The ACIT,(OSD) Circle-8, Ahmedabad V. Satellite Engineering Ltd., Ahmedabad

ITA 1876/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9119 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 1995-1996
• Appeal Filed On: 04-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA
• Keywords: Depreciation; Difference of opinion; Change of opinion
• Section: 271(1)(c); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI P.K.BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1876/AHD/2009 ASSESSMENT YEAR:1995-96 DATE OF HEARING:5.8.09 DRAFTED:6.8.09 ACIT (OSD) CIRCLE-8, AHMEDABAD V/S . SATELITE ENGINEERING LTD., 404, SWAGAT BULDIG, C.G. ROAD, AHMEDABAD PAN NO.AAECS0773R (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI P.M. SHUKLA, SR. DR RESPONDENT BY:- NONE O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD IN APPEAL NO. C IT(A) XIV /CIR.8 / 119/2008- 09 DATED 27-03-2009. THE ASSESSMENT WAS FRAMED BY THE ACIT/CO.CIRCLE-7(3), AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 05-03-1998 FOR THE ASSES SMENT YEAR 1995-96. THE PENALTY UNDER DISPUTE WAS LEVIED BY THE ACIT(OSD), CIRCLE-8 , AHMEDABAD U/S. 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 06-08-2008. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICE R U/S.271(1)(C) OF THE ACT AMOUNTING TO RS.3,30,280/-. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO P ERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER, THE ORDER OF CIT(A) AND THE PENALTY ORDER. THE BRIEF ITA NO.1876/AHD/2009 A.Y. 1995-96 ACIT (OSD) CIR-8, ABD V. SATELLITE ENGINEERING LTD. PAGE 2 FACTS ARE THAT THE ASSESSING OFFICER DURING THE COU RSE OF ASSESSMENT PROCEEDINGS MADE DISALLOWANCE OF DEPRECIATION OF RS.7.18 LAKHS ON PLANT & MACHINERY OF DAE ELECTRIC UNIT. ON THIS DISALLOWANCE, THE AO INITIA TED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND THIS DISALLOWANCE WAS CONFIRMED BY THIS TRIBUNAL IN ITA NO.1471/AHD/2002 , WHEREIN THE RELEVANT FINDING OF THIS TRIBUNAL IN THE ORDERS OF THE LOWER AUTHORITIES AND FOR THE SAKE OF CLARITY THE S AME IS BEING REPRODUCED AS UNDER:- WE ARE IN AGREEMENT WITH THE VIEWS EXPRESSED BY TH E BOMBAY, CALCUTTA AND MP HIGH COURTS. IN THE LIGHT OF THESE JUDGMENTS DI RECTLY AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THE KEPT READY THEORY IS NO T AVAILABLE TO THE ASSESSEE FOR THE PURPOSE OF CLAIMING DEPRECIATION WHEN THE L EGISLATURE HAS CHOSEN TO USE THE WORD USED , WE HAVE TO GIVE A FULL MEANING TO IT AND AVOID R EADYING SOME THING NOT INTENDED BY THE LEGISLATION. AFTER A LL, THESE BENEFITS ARE PROVIDED FOR CERTAIN PURPOSES. THAT PURPOSE IF USED IN TERMS OF THE STATUE IF THE MACHINERY IS NOT USED, SECTION 32 IS NOT APPLIC ABLE AND HENCE, THE ASSESSEE CANNOT HAVE ANY BENEFITS IF GRANTED WOULD RESULT IN READING SOMETHING THING WHICH IS NOT PROVIDED I THE STATUTE IN TERMS OF SECTION 32. THEORY OF MACHINERY KEPT READY FOR USE HAS NOT FOUN D FAVOUR FO THE ASSESSEE. THE DECISION RELIED UPON BY THE ASSESSEE ARE, THUS, OF NO HELP TO THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS R EVERSED AND THAT OF THE A.O IS RESTORED. THE MATTER WAS NOT CARRIED IN FURTHER APPEAL BEFORE THE HONBLE HIGH COURT BY THE ASSESSEE. THE ASSESSING OFFICER INITIATED THE PENAL TY PROCEEDINGS AND REQUIRED THE ASSESSEE TO FILE EXPLANATION AND IT WAS EXPLAINED B Y THE ASSESSEE THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED TO TH E ASSESSING OFFICER THAT THE MACHINERY WAS ALREADY INSTALLED AND THE ASSESSEE WA S HOLDING THE MACHINERY FOR THE PURPOSE OF PRODUCTION. IT WAS BECAUSE OF ILL-LUCK T HAT THE MACHINERY WAS NOT WORKING PROPERLY AND THE ASSESSEE WAS NOT ABLE TO USE IT FO R PRODUCTION. IT WAS ARGUED THAT THE ASSETS CANNOT BE ACTUALLY USED FOR THE REASONS OF REPAIRS BUT THE DEPRECIATION CANNOT BE DISALLOWED AND THE ASSESSEES INTENTION W AS TO USE THE ASSETS FOR THE PURPOSE OF BUSINESS AND THE TEST OF PASSIVE USER WA S SATISFIED. IT WAS ONLY BECAUSE OF CERTAIN TECHNICAL REASONS THAT IT WAS NOT ABLE T O USE THE ASSETS. FURTHER THIS MACHINERY ALREADY FORMED PART OF THE BLOCK OF ASSET S DURING THE ASSESSMENT YEAR 1994-95 AND THE SAME CAN NOT BE EXCLUDED FROM THE B LOCK. ACCORDINGLY, IT WAS SUBMITTED THAT THE WHOLE BUSINESS OF THE ASSESSEE-C OMPANY IS THAT OF MANUFACTURING OF ELECTRICAL ITEM AND IT IS ACCEPTED POSITION THAT ALL THE ACTIVITIES ARE CONSIDERED AS COMPOSITE BUSINESS AND THE DEPRECIATION IS BEING CO MPUTED FOR THE COMPANYS ITA NO.1876/AHD/2009 A.Y. 1995-96 ACIT (OSD) CIR-8, ABD V. SATELLITE ENGINEERING LTD. PAGE 3 BUSINESS AS A WHOLE. THE AO JUST RELYING ON THE TR IBUNALS ORDER LEVIED THE PENALTY BY GIVING FOLLOWING FINDING IN PARA-8 OF HIS PENALTY ORDER:- 8. I HAVE CONSIDERED THE EXPLANATION OFFERED BY TH E ASSESSEE COMPANY VERY CAREFULLY. THE ASSESSEE COMPANYS ABOVE ISSUE WAS D ISCUSSED AT LENGTH BY THE HONBLE ITAT AT PARA-5 OF ITS ORDER. THAT SHOWS THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS BY SHOWING WRONG C LAIM OF DEPRECIATION ON DAE ELECTRIC UNIT WHEN THERE WAS NO MANUFACTURING A CTIVITY DURING THE WHOLE YEAR THEREBY COMMITTED A DEFAULT PUNISHABLE U/S.271 (1) OF THE INCOME-TAX ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A). THE CIT(A) DELETED THE PENALTY BY GIVING FOLLOWING FINDING IN PARA-2.3 OF HIS APPELLATE ORDER:- 2.3 I HAVE CONSIDERED THE FATS OF THE CASE AS WELL AS THE SUBMISSIONS AS ADVANCED BY THE A.R OF THE APPELLANT ALONG WITH THE CASE LAWS AS RELIED UPON. I FIND THAT THE A.O HAS DISALLOWED DEPRECIATION IN RESPECT OF MACHINERIES IN DAE ELECTRIC UNIT ON THE GROUND THAT THERE WAS NO P RODUCTION IN THAT UNIT AND THEREFORE, MACHINERY OF THAT UNIT WAS NOT USED DURI NG THAT YEAR. DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT EXPLAINED TO T HE A.O HAT THE MACHINERY WAS ALREADY INSTALLED AND THE APPELLANT W AS HOLDING THE MACHINERY FOR THE PURPOSE OF PRODUCTION AND IT WAS BECAUSE OF ILL LUCK THAT THE MACHINERY WAS NOT WORKING PROPERLY AND THE APPELLANT WAS NOT ABLE TO USE IT FOR PRODUCTION. THE APPELLANT WHILE MAKING THE CLAIM OF DEPRECIATION HAS RELIED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF KHIMJI VISHRAM & SONS VS. CIT. I FIND THAT THE APPELLANT HAD ALREADY FURNISHED NE CESSARY DETAILS IN RESPECT OF THE CLAIM OF DEPRECIATION ON DAE UNIT AN D THE APPELLANT HAD A BONA FIDE BELIEF THAT BECAUSE THE MACHINERY FORMED PART OF THE BLOCK DURING THE ASSESSMENT YEAR 1994-95, THE SAME CANNOT BE EXCLUDE D FROM THE BOCK, THE DEPRECIATION ON THE SAME CANNOT BE DENIED. AS THE C LAIM OF THE APPELLANT IS DEBATABLE AND THERE ARE TWO VIEWS AND AT THE TIME O F FILING RETURN OF INCOME THE APPELLANT HAD SUPPORT OF JURISDICTIONAL HIGH CO URT IN ITS FAVOUR WHICH WAS SUBSEQUENTLY REVERSED IN YELLAMMA DASAPPA HOSPITAL, IN VIEW OF DECISION OF HARSHVARDHAN CHEMICALS & MINARAL LTD. CITED BY THE A.R NO PENALTY UNDER SECTION 271(1)(C) CAN BE IMPOSED. IN VIEW OF THE A BOVE FACTS, I AM OF THE VIEW THAT IT IS NOT A CASE OF NOT FURNISHING THE EXPLANA TION, BUT OF THE ABOVE FACTS, I AM OF THE VIEW THAT IT IS NOT A CASE OF NOT FURNIS HING THE EXPLANATIONS, BUT THE SAME WAS NO ACCEPTED BY THE A.O DUE TO DIFFERENCE O F OPINION. THEREFORE, THERE IS NO QUESTION OF CONCEALING ANY PARTICULARS AND / OR FURNISHING INACCURATE PARTICULARS OF INCOME. FURTHER BY FOLLOW ING CITED JUDICIAL DECISION, I AM OF THE VIEW THAT PENALTY U/S.271(1) CANNOT BE S USTAINED IN THIS CASE, WHERE THE DISALLOWANCE HAS BEEN MADE MERELY DUE TO CHANGE OF OPINION AND ON DEBATABLE ISSUES. I THEREFORE DIRECT THE A.O TO DELETE THE PENALTY LEVIED IN THIS CASE TO THE TUNE OF RS.3,30,280/-. 4. AFTER HEARING LD. DR, WE FIND THAT THE ASSESSEE HAS EXPLAINED, THAT THE MACHINERY WAS ALREADY INSTALLED AND IT WAS HOLDING THE MACHINERY FOR THE PURPOSE OF PRODUCTION BUT AS THE MACHINERY WAS NOT WORKING PRO PERLY THE ASSESSEE COULD NOT ITA NO.1876/AHD/2009 A.Y. 1995-96 ACIT (OSD) CIR-8, ABD V. SATELLITE ENGINEERING LTD. PAGE 4 USE THE SAME FOR ITS PRODUCTION. WE FIND THAT THE C IT(A) HAS RIGHTLY HELD THE EXPLANATION OF THE ASSESSEE AS BONA FIDE AS THE ASS ESSEE HAS ALREADY FURNISHED NECESSARY DETAILS IN RESPECT OF CLAIM OF DEPRECIATI ON ON DAE ELECTRIC UNIT AND IT WAS BONA FIDE BELIEF OF THE ASSESSEE THAT BECAUSE THE M ACHINERY FORM PART OF THE BLOCK DURING THE ASSESSMENT YEAR 1994-95, THE SAME CANNOT BE EXCLUDED FROM THE BLOCK AND THE DEPRECIATION WAS CLAIMED. WE FIND THAT THE EXPLANATION OF THE ASSESSEE IS BONA FIDE AND MERELY ON DISALLOWANCE OF THE DEPRECI ATION, THE PENALTY CANNOT BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME. I N VIEW OF BONA FIDE CLAIM OF THE ASSESSEE THE PENALTY CANNOT BE LEVIED. WE CONFIRM THE ORDER OF CIT(A) DELETING THE PENALTY AND THIS ISSUE OF THE REVENUES APPEAL IS D ISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11/09/2009 SD/- SD/- (P.K.BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 11/09/2009 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XIV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD