Magic International (P) Ltd, New Delhi V. ITO, New Delhi

ITA 2922/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2108 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT M GOVIL
• Assessee Lawyers: NARESH NAGPAL
• Keywords: Depreciation; Bonafide mistake
• Section: 271(1)(c); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMEBR AND SHRI DEEPAK R SHAH, ACCOUNTANT MEMBER I.TA. NO 2922 /DEL./09 ASSTT. YEAR 2005-06 MAGIC INTERNATIONAL P. LTD. 9/ 54, KIRTI NAGAR IND. AREA, NEW DELHI. VS. ITO WARD NO. 6 (1) NEW DELHI. . (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARESH NAGPAL, CA RESPONDENT BY : SHRI AMIT M. GOVIL, SR. DR. ORDER PER DEEPAK R SHAH, ACCOUNTANT MEMBER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DATED 02.4.2009 IN AN APPEAL AGAINST THE ORDER LEVY ING PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT 1961 (THE ACT). 2. THE ASSESSEE FILED RETURN OF INCOME DECLARING LO SS OF RS. 77,82,374/-. THE ASSESSEE PAID TAX ON THE BOOK PROFIT AS PER PROVISI ON OF SECTION 115JB OF THE ACT. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URING STATIONERY ITEMS. THE ASSESSING OFFICE NOTED THAT THE OPENING WDV OF FIXE D ASSET WAS SUBSTANTIALLY HIGHER THAN THE CLOSING WDV OF THIS ASSET OF IMMEDI ATELY PRECEDING YEAR. THE ASSESSEE WAS ASKED TO EXPLAIN THE VARIATION. THE AS SESSEE, REALIZING THE MISTAKE THAT THE BOOK VALUE OF THE WDV AS PER COMPANIES ACT WAS ADOPTED IN PLACE OF WDV AS PER INCOME TAX RECORDS, FILED REVISED CHART AND THE EXCESS DEPRECIATION ITA NO. 2922/DEL/09 ASSESSMENT YEAR 2005-06 2 CLAIMED DUE TO INADVERTENCE WAS WITHDRAWN. ORIGINAL LY THE ASSESSING OFFICER DISALLOWED EXCESS CLAIM OF DEPRECIATION TO THE EXTE NT OF RS. 57,49,416/-. LATER ON ASSESSING OFFICER REALIZING HIS MISTAKE RESTRICTED THE DISALLOWANCE TO RS. 45,08,106. THE ASSESSING OFFICER LEVIED PENALTY QUA THE EXCESS DEPRECIATION DISALLOWED TO THE EXTENT OF RS. 45,08,106/-. THE SA ME WAS CONFIRMED BY LEARNED CIT (A) AND HENCE THIS APPEAL. 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER BOOKS OF ACCOUNTS THE ASSESSEE MAINTAINS RECORD FOR CLAIMING DEPRECIATION UNDER THE COMPANIES ACT WHICH IS DEBITED TO BOOKS OF ACCOUNT . THE W.D.V FOR DEPRECIATION UNDER INCOME TAX ACT ARE DIFFERENT AND HENCE SEPARATE RECORD IS MAINTAINED FOR CLAIM OF DEPRECIATION UNDER THE INCO ME TAX ACT. DUE TO INADVERTENT MISTAKE THE DEPRECIATION RECORDED UNDER COMPANIES ACT WAS PICKED UP AND DEPRECIATION AS DEBITED IN BOOKS OF ACCOUNT S WAS CLAIMED. HOWEVER ON REALIZING THE MISTAKE THE SAME WAS ACCEPTED AND HEN CE DO NOT AMOUNT EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT THERE IS NO DIFFERENCE BE TWEEN THE BOOK PROFIT OFFERED FOR TAX AND ASSESSED AS SUCH. THEREFORE, THERE IS N OT ADDITION / DISALLOWANCES AND HENCE PENALTY U/S 271(1) (C) IS NOT ATTRACTED. 4. LEARNED DR ON THE OTHER HAND SUBMITTED THAT THE MISTAKE WAS FOUND BY THE ASSESSING OFFICER. THEREFORE THE CLAIM OF ASSES SEE CANNOT BE CONSIDERED TO BE BONAFIDE. IN VIEW OF THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF UOI VS. DHARMENDRA TEXTILE PROCESSORS THE REVENUE IS NO T REQUIRED TO PROVE MENS REA OR WILLFUL CONCEALMENT. THEREFORE THE PENALTY W AS RIGHTLY LEVIED. ITA NO. 2922/DEL/09 ASSESSMENT YEAR 2005-06 3 5. WE HAVE CAREFULLY CONSIDERED RELEVANT FACT AND A RGUMENTS ADVANCED. WE FIND THAT THE MISTAKE IN CLAIM OF DEPRECIATION IS A N INADVERTENT MISTAKE WHICH CREPT IN AND NOT BY WAY OF AN INTENTIONAL CLAIM. TH ERE IS DIFFERENCE BETWEEN MISTAKE AND FURNISHING INACCURATE PARTICULARS OF IN COME. THE MISTAKE WHEN REALIZED AND RECTIFIED WHICH WAS A BONAFIDE MISTAKE WILL EXONERATE THE ASSESSEE FROM PENALTY PROCEEDINGS. EVEN AFTER THE MISTAKE IS REALIZED IF THE ASSESSEE WILL CONTINUE WITH THE SAME OR DEFEND SUCH MISTAKE MAY A TTRACT PENALTY PROCEEDINGS. HOWEVER, SINCE THE ASSESSEE ON REALIZING THE MISTAK E, THOUGH POINTED BY THE ASSESSING OFFICER, WITHDREW ITS CLAIM WILL NOT BE L IABLE TO PENALTY U/S 271 (1) (C) OF THE ACT. 5.1 WE HAVE PERUSED THE CHARTS OF DEPRECIATION UNDE R COMPANIES ACT AS WELL AS UNDER THE INCOME TAX ACT. THE CONTENTION OF ASSE SSEE THAT BY MISTAKE A DEPRECIATION AS PER COMPANIES ACT WAS CLAIMED APPEA RS TO BE CORRECT AS THERE IS DIFFERENCE IN THE FIGURES IN THE DEPRECIATION DEBIT ED UNDER COMPANIES ACT AND NOW CLAIMED IN THE RETURN OF INCOME. IT IS EQUALLY TRUE THAT EVEN ASSESSING OFFICER MADE MISTAKE WHILE DISALLOWING THE CLAIM OF DEPRECI ATION. INITIALLY THE DISALLOWANCE WAS RS. 57,49,416/- LATER ON REALIZING THE MISTAKE APPARENT ON RECORD, THE ASSESSING OFFICER RESTRICTED THE DISALL OWANCE OF RS. 45,08,106/-. JUST AS THE ASSESSING OFFICER MAY BE MISTAKE, THE ASSESS EE HEREIN ALSO COMMITTED MISTAKE INADVERTENTLY AND WITHOUT ANY INTENTION OF THE SAME AS IS EVIDENT FROM THE FACT THAT THE INCOME DECLARED U/S 115 JB BEING BOOK PROFIT IS CORRECTLY DECLARED. THEREFORE, THERE IS NO ADDITION / DISALL OWANCE AS ENVISAGED IN EXPLANATION 1 TO SECTION 271 (1) (C) OF THE ACT. HO NBLE PUNJAB AND HARYANA HIGH ITA NO. 2922/DEL/09 ASSESSMENT YEAR 2005-06 4 COURT IN THE CASE OF CIT VS. SIDHARTHA ENTERPRISES IN ITA NO. 908 OF 2008 DATED 14 TH JULY, 2009 HELD AS UNDER :- WE ARE UNABLE TO ACCEPT THE SUBMISSION. THE JUDGME NT OF THE HONBLE SUPREME COURT IN DHARMENDRA TEXTILE (SUPRA) CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE, WHERE PARTICULARS OF INCOM E ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IN THA T QUALITATIVE DIFFERENCE BETWEEN CRIMINAL LIABILITY U/S 276 C AND PENALTY U/ S 271(1)(C) HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO THE TRIAL OF A CRIMINAL CASE NEED NOT BE ADOPTED WHILE CONSIDERING THE LEVY OF PENALTY. E VEN SO, CONCEPT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF THE S AID JUDGMENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIB ERATE DEFAULT AND NOT MERE MISTAKE. THIS BEING THE POSITION, THE FINDING HAVING BEEN R ECORDED ON FACTS THAT THE FURNISHING OF INACCURATE PARTICUL ARS WAS SIMPLY A MISTAKE AND NOT A DELIBERATE ATTEMPT TO EVADE TAX, THE VIEW TAKEN BY THE TRIBUNAL CANNOT BE HELD TO BE PERVERSE. (EMPHASIS SUPPLIED) . 6. IN VIEW OF THE ABOVE DISCUSSION AND SINCE WE HAV E HELD THAT THERE WAS A BONAFIDE MISTAKE ON PART OF ASSESSEE, WE CANCEL THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. THE FACT ALSO REMAINS THAT THERE IS NO ADDITION OF DISALLOWANCE IN THE ULTIMATELY ASSESSED INCOME U/S 115 JB OF THE ACT. T HEREFORE, PENALTY IS DIRECTED TO BE CANCELLED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON ________________ _. [A.D. JAIN] [DEEPAK R SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA DATED : COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, D EPUTY REGISTRAR, ITAT