SKY INDUSTRIES LTD, MUMBAI V. ITO 4(3)(1), MUMBAI

ITA 2459/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62329 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 26-04-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 29-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: NEKCHEHR ELARIA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE APPELLATE APPELLATE APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A.NO. 2459/MUM/2011 ASSESSMENT YEAR : 2002-03 M/S. SKY INDUSTRIES LIMITED,C/O. KALYANIWALLA & MISTRY, ARMY & NAVY BUILDING, 3 RD FLOOR, 148, M.G.ROAD, MUMBAI 400 001. PAN: AAECS 0561 R INCOME TAX OFFICER -4(3)(1), MUMBAI. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : MR. AKRAM KHAN & MR. NEKCHEHR ELARIA RESPONDENT BY : MR. M. RAJAN DATE OF HEARING : 26-04-2012 DATE OF PRONOUNCEMENT : O R D E R VIVEK VARMA, JM: THE APPEAL ARISES FROM THE ORDER OF THE CIT(A) 8, M UMBAI, DATED 18-01-2011 CONFIRMING THE PENALTY U/S 271(1)( C) OF RS. 90,000/- 2. THE APPELLANT IS A LIMITED COMPANY MANUFACTURING ELASTIC TAPE FASTENERS AND HOOK LOOP TAPE FASTENERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAD DEBITED RS. 2,37,150/- ON ACCOUNT OF REPAIRS OF DRYING MACH INE. THE AO CALLED FOR THE DETAILS TO EXAMINE THE GENUINENESS OF THE E XPENSE AND THE BILL I.T.A. NO.2495/MUM/2011 M/S. SKY IND USTRIES LTD. 2 THAT WAS PRODUCED BEFORE HIM, IT MENTIONED, REPAIR & RECONDITIONING OF YOUR DYEING MACHINE WITH ADDITIONAL DRYING CHAMB ER. THE AO HELD THAT THE EXPENDITURE OF RS. 2,37,150/- IS NOT JUST USUAL REPAIRS BUT RECONDITIONING RESULTING IN ADDITION OF A CAPITAL A SSET, BY WAY OF AN EXTRA DYING CHAMBER. THE AO, THEREFORE DENIED THIS EXPENDITURE AS REVENUE AND HELD IT TO BE OF CAPITAL IN NATURE. THE AO, THEREFORE, ALLOWED DEPRECIATION @ 25% AND HE ADDED BACK THE RE ST OF RS. 1,77,862/- TO THE INCOME OF THE ASSESSEE AND AS A C ONSEQUENCE, HE INITIATED PENALTY PROCEEDINGS ON THIS ADDITION AND ULTIMATELY LEVIED A PENALTY OF RS. 90,000/-. 3. THE ASSESSEE, AGGRIEVED BY THE DECISION, APPROAC HED THE CIT(A), WHO CONFIRMED THE PENALTY LEVIED BY THE AO. 4. BEING AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 5. BEFORE US, THE A.R. REPRESENTING ON BEHALF OF TH E ASSESSEE SUBMITTED THAT THE ASSESSEE HAD UNDERTAKEN REPAIRS TO ITS DRYING CHAMBER, WHICH WAS A ROUTINE AFFAIR OF THE FUNCTION ING OF THE PLANT. HE SUBMITTED THAT ONLY BECAUSE THE BILL MENTIONED ADD ITIONAL DRYING CHAMBER, THE REVENUE AUTHORITIES HAVE INTERPRETED IT TO BE AN ADDITIONAL ASSET HAVING BEING BROUGHT INTO EXISTENC E WHICH WOULD BE OF AN ENDURING NATURE. THE A.R. SUBMITTED THAT REPAIR AND RECONDITIONING IS A PART OF SMOOTH RUNNING OF THE MACHINE AND IN D OING THE REPAIR OF THE MACHINE, HE EMPHASIZED THAT NEITHER ANY NEW PAR T NOR ANY NEW MACHINE OR ANY NEW DRYING CHAMBER HAD BEEN INSTALLE D BY THE VENDOR. THE A.R. EXPLAINED THAT DRYING CHAMBER WAS ALWAYS A PART OF THE I.T.A. NO.2495/MUM/2011 M/S. SKY IND USTRIES LTD. 3 INSTALLED MACHINE AND WAS ALWAYS IN EXISTENCE. HE, THEREFORE, PLEADED ON FACTS, THAT THE OBSERVATIONS OF THE REVENUE AUTH ORITIES WERE, IN FACT, INFIRM IN SO FAR AS THE ISSUE OF LEVY OF PENALTY WA S CONCERNED. THE A.R. ALSO SUBMITTED THAT IT WAS IN FACT A CASE OF DIFFER ENCE OF OPINION ON THE ISSUE, WHETHER EXPENDITURE IS CAPITAL IN NATURE OR REVENUE IN NATURE AND IS A DEBATABLE ISSUE. THE A.R. AFTER GIVING ALL THE FACTS, RELIED ON THE FOLLOWING DECISIONS: 1) CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 1 58 (S.C) 2) CIT VS. AT& T COMMUNICATION SERVICES INDIA PVT. LTD . 342 ITR 275 (DEL) 3) SHREE DATTA METAL INDS. VS. ACIT, I.T.A. NO. 4459/M /2009 (MUM) 4) CIT VS. INDIAN METALS & FERRO ALLOYS LTD. 211 ITR 3 5 (ORISSA) 5) CIT VS. JANAKIRAM MILLS LTD . 275 ITR 430 (MAD) 6. WE HAVE GONE THROUGH THE FACTS OF THE CASE AS BO RNE OUT FROM THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS TH E ORDER OF THE CO- ORDINATE BENCH IN THE ASSESSEES CASE WHEREIN, THE CO-ORDINATE BENCH HAS SUSTAINED THE VIEWS TAKEN BY THE REVENUE AUTHOR ITIES IN QUANTUM. APROPOS THE PENALTY PROCEEDINGS, THE CRUX DOES NOT DEPEND PRIMARILY ON THE DECISION OF QUANTUM, BUT IT WHOLLY DEPENDS U PON THE CONDUCT OF THE ASSESSEE, WHETHER AT ALL, THERE WAS A HINT OF C ONCEALMENT IN THE CASE. WE HAVE GONE THROUGH THE ACCOUNTS OF THE ASSE SSEE AND WE FIND THAT DURING THE YEAR UNDER CONSIDERATION, THERE WER E ADDITIONS TO THE PLANT & MACHINERY TO THE TUNE OF RS. 1,23,54,347/- AND THE IMPUGNED DISPUTE IS WITH REGARD TO RS. 2,37,150/-. THIS AMOU NT HAS BEEN TAKEN TO THE PROFIT & LOSS ACCOUNT UNDER REPAIRS AND MAIN TENANCE. WHAT I.T.A. NO.2495/MUM/2011 M/S. SKY IND USTRIES LTD. 4 MALAFIDE INTENT, THE ASSESSEE COULD BE HAVING TO NO T TO INCLUDE THIS PALTRY AMOUNT TO MAJOR ADDITIONS TO THE PLANT & MAC HINERY, WHERE THE EXPENSES ARE MORE THAN RS. 1.20 CRORES. WE HAVE ALS O GONE THROUGH THE SUBMISSIONS MADE BY THE DR, WHEREIN HE SUPPORTE D THE ORDERS OF THE REVENUE AUTHORITIES AND RELYING ON THE DECISION OF CIT V/S ZOOM COMMUNICATIONS (P) LTD. IN I.T.A. NO. 7 OF 2010, DE LIVERED BY HON'BLE DELHI HIGH COURT, WHEREIN THE DECISION OF HON'BLE A PEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. ( SUPRA) WAS ALSO DISCUSSED. BUT THE HON'BLE DELHI HIGH COURT HELD TH AT IN THE CASE BEFORE THEM AND THE FACTS OF RELIANCE PETRO PRODUCT S PVT. LTDS CASE WERE ENTIRELY DIFFERENT. WE ARE IN AGREEMENT WITH T HE DECISION THAT FACTS IN THE CASES OF CIT VS. RELIANCE PETRO PRODUC TS PVT. LTD. AND ZOOM COMMUNICATIONS (P) LTD. ARE DISTINGUISHABLE, B ECAUSE NOT ONLY TWO PLAUSIBLE VIEWS CAN BE TAKEN ON THE FACTS OF TH E INSTANT CASE, BUT WE FIND THAT THE CASE IS STRONGLY FORTIFIED BY THE DECISION OF THE HON'BLE APEX COURT IN RELIANCE PETRO PRODUCTS PVT. LTD. (SU PRA), WHEREIN THE HON'BLE APEX COURT HAVE HELD THAT EVEN IF A CLAIM I S REJECTED BY THE REVENUE AUTHORITIES STILL IT CANNOT BE HELD THAT TH ERE WAS CONCEALMENT ON THE PART OF THE ASSESSEE, WHICH COULD BE TERMED AS MALAFIDE. 7. AS WE HAVE ALREADY OBSERVED IN PRE PARA THAT THE LIKELIHOOD OF CONCEALMENT OF RS. 2.37 LACS OUT OF TOTAL ADDITION OF EXPENSES OF RS. 1. 20 CRORES IS UNLIKELY. WE HAVE ALSO SEEN THAT THE M ERE MENTION OF THE WORDS ADDITIONAL DRYING CHAMBER DOES NOT AUTOMATI CALLY MEAN THE INSTALLATION OF A NEW MACHINE IN THE GARB OF REPAIR S. THIS ISSUE ITSLF IS I.T.A. NO.2495/MUM/2011 M/S. SKY IND USTRIES LTD. 5 DEBATABLE AND THERE ARE TWO POSSIBLE AND PROBABLY V IEWS, ON WHICH PENALTY IS NOT EXIGIBLE. WE ARE OF THE VIEW THAT T HE INITIATION AND LEVY OF PENALTY WAS NOT CORRECT AND, WE, THEREFORE, CANC EL THE PENALTY. 7. APPEAL FILED BY THE ASSESSEE IS ALLOWED. IN THE RESULT, APPEAL IN I.T.A. NO. 2459/MUM/2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 11/5/2012. SD/- SD/- (B.RAMAKOTAIAH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDIC IAL MEMBER MUMBAI: 11/05/2012. P/-* COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. I.T.A. NO.2495/MUM/2011 M/S. SKY IND USTRIES LTD. 6