SHREE CHAKRA ORGANICS P. LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 2767/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1501 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 11-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 29-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MOHANTY
• Assessee Lawyers: D V LAKHANI
• Keywords: Depreciation; Bonafide belief; Wrong claim
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI A.L. GEHLO T ,(AM) ITA NO.2767/MUM/2009 ASSESSMENT YEAR : 2003-04 SHREE CHAKRA ORGANICS PVT. LTD. A/7, VIRAL APARTMENT S.V. ROAD, ANDHERI(W) MUMBAI-400 058. ..( APPELLANT ) P.A. NO. (AAACS 0655 A) VS. DY. COMMISSIONER OF INCOME TAX RANGE 8(3) MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI D.V. LAKHANI RESPONDENT BY : SHRI S. K. MOHANTY O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 13.2.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF DYE S. THE RETURN WAS FILED DECLARING TOTAL INCOME AT RS.62,08,326 /-. HOWEVER, THE ASSESSMENT WAS COMPLETED UNDER NORMAL PROVISIONS OF THE ACT AT AN INCOME OF RS.67,73,020/- INCLUDING THE DISALLOWANCE O F DEPRECIATION ITA NO.2767/M/09 A.Y:03-04 2 ON MOTOR CAR RS.3,90,672/- AND STAFF QUARTERS RS.1,74,02 2/- VIDE ORDER DATED 30.11.2005 PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). ON APPEAL, THE LD. CIT(A) WHILE CONF IRMING THE DISALLOWANCE OF DEPRECIATION ON MOTOR CAR AND STAFF QUA RTERS, PARTLY ALLOWED THE APPEAL. AFTER GIVING APPEAL EFFECT THE REVISED TOTAL INCOME WAS WORKED OUT BY THE ASSESSING OFFICER AT RS.67,10,400/- VIDE ORDER DATED 18.12.2006. WHILE PASSING THE ASSESSMENT ORDER, TH E ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDING U/S.271(1)(C) OF THE ACT. ACCORDINGLY A NOTICE WAS ISSUED TO SHOW CAUSE AS TO WHY PEN ALTY U/S.271(1)(C) SHOULD NOT BE IMPOSED. IN RESPONSE, IT WA S INTERALIA SUBMITTED BY THE ASSESSEE THAT THE INCOME TAX RULES HAVE B EEN AMENDED W.E.F. ASSESSMENT YEAR 2003-04 THE RATE OF DEP RECIATION HAS BEEN REDUCED FROM 20% TO 5%. THE DEPRECIATION @ OF 2 0% WAS CLAIMED AND ALLOWED UPTO ASSESSMENT YEAR 2002-03. THE A SSESSEE WAS UNDER THE BONAFIDE BELIEF THAT THE NEW RATE OF DEPRECIATION IS APPLICABLE IN RESPECT OF ASSETS PURCHASED FROM ASSESSMENT YEAR 2003- 04 FALLING UNDER THE CATEGORY OF STAFF QUARTERS. FURT HER UNDER THE ACT THE DEPRECIATION IS ALLOWED ON THE BLOCK OF ASSET METHO D AND ONCE AN ASSET FALLS UNDER A PARTICULAR BLOCK THEN THE RATE APPLI CABLE TO THE SAID BLOCK WILL FOLLOW FOR SUBSEQUENT YEAR ALSO. THE ASSESSEE WH ILE RELYING ON THE DECISION IN HINDUSTAN STEEL LIMITED REPORTED IN 83 ITR 26 (SC) SUBMITTED THAT IT HAS NOT CONCEALED ANY PARTICULARS OF H IS INCOME NOR ITA NO.2767/M/09 A.Y:03-04 3 FURNISHED ANY INACCURATE PARTICULARS THEREOF, THEREFOR E THE PENALTY PROCEEDING BE DROPPED. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION AND WAS OF THE VIEW THAT THE A SSESSEE MADE A CONSCIOUS ATTEMPT TO EVADE TAXES BY FURNISHING INA CCURATE PARTICULARS OF INCOME AND ACCORDINGLY HE IMPOSED PENALTY OF RS.1,84,510/- VIDE ORDER DATED 19.3.2008 PASSED U/S.271 (1)(C) OF THE ACT. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277 (S C) HELD THAT ASSESSING OFFICER WAS JUSTIFIED IN IMPOSING PENALTY U/S.271(1)(C) OF THE ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IN IS APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SU STENANCE OF PENALTY IMPOSED BY THE ASSESSING OFFICER U/S.271(1)(C) OF T HE ACT. 4. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSESSEE W HILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) FURTHER SUBMITS THAT ALONG WITH THE RETURN OF INCOME THE ASSESSEE HAS FILED COMPLETE DETAILS OF DEPRECIATI ON CLAIMING DEPRECIATION ON STAFF QUARTER AT 20% AND MOTOR CAR AT 50% BASED ON THE PAST HISTORY OF THE CASE. THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT SINCE IN THE EARLIER YEARS THE SAID DEPRECIA TION WAS ALLOWED THEREFORE THE SAME WOULD BE ALLOWED IN THE YEAR UNDE R CONSIDERATION ITA NO.2767/M/09 A.Y:03-04 4 ALSO. HE FURTHER SUBMITS THAT SINCE ASSESSEE HAS DISCLOSED COMP LETE PARTICULARS OF INCOME THEREFORE THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE. THE RELIANCE WAS ALSO PLACED ON THE DECISION O F RELIANCE PETROPRODUCTS LTD. 322 ITR 158 (SC). 5. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS DISCLOSED ALL THE RELEVANT DET AILS OF DEPRECIATION CLAIMED IN RESPECT OF STAFF QUARTER AND MOT OR CAR. THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.3,90,672/- ON MOTOR CAR AND RS.1,74,022/- ON STAFF QUARTERS WAS MADE BY THE ASSESSI NG OFFICER ON THE GROUND THAT AT THE RELEVANT YEAR THE ELIGIBL E RATE FOR DEPRECIATION IN RESPECT OF MOTOR CAR AND STAFF QUARTER WAS 20% AND 5% RESPECTIVELY. HOWEVER, THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT SINCE 50% DEPRECIATION ON MOTOR CAR AND 20% DEPRE CIATION ON STAFF QUARTERS WAS ALLOWED IN PAST, THE SAME WOULD BE AL LOWED IN THE YEAR UNDER CONSIDERATION ALSO. 7. IN ORDER TO APPLY THE PROVISIONS OF SECTION 271(1)(C) , THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSE SSEE. ITA NO.2767/M/09 A.Y:03-04 5 SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICU LARS OF HIS INCOME. IN THE PRESENT CASE IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME. THE AO HAS IMPOSED PENALTY ON THE GROUND THAT THE ASSESSEE HAS FURNI SHED INACCURATE PARTICULARS OF HIS INCOME. 8. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC ) THEIR LORDSHIPS, AFTER CONSIDERING VARIOUS DECISIONS INCLUDING DI LIP N. SHROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA V S. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER : A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) O F THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER T O BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN OR DER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING A N INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUC H PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. ITA NO.2767/M/09 A.Y:03-04 6 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLI ED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCOR RECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE R ETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HONBLE APE X COURT AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT FILED COMPLETE PARTICULARS OF HIS INCOME OR IT IS NOT THE CASE OF BONAFIDE BELIEF OR THE EXPLANATION OFFERED BY THE ASSESSEE WAS F OUND TO BE FALSE OR UNTRUE, WE ARE OF THE VIEW THAT MAKIN G A WRONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INF ORMATION, WHICH MAY CALL FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THIS VIEW ALSO FINDS SUPPORT FROM THE RECENT DECISIONS IN CIT VS. SIDHART HA ENTERPRISES (2010) 322 ITR 80 (P&H) AND CIT VS. SHAHABA D CO-OP. SUGAR MILLS LTD. (2010) 322 ITR 73(P&H). ACCORDINGLY T HE PENALTY IMPOSED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS DELETED. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREF ORE, ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.6.2010 SD/- SD/- (A.L. GEHLOT) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.6.2010. JV. ITA NO.2767/M/09 A.Y:03-04 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.