Gulbrandsen Chemicals Pvt. Ltd., Vadodara V. The Dy.CIT.,Circle-1(1), Baroda

ITA 2228/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9889 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: MUKUND BAXI
• Keywords: Depreciation
• Section: 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA.NO.2228 AND 2229/AHD/2015 / ASSTT. YEAR: 2007-2018 AND 2008-2009 GULBRANDSEN CHEMICALS P.LTD. ON COASTAL HIGHWAY P.O. MUJPUR TAL. PADRA, VADODARA 391 440 PAN : AABCG 0812 A VS. DCIT, CIR.1(1) BARODA. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI MUKUND BAXI, AR REVENUE BY : SHRI LALIT P. JAIN, SR.DR / DATE OF HEARING : 12/12/2018 / DATE OF PRONOUNCEMENT: 12/12/2018 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST ORDERS OF THE LD.CIT(A)-1, VADODARA DATED 13.5.2015 AND 15.5.2015 PASSED FOR THE ASSTT.YEAR 2007-08 AND 2008-09. 2. GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN IMPOSING PENALTY OF RS.32,02,165/- AND 6,18,270/- IN THE ASS TT.YEARS 2007-08 AND 2008-09 RESPECTIVELY. 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD T HAT THE LD.CIT(A) HAS IMPOSED PENALTY IN THE ASSTT.YEAR 2007-08 ON ACCOUN T OF TWO DISALLOWANCES MADE TO THE ASSESSEE, WHEREAS IN THE ASSTT.YEAR 200 8-09, PENALTY HAS BEEN ITA NO.2228 AND 2229/AHD/2015 2 LEVIED ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION T O THE ASSESSEE. THUS, SO FAR AS DISALLOWANCE OF DEPRECIATION GOADING THE LD. CIT(A) TO VISIT ASSESSEE WITH PENALTY, IS A COMMON FACTOR IN BOTH THE YEARS. ACCORDING TO THE LD.CIT(A), ASSESSEE HAS MADE CLAIM OF DEPRECIATION AT RS.21,39,973/- AND RS.18,18,977/- IN THE ASSTT.YEARS 2007-08 AND 2008- 09. IT EMERGES OUT FORM THE RECORD THAT ASSESSEE HAS SET UP A BUSINESS APPA RATUS FOR WHICH IT HAS INCURRED A SUM OF RS.1,42,66,483/- TOWARDS CONSULTA NCY CHARGES AND FOR TECHNICAL ASSISTANCE. ACCORDING TO THE ASSESSEE, T HIS COST WAS BORNE BY GULBRANDSEN CHEMCIALS INC., USA. THE PLANT WAS SET UP IN BETWEEN THE YEAR 2000 TO 2002. THE ASSESSEE WAS NOT HAVING ORGANIZA TIONAL AND FUNCTIONAL RESOURCES AT THAT TIME POINT OF TIME, AND THEREFORE , ENGAGED EXTERNAL SERVICE PROVIDER, SUCH AS PLANT CONSULTANTS, ARCHITECT ETC. GULBRANDSEN CHEMICALS INC., USA HAS RAISED A DEBIT NOTE UPON THE ASSESSEE FOR A SUM OF RS.1,42,66,483/-. THIS WAS REIMBURSED. THE ASSESS EE HAS CAPITALIZED THIS COST AND CLAIMED DEPRECIATION. THIS CLAIM WAS DISALLOW ED TO THE ASSESSEE AND ULTIMATELY, DISPUTE TRAVELLED TO THE TRIBUNAL IN IT A NO.915 AND 917/AHD/2015. THE TRIBUNAL HAS ALLOWED THE CLAIM O F THE ASSESSEE AND HELD THAT THIS AMOUNT HAS RIGHTLY BEEN CAPITALIZED AND D EPRECATION AT RS.21,39,973/- IS ADMISSIBLE TO THE ASSESSEE. HENC E, THE TRIBUNAL HAS DELETED DISALLOWANCE OF DEPRECIATION CLAIMED AT 15% OF RS.1 ,42,66,483/-. 4. WE FIND THAT SUB-CLAUSE (III) OF SECTION 271(1)( C) PROVIDES MECHANISM FOR QUANTIFICATION OF PENALTY. IT CONTEMPLATES THA T THE ASSESSEE WOULD BE DIRECTED TO PAY A SUM IN ADDITION TO TAXES, IF ANY, PAYABLE BY HIM, WHICH SHALL NOT BE LESS THAN THE ADDITION BUT WHICH SHALL NOT E XCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF CONC EALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OTHER WORDS, THE QUANTIFICATION OF THE PENALTY IS DEPENDED UPON THE ADDITION MADE TO THE INCOME OF THE ASSESSEE. IN THE INSTANT CASE, THE D ISALLOWANCE HAS BEEN DELETED ITA NO.2228 AND 2229/AHD/2015 3 BY THE TRIBUNAL, AND THEREFORE, NOTHING REMAINED FO R THE LD.CIT(A) TO VISIT THE ASSESSEE WITH PENALTY. THEREFORE, THE FIRST GROUND RELATING TO PENALTY QUA DEPRECIATION IN BOTH THE YEARS IS DELETED. APPEAL FOR THE ASSTT.YEAR 2008-09 IS TREATED AS ALLOWED. 5. SO FAR AS SECOND ISSUE FOR VISITING THE ASSESSEE FOR PENALTY IS CONCERNED, IT EMERGES OUT FROM THE RECORD THAT THE ASSESSEE HA S BROUGHT FORWARD LOSS FOR THE ASSTT.YEAR 2005-06 AND 2006-07. ACCORDING TO T HE LD.CIT(A), THE BROUGHT FORWARD LOSS FOR THE ASSTT.YEAR 2005-06 WAS RS.5,06,50,610/- WHEREAS THE ASSESSEE HAS CLAIMED IT AT RS.5,91,22,7 82/-. THE EXCESS LOSS CLAIMED AT RS.84,72,172/- HAS BEEN CONSIDERED BY TH E LD.CIT(A) AS AN INCOME FOR WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHE D BY THE ASSESSEE. THE CASE OF THE ASSESSEE IS THAT IT HAS FILED RETURN OF INCOME FOR THE ASST.YEAR 2007- 08 ON 5.11.2007. IT HAD CALCULATED LOSS AVAILABLE FOR SET OFF FOR THE ASSTT.YEAR 2005-06 AND 2006-07. THE ASSESSMENT FOR THE ASSTT. YEAR 2005-06 WAS MADE ON 30.12.2008. THE ASSESSMENT WAS MADE AFTER FILIN G THE RETURN BY THE ASSESSEE. THE CASE OF THE REVENUE IS THAT THE ASSE SSMENT YEAR A.Y.2007-08 WAS REOPENED ON 24.3.2012. AT THAT POINT OF TIME, REDUCED LOSS WAS AVAILABLE WITH THE ASSESSEE, BECAUSE ASSESSMENT IN A.Y.2005-0 6 HAS BEEN PASSED. THEREFORE, IN THE RETURN FILED IN RESPONSE TO THE N OTICE UNDER SECTION 148 OF THE ACT, ASSESSEE SHOULD HAVE REDUCED THE CLAIM OF LOSS PERTAINING TO THE ASSTT.YEAR 2005-06. ON THE OTHER HAND, STAND OF TH E ASSESSEE IS THAT APPEAL WITH REGARD TO DETERMINATION OF REDUCED LOSS FOR TH E ASSTT.YEAR 2005-06 IS CONCERNED, IT IS STILL PENDING IN THE TRIBUNAL, AND THEREFORE, IT CANNOT BE ALLEGED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 6. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GO NE THROUGH THE RECORD CAREFULLY. WE ARE OF THE VIEW THAT DETERMIN ATION OF LOSS AT A PARTICULAR FIGURE IN THE ASSTT.YEAR 2005-06 IS STILL SUBJECT M ATTER OF APPEAL BEFORE THE ITA NO.2228 AND 2229/AHD/2015 4 APPELLATE AUTHORITY. HAD THE ASSESSEE IN THE RETUR N FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 CLAIMED A REDUCED LOSS, TH EN IT WOULD HAVE TO FORGO ITS CLAIM IN THE APPEAL FOR THE ASSTT.YEAR 2005-06. IT IS A DEBATABLE QUESTION, WHERE THE ASSESSEE IS EMPHASIZING ITS RIGHT. NO AL LEGATIONS OF INACCURATE PARTICULARS COULD BE LEVELED AGAINST THE ASSESSEE I N THIS SITUATION, AND NO PENALTY IS ATTRACTED UPON THIS DISPUTE. THEREFORE, WE ALLOW THIS CONTENTION OF THE ASSESSEE IN THIS FOLD OF DISPUTE ALSO, AND DELE TE PENALTY IMPOSED BY THE LD.CIT(A). 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 12 TH DECEMBER, 2018 AT AHMEDABAD. S D / - (AMARJIT SINGH) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 12/12/2018