Patel Alloy Steel Pvt.Ltd., Ahmedabad V. The ACIT., Circle-5, Ahmedabad

ITA 2774/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8122 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUDIT NAGPAL HEARING CONCLUDED
• Keywords: Depreciation

Judgement Text

ITA NO.2774/AHD/2015 ASSESSMENT YEAR: 2009-10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO.2774/AHD/2015 ASSESSMENT YEAR: 2009-10 PATEL ALLOY STEEL PVT. LTD., ..................APPELLANT PLOT NO.297 300, PHASE-II, GIDC ESTATE, VATVA, AHMEDABAD 382 445. [PAN : AABCP 2984 J] VS. ADDL. COMMISSIONER OF INCOME TAX, CIRCLE 5, AHMEDABAD. ............................RESPONDENT APPEARANCES BY S.N. SOPARKAR FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT HEARING CONCLUDED ON: 20.03.2018 ORDER PRONOUNCED ON : 15.06.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 27 TH AUGUST, 2015 PASSED BY THE LD. CIT(A), IN THE MATT ER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. GRIEVANCE OF THE ASSESSEE, IN SUBSTANCE, IS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE IMPUGNED PENALTY OF RS.78,00,000/- I MPOSED ON THE ASSESSEE. 3. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE QUANTUM DISALLOWANCES IN RESPECT OF WHICH THE IMPUGNED PENALTY IS LEVIED ARE AS FOLL OWS :- (I) ADDITION OF RS.1,30,869/- ON ACCOUNT OF OTHER I NCOME; (II) ADDITION OF RS.1,01,456/- ON ACCOUNT OF INTERE ST EXPENSES; (III) ADDITION OF RS.42,40,790/- ON ACCOUNT OF EXCH ANGE FLUCTUATION; (IV) DISALLOWANCE OF RS.50,00,000/- ON ACCOUNT OF D EPRECIATION ON LAND; (V) DISALLOWANCE OF RS.1,33,39,000/- UNDER SECTION 40A(2)(B). ITA NO.2774/AHD/2015 ASSESSMENT YEAR: 2009-10 PAGE 2 OF 4 4. AS REGARDS THE DISALLOWANCE OF RS.1,33,39,000/- UNDER SECTION 40A(2)(B), THE SAME STANDS DELETED VIDE CO-ORDINATE BENCH ORDER DA TED 08.04.2016. 5. AS REGARDS THE ADDITIONS OF RS.1,30,869/- ON ACC OUNT OF OTHER INCOME AND OF RS.1,01,456/- ON ACCOUNT OF INTEREST EXPENSES, IT I S SUFFICIENT TO NOTE THAT THESE AMOUNTS WERE OFFERED BY THE ASSESSEE ON HIS OWN AS, DUE TO AN INADVERTENT MISTAKE, THE ASSESSEE HAD CLAIMED PMS INCOME OF RS.1,30,869/- WH ICH WAS INTACT INTEREST EARNED ON INVESTMENT WITH KATAL SECURITIES, AND THE ASSESS EE HAD CLAIMED DEDUCTION FOR DELAYED DEDUCTION OF TAX AT SOURCE FROM PAYMENTS TO C&F AGENT. AS THE ASSESSING OFFICE REJECTED THE EXPLANATION OF BONAFIDE ERROR O F THE ASSESSEE, HE ALSO IMPOSED PENALTY FOR CONCEALMENT OF INCOME. IN APPEAL, LEAR NED CIT(A) HAS ALSO CONFIRMED THE SAME. THE ASSESSEE IS NOT SATISFIED AND IS IN FURT HER APPEAL BEFORE US. 6. AS REGARDS THE ADDITION OF RS.42,40,790/- ON ACC OUNT OF EXCHANGE FLUCTUATION, IT IS NOTED THAT CERTAIN EXCHANGE FLUCTUATION VOUCHERS , IN RESPECT OF CAPITAL ITEMS WERE TREATED AS REVENUE ITEMS AND, ACCORDINGLY, BOTH INC OME AND EXPENDITURE WERE WRONGLY BOOKED AS INCOME NATURE AND REVENUE EXPENSES. WHEN THESE ENTRIES WERE EVENTUALLY SEGREGATED, AFTER PROVIDING FOR DEPRECIATION, ADMIS SIBLE REVENUE DEDUCTION WAS REDUCED BY RS.42,40,790/-. THE SAID POSITION WAS ACCEPTED IN THE ASSESSMENT PROCEEDINGS. HOWEVER, THE MATTER DID NOT REST THERE. THE ASSESS ING OFFICER TREATED THE SAME AS CONCEALMENT OF INCOME, AND ACCORDINGLY, IMPOSED THE IMPUGNED PENALTY WHICH HAS SURVIVED THE FIRST APPEAL AS WELL. THE ASSESSEE IS NOW IN SECOND APPEAL BEFORE US. 7. THE LAST ADJUSTMENT, IN RESPECT OF WHICH IMPUGNE D PENALTY IS LEVIED, IS IN RESPECT OF DENIAL OF DEPRECIATION OF RS.50 LAKHS ON BUILDIN G. THE ASSESSEE HAD PURCHASED LAND AND BUILDING FOR A VALUE OF RS.5,93,47,914/-. THE PURCHASE DEED DID NOT SEPARATELY SPECIFY THE VALUE OF LAND AND BUILDING COMPONENTS. ON THESE FACTS, THE ASSESSEE CLAIMED DEPRECIATION OF RS.50 LAKHS TREATING COST O F BUILDING AT RS.5 CRORES. THE ASSESSING OFFICER DECLINED THE DEDUCTION AND HELD T HAT THE BUILDING WAS EFFECTIVELY WORTHLESS AS IT HAD TO BE EVENTUALLY DEMOLISHED NEX T YEAR. THE MATTER HAS TRAVELLED UPTO THIS TRIBUNAL AND THE DISALLOWANCE IS CONFIRME D. IT IS IN RESPECT OF THIS DISALLOWANCE THAT THE ASSESSING OFFICER HAS IMPOSED PENALTY UNDE R SECTION 271(1)(C) WHICH IS CONFIRMED IN APPEAL. AGGRIEVED BY THE CONFIRMATION OF PENALTY BY THE LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.2774/AHD/2015 ASSESSMENT YEAR: 2009-10 PAGE 3 OF 4 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 9. SO FAR AS THE FIRST TWO ADDITIONS OF RS.1,30,869 /- AND RS.1,01,956/- ARE CONCERNED, WE HAVE NOTED THAT THE ASSESSEE HAS, ON ITS OWN, ACCEPTED THESE INADVERTENT MISTAKES. THE EXPLANATION OF THE ASSES SEE ABOUT THESE MISTAKES, IN OUR CONSIDERED VIEW, DESERVES TO BE ACCEPTED. THE PMS RECEIPT BREAK UP IS KNOWN ONLY UPON RECEIPT OF THE STATEMENT, AND, MORE OFTEN THAN NOT, PMS RECEIPTS ARE DIVIDEND RECEIPTS WHICH ARE TAX EXEMPT IN NATURE. SIMILARLY , INTEREST ON DELAYED TDS IS AN INTEREST PAYMENT NEVERTHELESS AND IT CANNOT BE TREA TED AS A FAKE, MALAFIDE OR PATENTLY INCORRECT CLAIM. IN A CASE IN WHICH RETURNED INCOM E IS RS.35.37 CRORES, ERRORS OF THIS MAGNITUDE CANNOT BE SAID TO DELIBERATE ERRORS WITH ULTERIOR MOTIVES. THE AMOUNTS ARE INDEED SMALL AND EXPLANATIONS OF THE ASSESSEE ARE Q UITE REASONABLE. SIMILARLY, WITH REFERENCE TO THE EXCHANGE FLUCTUATION AMOUNT OF RS. 42.40 LAKHS, WE FIND THAT THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE FACT THA T EVEN INCOME WAS BOOKED ON CAPITAL ACCOUNT BY MISTAKE AS A RESULT OF WRONG POS TING OF CAPITAL FIELD VOUCHERS IN THE REVENUE ACCOUNT. CERTAINLY, THIS KIND OF A CASUAL APPROACH IS NOT DESIRABLE BUT THEN RIGHT NOW WE ARE ONLY CONCERNED WHETHER THE EXPLANA TION OF THE ASSESSEE IS REASONABLE, AND WHETHER MEETS THE TEST OF PREPONDER ANCE OF PROBABILITIES, OR NOT. VIEWED IN THIS PERSPECTIVE, IN OUR CONSIDERED VIEW, THE EXPLANATION OFFERED BY THE ASSESSEE IS REASONABLE AND WORTH BEING ACCEPTED. W E, THEREFORE, DEEM IT FIT AND PROPER TO DELETE THE PENALTY IN RESPECT OF THE ADDI TION FOR EXCHANGE FLUCTUATION AS WELL. AS REGARDS THE CLAIM OF DEPRECIATION, WE HAVE NOTED THAT THE ASSESSEE HAD PURCHASED THE BUILDING AND LAND FOR RS.5,93,47,914/- AND THE STAMP DUTY VALUATION OF LAND WAS RS.1,10,99,970/-. WHILE THERE IS NO BUILDING VALUA TION ON RECORD, BASED ON THE ABOVE FACTS, THE BUILDING BEING TREATED AT THE VALUE OF R S.5 CRORES IS NOT AN OUTRIGHT ABSURD CLAIM AS, EVEN AFTER REDUCING THE STAMP DUTY VALUAT ION OF LAND, THE BUILDING VALUE AT RS.4.83 CRORES DOES SEEM REASONABLE FROM THAT PERSP ECTIVE EVEN THOUGH THAT IS NOT LEGALLY CORRECT, AS HELD BY THE CO-ORDINATE BENCH. THE FACT THAT BUILDING WAS DEMOLISHED IS A SUBSEQUENT EVENT, AND ADOPTING THE STAMP DUTY VALUATION FIGURES IN BROAD TERMS MAY RESULT IN DISALLOWANCE OF DEPRECIATION BUT THE CLAIM HAS SOME BASIS. KEEPING IN VIEW OF THESE DISCUSSIONS, IN OUR CONSIDERED VIEW, THE PENALTY IN RESPECT OF DISALLOWANCE OF DEPRECIATION MUST ALSO STAND DELETED. ITA NO.2774/AHD/2015 ASSESSMENT YEAR: 2009-10 PAGE 4 OF 4 10. AS WE PART WITH THE MATTER, WE MAY ADD THAT SO FAR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) IS CONCERNED, ALL THAT IS TO BE S EEN IS WHETHER OR NOT THE ASSESSEE HAS A REASONABLE EXPLANATION FOR MAKING A CLAIM, IRRESP ECTIVE OF ITS EVENTUAL LEGAL ADMISSIBILITY, AS WOULD APPEAL TO A FACT FINDING AU THORITY. THE TEST FOR THIS EXPLANATION IS THUS MUCH LESS ONEROUS AND CANNOT BE LINKED TO LEGA L CORRECTNESS OF SUCH AN EXPLANATION. IT IS IN THIS LIGHT THAT THE EXPLANAT ION OF THE ASSESSEE HAS BEEN CONSIDERED, AND IT CANNOT BE CONSTRUED AS HAVING ANY BEARING ON MERITS OF THE MATTER. 11. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED I N THE OPEN COURT ON THIS 15 TH DAY OF JUNE, 2018. SD/- SD/- MAHAVIR PRASAD PR AMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 15 TH JUNE, 2018. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD