Agarwal Polyfibres Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(4), Surat

ITA 2085/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76730 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Depreciation; Bonafide mistake
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVED I, A.M.) I.T. A. NO. 2085/AHD/2011 (ASSESSMENT YEAR: 2007-08) AGARWAL POLYFIBRES PVT. LTD. 302/A, 3 RD FLOOR, CENTRE POINT, RING ROAD, SURAT V/S THE I.T.O, WARD-1(1), SURAT. (APPELLANT) (RESPONDENT) PAN: AACCA 0013C APPELLANT BY : SHRI RAMESH MALPANI RESPONDENT BY : SHRI P.L. KUREEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 29-05-2014 DATE OF PRONOUNCEMENT : 06 -06-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-I, SURAT DATED 21.06.2011 FOR A.Y. 2007-08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF TEXTURIZING OF YARN AND TRADING OF EMBROIDERED FABRICS. ASSESSE E ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y 07-08 ON 27.10.2007 DE CLARING TOTAL INCOME OF RS. 3,54,283/-. ASSESSMENT WAS FRAMED UNDER SEC TION 143(3) VIDE ITA NO 2085/AHD/2011 . A.Y. 2007- 08 2 ORDER DATED 22.12.2009 AND THE TOTAL INCOME WAS DET ERMINED AT RS. 24,73,270/-. WHILE FRAMING THE ASSESSMENT, A.O APAR T FROM MAKING VARIOUS ADDITIONS ALSO DISALLOWED THE CLAIM OF DEPR ECIATION ON THE PLANT AND MACHINERY. A.O WAS OF THE VIEW THAT ASSESSEE HA D CLAIMED DEPRECIATION AT 35% INSTEAD OF 15%. THE EXCESS CLA IM OF DEPRECIATION WAS DISALLOWED BY THE A.O AND ON THE AFORESAID EXCE SS DEPRECIATION OF RS. 9,39,469/- CLAIMED BY THE ASSESSEE. A.O VIDE PE NALTY ORDER DATED 05.05.2010 LEVIED PENALTY U/S. 271(1)(C) OF RS. 3,1 6,225/-. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFOR E CIT(A). CIT(A) CONFIRMED THE PENALTY BY HOLDING AS UNDER:- THE ARGUMENTS OF A.O. AS WELL AS APPELLANT HAS BEE N CONSIDERED. THE APPELLANT HAS RAISED THE DEFENCE OF BONAFIDE MISTAKE. HOWEVER, AP PELLANT HAS LED NO EVIDENCE TO SUPPORT ITS CONTENTIJON OF BONAFIDE MISTAKE. ON THE CONTRARY, A.O. HAS REASONED WELL TO ESTABLISH THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS. THE APPELLANT HAS LED NO EVIDENCE/ARGUMENTS WHICH CALL FOR INTERFERENCE W ITH A.OS ORDER. HAVING REGARD TO THE ABOVE AS WELL AS THE REASONING GIVEN BY A.O, THE ORDER IMPOSING PENALTY IS UPHELD. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. 5. BEFORE US LD. A.R. SUBMITTED THAT ASSESSEE HAD CLAI MED DEPRECIATION OF 35% UNDER SECTION 32(1)(IIA) AND THE DEPRECIATION W AS AVAILABLE IN THE YEAR NEW MACHINERY OR PLANT WAS ACQUIRED AND INSTAL LED. INADVERTENTLY, THE DEPRECIATION RATE OF 35% WAS APPLIED IN THE SEC OND YEAR. THE CONTINUANCE OF THE SAME BLOCK IN THE NEXT YEAR WAS MISTAKE THROUGH OVERSIGHT. WHEN THE MATTER CAME TO THE NOTICE OF TH E ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE ACCEPTED THE M ISTAKE. LD. A.R. ITA NO 2085/AHD/2011 . A.Y. 2007- 08 3 THEREFORE SUBMITTED THAT THE CLAIM OF DEPRECIATION WAS NOT A DELIBERATE CLAIM BUT WAS DUE TO OVERSIGHT AND FOR WHICH HE PLA CED RELIANCE IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT (2012) 348 ITR 306 (SC), CIT VS. SANIYA MIRZA (2013) 87 DTR 371 (A.P) AND THE CASE OF CIT VS. BRAHAMPUTRA CONSORTIUM LTD. ITA NO. 1582/DE L/2010 ORDER DATED 03.08.2011. HE THEREFORE SUBMITTED THAT THE PENALTY LEVIED BY THE A.O BE DELETED. THE LD. D.R. ON THE OTHER HAND RELI ED ON THE ORDER OF A.O AND CIT(A) AND FURTHER PLACED RELIANCE ON THE DECIS ION IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS PVT. LTD. 327 ITR 510 (DEL) . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, THE ASSESSEE WAS ELIGIBLE FOR DEPRECIATION AT 15% BUT HAD CLAIMED DEPRECIATION AT 35%. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS ASSESSEES CONTENTION THAT WHEN THE MISTAKE WAS BROUGHT TO HIS NOTICE IT ACCEPTED THE MISTAKE. ASS ESSEE HAS FURTHER CONTENDED THAT THE MISTAKE AROSE DUE TO THE FACT TH AT THE DEPRECIATION AT 35% WAS ALLOWABLE TO ASSESSEE UNDER SECTION 32(1)(I IA). DUE TO INADVERTENT MISTAKE, THE RATE OF DEPRECIATION WHICH WAS APPLIED IN THE FIRST YEAR WAS ALSO ERRONEOUSLY APPLIED IN THE SECO ND YEAR AND THE MISTAKE WAS NOT INTENTIONAL. THE AFORESAID SUBMISSION OF T HE ASSESSEE HAS NOT BEEN CONTROVERTED BY REVENUE BY BRINGING ANY CONTRA RY MATERIAL ON RECORD. 7. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLN. 1 T O SECTION 271(L)(C) ARE THAT : (I) THE PERSON FAILS TO OFFER THE EXPLAN ATION, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE CIT (A) OR THE CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WH ICH HE IS NOT ABLE TO ITA NO 2085/AHD/2011 . A.Y. 2007- 08 4 SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN D ISCLOSED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CA TEGORIES, THEN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPL N. 1 TO SECTION 271(L)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTI NG THE TOTAL INCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED, FOR THE PURPOSES O F CL. (C) OF S. 271(1), AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUT HORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLA NATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BE EN DISCLOSED BY HIM, THEN IN THAT CASE PENALTY SHALL NOT BE IMPOSED. 8. IN THE PRESENT CASE THE ASSESSEE HAD DISCLOSED THE MATERIAL FACTS BEFORE THE AO. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLA IM IN THE RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL FACT S RELEVANT THERETO, THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS IN COME BY THE ASSESSEE OR FURNISHING INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BONA FIDE A ND WHETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENALTY UNDER S. 271(1) (C) OF THE ACT. IN THE CASE OF RELI ANCE PETRO PRODUCTS (SUPRA) IT HAS BEEN HELD THAT ' A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING INCOME OF THE ASSE SSEE. SUCH A CLAIM ITA NO 2085/AHD/2011 . A.Y. 2007- 08 5 MADE IN RETURN IS NOT AMOUNTING TO FURNISHING OF IN ACCURATE PARTICULARS'. 9. IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. V S. CIT (2012) 348 ITR 306 (SC) THE HON. APEX COURT NOTED THAT THOUGH A BONAFIDE AND INADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING IT S RETURN HAD FAILED TO ADD THE PROVISIONS FOR GRATUITY TO ITS TOTAL INCOME , THE SAME WAS DESCRIBED AS A HUMAN ERROR WHICH ALL ARE PRONE TO MAKE. IT FU RTHER NOTED THAT THE CALIBER AND EXPERTISE OF THE ASSESSEE HAD LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. IT FURTHER HELD THAT ABSENCE OF DUE CARE DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING IN ACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 10. IN THE CASE OF CIT VS. BRAHAMPUTRA CONSORTIUM LTD. (SUPRA) VIDE ORDER DATED 03.08.2011 THE FACTS WERE THAT THE ASSESSEE H AD CLAIMED DEPRECIATION AT 40% ON CERTAIN EQUIPMENTS THOUGH TH E ASSESSEE WAS ELIGIBLE TO CLAIM DEPRECIATION @ 25%. WHEN THE ASSE SSEE WAS CONFRONTED, IT REVISED ITS CLAIM OF DEPRECIATION. HONBLE HIGH COURT CONCLUDED WHEN THE ASSESSEE ACCEPTS THE EXCESS DEPR ECIATION CLAIMED INADVERTENTLY AND THE SAME BEING DISALLOWED BY THE A.O, PENALTY UNDER SECTION 271(1)(C) IS NOT WARRANTED IN SUCH A CASE. THE CASE LAW RELIED BY REVENUE IS DISTINGUISHABLE ON FACTS BECAUSE IN THAT CASE THE ASSESSEE HAD MADE A CLAIM ON ACCOUNT OF INCOME TAX WHICH IS UNDI SPUTEDLY NOT ALLOWABLE AND THEREFORE THE EXPLANATION FOR CLAIMIN G DEDUCTION COULD NOT BE CONSIDERED BONAFIDE. THE CASE OF THE ASSESSEE IS DIFFERENT. ITA NO 2085/AHD/2011 . A.Y. 2007- 08 6 11. CONSIDERING THE TOTALITY OF FACTS AND RELYING ON TH E AFORESAID DECISIONS OF HONBLE APEX COURT AND DELHI HIGH COURT, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, MAKING OF ADDITION WHILE FRAMI NG ASSESSMENT DOES NOT CALL FOR LEVY OF PENALTY U/S 271(L)(C). WE THUS CANCEL THE PENALTY LEVIED BY THE AO. THEREFORE, THIS GROUND OF ASSESSE E IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 06 -06- 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD