The ACIT, Vapi Circle, Vapi V. M/s. Vraj Packaging Pvt. Ltd., Nani Daman

ITA 1900/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8651 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 25-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAJANA PARAMITA
• Keywords: Capital asset; Depreciation; Additional depreciation; Bonafide belief; Revised return
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBE R AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1900/AHD/2015 (ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI APPELLANT VS. M/S VRAJ PACKAGING PVT. LTD., 71/1 & 70/2-C, KADAIYA, NANI DAMAN RESPONDENT PAN: AAACV8096L /BY REVENUE : PRAJANA PARAMITA, SR. D.R. /BY ASSESSEE : SHRI RAJIV KHANDELWAL, A.R. /DATE OF HEARING : 11.08.2017 /DATE OF PRONOUNCEMENT : 31.08.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2007-08 I S DIRECTED AGAINST THE CIT(A), VALSADS ORDER DATED 08.05.2015, IN CAS E NO. CIT(A)/VLS/24/12- 13, DELETING PENALTY OF RS.20,61,850/- AS IMPOSED B Y THE ASSESSING OFFICER IN ITA NO. 1900/AHD/15 (ACIT VS. M/S. VRAJ PACKAGING P VT. LTD.) A.Y. 2007-08 - 2 - HIS ORDER DATED 29.03.2012, IN PROCEEDINGS U/S. 271 (1)(C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. RELEVANT FACTS ARE IN A VERY NARROW COMPASS. TH E ASSESSEE ADMITTEDLY IS A COMPANY MANUFACTURING POLYPROPYLENE AND HDPE W OVEN SACKS, KRAFT PAPER LINED BAGS AND MULTIWALL PAPER SACKS. IT FIL ED ITS RETURN ON 31.10.2007 STATING TOTAL INCOME OF RS.1,29,38,393/-. THE SAME FOLLOWED A REVISED RETURN DATED 04.09.2008. THE ASSESSEE REDUCED ITS INCOME THEREIN TO RS.68,12,881/- AFTER CLAIMING SECTION 80IB DEDUCTION OF RS.61,25,5 13/-. IT THEREAFTER CHOSE TO FILE A REVISED RETURN AS WELL ON 24.09.2008 ONCE AGAIN REDUCING ITS TAXABLE INCOME TO RS.50,88,388/-. THE ASSESSING OFFICER FR AMED A REGULAR ASSESSMENT ON 29.12.2009 COMPUTING TOTAL INCOME AS RS.1,12,13,901/- THEREBY DISALLOWING ITS ABOVE SECTION 80IB DEDUCTIO N CLAIM AFTER HOLDING THAT THE SAME HAD ARISEN FROM AN INSURANCE CLAIM RECEIPT OF RS.2,90,00,764/- AS CREDITED IN P&L ACCOUNT WHICH WAS NOT DERIVED FROM THE RELEVANT UNDERTAKING. HE TREATED THE SAME AS NOT A REVENUE RECEIPT BUT ON ACCOUNT OF LOSS OF A CAPITAL ASSET. THE ASSESSING AUTHORITY T HEN INITIATED IMPUGNED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) REJECTED THE SAME IN HIS ORDER DATED 19. 07.2010. THE ASSESSEE THEN FILED ITA NO. 3109/AHD/2010 BEFORE THIS TRIBUN AL. A CO-ORDINATE BENCH IN ITS ORDER DATED 25.04.2014 DISCUSSED VARIOUS CAS E LAWS TO CONCLUDE THAT THE ASSESSEE IS ENTITLED FOR THE IMPUGNED DEDUCTION IN RESPECT OF ITS INSURANCE CLAIM PERTAINING TO RAW MATERIAL, WORK-IN-PROGRESS AND FINISHED GOODS. QUANTUM PROCEEDINGS SEEM TO HAVE ATTAINED FINALITY AT THIS STAGE. 3. WE NOW ADVERT TO THE IMPUGNED PENALTY PROCEEDING S. THE ASSESSING OFFICER REJECTED ASSESSEES EXPLANATION IN HIS ORDE R DATED 29.03.2012 AFTER PLACING HEAVY RELIANCE ON ABOVE QUANTUM DEVELOPMENT OUTCOME TO CONCLUDE THAT THE ASSESSEES ABOVE CLAIM IS AN INSTANCE OF F URNISHING OF INACCURATE ITA NO. 1900/AHD/15 (ACIT VS. M/S. VRAJ PACKAGING P VT. LTD.) A.Y. 2007-08 - 3 - PARTICULARS U/S. 271(1)(C) OF THE ACT. HE THEREFOR E LEVIED IMPUGNED PENALTY OF RS.20,61,850/-. 4. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) REVER SES ASSESSING OFFICERS ABOVE ACTION IMPOSING THE IMPUGNED PENALT Y AS UNDER: 6. DECISION I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A S CONTAINED IN THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER AS WELL AS TH E WRITTEN SUBMISSION MADE BY AR OF THE APPELLANT DURING THE APPELLATE PROCEEDINGS. BRIEFLY STATED THE FACTS INVOLVED ARE THAT THE APP ELLANT FILED THE RETURN OF INCOME FIRST TIME ON 31.10.2007 WITHOUT CLAIMING AN Y DEDUCTION U/S80IB OF THE ACT. A REVISED RETURN WAS FILED ON 04.09.2008 BY CLAIMIN G DEDUCTION U/S 80IB OF THE ACT AT RS.61,25,513/-. AGAIN THEREAFTER ON 24.09.2008 T HE APPELLANT HAS REVISED THE RETURN BY DECLARING TOTAL INCOME AT RS.50,88,388/- AFTER TAKING IN TO CONSIDERATION THE ADDITIONAL DEPRECIATION OF RS.17,24,493/- AVAIL ABLE ON PLANT & MACHINERY. DURING THIS YEAR THE ASSESSING OFFICER FOUND THAT T HE APPELLANT HAS CREDITED AN AMOUNT OF RS.2,90,00,764/- BEING INSURANCE CLAIM RE CEIVED. OUT OF THIS AMOUNT RS.2,06,32,984/- PERTAINED TO INSURANCE CLAIM RECEI VED ON ACCOUNT OF RAW MATERIAL, WORK IN PROGRESS AND FINISHED GOODS AND T HE RESIDUAL AMOUNT OF RS.83,67,780/- WAS ON ACCOUNT OF PLANT & MACHINERY. AGAINST THIS INSURANCE CLAIM OF RS.2,90,00,764/-THE APPELLANT CLAIMED DEDUCTION U/S80IB OF THE ACT TO THE TUNE OF RS.61,25,513/-. THIS CLAIM OF DEDUCTION U/S 80IB OF THE ACT WAS DISALLOWED BY THE ASSESSING OFFICER BECAUSE AS PER HIM IT HAS NOT BEEN DERIVED FROM THE MANUFACTURING. THE CIT(A) CONFIRMED THE ACTION OF T HE ASSESSING OFFICER BUT HON'BLE ITAT ALLOWED THE CLAIM OF DEDUCTION ON THE AMOUNT OF INSURANCE CLAIM OF RS.2,06,32,984/- BUT DISALLOWED THE DEDUCTION ON TH E INSURANCE CLAIM PERTAINING TO PLANT & MACHINERY AT RS.83,67,780/-. THE ASSESSING OFFICER GAVE THE APPEAL EFFECT TO THE HON'BLE ITAT 11.07.2014 IN WHICH DEDUCTION U /S 80IB OF THE ACT WAS ALLOWED AT RS.36,46,170/-. DURING THE PENALTY PROCEEDINGS THE ASSESSING OFFICE R LEVIED THE PENALTY U/S271(1)(C) OF THE ACT ON THE CLAIM OF DEDUCTION U /S 80IB OF THE ACT MADE BY THE APPELLANT AT RS.61,25,513/- BY TREATING THIS CLAIM AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. DURING THE APPELLATE PROCEED INGS, THE AR OF THE APPELLANT SUBMITTED THAT THE CLAIM OF DEDUCTION U/S 80IB OF T HE ACT IS A CLAIM MADE UNDER A BONAFIDE BELIEF THAT IT IS AN ALLOWABLE DEDUCTION. ALLOWING OR NOT ALLOWING THIS CLAIM IS A LEGAL ISSUE BUT CERTAINLY NOT AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. RELIANCE WAS PLACED ON THE D ECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LT D. REPORTED IN 322 ITR 158. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN MY CONSIDERED VIEW CLAIMING OF DEDUCTION AND DISALLOWANCE THEREOF DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. KEEPING IN VIEW T HE DECISION OF HON'BLE SUPREME ITA NO. 1900/AHD/15 (ACIT VS. M/S. VRAJ PACKAGING P VT. LTD.) A.Y. 2007-08 - 4 - COURT AS STATED SUPRA, I DO NOT AGREE WITH THE ASSE SSING OFFICER HENCE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. AT RS.20,61,850/- IS DELETED. THE GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 5. WE HAVE HEARD BOTH THE PARTIES STRONGLY REITERAT ING THEIR RESPECTIVE STANDS. THE REVENUES SOLE ARGUMENT IS THAT THE CI T(A) OUGHT NOT TO HAVE DELETED THE IMPUGNED PENALTY SINCE THE INSTANT CASE INVOLVES A CLEAR CUT INSTANCE OF FURNISHING OF INACCURATE PARTICULARS AT ASSESSEES BEHEST IN CLAIMING SECTION 80IB DEDUCTION HEREINABOVE IN RESP ECT OF INSURANCE RECEIPT. WE FIRST OF ALL REITERATE THE BASIC FACT IN THIS BA CKDROP THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED ASSESSEES CLAIM TO TH E TUNE OF RS.36,46,170/- OUT OF THE ORIGINAL DISALLOWANCE FIGURE OF RS.61,25 ,513/-. THE ABOVE DEDUCTION CLAIM THEREFORE STANDS GRANTED IN PRINCIP LE QUA MAJOR PORTION OF THE DISALLOWANCE AMOUNT. WE NOTICE FROM TRIBUNALS QUA NTUM ORDER (SUPRA) THAT WHETHER OR NOT AN INSURANCE CLAIM IS ENTITLED FOR S ECTION 80IB DEDUCTION IS VERY MUCH A DEBATABLE QUESTION SINCE DECIDED IN VAR IOUS CASE LAWS I.E. CIT VS. SHREE RAMA MULTI TECH LTD. (2013) 33 TAXMANN.CO M 194 (GUJ.), CIT VS. SPORTKING INDIA LTD. (2009) 183 TAXMANN 312 (DELHI) . WE PROCEED IN THIS FACTUAL AND LEGAL BACKDROP TO OBSERVE THAT ASSESSEE S DEDUCTION CLAIM COMPRISED OF RAW MATERIAL, WORK-IN-PROGRESS AND FIN ISHED GOODS FORMING PART OF ITS INSURANCE CLAIM RECEIPTS. WE THEREFORE EXPR ESS OUR AGREEMENT WITH LEARNED CIT(A)S CONCLUSION THAT SUCH AN INSTANCE C ANNOT BE HELD TO BE A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME U/S. 271(1)(C) OF THE ACT AS PER HONBLE APEX COURTS JUDGMENT IN CIT VS. RELIANCE P ETROPRODUCTS (P) LTD. 322 ITR 158 (SC) CARVING OUT A FINE DISTINCTION BET WEEN QUANTUM AND PENALTY PROCEEDINGS WHEREIN EACH AND EVERY DISALLOW ANCE MADE IN THE COURSE OF FORMER DOES NOT IPSO FACTO ATTRACT LATTER PENALT Y PROVISION. IT HAS ALREADY COME ON RECORD THAT THE ASSESSEE HAD FILED ALL NECE SSARY PARTICULARS IN RESPECT OF ITS CLAIM AT THE FIRST INSTANCE. THE SAME THERE FORE SUFFICIENTLY INDICATE THAT THE SAID PARTICULARS WERE NOT FOUND TO BE INCORRECT AS THE DISPUTE IN QUANTUM ITA NO. 1900/AHD/15 (ACIT VS. M/S. VRAJ PACKAGING P VT. LTD.) A.Y. 2007-08 - 5 - PROCEEDINGS WAS ESSENTIALLY THAT OF INTERPRETATION OF THE DEDUCTION PROVISION. WE THEREFORE REJECT REVENUES ARGUMENTS IN SUPPORT OF ITS SOLE SUBSTANTIVE GROUND SEEKING TO REVIVE THE IMPUGNED PENALTY. 6. THIS REVENUES APPEAL IS ACCORDINGLY DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF AUGUST, 2017.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODA RA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 31/08/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0