The DCIT, Circle-2, Surat V. M/s. Priyanka Polyster, Surat

ITA 2905/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76641 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Depreciation; Additional depreciation; Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.2905/AHD/2010 A.Y. 2006-07 DCIT, SURAT. VS M/S. PRIYANKA POLYSTER, 3/3973, NAGARDAS NI SHERI, NAVAPURA, SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, SR.D.R. , ASSESSEE(S) BY : SHRI MEHUL SHAH, AR / DATE OF HEARING : 09/04/2014 / DATE OF PRONOUNCEMENT: 11/04/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-II, SURAT, DATED 12.08.2010 AND THE GROUND RAISED IS REPRODUCED BELOW: 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED U/ S.271(1)(C) BY THE AO, WHEN THE ASSESSEE HAD FURNISHED INACCURATE PART ICULARS OF INCOME BY CLAIMING EXCESS DEPRECIATION ON MACHINERY USED F OR TEXTURISING BUSINESS. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) DATED 12.12.2008 AND THE CORRESPO NDING PENALTY ORDER PASSED U/S.271(1)(C) DATED 23 RD OF NOVEMBER, 2009 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF TEXTURISING AND TRADING OF YA RN. THE ASSESSEE HAD CLAIMED DEPRECIATION @ 50% ON PLANT AND MACHINERY W HICH WAS PURCHASED UNDER TUF SCHEME. AS PER AO, ON THE SAID MACHINERY THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATION @ 35%; HENCE, DISALLOWED ITA NO.2905/AHD/2010 DCIT, SURAT VS. M/S. PRIYANKA POLYSTER A.Y.2006-07 - 2 - THE CLAIM OF RS.16,94,920/-. IT WAS HELD THAT THE D EPRECIATION WAS WRONGLY CLAIMED; HENCE, A PENALTY OF RS.5,70,510/- WAS LEVIED. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, IT WAS HELD AS UNDER: I HAVE DULY CONSIDERED THE FACTS OF THE CASE AND S UBMISSION OF THE APPELLANT AND FIND THAT THE ISSUE ON WHICH PENALTY HAS BEEN LEVIED IS NOT FREE FROM CONTROVERSY AND IS DEBATABLE ONE. THE APP ELLANTS CONTENTION IS THAT MACHINERY HAS BEEN PURCHASED UNDER TUF SCHE ME. THEREFORE, THE QUESTION WHETHER THE TEXTURISING ACTIVITIES CAR RIED OUT ON THE SAID MACHINES CONSTITUTE WEAVING OR PROCESSING OR MANUFA CTURING OF GARMENT IN THE TEXTILE INDUSTRY, SO AS TO BE ELIGIB LE FOR HIGHER DEPRECIATION @ 50%, IS NOT FREE FROM DOUBT AND THE SAME WILL DEPEND ON INTERPRETATION OF PROVISIONS OF LAW TO SPECIFIC FACTS OF EACH CASE. IN SUCH CIRCUMSTANCES, THE CLAIM OF THE APPELLANT FOR HIGHER DEPRECIATION ON PLANT & MACHINERY CANNOT BE TERMED AS CONCEALMEN T OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME. FURTHER , THE APPELLANT HAS NOT CONCEALED ANY FACTS RELATING TO THE ABOVE CLAIM EITHER IN THE RETURN OF INCOME OR FROM THE ASSESSING OFFICER. I, THEREFO RE, HOLD THAT THE ASSESSING OFFICER HAS NOT ESTABLISHED CONCEALMENT O R FILING OF INACCURATE PARTICULARS OF INCOME IN THE CASE OF THE APPELLANT AND ACCORDINGLY, CANCEL THE PENALTY. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES. WE HAVE NOTED THAT ON IDENTICAL FACTS HONBLE ITAT D BENCH AHME DABAD IN THE CASE OF ITO, WARD 1(2), SURAT VS. M/S. DESHRAJ TEXTURIZE RS PVT. LTD., BEARING ITA NO.660/AHD/2010 FOR A.Y. 2005-06 ORDER DATED 07 .09.2012 HAS DELETED THE PENALTY LEVIED U/S.271(1)(C) IN THE FOL LOWING MANNER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE FACTUAL POSITION ON THE BASIS OF ASSESS MENT ORDER AND SUBMISSIONS THAT EMERGES IS THAT ASSESSEE HAD AVAIL ED LOAN FROM BANK UNDER TUF SCHEME FOR PURCHASE OF MACHINERY. AS PER INCOME TAX RULES, APPENDIX-1, PART-III, ITEM NO.6, MACHINERY A ND PLANT USED IN WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE I NDUSTRY, WHICH IS PURCHASED UNDER TUFS ON OR AFTER 1 ST APRIL, 2001 BUT BEFORE 1 ST APRIL, 2004 AND IS PUT TO USE BEFORE 1 ST APRIL, 2004 ARE ELIGIBLE FOR DEPRECIATION @ 50%. IT IS AN UNDISPUTED FACT THAT A SSESSEE IS IN THE BUSINESS OF MANUFACTURING OF TEXTURISED YARN AND HA D PURCHASED ITA NO.2905/AHD/2010 DCIT, SURAT VS. M/S. PRIYANKA POLYSTER A.Y.2006-07 - 3 - MACHINERY BY AVAILING LOAN UNDER TUFS SCHEME. THE A SSESSEE WAS UNDER A BONAFIDE BELIEF THAT SINCE IT HAS PURCHASED MACHINERY BY AVAILING LOAN FROM BANK UNDER TUF SCHEME, IT WAS EL IGIBLE FOR DEPRECIATION @ 50% ON THE MACHINERY PURCHASED. THE CLAIM OF DEPRECIATION WAS NOT ALTOGETHER BOGUS. THE DISPUTE WAS ONLY WITH RESPECT TO THE RATE OF DEPRECIATION. THE BELIEF OF THE ASSESSEE IS NOT FOUND TO BE UNTRUE OR FALSE BY THE A.O. ON THESE FA CTS IT CANNOT BE SAID THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS AND IS THEREFORE LIABLE TO PENALTY U/S.271(1)(C ). IN THE CASE OF EA GLE FIBRES PVT. LTD. (SUPRA) THE COORDINATE BENCH, ON SIMILAR FACTS HAD DELETED THE PENALTY BY HOLDING AS UNDER:- '5. WE HAVE CONSIDERED THE MATERIAL PLACED ON RECOR D. AS FAR AS THE REVENUE'S APPEAL IN RESPECT OF EXCESS CLAIM OF DEPR ECIATION ON MACHINERY IS CONCERNED, THE A.O. HAD MADE A DISALLO WANCE OF DEPRECIATION OF RS.18,04,688/- PRIMARILY ON THE GRO UND THAT THE DEPRECIATION ON MACHINERY AND PLANT (TUF SCHEME) WA S ALLOWABLE @ 25%, HOWEVER, THE ASSESSEE HAD CLAIMED THE DEPRECIA TION AT 50%. ACCORDING TO A.O., THE ELIGIBLE DEPRECIATION AS PER THE INCOME TAX RULES WAS ONLY 25%, HENCE, THE SAME WAS RESTRICTED TO THA T EXTENT ONLY. THE EXCESS CLAIM OF DEPRECIATION WAS AFFIRMED BY THE LD . CIT (A) IN FIRST APPEAL. CONSEQUENT THEREUPON THE A.O. HAS THOUGHT I T PROPER TO LEVY THE PENALTY. HOWEVER, WHEN THE QUESTION OF LEVY OF PENA LTY WAS CHALLENGED, LD. CIT (A) HAS NOTED, AS PER THE PARAGRAPH REPRODU CED ABOVE, THAT THE MACHINERIES WERE ONLY PURCHASED OUT OF THE LOAN GIV EN BY THE BANK UNDER A TUF SCHEME FLOATED BY MINISTRY OF TEXTILE. THE ASSESSEE WAS UNDER AN IMPRESSION THAT THE CLAIM OF DEPRECIATION WAS AS PER THE SPECIFIC RATES PRESCRIBED, HOWEVER, IT WAS FOUND BY THE A.O. THAT THAT SPECIFIC RATE OF DEPRECIATION WAS NOT ADMISSIBLE AS PER THE INCOME TAX RULES, 1962. 5.1. ON DUE EXAMINATION OF THE CIRCUMSTANCES, ONCE THE CLAIM OF DEPRECIATION WAS NOT ALTOGETHER BOGUS OR MALAFIDES BUT THE DISPUTE WAS IN RESPECT OF THE CORRECT RATE OF DEPRECIATION, THE N IN OUR CONSIDERED VIEW THAT THOUGH THE RATE OF DEPRECIATION AS PER A. O. WAS CORRECT BUT ASSESSEE'S ACTION SHOULD NOT BE HELD AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. IT IS ALSO EV IDENT THAT STILL THE ASSESSEE IS HARPING UPON THE INTERPRETATION OF ANNE XURE TO I T, RULES, 1962 FOR THE PURPOSE OF HIGHER DEPRECIATION ALLOWAN CE, THEREFORE, THIS FACT ITSELF PROVES THAT THE CORRECT ENTITLEMENT OF DEPRECIATION WAS A DEBATABLE ISSUE. TO BUTTRESS THIS VIEW, WE PLACE RE LIANCE ON A LATEST DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V S. RELIANCE PETROPRODUCTS (P) LTD, REPORTED AT (2010) 322 ITR 1 58 (SC), WHEREIN IT WAS LAID DOWN THAT NO PENALTY COULD BE LEVIED MEREL Y ON DISALLOWANCE OF A DEDUCTION, WE FIND NO FORCE IN THIS GROUND OF THE REVENUE AND AFFIRM THE FINDINGS OF THE LD. CIT(A). ITA NO.2905/AHD/2010 DCIT, SURAT VS. M/S. PRIYANKA POLYSTER A.Y.2006-07 - 4 - 11. SINCE THE FACTS IN THE PRESENT CASE ARE IDENTIC AL TO THAT OF EAGLE SYNTHETICS PRIVATE LIMITED (SUPRA) AND SINCE NOTHIN G HAS BEEN BROUGHT ON RECORD, TO THE CONTRARY BY THE REVENUE AND RELYI NG ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRO DUCTS (SUPRA) WE DO FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT (A). WE THEREFORE, UPHOLD THE ORDER OF THE CIT (A). 4.1 SINCE, ON IDENTICAL FACTS A RESPECTED CO-ORDINA TE BENCH HAS TAKEN A VIEW IN FAVOUR OF THE ASSESSEE; THEREFORE, ON THE SAME LINES, WE HEREBY HOLD THAT THERE WAS NO BASIS FOR LEVY OF PENALTY. T HE VIEW TAKEN BY LEARNED CIT(A) IS HEREBY APPROVED AND THE GROUND OF THE REVENUE IS DISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 11/04/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD