P.C. Snehal Engineers Pvt. Ltd., Ahmedabad V. The ACIT(OSD), Circle-5, Ahmedabad

ITA 2341/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1227 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 15-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 25-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MANOJ ACHARYA
• Keywords: Depreciation; Wrong claim; Difference of opinion
• Section: 143(3); 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2341/AHD/2013 / ASSTT. YEAR: 2007-2008 P.C. SNEHAL ENGINEERS PVT. LTD. 18, PRATIMA SOCIETY NR.DADA SAHEB PAGLA NAVRANGPURA AHMEDABAD 380 009. PAN : AACCP 2051 P VS ACIT (OSD) CIR.5, AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI MANOJ ACHARYA, CA REVENUE BY : SHRI SANJAY KUMAR, SR.DR / DATE OF HEARING : 15/06/2016 / DATE OF PRONOUNCEMENT: 13/07/2016 $%/ O R D E R THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD.CIT(A)-XI, AHMEDABAD DATED 26.7.2013 PASSED FOR THE ASSTT.YEAR 2007- 08. 2. ASSESSEE HAS CHALLENGED CONFIRMATION OF PENALTY AMOUNTING TO RS.3,26,200/- IMPOSED UNDER SECTION 271(1)(C) OF TH E INCOME TAX ACT, 1961. 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, I HAVE GONE THOUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD T HAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 29.10.2007 SHOWING TOTAL INCOME AT RS.16,63,938/- AND ASSESSMENT WAS FINALIZED UNDER SECTION 143(3) ON 4. 12.2009, DETERMINING THE TOTAL INCOME AT RS.26,33,040/-. THE LD.AO HAS MADE ADDITION OF RS.9,69,102/- OUT OF THE CLAIM OF DEPRECIATION. ITA NO.2341/AHD/2013 2 IT IS PERTINENT TO OBSERVE HERE THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AT THE RATE OF 100% ON CENTERING MATERIAL, BECAUSE VALUE OF EACH ITEM WAS LESS THAN RS.5,000/-. THIS CLAIM OF THE ASSESSEE WAS DI SALLOWED. THE LD.AO HAS MADE ADDITION OF RS.9,69,102/- BY OBSERVING AS UNDE R: 3. ON VERIFICATION OF DEPRECIATION CHART, IT IS SE EN THAT ASSESSEE HAS CLAIMED DEPRECIATION AT THE RATE OF 100% ON CENTERI NG MATERIAL AT AN AMOUNT OF RS.2,95,035/- ON THE OPENING BALANCE AS W ELL AS OF RS.6,74,067/- ON THE ADDITION MADE DURING FIRST HAL F. THE TOTAL CLAIM IS MADE AT AN AMOUNT OF RS.9,69,102/- AND DEPRECIATION IS CLAIMED @100%. ON GOING THROUGH THE BILLS FOR ADDITION, MAD E DURING FIRST HALF OF THE YEAR, IT IS SEEN THAT THE SAME IS IN RESPECT OF M.S. ANGLES AND BARS, HR SHEETS & PLATES AS WELL AS LABOUR CHARGES. THERE IS ALSO A JV ENTRY TOWARDS LOAN ACCOUNT IN THE SAID ADDITION OF RS.2,16,002/- IN THE MONTH OF AUGUST 2006. THIS MEANS THAT ORIGINALLY TH E ITEM WAS PURCHASED BY P.C. SNEHAL CONSTRUCTION CO. AND NOT T HE ASSESSEE. THE ITEMS ARE ABOVE WORTH RS.5,000/-. THE ASSESSEE APPE ARS TO HAVE ALSO CLAIMED DEPRECIATION EVEN ON LABOUR CHARGES, WHICH IS RS.86514/- AND RS.27297/-. THE CONCLUSION OF THE ABOVE DISCUSSION IS THAT THE DEPRECIATION CLAIM APPEARS TO IMPROPER. MOREOVER, T HE USER ASPECT HAS NOT BEEN PROVED OF THE SAID ASSETS. THEREFORE THE E NTIRE CLAIM OF DEPRECIATION OF RS.9,69,102/- IS DISALLOWED AND ADD ED TO THE TOTAL INCOME. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE AC T ARE INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. (DISALLOWANCE - RS.9,69,102/-) 6. DISSATISFIED WITH THE ADDITION, THE ASSESSEE CAR RIED THE MATTER BEFORE THE LD.CIT(A), WHO IN THE FIRST ROUND OF APPEAL, OBSERV ED THAT THE AO TO VERIFY THE CONTENTIONS OF THE ASSESSEE WHETHER EACH STEEL PLAT E CONSUMED BY THE ASSESSEE FOR PREPARING CENTERING PLATES WAS BELOW RS.5,000/- AND AFTER VERIFICATION OF THIS FACT, THIS ISSUE BE DECIDED AGAIN. THE LD.AO WHILE GIVING EFFECT TO THE ORDER OF THE LD.CIT(A) PASSED AN ORDER UNDER SECTIO N 154 ON 26.7.2013 AND RECONFIRMED THE ADDITION. THE ISSUE AGAIN TRAVELLE D TO THE CIT(A). THE LD.CIT(A) HAS DIRECTED FOR GRANT OF DEPRECIATION AT THE RATE OF 15%. THIS ISSUE, THEREAFTER TRAVELLED TO ITAT AND THE TRIBUNA L IN ITA NO.758/AHD/2011 ITA NO.2341/AHD/2013 3 DISMISSED THE APPEAL OF THE REVENUE. IN THIS WAY, IT APPEARS THAT THE DEPRECIATION WAS GRANTED TO THE ASSESSEE AT THE RAT E OF 15%. THE LD.AO HAS INITIATED PENALTY PROCEEDINGS AND IMPOSED A PENALTY OF RS.3,26,200/- WHICH IS EQUIVALENT TO THE TAX SOUGHT TO BE EVADED. 7. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 8. BEFORE ME, IT HAS BEEN PLEADED BY THE ASSESSEE T HAT ITS CLAIM FOR GRANT OF DEPRECATION AT THE RATE OF 100% WAS NOT ACCEPTED BY THE AO, DOES NOT MEAN THAT THE ASSESSEE DESERVES TO BE VISITED WITH PENAL TY. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS, 322 ITR 15 8 (SC). ACCORDING TO THE LD.COUNSEL FOR THE ASSESSEE IT WAS ONLY A DIFFERENC E OF OPINION BETWEEN HIM AND THE AO. THE LD.COUNSEL FOR THE ASSESSEE, THERE AFTER RELIED UPON THE ORDER OF THE ITAT IN THE CASE OF VINAY BALWANTRAI AGARWAL VS. ITO, ITA NO.231/AHD/2013. HE PLACED ON RECORD COPY OF THE O RDER. THE LD.COUNSEL FOR THE ASSESSEE FURTHER RELIED UPON THE JUDGMENT OF TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF MITSU INDUSTRIES LTD. VS. DCIT , TAX APPEAL NO.216 OF 2004. HE PLACED ON RECORD COPY OF THIS JUDGMENT. HE RELIED UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF NALIN P. SHAH (HUF), TAX APPEAL (LOD) 49 TO 51 OF 2013. COPY OF THIS ORDER ALSO PLACED ON RECORD. 7. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ERS OF THE REVENUE AUTHORITIES. 8. I HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THR OUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE ACT HAS A DIREC T BEARING ON THE CONTROVERSY, THEREFORE, WE TAKE NOTE RELEVANT PROVISION, WHICH R EADS AS UNDER: ITA NO.2341/AHD/2013 4 '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE OF COURSE OF ANY PROCEE DINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B) ** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL N OT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULA RS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OR SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 9. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE ITA NO.2341/AHD/2013 5 SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION-1 TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANAT ION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. ITA NO.2341/AHD/2013 6 8. IN THE LIGHT OF THE ABOVE DISCUSSION, IF I EXAMI NE THE FACTS OF THE PRESENT CASE, THEN, IT WOULD REVEAL THAT THE AO HAS DEMONST RATED AS TO HOW THE CLAIM OF THE ASSESSEE WAS FACTUALLY INCORRECT. IN OTHER WORDS, HE HAS DEMONSTRATED THAT IT WAS A FALSE CLAIM. HE MADE REFERENCE THAT ORIGINALLY THE ITEM WAS PURCHASED BY P.C. SNEHAL CONSTRUCTION COMPANY AND N OT THE ASSESSEE. THUS, THE DISALLOWANCE WAS NOT MADE MERELY ON THE BASIS O F DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AO. THE LD.FIRST APPE LLATE AUTHORITY HAS MADE REFERENCE TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS, 327 ITR 510 FOR HOLDING TH AT THE PENALTY REQUIRED TO BE IMPOSED UPON THE ASSESSEE. THE ASS ESSEE NOWHERE RENDERED AN EXPLANATION THAT WHAT HAS OPERATED IN HIS MIND WHIL E FILING THE RETURN FOR CLAIMING DEPRECIATION AT THE RATE OF 100%. THE PRO VISION OF ALLOWING 100% DEPRECIATION ON THE ITEMS VALUED LESS THAN RS.5,000 /- HAS BEEN OMITTED FROM THE STATUTE BOOK BY FINANCE ACT, 1995 W.EF. 1.4.199 6. THUS, THERE WERE TWO FALLACIES, VIZ. (I) IN SPITE OF NON-AVAILABILITY OF DEPRECIATION BY VIRTUE OF AMENDMENT CARRIED OUT IN THE ACT, THE ASSESSEE HAD MADE OUT A CLAIM, AND (II) THE AO HAS DEMONSTRATED THAT ITS CLAIM WAS NOT FACT UALLY ADMISSIBLE. THE CASES LAWS REFERRED BY THE ASSESSEE ARE NOT APPLICA BLE ON THE GIVEN FACTS OF THE CASE. THEREFORE, I AM OF THE VIEW THAT THE LD.CIT( A) HAS RIGHTLY CONFIRMED PENALTY UPON THE ASSESSEE, AND THE IMPUGNED ORDER O N THIS ISSUE IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 13 TH JULY, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 13/07/2016