Arvind Rub Web Control Ltd., Ahmedabad V. The Dy.CIT, Circle-1, Ahmedabad

ITA 2864/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9142 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 12-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Additional depreciation

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.2864/AHD/2015 / ASSTT. YEAR: 2011-2012 ARVIND RUB WEB CONTROL LTD. BLOCK NO.198, CHANCHARWADI VASANA VILLAGE, NR.CLARIS PHARMA, SARKHEJ, BAVLA ROAD, AHMEDABAD 382 110. PAN : AABCA 3133 G VS DCIT, CIR.1 AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL, AR REVENUE BY : SONIA KUMAR, SR.DR / DATE OF HEARING : 15/03/2016 / DATE OF PRONOUNCEMENT: 16/03/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A)-1 DATED 24.8.2015 PASSED FOR THE ASSTT.YE AR 2011-12. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.71,800/- IMPOSED BY TH E AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. ITA NO.2864/AHD/2015 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 29.9.2011 DECLARING TOTAL INCOME AT RS.97 ,73,249/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPO N THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS OF THE ASSESSEE, IT REVEAL ED TO THE AO THAT THE ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS OF RUB BER ROLLS WEB PROCESSING EQUIPMENTS. IT CLAIMED ADDITIONAL DEPRE CIATION. THE AO HAS DIRECTED THE ASSESSEE TO PRODUCE ALL BILLS FOR ADDI TION TO FIXED ASSETS. ON VERIFICATION OF EACH BILL, IT CAME TO THE NOTICE OF THE AO THAT THE ASSESSEE HAS PURCHASED A USED GRINDER WMW 5000MM AMOUNTING T O RS.10 LAKHS FROM COATWELL INDIA P. LTD. SINCE IT WAS AN OLD MA CHINERY AND NOT ENTITLE FOR ADDITIONAL DEPRECIATION, THEREFORE, AN ADDITION OF RS.2.00 LAKHS WAS MADE OUT OF THE CLAIM OF ADDITIONAL DEPRECIATIO N. THE LD.AO HAS INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE HAS CONTENDED T HAT AUDITORS HAVE NOT IDENTIFIED THIS ITEM IN THE AUDIT REPORT. OTHERWIS E, THE ASSESSEE HAS NO MALA FIDE INTENTION TO MISREPRESENT THE INCOME OF RS.2.00 LA KHS WHEN IT WAS DISCLOSING INCOME OF RS.97 LAKHS IN THE RETURN OF INCOME. ACCORDING TO THE ASSESSEE, IT WAS A BONA FIDE HUMAN ERROR. THE MOMENT IT WAS POINTED OUT TO THE ASSESSEE, IT HAS REVISED ITS RETURN AND DID NOT DISPUTE WITH THE DEPARTMENT. THE LD.AO WAS NOT SAT ISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE IMPOSED A PENALTY OF RS.71,800/-. 4. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. ITA NO.2864/AHD/2015 3 5. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE H AVE GONE THROUGH THE RECORD. THE LD.DR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATI ONS P. LTD., REPORTED IN 327 ITR 510. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISIONS OF THE HONBLE S UPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD., 322 IT R 158 (SC) AND PRICE WATER HOUSE COOPERS PVT.LTD., [2012] 348 ITR 306 (SC). 6. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS D IRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTINENT TO TAKE NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR ITA NO.2864/AHD/2015 4 (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UN DER THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FE ATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCO ME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HA S CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUT ORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEE MING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATE S TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO T HE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE A SSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE AS SESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEA L); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT S UCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL T HE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOT AL INCOME. UNDER ITA NO.2864/AHD/2015 5 FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE T WO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWAN CE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SEC TION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 8. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FAC TS OF THE PRESENT CASE, THEN IT WILL REVEAL THAT THERE WAS NO MALA FIDE INTENTION AT END OF THE ASSESSEE FOR FURNISHING PARTICULARS OF THE DEPR ECIATION CLAIM. AUDITOR COULD NOT IDENTITY THIS MACHINE FOR EXCLUDING FROM THE CLAIM OF ADDITIONAL DEPRECIATION. IT COULD BE A POSSIBLE HU MAN ERROR. THIS HUMAN ERROR REQUIRES TO BE APPRECIATED IN THE FACTUAL BAC KGROUND THAT THE ASSESSEE HAS DISCLOSED AN INCOME OF RS.97.73 LAKHS. THIS ADDITIONAL INCOME OF RS.2.00 LAKHS WOULD HAVE NOT AFFECTED IT MATERIALLY, WHICH COULD INSTIGATE THE ASSESSEE TO FURNISH INACCURATE PARTICULARS OF DEPRECIATION CLAIM. THEREFORE, WE ARE SATISFIED TH AT IT WAS A POSSIBLE ITA NO.2864/AHD/2015 6 HUMAN ERROR WITHOUT ANY MALA FIDE INTENTION. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 16 TH MARCH, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER