The ACIT, Circle-8, Ahmedabad V. Vadilal Industries Ltd., Ahmedabad

ITA 2047/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6261 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-06-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAVANSHI
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Depreciation; Question of law; Initiation of penalty proceedings; Wrong claim; Bad and doubtful debts; Difference of opinion
• Section: 133A

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D. K. TYAGI, JM AND D.C.AGRAWAL, AM ASSTT. CIT, CIRCLE-8, AHMEDABAD. VS. VADILAL INDUSTRIES (P) LTD., VADILAL HOUSE, SHRIMALI SOCIETY, NAVRANGPURA RLY.CRO RLY CROSSING, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI G. S. SOURYAVANSHI, SR. DR RESPONDENT BY:- SHRI S. N. SOPARKAR, SR.ADVOCATE. O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) WHEREIN HE HAS CANCELLED THE PENALTY U/S 271 (1)(C). THE QUANTUM OF PENALTY INVOLVED IN ASST. YEAR 1993-94 IS RS.50, 46,398/- WHEREAS FOR ASST. YEAR 1994-95 IT IS RS.31,10,180/-. ASST. YEAR 1993-94 2. IN THIS YEAR THE REVENUE HAS RAISED THE FOLLOWIN G GROUND :- (1) THE LD. CIT(A) XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.50,46,398/- LEVIED U/S 2 71(1)(C) OF THE ACT. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 2 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING ICE-CREAM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO MADE ADDITIONS IN RESPECT OF FOL LOWING ITEMS :- NATURE OF DISALLOWANCE RS. SALE OF GLOW SIGNED BOARD 33,00,000 SALE OF GAS CYLINDERS U/S 50 19,95,000 VALUATION OF CLOSING STOCK OF GRAPES 41,59,054 PURCHASE OF DRY FRUITS 42,604 PREVIOUS YEAR EXPENSES 1,83,233 PROJECT REPORT EXPENSES 11,602 THE ISSUE REGARDING LEVY OF PENALTY IN RESPECT OF E ACH ITEM IS CONSIDERED AS UNDER :- (1) SALE OF GLOW SIGN BOARD RS.33,00,000/- 4. IN THE RETURN OF INCOME ASSESSEE HAD REDUCED THE WRITTEN DOWN VALUE OF BLOCK OF ASSETS BY THE SALE PROCEEDS OF GL OW SIGN BOARD AT RS.33,00,000/- AND CALCULATED DEPRECIATION THEREAFT ER. THE CASE OF THE AO WAS THAT ASSESSEE HAD ALREADY AVAILED DEPRECIATION @ 100% ON THIS ITEM IN ASST. YEAR 1991-92. THEREFORE, IT SHOULD NOT HAV E DEDUCTED THE SALE PROCEEDS THEREOF FROM BLOCK OF ASSETS WHICH IS ENTI TLED FOR DEPRECIATION @ 25%. THE AO TREATED THE SALE PROCEEDS OF THE GLOW S IGN BOARD AS BUSINESS INCOME. IN OTHER WORDS IF 100% DEPRECIATION HAS BEE N ALLOWED TO THE ASSESSEE IN THE YEAR OF PURCHASE OF THE GLOW SIGN B OARD IN VIEW OF THE SPECIFIC PROVISIONS OF PROVISO TO SECTION 32(1)(II) AS COST OF EACH ITEM, THEN SALE PROCEEDS OF SUCH ITEMS SHOULD BE OFFERED AS BUSINESS INCOME. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 3 AGAINST THIS, ASSESSEE HAD SUBMITTED THAT THERE IS NO FINDING THAT PURCHASE OF GLOW SIGN BOARD WAS ALLOWED AS ADVERTISEMENT EXP ENDITURE IN EARLIER YEARS AND THAT NO SPECIFIC RATE OF DEPRECIATION WAS PRESCRIBED IN RESPECT OF GLOW SIGN BOARD, THE CORRECT BLOCK OF ASSETS IS GEN ERAL PLANT AND MACHINERY HAVING 25% RATE OF DEPRECIATION. HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE TRIBUNAL WHICH FOLLOWED THE DECISION IN THE CASE OF NECTAR BEVERAGES VS. CIT 26 7 ITR 385 (BOM) AND UPHELD THE ADDITION AS UNDER :- 3. BOTH PARTIES AGREED THAT GROUND NO.2 HAS BEEN S ET ASIDE BY THE CIT(A) AND REFRAMED PROCEEDINGS CAME BACK TO ITAT W HERE ASSESSEE HAS LOST THE ISSUE, THEREFORE, THIS GROUND BECOMES INFR UCTUOUS. SO ALSO GROUND NO.7 HAS BEEN SET ASIDE BY THE CIT(A) AND CO NSEQUENTLY DECIDED, THEREFORE, THE SAME ALSO BECOMES INFRUCTUOUS. ACCOR DINGLY, GROUND NOS.2 & 7 ARE DISMISSED AS INFRUCTUOUS. 16. LD. COUNSEL FOR THE ASSESSEE FAIRLY CONCEDES TH AT ISSUE ABOUT TAXABILITY OF SALE PROCEEDS OF GAS CYLINDERS UNDER SECTION 50(2) ON WHICH 100% DEPRECIATION HAS BEEN ALLOWED EARLIER U/S 3291 )(II) STANDS DECIDED AGAINST ASSESSEE IN THE CASE OF NECTAR BEVERAGES VS . CIT 267 ITR 385 (BOM). THIS GROUND OF THE ASSESSEE MAY BE DISMISSED . WHILE LEVYING THE PENALTY THE AO OBSERVED THAT ENTI RE TRANSACTION IS NOT GENUINE AND THE ASSESSEE HAS FURNISHED INACCURATE P ARTICULARS OF INCOME. 5. THE LD. CIT(A) CANCELLED THE PENALTY ON THIS ITE M BY HOLDING THAT THERE WAS A DIFFERENCE OF OPINION AS TO FROM WHICH BLOCK OF ASSETS THE SALE VALUE IS TO BE REDUCED AND THERE WAS NO QUESTION OF CONCEALING ANY PARTICULARS OF INCOME WHICH WERE ALREADY DISCLOSED BY THE ASSESSEE. FOR ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 4 MERELY MAKING A CLAIM WHICH WAS NOT SUSTAINABLE IN LAW WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE LD. CIT(A) IN THIS REGARD OBSERVED AS UNDER :- AS REGARDS THE SALE PROCEEDS OF GLOW SIGN BOARDS O F RS.33,00,000/- THERE WAS DIFFERENCE OF OPINION AS TO FROM WHICH BL OCK OF ASSETS THE SALE VALUE WAS TO BE REDUCED. THE APPELLANT REDUCED FROM BLOCK OF ASSETS ELIGIBLE FOR DEPRECIATION @ 25% AND THE DEPARTMENT REDUCED IT FROM 100% BLOCK OF ASSETS. THUS TWO VIEWS WERE POSSIBLE ON THE ISSUE AND IT IS DEBATABLE ISSUE. FURTHER AS REFERENCE APPLICATION O F THE APPELLANT AGAINST ADDITION OF RS.33,00,000/- HAS BEEN ADMITTED IN GUJ ARAT HIGH COURT, THE ISSUE IS A DEBATABLE ISSUE AND QUESTION OF LAW IS I NVOLVED. IN RESPECT OF DEBATABLE ISSUE NO PENALTY FOR CONCEALMENT CAN BE L EVIED. IT IS ALSO SEEN THAT THE APPELLANT HAD MADE THE CLAIM THAT SALE PRO CEEDS OF GAS CYLINDERS IS DEDUCTIBLE FROM THE BLOCK OF ASSETS ELIGIBLE FOR DEPRECIATION @ 25%. HERE AGAIN TWO VIEWS WERE POSSIBLE ON THIS ISSUE AN D IT IS DEBATABLE ISSUE. 6. WE HAVE HEARD THE PARTIES. UNDISPUTED FACTS ARE THAT THE ASSESSEE CLAIMED REDUCTION OF THIS AMOUNT FROM BLOCK OF ASSE TS ENTITLED FOR DEPRECIATION @ 25% WHEREAS ASSESSEE HAD ALREADY CLA IMED DEPRECIATION @ 100% AS EACH ITEM WAS BELOW RS.5,000/-. THUS GLOW SIGN BOARDS WERE TREATED BY THE ASSESSEE AS PLANT AND MACHINERY ENTI TLED FOR 100% DEPRECIATION. CASE OF THE ASSESSEE NOW IS THAT REVE NUE HAS NOT PROVED THAT 100% DEPRECIATION WAS NOT CLAIMED THEREON AND THAT NO PARTICULARS HAVE BEEN CONCEALED AND EVERY DETAIL WAS ON RECORD. MERELY FOR MAKING A CLAIM WHICH WAS NOT SUSTAINABLE UNDER LAW, PENALTY U/S 271(1)(C) CANNOT BE LEVIED. THE LD. AR RELIED ON THE DECISION OF HON . SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS 322 ITR 158 (SC). ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 5 6.1 HONBLE SUPREME COURT IN THIS REGARD HAS OBSERV ED AS UNDER :- (I) S. 271 (1) (C) APPLIES WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE PRESENT WAS NOT A CASE OF CONCEALMENT OF THE INCOME. ANY FURNISHING OF INACCURATE PARTICULARS, IT HAS TO BE SHOWN THAT INFORMATION CONTAINED IN THE RETURN WAS INCORRECT OR INACCURATE . THE WORDS INACCURATE PARTICULARS MEAN THAT THE DETAILS SUPP LIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING T O TRUTH OR ERRONEOUS . THEREFORE, IN THE ABSENCE OF A FINDING BY THE AO TH AT ANY DETAIL SUPPLIED BY THE ASSESSEE IN ITS RETURN WAS INCORRECT OR ERRO NEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INVITING PENALTY U/S 271(1) (C). (II) THE ARGUMENT OF THE REVENUE THAT SUBMITTING AN INCORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTI CULARS OF SUCH INCOME IS NOT CORRECT. BY NO STRETCH OF IMAGINATIO N CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INA CCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF THE REVENUE IS ACCEP TED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED B Y THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY U/S 271(1) (C). THIS IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 6.2 ITAT MUMBAI C BENCH IN THE CASE OF ITO VS. PA RIKH INVESTMENT AND DEVELOPMENT (P) LTD. (2010) 5 TAXMAN.COM 100 (M UMBAI ITAT) (ITA NO.4760/MUM/2009 PRONOUNCED ON MAY 7, 2010) HE LD AS UNDER:- IT IS SETTLED LAW THAT PENALTY UNDER SECTION 271(1) (C) IS A CIVIL LIABILITY AND THE REVENUE IS NOT REQUIRED TO PROVE WILLFUL CONCEA LMENT AS HELD BY THE HONBLE SUPREME COURT IN CASE THE OF UNION OF INDIA VS. DHARAMENDRA TEXTILES AND PROCESSORS (2008) 306 ITR 277(SC). HOW EVER, EACH AND EVERY ADDITION MADE IN THE ASSESSMENT CANNOT AUTOMA TICALLY LEAD TO LEVY OF PENALTY FOR CONCEALMENT OF INCOME. A CASE FOR IM POSITION OF PENALTY HAS TO BE EXAMINED IN TERMS OF THE PROVISIONS OF EX PLANATION 1 TO SECTION 271(1)(C). SECONDLY, IT IS ALSO A SETTLED LEGAL POS ITION THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDIN GS. THE FINDING GIVEN IN THE ASSESSMENT THOUGH IS A GOOD EVIDENCE BUT THE SAME IS NOT CONCLUSIVE IN PENALTY PROCEEDINGS. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 6 IN ORDER TO APPLY THE PROVISIONS OF SECTION 271(1)( C), THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASS ESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. IN THE PRESENT CASE IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME. THE AO HAS IMPOSED P ENALTY ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF HIS INCOME. 6.3 IN UNION OF INDIA VS. DHARMENDRA TEXTILES PROCE SSORS (2008) 306 ITR 277 (SC) HONBLE SUPREME COURT HELD PAGE 158 HEAD-NOTES AS UNDER:- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND T O BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY O F FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGI NATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING T HAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISH ING INACCURATE PARTICULARS. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 7 6.4 ITAT B BENCH, AHMEDABAD IN THE CASE OF GUJARA T STATE FINANCIAL SERVICES LTD. VS. ACIT (2010) 5 TAXMAN.COM 117 (AHM EDABAD ITAT) IN (ITA NO.2078/AHD/2006 AND 2526/AHD/2006 PRONOUNCED ON MAY 31, 2010 HELD AS UNDER :- 5.2 AS IS EVIDENT FROM THE AFORESAID CL. (C) OF S. 271(1) OF THE ACT, THE WORDS USED ARE 'HAS CONCEALED THE PARTICULARS OF HI S INCOME' OR FURNISHED 'INACCURATE PARTICULARS OF SUCH INCOME'. THUS, BOTH IN CASE OF CONCEALMENT AND INACCURACY, THE PHRASE 'PARTICULARS OF INCOME' HAS BEEN USED. THE LEGISLATURE HAS NOT USED THE WORDS 'CONCE ALED HIS INCOME'. FROM THIS IT WOULD BE APPARENT THAT PENAL PROVISION WOULD OPERATE WHEN THERE IS A FAILURE TO DISCLOSE FULLY OR TRULY ALL T HE PARTICULARS. THE WORDS 'PARTICULARS OF INCOME' REFER TO THE FACTS WHICH LE AD TO THE CORRECT COMPUTATION OF INCOME IN ACCORDANCE WITH THE PROVIS IONS OF THE ACT. SO WHEN ANY FACT MATERIAL TO THE DETERMINATION OF AN I TEM AS INCOME OR MATERIAL TO THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE, THEN THE ASSESSEE WOULD BE LIABLE TO PENALTY UNDER S. 271(1)(C) OF THE ACT. IN THE INSTANT CASE, THE LD. CIT(A) UPHELD THE LEVY OF PENALTY 271(1)(C) OF THE ACT SINCE THE ASSESSEE FUR NISHED INACCURATE PARTICULARS OF THE INCOME BY CLAIMING PROVISION FOR BAD DEBTS AND PROVISION FOR DIMINUTION OF INVESTMENTS IN VIOLATIO N OF PROVISIONS OF THE ACT. RATHER THE PROVISIONS OF THE ACT EXPRESSLY DEB AR DEDUCTION OF SUCH PROVISION FOR BAD DEBTS AND PROVISION FOR DIMINUTIO N OF INVESTMENTS. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME ' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEF INED EITHER IN SECTION 271 OR ELSEWHERE IN THE ACT. HOWEVER, NOTWITHSTANDI NG THE DIFFERENCE IN THE TWO CIRCUMSTANCES, IT IS NOW WELL ESTABLISHED T HAT THEY LEAD TO THE SAME EFFECT NAMELY, KEEPING OFF A CERTAIN PORTION O F THE INCOME FROM THE RETURN. ACCORDING TO LAW LEXICON, THE WORD 'CONCEAL ' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS CON+ CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVAT ION; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOL D KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT T O HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCO ME-TAX AUTHORITIES.' IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFI NED AS : 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 8 5.3 IF THE DISCLOSURE OF FACTS IS INCORRECT OR FALS E TO THE KNOWLEDGE OF THE ASSESSEE AND IT IS ESTABLISHED, THEN SUCH DISCLOSUR E CANNOT TAKE IT OUT FROM THE PURVIEW OF THE ACT OF CONCEALMENT OF PARTICULAR S OR FURNISHING INACCURATE PARTICULARS THEREOF FOR THE PURPOSE OF L EVY OF PENALTY. THE PENALTY U/S 271(1) (C) OF THE ACT IS LEVIABLE IF TH E AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY P ERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME. HERE WE MAY POINT OUT THAT THE DECISIONS RE LIED UPON BY THE ASSESSEE ON THE ISSUE OF RECORDING OF SATISFACTION BY THE AO BEFORE INITIATING PENAL TY PROCEEDINGS U/S 271(1) (C) OF T HE ACT ARE NO LONGER RELEVANT IN VIEW OF SUB-SECTION 1B INSERTED IN SECT ION 271 OF THE ACT BY ITA FINANCE ACT, 2008. THE SAID PROVISION PURPORTS TO CREATE A FICTION BY WHICH SATISFACTION OF THE AO IS DEEMED TO HAVE BEEN RECORDED IN CASES WHERE AN ADDITION OR DISALLOWANCE IS MADE BY THE AS SESSING OFFICER AND A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS IS ISSUED. THE SAID PROVISION IS MADE EFFECTIVE RETROSPECTIVELY WITH EF FECT FROM 1ST APRIL, 1989. THE LD. AR ON BEHALF OF THE ASSESSEE HAS NOT EXPLAINED AS TO HOW THE DECISIONS RELIED UPON BY HIM REGARDING RECORDIN G OF SATISFACTION WERE RELEVANT IN VIEW OF THE SAID PROVISIONS OF SEC. 271 (1B) OF THE ACT. 6.5 SINCE THERE IS NO FINDING THAT ASSESSEE HAS CON CEALED ANY PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF IN COME, THE CASE WOULD FALL ONLY UNDER THE HEAD INCORRECT CLAIM AND, THERE FORE, THE DECISION OF HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (SUPRA) AND IN OTHER CASES WOULD BE APPLICABLE AND NO PENALTY WOULD BE LEVIABLE ON THIS ISSUE. (2) SALE OF GAS CYLINDERS AT RS.19,95,000/- 7. THIS ISSUE IS SIMILAR TO THE ISSUE NO.1. IN THE RETURN OF INCOME ASSESSEE HAS REDUCED THE SALE PROCEEDS OF GAS CYLIN DERS AT RS.19,95,000/- FROM THE WRITTEN DOWN VALUE OF BLOCK OF ASSETS WHIC H WERE ENTITLED TO DEPRECIATION @ 25%. THE CLAIM WAS REJECTED BY THE A O HOLDING THAT ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 9 ASSESSEE PURCHASED THE GAS CYLINDERS IN FINANCIAL Y EAR 1997-98 ON WHICH DEPRECIATION @ 100% WAS CLAIMED. THUS WRITTEN DOWN VALUE AS ON 1.9.1992 WAS NIL, AND THEREFORE, ENTIRE SALE PROCEE D WAS LIABLE TO BE TAXED AS SHORT TERM CAPITAL GAIN U/S 50(2). THUS TH E ASSESSEE WAS NOT CORRECT IN FURTHER CLAIMING DEDUCTION OF THE SALE P ROCEEDS OF GAS CYLINDERS FROM THE BLOCK OF ASSETS ENTITLED FOR DEPRECIATION @ 25%. THIS VIEW OF THE AO WAS UPHELD BY THE TRIBUNAL. WHILE LEVYING PE NALTY THE AO OBSERVED THAT ASSESSEE CONSEQUENTLY FAILED TO FOLLO W THE PROVISIONS OF THE ACT WHICH ARE UNAMBIGUOUS AND UNEQUIVOCAL. THE TRAN SACTION BY THE ASSESSEE WAS NOT GENUINE AND ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 8. THE LD. CIT(A) CANCELLED THE PENALTY FOR THE SAM E REASONS AS PER ISSUE NO.1. HE HELD THAT IT IS NOT A CASE OF FURNIS HING OF INACCURATE PARTICULARS BUT A CASE OF DIFFERENCE OF OPINION. NO PARTICULARS OF INCOME WERE CONCEALED OR INACCURATE PARTICULARS OF INCOME WERE FILED. 9. WE HAVE HEARD THE PARTIES. THE ARGUMENTS OF THE PARTIES WERE SAME AS PER ISSUE NO.1. FOR THE REASONS GIVEN BY US WHIL E DISPOSING OF ISSUE NO.1 AND RELYING ON THE DECISION OF HON. SUPREME CO URT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (SUPRA) AND OTHER JU DGMENTS REFERRED TO ABOVE WE UPHOLD THE ORDER OF LD. CIT(A). THIS GROUN D OF REVENUE IS ACCORDINGLY REJECTED. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 10 (3) THE THIRD ISSUE IS ABOUT ADDITION ON ACCOUNT OF VAL UATION OF GRAPES 10. IN THE ASSESSMENT ORDER THE AO VALUED THE CLOSI NG STOCK OF GRAPES AT COST AS ON BALANCE SHEET DATE AS ACCORDING TO HI M THE COST PRICE IS LOWER THAN THE MARKET PRICE. THE ASSESSEE ON THE OTHER HA ND HAD VALUED THE STOCK AT NET REALIZABLE VALUE ON THE BASIS OF PRICE S IT FETCHES IN THE SUBSEQUENT YEAR WHEN THE SAID STOCK OF GRAPES WAS S OLD. ACCORDING TO THE ASSESSEE THE BOOKS OF ACCOUNTS FOR ASST. YEAR 1993- 94 WERE OPEN WHEN GRAPES VALUE WAS REDUCED DUE TO DETERIORATION AND T HE SAME WERE SOLD AND ASSESSEE REALIZED LESSER VALUE AND, THEREFORE, THAT LESSER VALUE REALIZED BY THE ASSESSEE WAS ADOPTED AS VALUE OF THE CLOSING S TOCK AT THE END OF FY 1992-93 (ASST. YEAR 1993-94). HOWEVER, THE TRIBUNAL CONFIRMED THE ADDITION FOR THE REASONS THAT ASSESSEE FAILED TO DE MONSTRATE THAT INTERNATIONAL VALUE OF THE GRAPES HAD FALLEN IN UK OR THAT MATERIAL RELIED ON BY THE AO WERE NOT CONTROVERTED. FURTHER DAMAGES CLAIMED BY THE ASSESSEE TO THE GRAPES ARE SUBSEQUENT DEVELOPMENT A ND WOULD NOT AFFECT THE VALUATION OF GRAPES AS AT THE END OF THE FY. IN THIS REGARD THE TRIBUNAL HAD OBSERVED AS UNDER :- 8.3 THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A) AND CONTENDS THAT VALUATION BASED ON PRINCIPLE OF COST OR MARKET VALUE, WHICHEVER IS LESS, IS WELL RECOGNIZED PRINCIPLE. TI LL THE BOOKS ARE NOT SETTLED AND ACCOUNTS ARE NOT AUDITED, THE SUBSEQUEN T DEVELOPMENT INDICATE DIMINISHING IN VALUE OF STOCK CAN BE TAKEN INTO ACCOUNT. ACCOUNTING STANDARDS WERE REFERRED, RELIANCE WAS PL ACED ON - ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 11 I) SADHURAM GORDHANDAS VS. VIT 253 ITR 695 (GUJ) II) CIT VS. MAHALAKSHMI SUGAR MILLS CO. LTD. 200 ITR 27 5 (DELHI) III) TRIVENI ENGINEERING WORKS LTD. VS. CIT 167 ITR 742 (ALL). FOR THE PROPOSITION THAT ACCOUNTING STANDARDS AND P RINCIPLES SHOULD BE RESPECTED, IT WAS ALTERNATIVELY CONTENDED THAT C IT(A) HAS ALLOWED CLAIM OF THE ASSESSEE. IN CASE A VIEW IS TAKEN AGAI NST IT, THEN DIRECTION MAY BE GIVEN TO ADOPT VALUE OF OPENING STOCK OF 199 4-95 AND SUBSEQUENT YEARS ON THIS ENHANCED VALUE. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATE RIAL AVAILABLE ON RECORD. AS THE FACTS EMERGE, WE FOUND MERIT ON T HE ARGUMENTS OF THE LD.DR THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE T HAT INTERNATIONAL VALUE OF GRAPES HAS FALLEN IN UK. MATERIAL RELIED ON THE AO I.E. REPORT FROM DUBAI THAT MARKET RATE HAS NOT FALLEN, HAS NOT BEEN CONTROVERTED. SIMILARLY, DAMAGES AND OTHER FACTORS VALUED BY FORE IGN CONSIGNEE APPEARS TO BE SUBSEQUENT DEVELOPMENT. IN VIEW THERE OF, WE ARE OF THE VIEW THAT VALUATION ADOPTED BY AO IS PROPER IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES. ARGUMENTS ABOUT ACCOUNTING PRINCIPLE S AND CASE LAWS GIVEN BY THE ASSESSEE MAY BE GOOD ON MERITS, BUT SI NCE THE FACT THAT MARKET VALUE WAS LESS THAN THE COST, COULD NOT BE E FFECTIVELY DEMONSTRATED, WE ARE UNABLE TO SUBSCRIBE TO THE VIE W OF CIT(A) IN VIEW THEREOF, WE REVERSE THE ORDER OF THE CIT(A) AND UPH OLD THE ORDER OF AO ON THE VALUATION OF GRAPES. 9.1 AT THE SAME TIME, WE FIND MERIT IN THE ALTERNAT E PLEA OF THE LD. COUNSEL FOR THE ASSESSEE AND DIRECT AO TO ADOPT THE INCREASED COST OF CLOSING STOCK AS THE NEXT YEARS OPENING STOCK AND GIVE SUITABLE CONSEQUENTIAL EFFECT TO THE ASSESSEE. THIS GROUND O F THE REVENUE IS ALLOWED WITH THIS DIRECTION. IN PENALTY PROCEEDINGS THE AO OBSERVED THAT ASSESSE E HAS ADOPTED FALSE VALUE OF NET REALIZABLE VALUE WHICH WAS DISCOVERED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE DID NOT OFFER ANY VALID EXPLANATION. 11. THE LD. CIT(A) OBSERVED THAT EVEN THOUGH ADDITI ON HAS BEEN CONFIRMED BUT THE TRIBUNAL HAS GIVEN DIRECTION TO G IVE CONSEQUENTIAL ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 12 RELIEF IN NEXT ASST. YEAR. HE ACCORDINGLY CANCELLED THE PENALTY ON THIS ISSUE. 12. WE HAVE HEARD THE PARTIES. THE LD. AR SUBMITTED THAT IN QUANTUM PROCEEDINGS THE LD. CIT(A) HAS ALLOWED THE APPEAL A ND THE TRIBUNAL HAD ONLY RESTORED THE ORDER OF AO. THIS SHOWS THAT THE ISSUE IS DEBATABLE AND CANNOT BE A CASE FOR CONCEALING INCOME OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME. EVEN THOUGH AO MAY HAVE SHOW N THAT MARKET RATE IN DUBAI HAD NOT FALLEN BUT IT IS THE VIEW OF THE C ONSIGNEE TO WHOM THE ASSESSEE HAD DESPATCHED THE GOODS IN UK WHICH WOULD PREVAIL AND IT WAS ON THE BASIS OF HIS INFORMATION THAT GRAPES HAD DET ERIORATED IN QUALITY DUE TO PASSAGE OF TIME, THAT VALUE HAS BEEN REDUCED. TH E AO HAS ONLY PROCURED THE MARKET RATES OF GOOD QUALITY GRAPES AN D HAS NOT SHOWN THAT WHAT WOULD BE THE VALUE OF THE DETERIORATED QUALITY OF GRAPES WHICH WAS SO REPORTED BY THE CONSIGNEE TO THE ASSESSEE. IT IS NOT THE CASE THAT ASSESSEE HAS ADOPTED THE FIGURE OF NET REALIZABLE V ALUE BY ESTIMATE BUT HAD DONE SO ON THE BASIS OF ADVICE OF THE CONSIGNEE. IN FACT THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME BECAUSE MARKET RATE OBTAINED BY THE AO FROM DUBAI C OULD NOT BE SAID TO BE THE NET REALIZABLE VALUE OF THE GRAPES OF THE AS SESSEE WHOSE QUALITY HAD DETERIORATED. IN VIEW OF THIS, EVEN THOUGH THE ADDI TION IS CONFIRMED BUT THERE IS NO CASE FOR LEVY OF PENALTY. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 13 13. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTE D THE ORDER OF AO AND HEAVILY RELIED ON THE ORDER OF THE TRIBUNAL WHE REIN THE ADDITION HAS BEEN CONFIRMED. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR LEVY OF PENALTY BECAUSE AO COULD NOT SHOW THAT NET REALIZAB LE VALUE OF THE GRAPES HAVE BEEN INCORRECTLY SUBMITTED TO THE AO. IF IN GE NERAL, MARKET RATE OF GRAPES REMAINED STATIC, WOULD NOT MEAN THAT WHAT TH E ASSESSEE SUBMITTED ON THE BASIS OF THE REPORT OF THE CONSIGNEE THAT IT S GRAPES HAD DETERIORATED IS INCORRECT. THE CLAIM WAS MADE UNDER BONA FIDE BE LIEF ON THE BASIS OF INFORMATION WHICH ASSESSEE HAD IN POSSESSION AND TH IS CANNOT BE A CASE FOR LEVY OF PENALTY. AGAIN SUPPORT IS DERIVED FROM THE DECISION OF HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (SUPRA) AND OTHER JUDGMENTS REFERRED TO ABOVE. THEREFORE, THE O RDER OF LD. CIT(A) IN THIS REGARD IS UPHELD. (4) THE NEXT ISSUE IS REGARDING ADDITION OF PURCHASE OF DRY FRUITS 14. IN THE ASSESSMENT ORDER THE AO HAD DISALLOWED A SUM OF RS.4,26,040/- BEING PURCHASE OF PISTA FROM LAXMI SA LES CORPORATION, AHMEDABAD. THE ASSESSEE COULD NOT PRODUCE ONE SHRI ASHOK PANCHAL BEING THE PROPRIETOR OF LAXMI SALES CORPORATION. TH E AO MADE THE ADDITION ON THE BASIS OF HIS FINDING FOR ASST. YEAR 2002-03. THE LD. CIT(A) DELETED THE ADDITION FOLLOWING HIS ORDER FOR EARLIER YEARS. THE ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 14 TRIBUNAL CONFIRMED THE ADDITION TO THE EXTENT OF 10 % BY FOLLOWING ITS ORDER IN ASST. YEAR 1991-92 AND 1992-93. IN THOSE C ASES ALSO ADDITIONS FOR UNPROVED PURCHASES FROM LAXMI SALES CORPORATION WERE MADE WHICH WERE CONFIRMED BY THE TRIBUNAL. WHILE LEVYING THE P ENALTY THE AO HELD THAT SINCE ASSESSEE FAILED TO PRODUCE SHRI ASHOK PA NCHAL, THE PROPRIETOR OF THE CONCERN, ENTIRE TRANSACTION IS NOT GENUINE AND ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD. CIT(A) DE LETED THE PENALTY ON THE GROUND THAT ADDITION CONFIRMED WAS ON ESTIMATE BASIS AND EARLIER, ENTIRE ADDITION WAS DELETED BY THE LD. CIT(A). 15. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VI EW, THERE IS NO CASE FOR LEVY OF PENALTY. THE REASONS ARE THAT AS THE LD . AR SUBMITTED, THAT NO PENALTY WAS LEVIED IN ASST. YEAR 1991-92 AND 1992-9 3 FOR SIMILAR ADDITIONS WHICH WERE CONFIRMED BY THE TRIBUNAL IN T HOSE YEARS. FOLLOWING THE PRINCIPLES OF CONSISTENCY WE DO NOT F IND ANY CASE FOR SUSTAINING THE PENALTY, PARTICULARLY WHEN ADDITION SO CONFIRMED WAS MADE ONLY ON ESTIMATE BASIS. AS A RESULT, THIS GROUND OF REVENUE IS REJECTED. (5) THE NEXT ISSUE IS PROJECT REPORT EXPENSES OF RS.71, 602/- 16. THE ASSESSEE CLAIMED PROJECT REPORT EXPENSES OF RS.71,602/- FOR A NEW BUSINESS WHICH WAS NOT ALLOWED BY THE AO ON THE GROUND THAT PROJECT DOES NOT RELATE TO THE EXISTING LINE OF BUS INESS. THE TRIBUNAL HAD ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 15 CONFIRMED THE ADDITION AS IT DID NOT RELATE TO THE EXISTING LINE OF BUSINESS BUT WAS ONLY PRELIMINARY EXPENDITURE OF A NEW LINE OF BUSINESS. WHILE LEVYING PENALTY THE AO HELD THAT ENTIRE TRANSACTION WAS NOT GENUINE. THE LD. CIT(A) DELETED THE PENALTY BY HOLDING THAT IT W AS A MERELY DISALLOWANCE OF EXPENSES AND CANNOT BE HELD THAT AS SESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 17. BEFORE US, THE LD. AR HAD SUBMITTED THAT THE CL AIM WAS NOT DUE TO ANY MALAFIDE INTENTION ON THE PART OF THE ASSESSEE AND MERELY CONFIRMATION OF ADDITION BY APPELLATE AUTHORITY DOE S NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE ASSESSEE HAD FURNISHED ALL THE INFORMATION TO T HE AO AND ADDITIONAL DOCUMENTS BEFORE THE LD. CIT(A). THE ADDITION WAS M ADE DUE TO NON- SUPPLY OF INFORMATION AND DOCUMENTS. HE ALSO RELIED ON THE DECISION OF HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (SUPRA). 18. THE LD. DR SUPPORTED THE ORDER OF AO. 19. AFTER HEARING THE PARTIES, WE DECLINE TO INTERF ERE IN THE ORDER OF LD. CIT(A). THERE IS NO CASE FOR LEVY OF PENALTY FOR MA KING AN INCORRECT CLAIM. OUR VIEW IS SUPPORTED BY THE DECISION OF HON . SUPREME COURT IN ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 16 THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (SUPRA) AND OTHER JUDGMENTS REFERRED TO ABOVE. THIS GROUND OF REVENUE IS REJECT ED. (6) THE NEXT ISSUE IS REGARDING PRIOR PERIOD EXPENSES 20. IN THE STATEMENT OF TOTAL INCOME THE ASSESSEE H AD DISCLOSED A NOTE NO.12 THAT ASSESSEE HAS CLAIMED PRIOR PERIOD EXPENS ES OF RS.2,29,583/-. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT THEY DO NOT RELATE TO THE CURRENT YEAR. THE LD. CIT(A) SET ASIDE THE ISSUE FO R FRESH VERIFICATION. THE AO THEN RECONSIDERED THE FALL IN EXPENSES AND MADE AN ADDITION OF RS.183,233/-. THE CLAIM OF THE ASSESSEE THAT DELAY OCCURRED DUE TO TIME TAKEN BY THE MANAGING DIRECTOR IN PASSING THE BILLS , WAS NOT ACCEPTED BY THE AO. THE ADDITION WAS CONFIRMED BY THE TRIBUNAL. IN PENALTY PROCEEDINGS THE AO HELD THAT ENTIRE TRANSACTION IS NOT GENUINE. THE LD. CIT(A) CANCELLED THE PENALTY HOLDING THAT THEY ARE MERE DISALLOWANCES OF EXPENSES AND IT MAY BE HELD THAT ASSESSEE HAS FURNI SHED INACCURATE PARTICULARS OF INCOME. 21. WE HAVE HEARD THE PARTIES. THE ARGUMENTS OF THE LD. AR AND THE DR WERE THE SAME AS IN RESPECT OF CLAIM FOR PROJECT REPORT EXPENSES AND AFTER HEARING THE RIVAL SUBMISSIONS, WE CONFIRM THE DECISION OF THE LD. CIT(A) FOLLOWING THE DECISION OF HON. SUPREME COURT IN THE CASE OF CIT ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 17 VS. RELIANCE PETROPRODUCTS (SUPRA) AND OTHER JUDGME NTS REFERRED TO ABOVE. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ASST. YEAR 1994-95 22. IN THIS YEAR THE REVENUE HAS RAISED FOLLOWING G ROUND :- (1) THE LD. CIT(A) XIV, AHMEDABAD ERRED IN LAW AND ON F ACTS IN DELETING THE PENALTY OF RS.31,10,180/- LEVIED U/S 2 71(1)(C) OF THE ACT. 23. THE AO HAS SOUGHT TO LEVY PENALTY U/S 271(1)(C) IN RESPECT OF FOLLOWING ADDITIONS WHICH WERE CONFIRMED BY THE TRI BUNAL :- NATURE OF DISALLOWANCE RS. DEPRECIATION ON ETP LEASED TO EUREKA ORGANICS LTD. 2415000 DEPRECIATION ON ETP LEASED TO INDIAN LEADS LTD. 2500000 DEPRECIATION ON GUM ROLLER 222000 PRIOR YEAR EXPENDITURE 66489 EXCISE DUTY UNPAID 69729 DEPRECIATION ON REFRIGERATOR VEHICLE 736792 EACH ITEM IS DISCUSSED BELOW. (1) DEPRECIATION ON ETP LEASED TO EUREKA ORGANICS LTD. 24. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD FOUND THAT ASSESSEE HAD PURCHASED ETP PLANT FROM M/S NAVD URGA BUILDERS, BARODA AT RS.48.30 LACS AND WAS SHOWN TO HAVE GIVEN ON LEASE TO M/S UREKA ORGANICS LTD., BARODA. THE PURCHASE BILL WAS DATED 30.9.1993 ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 18 WHEREAS LEASE WAS SHOWN TO HAVE BEEN MADE ON 29.9.9 3. THE AO CARRIED OUT SURVEY UNDER SECTION 133A AND FOUND THAT ASSESS EE HAD CERTAIN PAPERS RELATED TO OTHER LESSEE NAMELY M/S INDIAN LEADS LTD . THOSE PAPERS WERE DATED 9.10.1993. THUS HE INFERRED THAT LEASE AGREEM ENT WITH UREKA ORGANICS LTD., BARODA COULD BE EXECUTED ON OR AFTER 9.10.1993. ON THE OTHER HAND, THE ASSESSEE CLAIMED 100% DEPRECIATION ON THE PLANT BY PRESUMING THAT THEY WERE PURCHASED PRIOR TO 30.9.19 93 AND LEASED PRIOR TO THAT DATE. ON THE OTHER HAND ACTUAL LEASE HAS TAKEN PLACED AFTER 9.10.1993 AND, THEREFORE, ASSESSEE IS ENTITLED TO 50% DEPRECI ATION. THUS THERE WAS A WRONG CLAIM MADE BY THE ASSESSEE. THIS ASPECT WAS C ONSIDERED BY LD. CIT(A) AND DISALLOWANCE OF DEPRECIATION WAS CONFIRM ED. THE ASSESSEE DID NOT PRESS FOR THIS ISSUE BEFORE THE TRIBUNAL, A S LD. CIT(A) HAD GIVEN DIRECTIONS TO ALLOW THE DEPRECIATION IN SUBSEQUENT YEAR. 25. IN PENALTY PROCEEDINGS THE AO HELD THAT CLAIM O F DEPRECIATION AT 100% WAS NOT GENUINE. THE LD. CIT(A) CANCELLED THE PENALTY BY HOLDING THAT THE ASSESSEE HAS FURNISHED FULL AND NECESSARY PARTICULARS AND THAT THE DECISION OF LD. CIT(A) IN QUANTUM PROCEEDINGS HAS B EEN ACCEPTED BY THE ASSESSEE, WHEREIN LD. CIT(A) HAD ALLOWED THE DEPREC IATION AT 50% FOR THE YEAR UNDER CONSIDERATION. THE DEPRECIATION ON THIS PLANT WAS ALLOWED FULL IN TWO YEARS. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 19 26. THE LD. DR ARGUED THAT ASSESSEE HAS MADE A FALS E CLAIM OF 100% DEPRECIATION WHEREAS THE LD. AR SUBMITTED THAT CLAI M WAS NOT FOUND NON- GENUINE AND IT WAS ONLY THE DIFFERENCE IN DATE AS T O WHEN THE PLANT WAS ACTUALLY COMMISSIONED. SO FAR ASSESSEE WAS CONCERNE D THE PLANT WAS GIVEN TO UREKA ORGANICS LTD. BEFORE END OF SEPTEMBE R BUT IT WAS COMMISSIONED ONLY AFTER 9.10.93. HE SUBMITTED THAT IT WAS DUE TO DOCUMENTS OF LEASE WHICH WERE EXECUTED AFTER 9.10.9 3 THAT IT WAS INFERRED THAT LEASE HAD TAKEN PLACE AFTER 1.10.93. THEREFORE , FOR THAT MATTER THERE WILL NOT BE ANY CASE FOR LEVY OF PENALTY. 27. WE HAVE HEARD THE PARTIES. WE ENTIRELY AGREE WI TH THE LD. AR. MERELY EXECUTING LEASE AGREEMENT AFTER 9.10.93 WOUL D NOT AMOUNT THAT PLANT WAS NOT USED PRIOR TO THIS DATE. SO FAR ASSES SEE IS CONCERNED IT HAD GOT THE PLANT INSTALLED PRIOR TO 1.10.93 BUT IN ANY CASE TRANSACTION IS NOT FOUND NON-GENUINE AND, THEREFORE, THERE IS NO CASE FOR LEVY OF PENALTY. EVEN FOR MAKING INCORRECT CLAIM PENALTY CANNOT BE L EVIED AS HELD BY HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (SUPRA) AND IN OTHER JUDGMENTS REFERRED TO ABOVE. (2) DEPRECIATION ON ETP LEASED TO INDIAN LEADS LTD . 28. THE ISSUE IS SIMILAR AS TO THE FIRST ISSUE AND FACTS ARE ALSO THE SAME. HERE ALSO LEASE AGREEMENT WAS EXECUTED ON 9.10.93 A ND ON THAT BASIS IT WAS PRESUMED THAT PLANTS WERE PUT TO USE AFTER THAT DATE AND THEREFORE, ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 20 ASSESSEE WOULD BE ENTITLED TO 50% AS AGAINST 100% C LAIMED BY THE ASSESSEE ON THE PRESUMPTION THAT ONCE ASSESSEE HAS GOT BILLS ON 29.9.93 THE PLANTS ARE INSTALLED AT THE PREMISES OF THE LES SEE THEN ASSESSEE WOULD BE ENTITLED TO 100% DEPRECIATION. 29. THE LD. CIT(A) CONFIRMED THE VIEW OF THE AO HOL D THAT TRANSACTION IS GENUINE. THE ASSESSEE DID NOT PRESS THE ISSUE BE FORE THE TRIBUNAL. THE AO LEVIED THE PENALTY FOR CONCEALMENT BY HOLDING TH AT THE TRANSACTION IS NOT GENUINE WHEREAS LD. CIT(A) CANCELLED THE PENALT Y BY HOLDING THAT ASSESSEE HAS NOT FURNISHED INACCURATE PARTICULARS O F INCOME. 30. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VI EW THERE IS NO CASE FOR LEVY OF PENALTY AND FOR THE REASONS STATED IN R ESPECT OF ISSUE NO.1 ABOVE AND RELYING ON THE DECISION OF HON. SUPREME C OURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (SUPRA) AND OTHER JU DGMENTS REFERRED TO ABOVE, WE CONFIRM THE ORDER OF LD. CIT(A). (3) DEPRECIATION ON GUM ROLLER 31. THE AO DISALLOWED THE CLAIM OF DEPRECIATION ON THE LEASE OF ASSETS CONSIDERING THE SAME AS NON-GENUINE TRANSACTION. IN THE FIRST INNING THE LD. CIT(A) SET ASIDE THE ISSUE TO EXAMINE THE MANAGING DIRECTOR OF SHAAN PACKAGING LTD. WHO HAD SIGNED THE LEASE AGREEMENT W ITH THE ASSESSEE WITH REGARD TO THE PURCHASE OF GUM ROLLER AND ITS S UBSEQUENT SALE BY THE ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 21 ASSESSEE TO THE LESSEE. THE MANAGING DIRECTOR SHRI SHIV KUMAR D. IYER CONFIRMED THE LEASE TRANSACTION WITH THE ASSESSEE C OMPANY. HE ALSO CONFIRMED THE PURCHASE BILL PRODUCED BY THE ASSESSE E. HOWEVER, HE WAS UNABLE TO PRODUCE HIS OWN PURCHASE BILL ON ACCOUNT OF NON-RECOVERY FROM THE SAME FROM HIS OFFICE AT SILVASSA. THUS THE CLAI M OF DEPRECIATION BY THE ASSESSEE WAS DISALLOWED FOR NON-PRODUCTION OF PURCH ASE BILL OF THE LEASED ASSETS BY SELLER OF THE ASSETS. THE DISALLOWANCE WA S FINALLY CONFIRMED BY THE TRIBUNAL. IN PENALTY PROCEEDINGS THE AO CLAIMED THAT TRANSACTION IS NOT GENUINE AS THE LESSOR WAS NOT ABLE TO PRODUCE T HE PURCHASE BILL. THE LD. CIT(A) CANCELLED THE LEVY OF PENALTY BY HOLDING THAT THE CLAIM WAS BONA FIDE BUT IT WAS ONLY THE OTHER PARTY WHO DID N OT PRODUCE THE PURCHASE BILL. 32. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VI EW ONCE THE EXISTENCE OF ASSET IS NOT DENIED THEN MERE FACT THA T OTHER PARTY COULD NOT PRODUCE THE PURCHASE BILL WILL NOT BE SUFFICIENT TO HOLD THAT CLAIM FOR DEPRECIATION WAS FALSE. FOR MERELY MAKING INCORRECT CLAIM PENALTY CANNOT BE LEVIED. EVEN THE AO IN THE ASSESSMENT ORDER WHIL E DISALLOWING THE CLAIM OF DEPRECIATION HAS ONLY MENTIONED THAT MR. I YER, HOWEVER, WAS UNABLE TO PRODUCE THE BILLS FOR PURCHASE OF GUM ROL LERS BY HIS COMPANY DUE TO TRANSFER OF HIS RECORDS TO FACTORY-CUM-OFFIC E AT SILVASSA. HE HAD PROMISED TO SEND COPIES OF THE BILLS IN DUE COURSE. TILL DATE HE HAS NOT ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 22 FURNISHED THE BILLS. FOR WANT OF VERIFICATION, DEPR ECIATION ON PURCHASE OF GUM ROLLERS AMOUNTING TO RS.2,22,000/- IS DISALLOWE D. SINCE THERE IS NO ALLEGATION OF ANY FALSE CLAIM PENALTY WAS RIGHTLY C ANCELLED BY THE LD. CIT(A). (4) PRIOR YEAR EXPENDITURE 33. AS REGARDS THIS ISSUE, THE ADDITION, ITS CONFIR MATION AND GROUND FOR LEVY OF PENALTY AND DELETION OF PENALTY BY LD. CIT( A) ARE THE SAME AS ON THE SAME ISSUE IN ASST. YEAR 1993-94. THEREFORE, FO LLOWING OUR REASONING IN THAT YEAR WE CONFIRM THE ORDER OF LD. CIT(A). (5) EXCISE DUTY UNPAID 34. WHILE EXAMINING THE FACTS OF THE AUDIT REPORT, THE AO FOUND THAT THERE WAS UNPAID EXCISE DUTY AMOUNTING TO RS.69,729 /- WHICH WAS DISALLOWED BY THE ASSESSEE U/S 43B. IT WAS SUBMITTE D THAT EXCISE DUTY CLAIMED WAS DISPUTED BY THE ASSESSEE WITH THE CENTR AL EXCISE AUTHORITIES. THE AO DID NOT ALLOW THE CLAIM ON THE GROUND THAT A SSESSEE HAS NOT PAID THE AMOUNT AND, THEREFORE, THE SAME IS NOT ALLOWABL E U/S 43B. THIS VIEW OF THE AO WAS CONFIRMED BY THE LD. CIT(A) AS WELL A S BY THE TRIBUNAL. THE AO LEVIED THE PENALTY BY HOLDING THAT ASSESSEE HAD MADE CLAIM WITHOUT ACTUALLY MAKING THE PAYMENT. ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 23 35. THE LD. CIT(A) CANCELLED THE PENALTY BY HOLDING THAT THE DISPUTE WAS REGARDING THE YEAR OF THE CLAIM AND IT CANNOT B E SAID THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 36. AFTER HEARING THE PARTIES, WE DECLINE TO INTERF ERE. THE REASONS ARE THAT ALL THE PARTICULARS ABOUT THE CLAIM WERE ON RE CORD AND THE ASSESSEE HAD A BELIEF THAT HE WOULD MAKE THE PAYMENT OF EXCI SE DUTY AFTER SETTLING THE DISPUTE WITH THE EXCISE AUTHORITIES. CERTAINLY THE CLAIM IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY CONFIRMED BY THE TRIBUNAL BUT FOR MAKING INCORRECT CLAIM, PENALTY CANNOT BE LEVIED AS HELD BY HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (SUPRA) AND OTHER JUDGMENTS REFERRED TO ABOVE. AS A RESULT, WE CONFIRM THE ORDER OF LD. CIT(A) ON THIS ISSUE. (6) DEPRECIATION ON REFRIGERATOR VEHICLE 37. WHILE EXAMINING THE RETURN OF INCOME THE AO NOT ICED THAT ASSESSEE HAS CLAIMED DEPRECIATION ON PURCHASE OF REFRIGERATO R VAN AT THE VALUE OF RS.18,41,980/- @ 40%. IT WAS ARGUED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THAT ASSESSEE PURCHASED TWO DCM TOYOTAS WHICH WERE LATER GOT INSULATED/REFRIGERATED. THE AO FOUND THAT DELIVERY OF THE VEHICLES WERE GIVEN ON 22.3.1994. THE AO REQUIRED T HE ASSESSEE TO FURNISH THE EVIDENCE AS TO SHOW THAT VEHICLES WERE PUT TO USE ON OR BEFORE ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 24 31.3.94. NO EVIDENCE IN SUPPORT OF USE OF VEHICLES PRIOR TO THIS DATE WAS SUBMITTED AND ACCORDINGLY THE CLAIM WAS DISALLOWED. THE ADDITION WAS FINALLY CONFIRMED BY THE TRIBUNAL ON THE GROUND THA T ASSESSEE HAS CHANGED THE STAND. EARLIER IT WAS STATED THAT VEHIC LES WERE PURCHASED ON 22.3.94, LATER IT WAS SUBMITTED BEFORE LD. CIT(A) T HAT THEY WERE PURCHASED ON 22.3.94 AND REGISTERED AT AHMEDABAD ON 28.3.94 A ND USED BY THE ASSESSEE FOR ITS OWN PURPOSE. ON THE OTHER HAND, IT WAS CLAIMED BEFORE THE AO THAT VEHICLES WERE GIVEN ON LEASE TO VADILAL ENT ERPRISE LTD. FOR TRANSPORTATION OF ICE-CREAM. THUS AS THERE WAS VARY ING STAND, CLAIM FOR DEPRECIATION WAS DISALLOWED. 38. WHILE LEVYING THE PENALTY THE AO HELD THAT THE VEHICLES WERE NOT PUT TO USE DURING THE RELEVANT PREVIOUS YEAR AND HE NCE THERE IS NO QUESTION OF ALLOWING DEPRECIATION ON SUCH ASSETS. T HE LD. CIT(A) DELETED THE PENALTY ON THE GROUND THAT THE ADDITION WAS MAD E FOR WANT OF EVIDENCE OF USE. 39. WE HAVE HEARD THE PARTIES. WE CONFIRM THE ORDER OF LD. CIT(A) FOR THE REASONS THAT NO EVIDENCE WAS BROUGHT ON RECORD TO SHOW THAT THEY WERE ACTUALLY NOT PUT TO USE PRIOR TO 31.3.94. DISA LLOWANCE OF DEPRECIATION WAS MADE ONLY FOR NON SUBMISSION OF US E PRIOR TO 31.3.94. ON THIS GROUND PENALTY CANNOT BE LEVIED. FOR MAKING INCORRECT CLAIM PENALTY CANNOT BE LEVIED, HAS BEEN HELD BY HON. SUP REME COURT IN THE ITA NOS.2047 & 2048/AHD/2009 ASST. YEARS 1993-94 & 94-95 25 CASE OF CIT VS. RELIANCE PETROPRODUCTS (SUPRA) AND OTHER JUDGMENTS REFERRED TO ABOVE. AS A RESULT, THIS APPEAL IS ALSO DISMISSED. 40. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30/6/11. SD/- SD/- (D. K. TYAGI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 30/6/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 16/6/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 24/6/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..