S.D.S. Electronics Private Limited, Chandigarh V. DCIT, Chandigarh

ITA 243/CHANDI/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5300 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S KAHLON
• Keywords: Depreciation
• Section: 271(1)(c); 80IC; 191

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH , !'# $' % & , '( BEFORE: SH.SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, A M ./ ITA NO.243/CHD/2018 / ASSESSMENT YEAR : 2007-08 S.D.S. ELECTRONICS PRIVATE LIMITED, CHANDIGARH THE D.C.I.T., CHANDIGARH. ./PAN NO: AABCS9990D /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI AJAY JAIN, CA ! / REVENUE BY : SHRI J.S. KAHLON, SR. DR '# $ /DATE OF HEARING : 23.07.2018 %&'(# /DATE OF PRONOUNCEMENT : 18.10.2018 ') /ORDER PER ANNAPURNA GUPTA, A.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE COMMISSIONER OF IN COME TAX,(APPEALS)-1(IN SHORT CIT(A) ,U/S 250(6) OF THE INCOME TAX ACT,1961,(HEREINAFTER REFERRED TO AS ACT) CONFIRM ING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 2 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUND OF APPEAL: 2. THAT THE LD COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN CONFIRMING THE PENALTY UNDER SECTION 271(1)(C ) ON DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.556656/-. 3. AT THE OUTSET, ITSELF, IT WAS POINTED OUT THAT T HE ISSUE ON WHICH PENALTY WAS LEVIED RELATED TO THE DISALLOW ANCE OF DEPRECIATION ON ACCOUNT OF REALLOCATION OF DEPRECIA TION 2 BETWEEN THE ELIGIBLE AND NON ELIGIBLE UNIT AMOUNTIN G TO RS.5,56,656/-. IT WAS POINTED OUT THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF SAFETY AND SECURITY EQUIPMENT AND WAS CARRYING ON I TS BUSINESS AT PANCHKULA AND PARWANOO. THE INCOME OF PARWANOO UNIT WAS CLAIMED EXEMPT U/S 80IC OF THE AC T. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE HAD NOT ALLOCATED DEPRECIATION PE RTAINING TO OFFICE AND INFRASTRUCTURES OF THE HEAD OFFICE AT PANCHKULA TO THE PARWANOO UNIT. HE, THEREFORE, ALLOCATED THE SAME IN THE SALE RATIO THUS RESULTING IN DISALLOWANCE OF D EPRECIATION TO THE EXTENT OF RS.5,56,656/- IN THE NON EXEMPT UN IT I.E. PANCHKULA UNIT. BEFORE THE CIT(APPEALS), THE ASSESS EE WITHDREW THE APPEAL FILED ON THIS ISSUE. THE ASSESS ING OFFICER THEREAFTER PROCEEDED TO LEVY PENALTY ON THE DISALLOWANCE SO MADE, HOLDING THAT THE BIASED ALLOC ATION OF DEPRECIATION ON THE COMMON ASSET, MADE BY THE ASSES SEE WAS CLEARLY MOTIVATED TOWARDS INCREASING BENEFIT U/S 80 IC AND THAT THE ASSESSEE HAD NO EXPLANATION FOR THE SAME. THE LD.CIT(A) UPHELD THE ORDER OF THE AO. 4. BEFORE US, THE LD. COUNSEL FOR ASSESSEE CONTENDE D THAT THE PANCHKULA UNIT WAS THE EXISTING UNIT AND THE PA RWANOO HAD BEEN SET UP LATER ON. THE LD. COUNSEL FOR ASSES SEE STATED THAT THE PARWANOO UNIT ALSO HAD ITS OFFICE AND STAF F TO EXECUTE THE SALE. IT WAS CONTENDED THAT THE PANCHK ULA UNIT BEING THE EXISTING UNIT ON WHICH DEPRECIATION ON TH E IMPUGNED ASSETS WAS BEING CLAIMED OVER THE YEARS, I N THE 3 OPINION OF THE ASSESSEE COMPANY, THE SAID UNIT HAD TO BEAR THE FIXED ASSET COST AND, THEREFORE, DEPRECIATION O N THE SAID ASSETS WAS CONTINUED TO BE CLAIMED. THE LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE ASSESSING OFFICER DID N OT AGREE WITH THE VIEW OF THE ASSESSEE AND HAD ALLOCATED DEP RECIATION TO THE PARWANO UNIT. IT WAS CONTENDED THAT THE MERE DISALLOWANCE OF AN EXPENSE PER SE DID NOT MEAN THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME AND HA D FURNISHED INACCURATE PARTICULARS OF INCOME AND HENC E PENALTY COULD NOT BE LEVIED. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: 1) CIT VS. AJAIB SINGH & CO., 253 ITR 630 (P&H) 2) CIT VS. RAVAIL SINGH& CO., 254 ITR 191 (P&H) 3) CIT VS. RELIANCE PETROPRODUCT (2010) 322 ITR 158 (SC). 5. LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER S OF THE LOWER AUTHORITIES STATING THAT THE PANCHKULA UNIT W AS ADMITTEDLY THE HEAD OFFICE OF THE ASSESSEES BUSINE SS AND DEPRECIATION ON OFFICE AND FURNITURE EQUIPMENT HAD TO BE ALLOCATED TO THE NON-EXEMPT UNIT ALSO SINCE THE BEN EFIT WAS BEING DERIVED BY THE SAID UNIT ALSO FROM THE ACTIVI TIES BEING CARRIED OUT AT THE HEAD OFFICE AND THE BIASED ALLOC ATION WAS MADE BY THE ASSESSEE DELIBERATELY TO INCREASE THE B ENEFIT U/S 80IC AND HAD THE SAID ATTEMPT OF THE ASSESSEE NOT B EEN UNEARTHED BY THE ASSESSING OFFICER, IT WOULD HAVE G ONE UNNOTICED. THE LD. DR FURTHER STATED THAT THE ASSES SEE HAD NOT BEEN ABLE TO EXPLAIN WHY EXCESS DEPRECIATION HA D BEEN CLAIMED IN THE NON EXEMPT UNIT. 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND MER IT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. MER E DISALLOWANCE OF CLAIM OF DEPRECIATION IN THE PRESEN T CASE, WE HOLD DOES NOT WARRANT AND JUSTIFY THE LEVY OF PENAL TY. WE FIND THAT THE ASSESSEE HAD PROFERRED A BONAFIDE EXP LANATION FOR THE CLAIM OF DEPRECIATION THAT ITS NON EXEMPT U NIT AT PANCHKULA WAS AN EXISTING UNIT ON WHICH IT HAD BEEN CLAIMING DEPRECIATION ON THE IMPUGNED ASSETS OVER T HE YEARS AND THAT THAT IT HAD WHEREWITHAL IN THE EXEMPT UNI T SET UP LATER ON ,I.E PARWANOO UNIT, TO CARRY OUT SALES OPE RATION. THAT IN VIEW OF THE SAID FACTS ,IT WAS CONTENDED ,T HAT EVEN AFTER THE EXEMPT UNIT CAME INTO EXISTENCE THE ASSES SEE WAS OF THE BELIEF THAT THE DEPRECIATION ON THESE ASSETS WAS TO BE CLAIMED IN THE NON EXEMPT UNIT ONLY. THE REVENUE HA S NOT CONTROVERTED THE AFORESAID FACTS STATED BY THE ASSE SSEE NOR HAS THE EXPLANATION BEEN FOUND TO BE FALSE. FURTHE R THE DISALLOWANCE HAD BEEN MADE BY MERE ALLOCATION OF TH E DEPRECIATION IN THE SALE RATIO OF THE TWO UNITS. I T IS NOT THE CASE OF THE REVENUE THAT ANY PARTICULARS RELATING T O THE CLAIM OF DEPRECIATION HAD BEEN CONCEALED OR ANY WRO NG PARTICULARS RELATING TO THE SAME HAD BEEN FURNISHED BY THE ASSESSEE. THEREFORE, WITH THE ASSESSEE HAVING DISCL OSED ALL PARTICULARS RELATING TO ITS CLAIM OF DEPRECIATION O N THE IMPUGNED ASSETS AND HAVING GIVEN A BONAFIDE EXPLANA TION FOR THE CLAIM SO MADE, THE MERE DISALLOWANCE OF THE CLA IM OF DEPRECIATION BY ALLOCATING A PART OF IT TO THE EXEM PT UNIT IN THE SALES RATIO, DOES NOT, WE HOLD, TANTAMOUNT TO C ONCEALING OR FURNISHING ANY PARTICULARS OF INCOME SO AS TO AT TRACT THE 5 LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. RELIANCE PLACED BY THE LD. COUNSEL FOR ASSESSEE ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS IN THIS REGARD IS APT, WHEREIN IT HAS BEEN HELD THAT MERE DISALLOWANCE OF CLAIM MADE BY ASSESSEE IS NOT SUFFI CIENT FOR LEVY OF PENALTY. IN VIEW OF THE ABOVE THE PENALTY LEVIED IN THE PRES ENT CASE THEREFORE, IS DIRECTED TO BE DELETED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS, TH EREFORE, ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $' % & (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER '( / ACCOUNTANT MEMBER *# /DATED: 18 TH OCTOBER, 2018 * ' * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - $ / CIT 4. - $ ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) $ / BY ORDER, 6 ! / ASSISTANT REGISTRAR