SHETH & CO, MUMBAI V. ASST CIT 20(3), MUMBAI

ITA 198/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8436 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Depreciation
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH , JUDICIAL MEMBER ITA NO. 198/MUM/2017 : A.Y : 2010 - 11 M/S. SHETH & CO., 309, 3 RD FLOOR, CENTRE SQUARE, S.V. ROAD, ANDHERI (W), MUMBAI 400 053 (APPELLANT) PAN : AAKFS3344K VS. ACIT - 20(3), MUMBAI (RESPONDENT) APPELLANT BY : SHRI SANJAY R. PARIKH RESPONDENT BY : SHRI RAJESH DAMOR (CIT - DR) DATE OF HEARING : 23/08/2017 DATE OF PRONOUNCEMENT : 10 /11/2017 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 37, MUMBAI DATED 27.10.2016 PERTAINING TO THE ASSESSMENT YEAR 20 1 0 - 11 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER, MUMBAI DATED 31.07.2013 IMPOSING PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, THE SOLITARY GRIEVANCE OF THE ASSESSEE IS AGAINST THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.3,38,002/ - . 2 M/S. SHETH & CO. ITA NO. 198/MUM/2017 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELLANT IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF IMPORT AN D EXPORT OF PLASTIC EXTRUDED AND MOULDED GOODS. FOR THE ASSESSMENT YEAR 2010 - 11, IT FILED A RETURN OF INCOME DECLARING AN INCOME OF RS.68,24,455/ - , WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT DATED 22.01.2013 WHEREBY THE TOTAL INCOME WAS ASSESSED AT RS.78,18,870/ - AFTER MAKING THREE ADDITIONS/DISALLOWANCES, NAMELY, (I) DISALLOWANCE OF DEPRECIATION RS.3,11,600/ - ; (II) SHORT TERM CAPITAL GAIN RS.5,89,000/ - ; AND (III) DIFFERENCE AS PER 26AS AND COMPUTATION OF INCOME RS.93,815/ - . SU BSEQUENTLY, THE ASSESSING OFFICER HAS LEVIED PENALTY WITH RESPECT TO THE TAX SOUGHT TO BE EVADED ON SUCH ADDITIONS IN TERMS OF SEC. 271(1)(C) OF THE ACT. THE CIT(A) HAS ALSO AFFIRMED THE LEVY, AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEA RD THE RIVAL STANDS AND PERUSED THE RELEVANT MATERIAL. INSOFAR AS THE DISALLOWANCE OF DEPRECIATION OF RS.3,11,600/ - IS CONCERNED, THE SAME RELATED TO THE PROPERTY WHICH WAS FOUND NOT TO BE REGISTERED IN THE NAME OF THE ASSESSEE - FIRM. THE ASSESSING OFFICE R NOTED THAT THE PROPERTY STOOD IN THE NAMES OF THE TWO PARTNERS AND, THEREFORE, THE ASSESSEE - FIRM WAS NOT ENTITLED TO DEPRECIATION ON THE COST OF THE PROPERTY. THE ASSESSEE JUSTIFIED IT BY POINTING OUT THAT THE PURCHASE OF THE OFFICE PREMISES WAS SUBSTAN TIVELY MADE BY THE ASSESSEE - FIRM AS THE REQUIRED FUND WAS PROVIDED BY IT, BUT AS THE PROPERTY COULD NOT BE REGISTERED IN THE NAME OF THE ASSESSEE - FIRM, AND THE SAME WAS REGISTERED IN THE NAMES OF THE INDIVIDUAL PARTNERS AND, IN ANY CASE, IT WAS THE ASSESSE E - FIRM WHICH HAD UTILISED THE PROPERTY. BE THAT AS IT MAY, IN OUR CONSIDERED OPINION, AT BEST IT IS A CASE OF MAKING OF 3 M/S. SHETH & CO. ITA NO. 198/MUM/2017 AN INCORRECT CLAIM IN LAW, WHICH OSTENSIBLY CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF S EC. 271(1)(C) OF THE ACT. NEITHER CAN IT BE CONSIDERED AS A CONCEALMENT OF INCOME INASMUCH AS THERE IS NO CHARGE MADE OUT THAT ANY OF THE PARTICULARS WERE CONCEALED OR WERE FOUND UNTRUE. THEREFORE, APPLYING THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREM E COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., (2010) 322 ITR 158 (SC), NO PENALTY IS EXIGIBLE WITH RESPECT TO THE DISALLOWANCE OF DEPRECIATION. 5. THE SECOND ELEMENT OF THE LEVY RELATES TO AN ADDITION MADE ON ACCOUNT OF SHORT TERM CAP ITAL GAIN ON SALE OF UNITS OF MUTUAL FUND OF RS.5,89,000/ - . IN THIS REGARD, THE FACT - SITUATION IS THAT THE RELEVANT PROFIT ON THE SALE OF UNITS OF MUTUAL FUND WAS CREDITED IN THE PROFIT & LOSS ACCOUNT AND THE BUSINESS PROFITS WERE REDUCED ON ACCOUNT OF TH IS PROFIT ON SALE OF UNITS OF MUTUAL FUND, BUT WHILE COMPILING THE COMPUTATION OF INCOME ANNEXED TO THE RETURN OF INCOME, THE CAPITAL GAINS WAS NOT INCLUDED. IN THIS CONTEXT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF, ASSESSEE CONTENDED THAT IT W AS AN INADVERTENT ERROR INASMUCH AS THE SHORT TERM CAPITAL GAIN ON SALE OF SHARES, WHICH WAS ALSO CREDITED IN THE PROFIT & LOSS ACCOUNT ALONGWITH THE PROFIT ON SALE OF UNITS OF MUTUAL FUND, WAS CONSIDERED SEPARATELY AND DECLARED IN THE COMPUTATION OF INCOM E. THE NON - INCLUSION OF THE INCOME FROM SHORT TERM CAPITAL GAIN ON THE SALE OF UNITS OF MUTUAL FUND WAS AN INADVERTENT ERROR AND A MISTAKE. ON THIS ASPECT ALSO, WE FIND THAT FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT, (2012) 348 ITR 306 (SC) , THIS BEING A CASE OF BONA FIDE AND AN INADVERTENT 4 M/S. SHETH & CO. ITA NO. 198/MUM/2017 MISTAKE , WHICH DOES NOT CALL FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND THE SAME IS HEREBY DIRECTED TO BE DELETED. 6. THE LAST ELE MENT OF THE LEVY OF PENALTY IS WITH RESPECT TO DIFFERENCE OF RS.93,815/ - BETWEEN THE AMOUNT SHOWN IN 26AS AND THE COMPUTATION OF INCOME. IN THIS CONTEXT, THE RELEVANT FACTS ARE THAT THE ASSESSEE POINTED OUT THAT ITS TURNOVER AMOUNTED TO RS.14,30,13,934/ - AND THE PROFIT AS PER THE PROFIT & LOSS ACCOUNT WAS RS.97,33,717/ - . ON THIS BASIS, IT WAS SOUGHT TO BE POINTED OUT THAT THE DIFFERENCE OF THE INCOME SHOWN IN 26AS FORM OF RS. 93,815/ - WAS ON ACCOUNT OF UNRECONCILABLE POSITION ON ACCOUNT OF CLERICAL SHORTAG E AND NOT A CASE OF ANY DELIBERATE OMISSION OF INCOME. WE FIND THAT THE EXPLANATION RENDERED BY THE ASSESSEE IS COGENT AND MERELY BECAUSE THERE IS A DIFFERENCE BETWEEN THE INCOME SHOWN IN AS26 AND THE AMOUNT REFLECTED IN THE COMPUTATION OF INCOME, CANNOT IPSO FACTO REFLECT EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS ANY FALSITY IS PROVED. WE HAVE PERUSED THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER AND FIND THAT ON BEING SHOW - CAUSED, ASSESSEE ACCEPTED THE ADDIT ION ON THE GROUND THAT DUE TO THE VOLUME OF TRANSACTIONS, THE RECONCILIATION MAY NOT BE POSSIBLE. THUS, IT IS NOT A CASE WHERE THE CLAIM HAS BEEN FOUND TO BE UNTRUE OR FALSE, BUT A CASE WHERE THE AMOUNTS ARE MERELY UNRECONCILABLE. THUS, NO PENALTY U/S 27 1(1)(C) IS ATTRACTED ON THE SAID ADDITION. 7. IN THE RESULT, THE ORDER OF THE CIT(A) IS SET - ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 5 M/S. SHETH & CO. ITA NO. 198/MUM/2017 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 0 T H NOVEMBER, 2017. SD/ - SD/ - (PAWAN SINGH) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 1 0 T H NOVEMBER, 2017 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, H BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI