DCIT, Coimbatore V. SMA Textile Processing Centre Ltd., Coimbatore

ITA 2213/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90334 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: L RAJESH
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO. 2213/MDS/2014 ( / ASSESSMENT YEAR: 2008-09) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE- I(1), 63-A RACE COURSE ROAD, COIMBATORE. VS M/S. SIMA TEXTILE PROCESSING CENTRE LTD., 41, RACE COURSE ROAD, COIMBATORE-641 018. PAN:AAJCS5062N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. L.RAJESH, C.A. /DATE OF HEARING : 25 TH MARCH, 2015 /DATE OF PRONOUNCEMENT : 20 TH MAY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, COIMBAT ORE DATED 4.6.2014 FOR THE ASSESSMENT YEAR 2008-09. TH E ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE PENAL TY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 2. BRIEF FACTS ARE THAT ASSESSEE RECEIVED SUBSIDY FROM THE GOVERNMENT FOR SETTING UP OF TEXTILE PROCESSING CEN TRE. THE ASSESSEE DEPOSITED SUCH MONEY IN THE BANK AND EARNE D 2 ITA NO.2213/MDS/2014 INTEREST OF ` 35,37,947/- ON THE GOVERNMENT SUBSIDY. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESS EE WAS IN THE PROCESS OF SETTING UP OF TEXTILE PROCESSING CENTRE INCURRED EXPENDITURE AMOUNTING TO ` 70,13,221/-. THE ASSESSEE FILED RETURN OF INCOME AND IN THE COMPUTAT ION INTEREST RECEIVED ON SUBSIDY WHICH WAS DEPOSITED IN THE BANK WAS CLAIMED SET OFF AGAINST THE EXPENDITURE INCURRE D BY THE ASSESSEE AND CAPITALIZED THE NET EXPENDITURE AS TH E ASSESSEE DID NOT COMMENCE BUSINESS DURING THE ASSES SMENT YEAR. ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY THE ASSESSING OFFICER ASSESSING THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WITHOUT ALLOWING ANY SET OFF AGAINST THE EXPENDITURE INCURRED BY THE ASSESSEE. ON FURTHER APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ASSESSMENT. THE ASSESSING O FFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT AND IN REPLY TO THE SHOW CAUSE NOTICE, ASSESSEE SUBMITTED THAT ASSESSEE HAS NOT CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS AND ITS CLAIM WAS BASED ON CERTAIN CASE LAWS, THEREFORE REQUESTED TO DROP THE PENALTY PROCEEDINGS. HOWEVER, THE ASSESSING OFFICER PASSED ORDER UNDER SECTION 271(1)(C) OF THE ACT, LEVYING PENALTY HOLDING 3 ITA NO.2213/MDS/2014 THAT ASSESSEE HAS CONCEALED INCOME BY SETTING OFF I NTEREST AGAINST EXPENDITURE. ON APPEAL, COMMISSIONER OF IN COME TAX (APPEALS) DELETED THE PENALTY. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN LEVYING PENALTY. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS AS THE ASSESSEE HAS CLAIMED SET OFF OF INTEREST AGA INST EXPENDITURE BEFORE COMMENCEMENT OF BUSINESS. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT WHATEVER ASSESSEE EARNED BEFORE COMMENCEMENT OF BUSINESS SHO ULD BE TREATED AS INCOME OF ASSESSEE FROM OTHER SOURCES . 4. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTS THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E PENALTY AND SUBMITS THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME A ND THE CLAIM WAS MADE BASED ON THE JUDICIAL PRONOUNCEMENTS. 5. HEARD BOTH THE SIDES. PERUSED ORDERS OF LOWER AUTHORITIES. THE ASSESSING OFFICER LEVIED PENALTY H OLDING THAT 4 ITA NO.2213/MDS/2014 THERE IS CONCEALMENT OF INCOME AS THE ASSESSEE HAS SET OFF OF INTEREST INCOME FROM SUBSIDY AGAINST THE EXPENDITUR E BEFORE COMMENCEMENT OF BUSINESS. ON APPEAL, COMMISSIONER O F INCOME TAX (APPEALS) DELETED THE PENALTY OBSERVING THAT THERE IS NO FILING OF INACCURATE PARTICULARS OF INC OME AND THERE IS NO CONCEALMENT OF INCOME ON THE PART OF THE ASSE SSEE. COMMISSIONER OF INCOME TAX (APPEALS) ALSO REFERRED TO THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. VGR FOUNDATIONS (198 ITRT 132) AND OBSERVED THAT T HE HIGH COURT HAS HELD THAT INTEREST INCOME OUT OF FIX ED DEPOSITS WITH BANKS FOR A PERIOD PRIOR TO COMMENCEMENT OF BU SINESS CAN BE SET OFF AGAINST EXPENDITURE. FURTHER, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE DELHI HIGH COURT IN THE CASE OF CIT VS. MUSHASHI A UTOPARTS INDIA PVT. LTD. (330 ITR 545) HELD AS UNDER:- IN THE CASE WHERE ASSESSEE COMPUTED THE PRE- OPERATIVE EXPENSES AFTER DEDUCTING INTEREST AND SHOWING IN BALANCE SHEET FILED ALONG WITH RETURN OF INCOME AND ASSESSING OFFICER HOLDING THAT INTEREST CANNOT BE ADJUSTED AGAINST PRE-OPERATIVE EXPENSES DOES NOT MEAN THAT THERE WAS ANY NON-DISCLOSURE OF MATERIAL FACT, WHICH COULD WARRANT LEVY OF PENALTY. THEREFORE, THERE WAS NO CONCEALMENT ON THE PART OF THE ASSESSEE AND IN 5 ITA NO.2213/MDS/2014 THESE CIRCUMSTANCES PENALTY COULD NOT BE IMPOSED. 6. THUS, THE COMMISSIONER OF INCOME TAX (APPEALS) OPINED THAT CASE OF THE ASSESSEE IS SIMILAR TO THE FACTS OF THE CASE BEFORE THE DELHI HIGH COURT IN CIT VS. MUSHAS HI AUTOPARTS INDIA P.LTD. (SUPRA) AND THEREFORE HELD T HAT THERE WAS NO FILING OF INACCURATE PARTICULARS OF INCOME A ND THERE WAS NO CONCEALMENT OF INCOME ON THE PART OF THE ASS ESSEE. WE ALSO FIND THAT THE ACTION OF THE ASSESSING OFFIC ER IN NOT ALLOWING SET OFF OF INTEREST SUBSIDY AGAINST THE EX PENDITURE INCURRED BY THE ASSESSEE BEFORE COMMENCEMENT OF BUS INESS IS ONLY A MERE CHANGE OF OPINION AND THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. IN THE CASE OF CIT VS. BOKARO STE EL LTD. (236 ITR 315), THE HONBLE SUPREME COURT REFERRING TO THE DECISION OF CHELLAPALLI SUGARS LTD. VS. CIT (98 ITR 167)(SC), HELD THAT IF THE ASSESSEE RECEIVES ANY AMOUNTS WHIC H ARE INEXTRICABLY LINKED WITH THE PROCESS OF SETTING UP OF ITS PLANT AND MACHINERY SUCH RECEIPTS WILL GO TO REDUCE THE COST OF ITS ASSETS AND THESE RECEIPTS ARE OF THE CAPITAL NATURE AND CANNOT BE TAXED AS INCOME. IN THE CIRCUMSTANCES, WE UPHOLD 6 ITA NO.2213/MDS/2014 THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) IN DELETING THE PENALTY. 7. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF MAY, 2015 . SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 20 TH MAY, 2015 SOMU 12 32 / COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .