3 COMMISSIONER OF INCOME - TAX(APPEALS) II I, HYDERABAD 4 COMMISSIONER OF INCOME - TAX II, HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S