M/s M/s Munjal Castings, Ludhiana V. ACIT, Ludhiana

ITA 209/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9925 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Depreciation; Additional depreciation; Unabsorbed depreciation; Bonafide mistake
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 209/CHD/2016 ASSESSMENT YEAR: 2008-09 M/S MUNJAL CASTINGS, VS THE ACIT, 730, INDUSTRIAL AREA-B, CIRCLE V, LUDHIANA. LUDHIANA. PAN: AACFM1084E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARW AL RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 13.06.2016 DATE OF PRONOUNCEMENT : 14.06.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 13.01.2016 FOR ASSESSMENT YEAR 2008-09 CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT ON THE FOLLOWING GROUNDS : 1. THAT THE LEARNED CIT(A)-2 HAS ERRED IN CONFIRMING PENALTY U/S 271(1)(C) ON THE FOLLOWING DISALLOWANCES:- I) ADDITION ON ACCOUNT OF DEPRECIATION ON MACHINES RS . 2,10,490/-. II) ADDITION ON ACCOUNT OF DISALLOWANCE OF B/F DEPRECIATION LOSS OF RS. 99,800/-. 2. THAT THE LEARNED ACIT IGNORED THE FACTS THAT THE ABOVE DIFFERENCES DID NOT TANTAMOUNT TO CONCEALMENT OF 2 INCOME / FURNISHING OF INACCURATE PARTICULARS OF INCOM E BUT IT WAS ONLY A CASE OF INADVERTENT MISTAKE WHICH WAS POINTED OUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THAT THE LEARNED CIT(A) HAS IGNORED THE FACT THAT TH E AO ISSUING THE PENALTY NOTICE HAS NO WHERE POINTED O UT WHETHER IT WAS A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 4. THAT IN ANY CASE THE CONFIRMATION OF PENALTY IS AGAIN ST THE LAW AND FACTS OF THE CASE. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. BRIEFL Y THE FACTS OF THE CASE ARE THAT IN THE PRESENT APPEAL, T HE LEVY OF PENALTY IS REGARDING ADDITION MADE ON ACCOU NT OF DEPRECIATION ON MACHINES AND ADDITION ON ACCOUNT OF DISALLOWANCE OF BROUGHT FORWARD DEPRECIATION LOSS. 3. THE ASSESSING OFFICER NOTED IN THE ASSESSMENT ORDER THAT ASSESSEE HAS, DURING THE YEAR, PURCHASED SECOND HAND MACHINERY FROM M/S SUNBEAM AUTO LTD. THE ASSESSEE WAS ASKED TO GIVE DETAILS OF ADDITIONA L DEPRECIATION CLAIMED BY ASSESSEE. THE ASSESSEE IN THE REPLY SUBMITTED BEFORE ASSESSING OFFICER THAT RETUR N WAS FILED DECLARING INCOME OF RS. 14,19,680/- WHICH INCLUDES PROFIT OF BUSINESS BEFORE UNABSORBED DEPRECIATION AT RS. 18,14,397/-. THIS PROFIT IS AF TER THE DEDUCTION OF DEPRECIATION OF RS. 2,93,89,410/-. INADVERTENTLY, IN THE DEPRECIATION CHART, THE ADDIT IONAL 3 DEPRECIATION HAD BEEN CLAIMED ON THE THREE MACHINES PURCHASED FROM M/S SUNBEAM AUTO LTD. AT THE COST OF RS. 10,52,449/- ON WHICH ADDITIONAL DEPRECIATION CLAIMED WAS AT RS. 2,10,490/-. THE ASSESSEE, THEREFORE, REQUESTED THAT ADDITIONAL DEPRECIATION M AY NOT BE ALLOWED. THE ASSESSING OFFICER ACCEPTED THE EXPLANATION OF THE ASSESSEE AND DID NOT ALLOW ADDITIONAL DEPRECIATION AND MADE THE ADDITION OF RS . 2,10,490/-. 4. THE ASSESSING OFFICER FURTHER NOTED IN THE ASSESSMENT ORDER REGARDING BROUGHT FORWARD LOSS THA T IN THE COMPUTATION CHART FOR ASSESSMENT YEAR UNDER APPEAL 2008-09, ASSESSEE HAS CLAIMED BROUGHT FORWAR D DEPRECIATION LOSSES FOR ASSESSMENT YEAR 2007-08 AMOUNTING TO RS. 12,57,027/-. HOWEVER, AS PER ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007-08, IT WA S FOUND THAT BROUGHT FORWARD LOSSES WERE ONLY RS. 11,57,167/-. THE ASSESSEE ACCEPTED THAT ADDITION O F RS. 99,800/- MAY BE MADE WHICH WAS MADE ACCORDINGLY. THE ASSESSING OFFICER ON BOTH THESE ADDITIONS, LEVIED THE PENALTY UNDER SECTION 271(1)( C) OF THE ACT. 5. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE LD. CIT(APPEALS) AND IT WAS SUBMITTED THAT COMPLETE DETAILS OF MACHINERY PURCHASED AND DEPRECIATION CHA RT WAS FILED ALONGWITH THE RETURN. IT WAS A BONAFIDE 4 MISTAKE. THE ASSESSEE ACCEPTED THE MISTAKE BEFORE ASSESSING OFFICER ON WHICH ADDITION IS MADE. COMPL ETE DEPRECIATION CHART WAS ENCLOSED WITH THE AUDITED ACCOUNTS. AS REGARDS BROUGHT FORWARD DEPRECIATION LOSS, ASSESSEE SUBMITTED THAT THERE WAS NO MALAFIDE INTENTION OF THE ASSESSEE NOR THERE WAS ANY INTENTI ON TO CONCEAL THE FACTS. THE ASSESSING OFFICER LEVIED TH E PENALTY WITHOUT CONSIDERING THE ORDER OF LD. CIT(APPEALS) FOR ASSESSMENT YEAR 2007-08 BECAUSE THERE WAS DIFFERENCE OF RS. 25,000/- ONLY ON ACCOUN T OF DISALLOWANCE MADE SUBJECT TO THE DATE OF FILING OF THE INCOME TAX RETURN FOR THE YEAR UNDER CONSIDERATION THEREFORE, NO PENALTY SHOULD BE IMPOSED. 6. THE LD. CIT(APPEALS), CONSIDERING EXPLANATION OF THE ASSESSEE FOUND THAT THE AUDITED ACCOUNTS DID NO T REFLECT TRUE AND CORRECT AFFAIRS OF THE ASSESSEE. THE ASSESSEE IS A COMPANY AND IS ASSISTED BY PROFESSION ALS, THEREFORE, THERE IS NO QUESTION OF MISTAKE AND CONFIRMED THE LEVY OF PENALTY. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS SUBMITTED THAT ASSESSING OFFICER DISALLOWED RS. 99,860/- UNDER SECTION 14A OF THE ACT IN ASSESSMENT YEAR 2007-08 AND REDUCED THE UNABSORBED DEPRECIATIO N TO RS. 11,57,167/-. THE LD. CIT(APPEALS) VIDE ORDE R DATED 23.03.2011 REDUCED THE DISALLOWANCE BY 5 RS. 74,860/- AND SUSTAINED THE DISALLOWANCE OF RS. 25,000/- ONLY. THEREFORE, THE DIFFERENCE IN BROUGH T FORWARD DEPRECIATION WAS ONLY RS. 25,000/-. AS REGARDS DEPRECIATION ON MACHINES, HE HAS SUBMITTED THAT IT IS A MISTAKE COMMITTED BY CHARTERED ACCOUNT ANT AND ALL FACTS HAVE BEEN DISCLOSED IN THE RETURN OF INCOME, THEREFORE, ON MISTAKE, PENALTY SHOULD NOT B E LEVIED. HE HAS ALSO RELIED UPON DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 IN WHICH IT WAS HELD THAT, MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. HE HAS ALSO RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F PRICE WATERHOUSE COOPERS PVT. LTD. VS CIT 348 ITR 3 06 IN WHICH IT WAS OBSERVED THAT, PROVISIONS TOWARDS PAYMENT OF GRATUITY WAS NOT ALLOWABLE BUT ASSESSEE FAILED TO ADD TO ITS TOTAL INCOME AND IT WAS HELD THAT, IT WAS BONAFIDE AND INADVERTENT ERROR, PENALTY NOT LEVIABLE. HE HAS ALSO RELIED UPON DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS SOMANY EVERGREE KNITS LTD. 352 ITR 592 IN WHICH IT WAS HELD THAT, BONAFIDE AND INADVERTENT MISTAKE OF CHARTERED ACCOUNTANT WHILE FILING RETURN OF INCOME WILL NOT A MOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 6 7(I) ON THE OTHER HAND, LD. DR RELIED UPON ORDERS O F THE AUTHORITIES BELOW AND SUBMITTED THAT PENALTY IS STRICTLY A CIVIL LIABILITY AND RELIED UPON DECISION S OF SUPREME COURT IN THE CASES OF DHARMENDRA TEXTILE & PROCESSORS 306 ITR 277 AND ATUL MOHAN BINDAL 317 IT R 1. THE LD. DR ALSO RELIED UPON DECISION OF DELHI H IGH COURT IN THE CASE OF ZOOM COMMUNICATIONS PVT. LTD. 327 ITR 510 IN WHICH IT WAS HELD THAT, INCORRECT CLAIM BY ASSESSEE ATTRACTS PENALTY. 8. I HAVE CONSIDERED RIVAL SUBMISSIONS. THE FACTS AS NOTED ABOVE ARE NOT IN DISPUTE. THE ASSESSEE CLAIM ED ADDITIONAL DEPRECIATION ON ACCOUNT OF PURCHASE OF MACHINERY FROM M/S SUNBEAM AUTO LTD. WHEN ASSESSING OFFICER MADE ENQUIRIES FROM THE ASSESSEE REGARDING ADDITIONAL DEPRECIATION, ASSESSEE EXPLAIN ED THAT INADVERTENTLY ADDITIONAL DEPRECIATION IS CLAIM ED WHICH FACT WAS ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSEE DISCLOSED COMPLETE DETAILS OF MACHINERY PURCHASED AND DEPRECIATION CHART WHICH WAS FILED ALONGWITH THE RETURN OF INCOME. THEREFORE, IT MAY BE A BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE IN MAK ING A CLAIM OF ADDITIONAL DEPRECIATION WHICH MAY NOT BE ALLOWABLE IN LAW. THE ASSESSEE ALSO EXPLAINED THAT IT WAS AN ERROR ON THE PART OF THE CHARTERED ACCOUNTAN T AND ASSESSEE ON REALIZING THE MISTAKE, IMMEDIATELY EXPLAINED BEFORE ASSESSING OFFICER THAT ADDITIONAL DEPRECIATION MAY NOT BE ALLOWED. THE ASSESSING OFF ICER 7 AFTER CONSIDERING EXPLANATION OF THE ASSESSEE, ACCE PTED THE EXPLANATION OF THE ASSESSEE. 8(I) SIMILARLY AS REGARDS DISALLOWANCE OF BROUGHT FORWARD DEPRECIATION LOSS, THE ASSESSEE MADE SPECIF IC SUBMISSIONS BEFORE LD. CIT(APPEALS) THAT LD. CIT(APPEALS) FOR PRECEDING ASSESSMENT YEAR 2007-08, HAS ALLOWED SUBSTANTIAL RELIEF TO THE ASSESSEE AND DIFFERENCE IS LEFT TO RS. 25,000/- ONLY. NO ADVERS E COMMENTS HAVE BEEN MADE BY THE LD. CIT(APPEALS) ON THE SUBMISSIONS OF THE ASSESSEE AND EVEN DURING ARGUMENTS, LD. DR DID NOT REBUT THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. THEREFORE, BROUGHT FORWA RD LOSSES WHICH WERE TAKEN FROM ASSESSMENT ORDER OF ASSESSMENT YEAR 2007-08 IN RETURN OF ASSESSMENT YEA R UNDER APPEAL, THERE MAY BE AN INADVERTENT MISTAKE O N THE PART OF THE ASSESSEE IN MAKING A CLAIM WHICH WA S MADE BASIS OF ADDITION ON ACCOUNT OF DISALLOWANCE MADE IN ASSESSMENT YEAR 2007-08 THEREFORE, ON BOTH THE ABOVE ITEMS ON WHICH PENALTY HAS BEEN IMPOSED, ASSESSEE HAS BEEN ABLE TO EXPLAIN THAT BOTH THESE ADDITIONS WERE MADE ON ACCOUNT OF INADVERTENT AND BONAFIDE MISTAKE COMMITTED BY THE ASSESSEE AND THEI R CHARTERED ACCOUNTANT. THE DECISIONS CITED BY LD. COUNSEL FOR THE ASSESSEE, THEREFORE, CLEARLY SUPPOR T CASE OF THE ASSESSEE THAT ON MERE MAKING A CLAIM ON ACCOUNT OF BONAFIDE MISTAKE, MAY NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF 8 INACCURATE PARTICULARS OF INCOME. THE PENALTY IN T HE FACTS AND CIRCUMSTANCES OF THE CASE MAY NOT BE ATTRACTED UNDER SECTION 271(1)(C) OF THE ACT OF THE ACT. 9. IN VIEW OF THE ABOVE DISCUSSION, I SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND CANCEL THE PENALTY ON BOTH THE ABOVE ITEMS. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 14 TH JUNE, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD