VIRESH G SHETH, MUMBAI V. ITO 23(3)(4), MUMBAI

ITA 1832/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84017 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 16-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBEY
• Keywords: Capital asset; Business income; Depreciation; Unabsorbed depreciation

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - F BENCH. , ,, , ! ! ! ! '# '# '# '# , ' ' ' ' ! ! ! ! BEFORE S/SH. VIJAY PAL RAO,JUDICIAL MEMBER & RAJEND RA,ACCOUNTANT MEMBER /. ITA NO.1832/MUM/2012 , $ $ $ $ % % % % / ASSESSMENT YEAR-2004-05 VIRESH G. SHETH 261, SHANTI INDUATRIAL ESTATE, S.N. ROAD, MULUND (WEST), MUMBAI 400 080 ITO 23(3)(4) BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI PAN: AAYPS5919A &' ( ' &' ( ' &' ( ' &' ( ' / / / / APPELLANT BY : SH. BHADRESH DOSHI *+&' , ( ' / RESPONDENT BY :SH. SACHCHIDANAND DUBEY $ , -. $ , -. $ , -. $ , -. / // / DATE OF HEARING :28/10/2014 /0% , -. / DATE OF PRONOUNCEMENT :28/10/2014 $ $ $ $ , 1961 1961 1961 1961 , , , , 254 254 254 254( (( (1 11 1) )) )' -9- ': ' -9- ': ' -9- ': ' -9- ': ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM. CHALLENGING THE ORDER DT.15.12.2011OF THE CIT(A)-11 , MUMBAI, ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: THE LD. CIT(A) HAS ERRED IN RETAINING THE PENALTY OF RS.1,55,901/- U/S 271(1)(C) LEVIED BY THE A.O. IN RESPECT OF SET OFF OF CAPITAL LOSS OF RS.5,56,33 5/- U/S.50 AGAINST BUSINESS INCOME. 2. ASSESSEE,AN INDIVIDUAL, FILED ITS RETURN OF INCOME ON 01.11.2004 DECLARING TOTAL INCOME OF RS.4.26 LACS.ASSESSING OFFICER (AO) COMPLETED THE A SSESSMENT ON 18.09.2005 DETERMINING THE TOTAL INCOME OF RS.14.59 LACS. DURING THE ASSESSMEN T PROCEEDING THE AO FOUND THAT ASSESSEE HAD CLAIMED SHORT TERM CAPITAL LOSS OF RS.10,50,161/- S HALL NOT BE SET OFF AS PER THE PROVISIONS OF U/S.71(3) OF THE ACT. THE AO HELD THAT THE ASSESSEE HAD SOLD DEPRECIABLE ASSETS (PLANT AND MACHINERY ), HE HAD INCURRED A LOSS OF RS.10,50,161 /- AND SAME WAS COVERED U/S.50 OF THE ACT, THAT IT COULD NOT BE ADJUSTED AGAINST THE BUSINESS INCOM E, THAT SHORT TERM CAPITAL LOSS OR ADJUSTED OF THE SHORT TERM CAPITAL GAIN OF RS.4.93 LACS ARISEN ON S ALE OF SHARES, THAT THE NET LOSS OF RS.5.56 LACS WA S NOT ALLOWED. HE FURTHER HELD THAT ASSESSEE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. 2 ITA.NO. 1683/M/2011 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM IT WAS STATED THAT THE NAME MADE BY THE ASSESSEE WAS SUPPORTED BY THE JUDGMENT OF THE TRIBUNAL DEPRECIATION IN THE CA SE OF JK CHEMICAL LTD. VS. ACIT (ITA NO.8206/BOM/1989 AND BY THE DECISION OF MUKUND GLOB AL FINANCE LTD. [117 ITD 20]. 5. AFTER CONSIDERING SUBMISSIONS OF THE ASSESSE, ASSES SMENT ORDER AND THE PENALTY ORDER THE FAA HELD THAT CIT(A) HAD DISMISSED THE QUANTUM APPEAL F ILED BY THE ASSESSEE REFERRING TO A JUDGMENT OF ACE BUILDER PVT. LTD. DELIVERED BY HONBLE BOMBAY H IGH COURT 181 ITR 210, THE FAA HELD THAT GAIN FROM THE TRANSFER OF CAPITAL ASSET ON WHICH DE PRECIATION HAS BEEN ALLOWED SO A CAPITAL GAIN AND WAS ASSESSABLE UNDER THE HEAD CAPITAL GAINS, THAT S AME COULD NOT BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION, THAT THE ACT PR OVIDE THAT PROFIT AND LOSS TRANSFER OF DEPRECIABLE ASSED ASSESSABLE UNDER THE HEAD OF CAPITAL GAIN. RE FERING TO THE JUDGMENT OF COMMONWEALTH TRUST LTD. [228 ITR 1]. AND SHAKTI METALS DEPOT [322 CTR 279]. UPHELD THE ORDER OF THE AO. 6. BEFORE US THE AUTHORIZED REPRESENTATIVE(AR) ARGUED THAT THE ORDER OF THE HONBLE COURT IN THE CASE OF ACE BUILDER PVT. LTD. WAS PRONOUNCED AFTER THE ASSESSEE FILED ITS RETURN OF INCOME, THAT HE HAD FILED IT RETURN IN NOVEMBER 2004, THAT ORDER IN THE CASE ACE BUILDER PVT. LTD. WAS PRONOUNCED IN APRIL 2005, THAT AT THAT TIME THERE WAS DIFFEREN CE OF OPINION, THAT THERE WAS DEBATABLE ISSUE, THAT IN SUCH CASE PENALTY U/S.271 SHOULD NOT BE LEVIED. DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED ORDER OF THE FAA.HE RELIED UPON THE ORDERS OF MUMBA I TRIBUNAL DELIVERED IN THE CASE OF ITL FABRICS P. LTD. ITA NO.7206/MUM/2011- A.Y.2006-07, DATED 30.11.2012 AND SANJAY INDUSTRIAL ENGINEERS PVT. LTD. (ITA NO.2052/MUM/2012- A.Y. 200 6-07, DATED 09.10.2013. 7. WE HAVE RIVAL SUBMISSIONS AND PERUSED MATERIAL BEFO RE US. WE FIND THAT BASIC ISSUE TO BE DECIDED IN THE MATTER BEFORE US IS WHETHER THE LOSS COULD B E SET OFF U/S.71 IN CASE OF DEPRECIABLE ASSET. WE FIND THAT SIMILAR QUESTION AS ARISEN IN THE CASE OF ITL FABRICS P. LTD. (SUPRA) ONE OF US WAS PART TO THE ORDER. DECIDING THE APPEAL IN AVAILABLE OF THE ASSESSEE, WE HAD DECIDED THE ISSUE AS AS UNDER: 2.DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS NOTICED BY THE AO THAT ASSESSEE HAD CREDITED A SUM OF RS.32,58,543/- ON ACCOUNT OF PROFIT ON SAL E OF ASSETS WHICH WAS SET OFF AGAINST UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION OF EARLIE R YEAR. SUCH CLAIM OF THE ASSESSEE WAS DENIED BY THE AO AND AFTER GIVING SET OFF OF UNABSORBED DEPRE CIATION THE NET INCOME WAS COMPUTED AT RS. 16,43,095/- ON WHICH CONCEALMENT PENALTY WAS INITIA TED. THE ADDITION MADE IN QUANTUM PROCEEDINGS HAS ALSO HPHELD BY TRIBUNAL VIDE ORDER DATED 8/2/20 12 IN ITA NO.3276/M/2010. ON SUCH ADDITION AO HAS LEVIED CONCEALMENT PENALTY AMOUNTING TO RS.5 ,53,L00/-. 3.LD. CIT(A) HAS CANCELLED THIS PENALTY ON THE GROU ND THAT AT THE TIME WHEN THE ASSESSEE HAD MADE THIS CLAIM THERE WERE JUDGMENTS BOTH IN FAVOUR AND AGAINST THE ASSESSEE. IT WAS A DEBATABLE AND LEGAL ISSUE WHICH HAS BEEN REFERRED TO SPECIAL BENC H IN THE CASE OF NANDI STEEL LTD., VS. ACIT, ITA NO.546/BANG/2008. THUS LD. CIT(A) HAS HELD THAT IN VIEW OF EXISTENCE OF NUMBER OF JUDICIAL PRONOUNCEMENTS ON THE SUBJECT THAT NO PENALTY IS IM POSABLE IN RESPECT OF VEXED LEGAL ISSUE WHICH ARE DEBATABLE OR ON WHICH TWO VIEWS/OPTIONS ARE POS SIBLE. THE DECISIONS IN WHICH IT HAS BEEN HELD THAT BROUGHT FORWARD BUSINESS LOSSES CAN BE SET OFF AGAINST CAPITAL GAIN ARISING ON SALE OF DEPRECIABLE BUSINESS ASSETS HAVE BEEN LISTED IN THE ORDER OF LD. CIT(A) AND ARE AS UNDER: 1. JK CHEMICAL LTD. VS. ACIT (ITA NO.8206/BOM/1989 AND 86 18/BOM/ 1989 OF MUMBAI TRIBUNAL, ORDER DATED 1.11.1993 2.EMPRESS TIN FACTORY P. LTD. VS. JCIT ITA BOM 1S55 /M/2000 DATED 26.10.2004. 3.M/S. SRI PADMAVATHI SRINIVAS COTTON GINNING & PTE SSING FACTORY, GUNTUR, APPELLANT VS. DCIT, CIRCLE 2(1), GUNTUR, RESPONDENT (ITAT VISHAKAPATNAM DATED 6.3.2009) 3 ITA.NO. 1683/M/2011 4.COMMISSIONER OF INCOME TAX V. S&S POWER SWITCHGEA R LTD., 2008 (2L8)CTR 0701-MAD. 5.THE OBSERVATION OF ITAT, MUMBAI BENCH IN THE CASE OF ACE BUILDER PVT. LTD. 71 TTJ (MUM) 188/76 ITD 389 (MUM) AND BOMBAY HIGH COURT IN 281 I TR 210 (BOM) ARE AS UNDER: 6.WESTERN STATES TRADING VS. CIT 80 ITR 21 (SC) 7. O R M SP. SV FIRM VS. CIT 63 ITR 404 (SC) 8.UNITED COMMERCIAL BANK LTD. VS. CIT 32 ITR 658(SC ) 9.BROOK BOND & CO. LTD. VS. CIT, 162 ITR 373 (SC) 10.CIT VS. COCANADA RADHASWAMI BANK, 57 ITR 306. (S C) 11.HIMALAYA CO. LTD. V. INCOME-TAX OFFICER, 1989(03 4) TTJ 0457 (CAL) 12.COMMISSIONER OF INCOME TAX VS. RAMNATH GOENKA, 2 002 (178) CTR034C- MAD 13.SNAM PROGETTI S.P.A V. ADDITIONAL COMMISSIONER O F INCOME TAX, DELHI-&AND OTHERS 1981 (132) ITR 0070-DEL 14.COMMISSIONER OF INCOME-TAX, MADHYA PRADESH V. SH RIKISHAN CHANDMAL,1966(060) ITR 0303- MP. 4.THE DECISIONS IN WHICH IT HAS BE EN HELD THAT ON DEBATABLE AND LEGAL ISSUE PENALTY C ANNOT BE IMPOSED ARE ALSO LISTED IN THE ORDER OF LD.CIT (A)READ AS UNDER: 1. CIT V. M.M.RJCE MILLS (2002) 253 ITR 17 (P&H) 2. SOUTHERN GAS FITTING (P) LTD. VS. DCIT 80 LTD 20 2 (CHENNAI)CIT(A), 3. CIT VS. PREM DAS (NO.1) 248 ITR 234 (P&H)/CIT VS . PREM DAS NO.2) 248 ITR 237 (P&H) 4. CIT VS. HARSHVARDHAN CHEMICALS AND MINERAL LTD. 259 ITR 0212 RAJ 5. ITO VS. ROBORANT INVESTMENTS (P) LTD. ITA NO.393 7/MUM/2002 7 SOT 181(MUM) 6. CIT VS. BACARDI MARTINI INDIA LTD. 206 CTR 250 ( DELHI) 7. ITO VS. MAHAVIR CYCLE INDUSTRIES, DEC.IDED BY: I TAT, CHANDIGARH, DECIDED ON 24TH SEPTEMBER, 2009. IN THIS VIEW OF THE SITUATION AFTER HEARING BOTH TH E PARTIES AND AFTER CAREFULLY CONSIDERING THE ORDER OF LD. CIT(A),WE ARE OF THE OPINION THAT THE ISSUE ON WHICH PENALTY HAS BEEN LEVIED WAS LEGAL AND DEBATABLE ONE. THEREFORE, APPLYING THE RA TIO LAID DOWN IN AFOREMENTIONED CASES,WE SEE NO INFIRMITY IN THE ORDER OF LD. CIT(A) VIDE WHICH IMPUGNED PENALTY HAS BEEN DELETED.WE DECLINE TO INTERFERE AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6.IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . 7. SIMILAR VIEW WAS TAKEN IN THE CASE SANJAY INDUSTRIA L ENGINEERS PVT. LTD. (SUPRA). IN OUR OPINION AT THE TIME OF FILING OF RETURN THE ISSUE WAS A DEB ATABLE ISSUE.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE ABOVE MENTIONED J UDGMENTS OF THE TRIBUNAL,WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEA L FILED BY THE ASSESSEE STANDS ALLOWED. ; !< $ ;- , !=- , - >? . ORDER PRONOUNCED IN THE OPE N COURT ON 28 TH OCTOBER, 2014 . ': , /0% ' A B $ 28 CD E , 201 4 0 , 9 F SD /- SD /- ( / VIJAY PAL RAO ) ( '# '# '# '# / RAJENDRA) ! /JUDICIAL MEMBER ' ' ' ' ! ! ! ! /ACCOUNTANT MEMBER 4 ITA.NO. 1683/M/2011 / MUMBAI, B $ /DATE: 28.10.2014 A.K.PATEL ': ': ': ': , ,, , *- *- *- *- H'%- H'%- H'%- H'%- / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / *+&' 3. THE CONCERNED CIT(A)/ I J , 4. THE CONCERNED CIT / I J 5. DR D BENCH, ITAT, MUMBAI / K9 *-$ . . , . . . 6. GUARD FILE/ 9 +- *- //TRUE COPY// ':$ / BY ORDER, L / > DY./ASST. REGISTRAR , /ITAT, MUMBAI .