Priya Klay (P) Ltd, New Delhi V. ITO, New Delhi

ITA 2995/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2208 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: SURINDER SINGH
• Keywords: Depreciation; TDS; Set aside
• Section: 271(1)(c)

Judgement Text

ITA NO. 2995/DEL/2009 A.Y. 2005-06 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE THE HONBLE JUDICIAL MEMBER, SHRI I.P. BANSA L & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 2995/DEL/ 2009 A.Y. : 2005-06 M/S PRIYA KLAY PRIVATE LIMITED, VS. INCOME TA X OFFICER, 806, PP TOWER, WARD-14(4), NEW DELHI NETAJI SUBHASH PLACE, PITAMPURA, DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SURINDER SINGH, AR DEPARTMENT BY : SH. H.K. LAL, SR. DR O R D E R PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) DATED 16.4.2009 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOM E TAX(A) ERRED IN CONFIRMING THE PENALTY UNDER SECTION 271(1)(C) OF T HE IT ACT AMOUNTING TO RS. 4,32,505/-. 3. IN THIS CASE PENALTY UNDER SECTION 271(1)(C) WAS LEVIED ON THE ASSESSEE ON ACCOUNT OF FOLLOWING ADDITIONS MADE:- I) LOSS ON SALE OF FIXED ASSETS : RS. 1,04,740/- ITA NO. 2995/DEL/2009 A.Y. 2005-06 2 II) NON DEDUCTION OF TDS ON INTEREST : RS. 6,31,600/- III) CLAIM OF DEPRECIATION ON TRUCK SOLD : RS. 4,45,61 2/- 4. UPON ASSESSEES APPEAL CIT(A) HAS DELETED THE PEN ALTY ON ACCOUNT OF NON DEDUCTION OF TDS OF INTEREST AND CONFIRMED THE LEV Y OF PENALTY ON THE OTHER TWO ITEMS. 5. AS REGARDS THE LOSS ON FIXED ASSETS IT WAS NOTED BY THE AO THAT THE SAID AMOUNT WAS TO BE COMPULSORY ADDED BY THE ASSES SEE. SINCE IT WAS CHARGED TO THE PROFIT AND LOSS ACCOUNT AND WAS NOT ALLOWABLE BEING CAPITAL LOSS. HOWEVER, THE ASSESSEE HAS FAILED T O DO SO. ASSESSEE EXPLAINED THAT IT WAS ONLY DUE TO OMISSION OCCURRED ON T HE PART OF THE COMPANY IN FILING THE INCOME THE RETURN. THIS CONTE NTION WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT ASSESSEE IS HA VING GUIDANCE OF TAX EXPERTS AND THE ACCOUNTS ARE BEING AUDITED. 6. AS REGARDS THE CLAIM OF DEPRECIATION OF TRUCK SOLD T HE AO OBSERVED THAT THE ASSESSEE COMPANY HAD CLAIMED DEPRECIATION OF RS. 27,12,808/- AS PER INCOME TAX RULES, 1962 AS PER ANNEXURE ENCLO SED WITH THE RETURN OF INCOME. ON PERUSAL OF DEPRECIATION CHART, I T WAS NOTICED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON SALE PROCEEDS OF FIXED ASSETS OF RS 11,14,030/- I.E. SALE OF TRUCK DURING THE FINAN CIAL YEAR 2004-05 RELEVANT TO THE ASSESSMENT YEAR 2005-06. THE AR OF T HE ASSESSEE ITA NO. 2995/DEL/2009 A.Y. 2005-06 3 COMPANY WAS ASKED AS TO WHY DEPRECIATION CLAIMED ON SAL E OF TRUCK SHOULD NOT BE ALLOWED AS THE DEPRECIATION WAS NOT ADMIS SIBLE ON ASSETS SOLD DURING THE YEAR. THE AR OF THE ASSESSEE COMPANY VIDE LETTER DATED 24.7.2007 HAD FILED REVISED DEPRECIATION CHART AND H AD WITHDRAWN DEPRECIATION OF RS. 4,45,612/- CLAIMED ON SALE OF TRUCK OF RS. 11,14,030/-. 7. ASSESSEE EXPLAINED THAT IT WAS AN OMISSION ON THE P ART OF THE ASSESSEE AND THE COMPANY HAS ITSELF ADMITTED THE SAM E. NOT BEING SATISFIED WITH THE EXPLANATION THE AO HELD IT WAS A DELIBERATE ATTEMPT TO ESCAPE THE SECTION 271(1)(C). HENCE, HE HIMSELF IMPOSED THE PENALTY UNDER SECTION 271(1)(C). 8. UPON ASSESSEES APPEAL THE LD. CIT(A) CONFIRMED TH E ADDITION NOTING THAT NONE OF THE ADDITION CAN BE SAID TO FALL UND ER THE CATEGORY OF SIMPLE OMISSION ESPECIALLY IN THE CASE OF A OLD COMPA NY WHICH IS DULY ASSISTED BY THE COMPETENT TEAM OF TAX EXPERTS. LD. CIT(A) ALSO REFERRED TO THE DECISION OF THE HONBLE APEX COURT IN THE DHARMEN DRA TEXTILE PROCESSORS AND OTHERS 306 ITR 277. 9. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 10. LD. COUNSEL OF THE ASSESSEE REITERATED THAT THE A DDITIONS WHICH HAVE BEEN MADE ARE PRIMARILY DUE TO MISTAKES AND OM ISSIONS. THE ITA NO. 2995/DEL/2009 A.Y. 2005-06 4 CLAIM OF LOSS ON SALE OF FIXED ASSETS WAS NOT ADDED BACK WHILE PREPARING THE RETURN OF INCOME AND THE SAME WAS A PURE MISTAKE . HE CLAIMED THAT IT WAS NOT THE CASE THAT THE LOSS OF SALE OF FIXED ASSETS WAS CONCEALED BY THE ASSESSEE. HE SUBMITTED THAT THIS A SPECT WAS DULY DISCLOSED IN THE AUDITED ACCOUNTS AND IT CANNOT BE SAI D THAT THERE WAS ANY ATTEMPT BY THE ASSESSEE TO FURNISH FALSE PARTIC ULARS OR CONCEAL THE INCOME. SIMILARLY, AS REGARDS THE CLAIM OF DEPRECIAT ION OF TRUCK SOLD LD. COUNSEL CONTENDED THAT IT WAS ALSO A MISTAKE AND DURIN G THE COURSE OF ASSESSMENT ITSELF THE ASSESSEE HAS SUBMITTED THE CO RRECT CALCULATION. HENCE, LD. COUNSEL CLAIMED THAT PENALTY UNDER SECTION 271(1)(C) SHOULD NOT BE LEVIED. 10.1 LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE R ECORDS. WE FIND THAT SECTION 271(1)(C) OF THE ACT POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALME NT OF INCOME. AS REGARDS THE LOSS ON SALE OF FIXED ASSETS THE FACT WAS VERY MUCH DISCLOSED BY THE ASSESSEE IN THE AUDITED ACCOUNTS. IT WAS ONLY A CASE OF MISTAKE AND OMISSION IN NOT ADDING BACK THE SAME IN THE RETURN OF INCOME WHICH CANNOT BE SAID THAT THE ACT OF THE ASSESSEE AT TRACTED PENALTY PROVISION OF SECTION 271(1)(C). SIMILARLY, IN THE CASE OF CLAIM OF ITA NO. 2995/DEL/2009 A.Y. 2005-06 5 DEPRECIATION OF TRUCK SOLD THE FACT THAT TRUCKS WERE S OLD AND THE DEPRECIATION WAS CLAIMED FOR THE SAME WAS VERY MUCH D ISCLOSED IN THE ACCOUNTS. WHEN THIS ASPECT WAS POINTED OUT THE ASSESS EE HAS HIMSELF ADMITTED THE MISTAKE AND CORRECT THE CLAIM OF DEPRE CIATION. IN OUR OPINION, THIS ACTION ALSO CANNOT BE SAID TO BE CONTUMACIOUS TO ATTRACT THE PROVISIONS OF PENALTY UNDER SECTION 271(1)(C). 11.1 IN 309 ITR 268 IN THE CASE OF CIT VS. S. DHANBA L, THE HONBLE JURISDICTIONAL HIGH COURT HAD UPHELD THE DELETION OF P ENALTY U/S 271(1)(C) ON THE FACTS WHEREIN THE ASSESSEE HAD CORR ECTED ITS CLAIM OF DEDUCTION U/S 80HHE, UPON AOS POINTING OUT THE SAME I N ASSESSMENT PROCEEDINGS. 11.2 IN THIS REGARD WE ALSO DRAW SUPPORT FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF TH REE OF THEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI -CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS T HE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FA ILURE TO PERFORM A ITA NO. 2995/DEL/2009 A.Y. 2005-06 6 STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF TH E AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBE D, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED I N REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE B ELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 12. AS REGARDS THE RELIANCE PLACED UPON LD. CIT(A) ON THE DECISION OF DHARMENDRA TEXTILE (SUPRA), WE FIND THAT THE SAME I S NOT APPLICABLE. THE HONBLE APEX COURT IN 317 ITR 1 HAS ITSELF EXPLAI NED THE RATIO OF THE DECISION AS UNDER:- 23. THE DECISION IN DHARMENDRA TEXTILE MUST, THEREF ORE, BE UNDERSTOOD TO MEAN THAT THOUGH THE APPLICATION OF SECTION 11AC WOULD DEPEND UPON THE EXISTENCE OR OTHERWISE OF THE CONDITIONS EXPRESSLY STATED IN THE SECTION, ONCE THE SE CTION IS APPLICABLE IN A CASE THE CONCERNED AUTHORITY WOULD HAVE NOT DISCRETION IN QUANTIFYING THE AMOUNT AND PENALTY M UST BE IMPOSED EQUAL TO THE DUTY DETERMINED UNDER SUB-SEC TION (2) OF SECTION 11A. THAT IS WHAT DHARMENDRA TEXTILE DECIDES. ITA NO. 2995/DEL/2009 A.Y. 2005-06 7 12.1 WE HAVE ALREADY OBSERVED THAT THE ASSESSEES AC TION CANNOT BE SAID TO BE COMING UNDER THE AMBIT OF PENAL PROVISION OF S ECTION 271(1)(C). 13. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE IT ACT. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/12/2009. SD/- SD/- [I.P. BANSAL] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 16/12/ 2009 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES