DCIT, New Delhi V. M/s. Ezentech India (P) Ltd., New Delhi

ITA 2861/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96997 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARVINDER KAUR
• Assessee Lawyers: ASHISH GOEL
• Keywords: Depreciation; Wholly owned subsidiary
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO: 2861/DEL/2013 ASSTT. YEAR 2005-06 DCIT VS. EZ ENTECH INDIA (P) LTD. CIRCLE-11(1), ROOM NO. 312, 216-B/6, GAUTAM NAGAR C.R. BUILDING NEW DELHI. NEW DELHI. (PAN AABCE3184F) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. PARVINDER KAUR, SR. DR RESPONDENT BY :SHRI ASHISH GOEL DATE OF HEARING :18.8.2015 DATE OF PRONOUNCEMENT :18. 8.2015 O R D E R PER T.S. KAPOOR, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AG AINST THE ORDER OF LD. CIT(A) DATED 1.3.2013. THE REVENUE IS AGGRIEVED WITH THE ACTION OF LD. CIT(A) BY WHICH HE HAS DELETED THE PENALTY AMOUNTING TO RS. 52,80,395/- IM POSED BY AO U/S 271(1)(C) OF THE ACT. 2. AT THE OUTSET LD. AR INVITED OUR ATTENTION TO AN ORDER OF HONBLE TRIBUNAL DATED 21.10.2014 IN THE CASE OF ASSESSEE ITSELF AN D SUBMITTED THAT THE ADDITION WHICH WAS SUBJECTED TO PENALTY HAS ALREADY BEEN DEL ETED BY HONBLE TRIBUNAL AND THEREFORE THE PENALTY DOES NOT SURVIVE. LD. DR HOWE VER SUPPORTED THE ORDERS OF AO . 3. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESEE IS A PRIVATE LT D. CO. AND A 100% SUBSIDIARY OF ITA NO. 2861/DEL/2013 DCIT VS. EZEN TECH INDIA (P) LTD. 2 EZENDECH CO. LTD. , KOREA AND IS ENGAGED IN THE MA NUFACTURING OF SHEET METAL PARTS OF REFRIGERATOR, AIR CONDITIONERS ETC. FOR ASSESSME NT YEAR 2005-06, THE ASSESSEE FILED A RETURN OF INCOME DECLARING A LOSS OF RS. 1,44,31, 247/- CONSISTING OF BUSINESS LOSS TO THE EXTENT OF RS. 8,09,383/- AND DEPRECIATION TO TH E TUNE OF RS. 1,36,21,869/-. THE AO DURING ASSESSMENT PROCEEDINGS DISALLOWED THE LOS S CLAIMED BY ASSESSEE HOLDING THAT THE ASSESSEE HAD NOT CARRIED OUT ANY MANUFACTU RING ACTIVITY AND CONSEQUENTLY PENALTY U/S 271(1)(C) WAS IMPOSED VIDE ORDER DATED 31.3.2011. THE RELEVANT FINDINGS OF ASSESSING OFFICER AS CONTAINED IN PENA LTY ORDER ARE REPRODUCED BELOW:- 5. THE TOTAL DISALLOWANCE OF RS. 1,44,31,252/- A S DISCUSSED ABOVE WAS UPHELD BY THE CIT(A) AND APPEAL OF THE ASSESSEE WAS DISMISSED. 6. IN THE LIGHT OF ABOVE STATED FACTS AND CIR CUMSTANCES, IT IS ESTABLISHED BEYOND DOUBT THAT THE ASSESEE HAS FURNISHED INACCU RATE PARTICULARS OF INCOME TO THE EXTENT OF RS. 1,44,31,252/-. FURTHER, THE AS SESEE COMPANY, EVEN DURING THE COURSE OF PENALTY PROCEEDINGS, COULD NOT PRODUCE ANY COGENT REPLY /EVIDENCE TO JUSTIFY NON IMPOSITION OF PENALTY. THI S IS IMPORTANT IN VIEW OF THE JUDGMENT OF CIT VS. LAL CHAND TIRATH RAM (1997) 225 ITR 675 (P & H), WHEREIN , IT HAS BEEN OBSERVED THAT :- TO AVOID BURDEN OF PENALTY, THE ASSESSEE SHOULD PR ODUCE COGENT AND RELIABLE EVIDENCE. 4. WE FURTHER FIND THAT THE HONBLE TRIBUNAL V IDE ORDER DATED 21 ST OCTOBER, 2014 HAS DELETED THE ADDITIONS CONFIRMED BY LD. CIT(A). THE RELEVANT FINDINGS AS CONTAINED IN PARA 2 & PARA 6.1 TO 6.2 ARE REPRODUCE D BELOW :- PARA 2. THE ASSESSEE IS A PRIVATE LTD. CO. AND A 100% SUBSIDIARY OF EZENDECH CO. LTD., KOREA (ECL) AND IS ENGAGED IN THE MANUFACTURE OF SHEET METAL PARTS OF REFRIGERATOR, AIR CONDITIONERS ETC., IT HAS TIED UP FOR DEDICATED SUPPLY OF COMPONENTS TO OEM CUSTOMERS SUCH AS L.G. INDIA AND SAMSUNG INDIA. FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE FILED A RETURN OF INCOME ON 25.10.2005 DECLARING A LOSS OF RS. 1,44,31,247/- . THE AO VIDE HIS ORDER DATED 28.12.2007 PASSED U/S 143(3) OF THE ACT DETER MINED THE TOTAL INCOME AT NIL INTERALIA REJECTING THE CLAIM OF THE ASSESSE E FOR BUSINESS LOSS TO THE EXTENT OF RS. 8,09,383/- AND DEPRECIATION TO THE TU NE OF RS. 1,36,21,869/-. ITA NO. 2861/DEL/2013 DCIT VS. EZEN TECH INDIA (P) LTD. 3 PARA 6.1 IN THE CASE ON HAND THE REVENUE IS NOT D ISPUTING THE FACT THAT THE ASSESSEE HAS SOLD GOODS WORTH RS. 698.70 ON 28.3.20 05. THE ASSESSEE HAS FILED BOTH EXCISE RECORDS AS WELL AS SALES TAX RECO RDS, AS EVIDENCE OF SALE. THIS EVIDENCE IS NOT CONTROVERTED BY THE LD. DR EXCEPT F OR SOME THAT THESE ARE SELF-SERVING DOCUMENTS. IN OUR VIEW THE ASSESSEE HA S EFFECTIVELY REPLIED TO THE ISSUES RAISED BY LD. AO . RECORDS WERE PRODUCED TO DEMONSTRATE PAYMENTS MADE TO THE CONTRACTORS FOR CONSTRUCTION OF THE BUI LDING. IT WAS ALSO DEMONSTRATED THAT THE ASSESSEE HAD TWO LARGE GENERA TORS OF 500 KVA AND THAT THESE GENERATORS WERE RUN FOR SUBSTANTIVE NUMB ER OF HOURS AND THAT THERE WAS SUBSTANTIAL CONSUMPTION OF FUEL. THERE IS NO DENYING OF THE FACT THAT THE TRIAL RUN PRODUCTION WAS CARRIED OUT BY TH E ASSESSEE. THERE WAS A PILOT LOT OF GOODS PRODUCED BY THE ASSESSEE AND THE RE WAS ALSO A SALE OF GOODS PRODUCED BY THE ASSESSEE. EXCEPT FOR FINDING FAULT WITH THE EVIDENCES PRODUCED BY THE ASSESSEE, THERE IS NO MATERIAL WITH REVENUE TO CONTROVERT THE STAND OF THE ASSESSEE. PARA 6.2 THUS IN OUR CONSIDERED VIEW, ONCE WE H AVE COME TO A CONCLUSION THAT THE ASSESSEES BUSINESS WAS SET UP PRIOR TO 31 ST MARCH, 2005 AND THAT THE PLANT AND MACHINERY WERE READY TO USE AND THAT THE TRIAL RUN HAS BEEN CARRIED OUT, WE HAVE TO ACCEPT THE CONTENTION OF THE ASSESS EE THAT THE DISALLOWANCE OF DEPRECIATION AND BUSINESS LOSS BY THE AO, AS CON FIRMED BY THE FIRST APPELLATE AUTHORITY IS ERRONEOUS. 5. FROM THE ABOVE FACTS AND CIRCUMSTANCES WE FIND THAT THE SUBJECT MATTER OF PENALTY HAS BEEN DECIDED IN FAVOUR OF ASSESSEE AND THEREFORE PENALTY DOES NOT SURVIVE AND THEREFORE THE APPEAL FILED BY THE REVEN UE IS DISMISSED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST, 2015. SD/- SD/- (C.M. GARG) (T.S. KAPOOR) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: THE 18 TH AUGUST, 2015 VEENA ITA NO. 2861/DEL/2013 DCIT VS. EZEN TECH INDIA (P) LTD. 4 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 18.8..2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 18.8.2 015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER