ACIT, CHENNAI V. CRN Investments P. Ltd., CHENNAI

ITA 2662/CHNY/2004

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7712 (ITAT-CHENNAI)
• Duration Of Justice: 13 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 1996-1997
• Appeal Filed On: 21-02-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Depreciation; Wrong claim; Unabsorbed depreciation
• Section: 6; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO. 2662/MDS/2004 / ASSESSMENT YEAR : 1996-97 THE ASSTT. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), CHENNAI 600 034. V. M/S. CRN INVESTMENTS P. LTD., 10, KARPAGAMBAL NAGAR, LUZ, CHENNAI 4. PAN : AAACC3114A ( /APPELLANT) ( !' /RESPONDENT) # /APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT !' # /RESPONDENT BY : SHRI T.N. SEETHARAMAN, ADVOCATE # /DATE OF HEARING : 12.01.2017 # /DATE OF PRONOUNCEMENT : 28.02.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) III, CHE NNAI, PASSED UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) FOR THE ASSESSMENT YEAR 1996-97. 2 I.T.A. NO. 2662/MDS/2004 2. SHRI SHIVA SRINIVAS, THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE CIT (APPEALS) BY PLACING RELIANC E ON THE JUDGMENT OF THE SUPREME COURT IN CIT V PRITHIPAL SI NGH & CO. 249 ITR 670 SET ASIDE HIS EARLIER ORDER BY WAY OF R ECTIFICATION AND DELETED THE PENALTY. ACCORDING TO THE LD. D.R., TH E JUDGMENT OF THE SUPREME COURT IN PRITHIPAL SINGH & CO. ( SUPRA) IS VERY MUCH AVAILABLE ON THE DATE OF PASSING OF THE ORIGINAL OR DER ON 17.03.2004. THE AMENDMENT BROUGHT IN BY WAY OF EXPLANATION 4(A) BY FINANCIAL ACT 2002 IS ONLY TO CLARIFY THE EXISTING POSITION O F LAW. THEREFORE IT WOULD APPLY RETROSPECTIVELY. ACCORDING TO THE LD. D.R., THE LEVY OF PENALTY IS DEBATABLE IN NATURE. THEREFORE, THE CIT (APPEALS) OUGHT NOT TO HAVE DELETED THE PENALTY IN A PROCEEDING UND ER SECTION 154 OF THE ACT. 3. SHRI T.N. SEETHARAMAN, THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEAR UNDER CONSID ERATION, THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271( 1) OF THE ACT. THE CIT (APPEALS) BY AN ORDER DATED 17.03.2004 INIT IALLY CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER. SUBSE QUENTLY, THE JUDGMENT OF THE APEX COURT IN PRITHIPAL SINGH & CO. SUPRA WAS BROUGHT TO THE NOTICE OF THE CIT (APPEALS). THE CI T (APPEALS) BY 3 I.T.A. NO. 2662/MDS/2004 PLACING RELIANCE ON THE JUDGMENT OF THE APEX COURT IN PRITHIPAL SINGH & CO CASE SUPRA FOUND THAT THERE WAS A PRIMA FACIE ERROR IN THE ORDER. ACCORDINGLY, THE PENALTY LEVIED BY THE ASS ESSING OFFICER WAS DELETED. AGAINST THAT ORDER OF THE CIT (APPEALS) P ASSED UNDER SECTION 154 OF THE ACT, THE REVENUE FILED THE PRESE NT APPEAL. 4. IN THE EARLIER ROUND OF LITIGATION, THIS TRIBUNA L FOUND THAT THE JUDGMENT OF THE APEX COURT IN PRITHIPAL SINGH & CO CASE ( SUPRA) WAS AVAILABLE ON THE DATE OF PASSING OF ORDER BY THE CI T(APPEALS). THEREFORE, THERE WAS NO MISTAKE IN THE ORIGINAL ORD ER WHICH IS APPARENT FROM THE RECORD. ACCORDINGLY, THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS CONFIRMED BY THIS TRIBUNAL. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE HIGH COURT IN TAX CASE (APPEAL) NO.155 OF 2007. THE HIGH COURT B Y JUDGMENT DATED 13.02.2014 FOUND THAT THE CIT (APPEALS) HAS R IGHTLY ENTERTAINED THE APPLICATION UNDER SECTION 154 OF TH E ACT AND RECTIFIED THE ERROR SOLELY ON THE GROUND THAT AS PE R LAW, WHICH HOLDS THE FIELD, AT THE RELEVANT POINT OF TIME, NO PENALT Y WAS IMPOSABLE WHEN A LOSS HAS BEEN INCURRED BY THE ASSESSEE. REF ERRING TO THE JUDGMENT OF THE MADRAS HIGH COURT MORE PARTICULARLY AT PARA 10, THE 4 I.T.A. NO. 2662/MDS/2004 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MAD RAS HIGH COURT CONCURRED WITH THE SUBMISSION OF THE COUNSEL FOR TH E ASSESSEE THAT THERE WAS A MISTAKE IN THE ORDER OF THE CIT(APPEALS ). ACCORDINGLY, THE SAME WAS RECTIFIED. HOWEVER, IN THE LAST PARAG RAPH, THE MATTER WAS REMITTED BACK TO THE FILE OF THE TRIBUNAL TO TA KE UP THE APPEAL ON MERIT. SINCE THE HIGH COURT HAS ALREADY FOUND THAT THE CIT (APPEALS) HAS RIGHTLY RECTIFIED THE ERROR UNDER SEC TION 154 OF THE ACT AND DELETED THE PENALTY, THE FURTHER OBSERVATION OF THE HIGH COURT IN REMITTING BACK THE MATTER TO THE FILE OF THIS TRIBU NAL IS INFRUCTUOUS. THE LD. COUNSEL HAS ALSO SUBMITTED THAT THE ASSESSE E HAS ALREADY FILED A REVIEW PETITION BEFORE THE HIGH COURT WHICH IS NOT LISTED SO FAR FOR HEARING. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1 )(C) OF THE ACT WAS CONFIRMED BY THE CIT (APPEALS) BY AN ORDER DATE D 17.03.2004. THE CIT (APPEALS) IN A PROCEEDING UNDER SECTION 154 OF THE ACT, BY PLACING RELIANCE ON THE JUDGMENT OF THE SUPREME COU RT IN THE CASE OF PRITHIPAL SINGH & CO ( SUPRA) RECTIFIED THE ORDER DATED 17.03.2004 AND DELETED THE PENALTY. THE QUESTION ARISES FOR C ONSIDERATION IS 5 I.T.A. NO. 2662/MDS/2004 WHETHER THE ORDER OF THE CIT (APPEALS) DATED 17.03. 2004 CAN BE RECTIFIED SUBSEQUENTLY. IN THE EARLIER ROUND OF LI TIGATION, THIS TRIBUNAL FOUND THAT THE JUDGMENT OF THE APEX COURT IN PRITHI PAL SINGH & CO ( SUPRA) IS VERY MUCH AVAILABLE ON 17.03.2004. THEREFORE IT IS NOT A DEBATABLE ISSUE. ACCORDINGLY, THIS TRIBUNAL CONFIR MED THE PENALTY LEVIED BY THE ASSESSING OFFICER BY AN ORDER DATED 3 1.08.2006. ON FURTHER APPEAL BY THE ASSESSEE, THE MADRAS HIGH COU RT FOUND THAT THE TERM INCOME UNDER SECTION 271(1)(C) OF THE AC T WAS INTERPRETED TO MEAN POSITIVE INCOME. THE ASSESSEE IN THIS CASE, DISCLOSED LOSS TO BE CARRIED FORWARD. THEREFORE, BY PLACING RELIA NCE ON THE JUDGMENT IN HONDA SEIL POWER PRODUCTS LIMITED V CI T, (2007), 295 ITR 466 (SC), THE HIGH COURT HOLD THAT COMMISSIONER WAS JUSTIFIED IN ENTERTAINING THE APPLICATION FILED BY THE ASSESS EE UNDER SECTION 154 OF THE ACT AND RECTIFIED THE MISTAKE. IN FACT, THE MADRAS HIGH COURT HAS OBSERVED AS FOLLOWS AT PARA 10: PARA 10: ADMITTEDLY, THE MISCELLANEOUS APPLICATION FILED UNDER SECTION 154 OF THE ACT TO RECTIFY THE MISTAKE IN TH E ORDER OF THE FIRST APPELLATE AUTHORITY DATED 17.3.2004 WAS BASED ON TH E DECISION OF THE SUPREME COURT IN THE CASE OF PRITHIPAL SINGH, (SUPR A). IT IS NOT IN DISPUTE THAT ON THE DATE WHEN THE FIRST APPELLATE A UTHORITY PASSED ORDER DATED 17.3.2004, THE DECISION IN THE CASE OF PRITHIPAL SINGH, (SUPRA), WAS VERY MUCH AVAILABLE. THEREFORE, THE F IRST APPELLATE AUTHORITY RIGHTLY ENTERTAINED THE APPLICATION UNDER SECTION 154 AND 6 I.T.A. NO. 2662/MDS/2004 RECTIFIED THE ERROR SOLELY ON THE GROUND THAT AS PE R THE LAW, WHICH HOLDS THE LAND, AT THE RELEVANT POINT OF TIME, NO P ENALTY WAS IMPOSABLE WHEN A LOSS HAS BEEN INCURRED BY THE ASSESSEE. IN OTHER WORDS, THE TERM INCOME INCOME IN SECTION 271(1)(C) WAS INTER PRETED TO MEAN PROSPECTIVE INCOME. AS FAR AS THE PRESENT CASE I S CONCERNED, THE ASSESSMENT ORDER DISCLOSE LOSS TO BE CARRIED FORWAR D. THEREFORE, BY APPLYING THE DECISION IN HONDA SEIL POWER PRODUCTS LIMITED (SUPRA), THE COMMISSIONER WAS JUSTIFIED IN ENTERTAINING THE APPLICATION AND RECTIFYING THE MISTAKE. TO THAT EXTENT WE AGREE WI TH THE SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. 7. SUBSEQUENTLY, AT PARA 11 OF THE JUDGMENT, THE H IGH COURT FOUND THAT THE ORDER OF THE TRIBUNAL HAS TO BE SET ASIDE AND RESTORE THE APPEAL BEFORE THE TRIBUNAL FOR A DECISION ON TH E QUESTION OF LEVY OF PENALTY ON MERIT. WE HAVE CAREFULLY GONE THROUG H THE PROVISION 154 OF THE ACT. SECTION 154 OF THE ACT PROVIDES FO R RECTIFICATION OF ERROR, WHICH IS APPARENT ON THE FACE OF THE RECORD. THE HIGH COURT ACCEPTED THE ARGUMENT OF THE ASSESSEE AND FOUND THA T THE COMMISSIONER WAS JUSTIFIED IN ENTERTAINING THE APPL ICATION AND RECTIFYING THE MISTAKE IN HIS ORDER DATED 17.03.200 4. HOWEVER, SUBSEQUENTLY THE HIGH COURT DIRECTED THE TRIBUNAL T O DECIDE THE QUESTION OF LEVY OF PENALTY ON MERIT. SINCE THIS I S A SPECIFIC DIRECTION FROM THE HIGH COURT, THIS TRIBUNAL MAY NOT GO BEYON D THE DIRECTION 7 I.T.A. NO. 2662/MDS/2004 OF THE HIGH COURT. THEREFORE, WE HAVE EXAMINED THE MERIT IN COMPLIANCE TO THE DIRECTION OF THE HIGH COURT. 8. FOR THE ASSESSMENT YEAR 1996-97, THE ASSESSEE OR IGINALLY DECLARED LOSS OF 13,70,284/- . THE ASSESSEE CLAIMED UNABSORBED DEPRECIATION OF 13,70,284/- TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR. THE LOSS INCLUDED THE DEPRECIATION OF 10,48,450/- CLAIMED ON THE STEEL ROLLER. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE CLAIMED DEPRECIATION ON THE STEEL ROLL TO THE EXTEN T OF 10,48,450/- FOR THE ASSESSMENT YEAR 1995-96 AND THE BALANCE OF 10,48,450/- FOR THE NEXT YEAR. NOW, THE LD. COUNSEL FOR THE AS SESSEE CLAIMS BEFORE THIS TRIBUNAL THAT FOR THE ASSESSMENT YEAR 1 995-96, THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS CONFIRM ED. THE UNABSORBED DEPRECIATION OF LOSS WAS CARRIED FORWARD FOR THE ASSESSMENT YEAR 1996-97. THEREFORE, THE ASSESSEE W AS PENALIZED FOR THE ASSESSMENT YEAR 1995-96. HENCE, THERE CANN OT BE ANY FURTHER PENALTY FOR THE ASSESSMENT YEAR 1996-97. T HE LD. COUNSEL PLACED HIS RELIANCE ON THE DECISION OF THIS TRIBUNA L IN DR. BAPUJI CHERUKURI V DCIT [2013] 21 ITR (TRIB) 714 (CHENNAI) AND SUBMITTED THAT WHEN THE PENALTY WAS LEVIED FOR THE ASSESSMENT YEAR 1995-96, THE ASSESSEE CANNOT BE PENALIZED FOR THE ASSESSMENT YEAR 1996-97 8 I.T.A. NO. 2662/MDS/2004 ON THE SAME SET OF FACTS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE TRIBUNAL BY APPLYING THE DOCTRINE OF CONTINUITY FOU ND THAT THE PENALTY HAS TO BE LEVIED ONLY IN THE FIRST YEAR OF ASSESSME NT. ACCORDINGLY, THE PENALTY LEVIED FOR THE SUBSEQUENT YEAR WAS CANC ELLED. IN THIS CASE THE PENALTY LEVIED BY THE ASSESSING OFFICER FO R CLAIMING DEPRECIATION WAS CONFIRMED BY THIS TRIBUNAL UP TO T HE YEAR 1995-96 AND THEREFORE FOR SUBSEQUENT YEARS, THERE CANNOT BE ANY LEVY OF PENALTY. 9. THE QUESTION ARISES FOR CONSIDERATION IS WHEN TH E ASSESSEE CLAIMS DEPRECIATION FOR THE ASSESSMENT YEAR 1996-97 WHICH WAS DISALLOWED BY THE ASSESSING OFFICER CAN THERE BE A LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT CLAIM OF DEPRECIATION IS A STATUTORY CLAIM. MERELY BECAUSE THE ASSESSEE MADE A STATUTORY CLAIM IN THE RETURN OF INCOME WHICH WAS DISALLOWED BY THE ASSESSING OFF ICER, THAT CANNOT BE A REASON FOR LEVYING PENALTY UNDER SECTIO N 271(1)(C) OF THE ACT. A MERE WRONG CLAIM UNDER THE STATUTORY PR OVISIONS OF THE INCOME TAX ACT CANNOT BE CONSIDERED TO BE CONCEALME NT OF INCOME OR FURNISHING ANY INACCURATE PARTICULARS OF INCOME. THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD., 32 2 ITR 158 9 I.T.A. NO. 2662/MDS/2004 EXAMINED THIS ISSUE AND FOUND THAT WHEN AN ASSESSEE MAKES A CLAIM BY FURNISHING ALL THE PARTICULARS AND THE ASS ESSING OFFICER DISALLOWED THE SAME CANNOT BE A REASON TO CONCLUDE THAT THE ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT LEVY OF PENALTY FOR THE ASSESSMENT YEAR 1996-97 IS NOT JUSTIFIED. ACCORDINGLY, THE OR DER OF THE CIT (APPEALS) IS CONFIRMED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON 28 TH FEBRUARY, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 28 TH FEBRUARY, 2017. JR. # ! $ % $ /COPY TO: 1. /APPELLANT 2. !' /RESPONDENT 3. &' ( )/CIT(A)-III 4. &' /CIT 5. ! $ /DR 6. () /GF.