DCIT, New Delhi V. M/s. Action Ispat and Power Pvt. Ltd., New Delhi

ITA 3021/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5634 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 14-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Depreciation; Additional depreciation; Revenue expenditure
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.3021/DEL/2015 ASSESSMENT YEAR: 2011-12 DCIT, CIRCLE-1(2), NEW DELHI. VS . ACTION ISPAT AND POWER PVT. LTD., 5 TH FLOOR, ITL TWIN TOWER, BLOCK A, NETAJI SUBHASH PLACE, PITAMPURA, NEW DELHI. PAN: AAECA9671L (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS ASHIMA NEB, SR. DR DATE OF HEARING : 22.01.2019 DATE OF PRONOUNCEMENT : 30.01.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27 TH FEBRUARY, 2015 OF THE CIT(A)-1, NEW DELHI, RELATING TO ASSESS MENT YEAR 2011-12. 2. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE. THEREFORE, THIS APPEAL IS BEING DECIDED ON THE BASIS OF MATERI AL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR. ITA NO.3021/DEL/2015 2 3. THE DELETION OF PENALTY OF RS.45,59,500/- LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT IS THE ONLY ISSUE RAISED BY TH E REVENUE IN THE GROUNDS OF APPEAL. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SPONGE IRON, STEEL BILLETS, FERRO ALLOYS, CAPTIVE POWER PLANT AND TRADING OF STEEL. IT FILED ITS RET URN OF INCOME ON 30 TH SEPTEMBER, 2011 DECLARING LOSS OF RS.49,39,96,469/-. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE H AS MADE ADDITION IN FOLLOWING PLANT & MACHINERY:- S.NO. PLANT & MACHINERY AMOUNT DATE OF ADDITION 1. FERRO ALLOYS RS.23,00,62,293/- 8 TH JUNE, 2010 2. COAL WASHERY PLANT RS.32,82,38,944/- 31 ST MARCH, 2011 3. POLLUTION CONTROL EQUIPMENTS RS.2,02,29,177/- 08 TH JUNE, 2010 5. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTEREST RELATING TO THE ABOVE SAID PLANT & MACHINERY TILL THE DATE OF CAPIT ALIZATION OF THE ASSETS HAVE NOT BEEN CAPITALIZED IN THE BOOKS OF ACCOUNT. THE ASSESSEE EXPLAINED THAT INADVERTENTLY IT FAILED TO CAPITALIZE THE INTEREST ON TERM LOANS RELATING T O PLANT & MACHINERY DURING THE YEAR AMOUNTING TO RS.2,96,68,644/- FOR THE PERIOD 1 ST APRIL, 2010 TO 8 TH JUNE, 2010 IN THE CASE OF FERRO ALLOYS PLANT AND 1 ST APRIL, 2010 TO 31 ST MARCH, 2011 IN THE CASE OF COAL WASHERY PLANT. HOWEVER, THE ASSESSEE COMPANY ON TH E POLLUTION CONTROL PLANT HAS ALSO CLAIMED THE PROPORTIONATE AMOUNT OF DEPRECIATI ON AND ADDITIONAL DEPRECIATION ON THESE EQUIPMENTS AT THE PRESCRIBED RATES WHICH COME S TO RS.1,62,54,434/-. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER MADE ADDITION OF R S.1,34,14,210/- BEING THE INTEREST ITA NO.3021/DEL/2015 3 PAID ON ACCOUNT OF PURCHASE OF PLANT & MACHINERY WH ICH IS NOT PUT TO USE UPTO THE DATE OF INSTALLATION. 6. THE ASSESSEE DID NOT CHALLENGE THE ABOVE ADDITION M ADE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREAFTER, INITIA TED PENALTY PROCEEDINGS U/S 271(1)(C). THE ASSESSEE, IN RESPONSE TO THE PENALT Y NOTICE ISSUED BY THE ASSESSING OFFICER, HAS SUBMITTED AS UNDER:- ' IN THIS MATTER, WE BEG TO SUBMIT AS UNDER:- THE PENALTY NOTICE DATED 28-03-2014 DOES NOT SPEC IFY AS TO UNDER WHICH SUB-SECTION OF SECTION 271 OF THE INCOME TAX ACT TH E PENALTY IS SOUGHT TO BE IMPOSED AND THEREFORE, THE NOTICE PER-SE IS BAD IN LAW. THE ADDITION OF RS. 134,14,210/- TO THE RETURNED LO SS BY CAPITALISING THE INTEREST ON TERM LOANS RELATING TO PLANT & MACHINERIES WHICH WERE NEWLY INSTALLED DURING THE YEAR DOES NOT IN ANY WAY AFFECT THE INTEREST OF THE REVENUE IN VIEW OF THE HUGE AMOUNT OF THE ACCUMULATED LOSSES SUFFERED BY THE AS SESSEE DURING THE RELEVANT ASSESSMENT YEAR AS WELL AS IN EARLIER ASSESSMENT YE ARS AS STATED IN THE RETURN OF THE INCOME FILED BY THE ASSESSEE. YOU MAY FURTHER A PPRECIATE THE FACT THAT EVEN FOR THE ASSESSMENT YEAR 2011-12 THERE HAS BEEN NIL DEMAND RAISED AGAINST THE ASSESSEE VIDE ASSESSMENT ORDER DATED 28-03-2014. MOREOVER THE AMOUNT OF INTEREST CAPITALISED IS NEUT RALISED IN SUBSEQUENT YEARS BY INCIDENCE OF HIGHER AMOUNT OF DEPRECIATION CHARGED ON PLANT & MACHINERY DUE TO SUCH CAPITALISATION. THEREFORE THERE IS IN FACT NO REVENUE LOSS/GAIN TO THE EX- CHEQUER THROUGH THIS ADDITION PARTICULARLY WHEN HUG E AMOUNT OF ACCUMULATED LOSSES ARE STILL OUTSTANDING. FURTHER UNDER NO CIRC UMSTANCES THIS CAN BE CONSIDERED AS CONCEALMENT OF THE PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME SINCE THERE W AS FULL DISCLOSURE OF ALL THE FACTS BY THE ASSESSEE AS PER RECORD. NOTHING HAS BEEN BROUGHT OUT IN THE ASSESSMENT ORDE R SO AS TO PROVE ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF SUCH INCOME DURING ASSESSMENT PROCEEDINGS, THEREFORE NO PENALTY UNDER SECTION 271 OF THE INCOME TAX ACT BECOMES LEVIABLE IN RESPECT OF SAID ADDITION OF RS. 1,34,14,210/- FOR THE REASONS STATED ABOVE.' ITA NO.3021/DEL/2015 4 6.1 VARIOUS DECISIONS WERE ALSO BROUGHT TO THE N OTICE OF THE ASSESSING OFFICER TO THE PROPOSITION THAT NO PENALTY IS LEVIABLE IN THE INST ANT CASE. 7. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. RELYING ON VARIOUS DECISIONS INCLUDI NG THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS PVT. LTD., 327 ITR 51 , THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS, 166 TAXMAN 65; GULJAG INDUSTRIE S LTD. VS. CPO, 293 ITR 584 (SC);AND K.P. MADHUSUDAN VS. CIT, 251 ITR 99 (SC), THE ASSESSING OFFICER LEVIED PENALTY OF RS.45,59,500/- U/S 271(1)(C) OF THE IT A CT. 8. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE GENUINENESS OF THE TERM LOAN TAKEN FOR PURCHASE OF PLANT & MACHINERY AND GENUINE NESS OF THE INTEREST PAID ON THE SAID TERM LOAN IS NOT IN DISPUTE. THE PAYMENT OF I NTEREST WAS DISCLOSED IN THE RETURN OF INCOME AND, THEREFORE, IT CANNOT BE SAID THAT THE A SSESSEE HAS CONCEALED ANY FACT OR ANY INCOME. IT WAS SUBMITTED THAT THE LOAN WAS TAK EN FOR THE PURPOSE OF BUSINESS AND THE TRANSACTION WAS A REVENUE NEUTRAL TRANSACTION. THE ASSESSEE ALSO SUBMITTED THAT THE CAPITALIZATION OF THE INTEREST WOULD HAVE BEEN IN T HE ASSESSEES FAVOUR AND, THEREFORE, THERE WAS NO LOSS TO THE REVENUE. RELYING ON VARIO US DECISIONS INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 158 (SC), IT WAS ARGUED THAT THE PENALTY LEVIED BY THE ASSE SSING OFFICER IS NOT JUSTIFIED. ITA NO.3021/DEL/2015 5 9. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, TH E LD.CIT(A), RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F RELIANCE PETRO PRODUCTS (SUPRA), DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICE R. WHILE DOING SO, HE FURTHER NOTED THAT THE ASSESSEE WAS HAVING HUGE UNA BSORBED DEPRECIATION WHICH WAS ALLOWED TO BE CARRIED FORWARD AND THE ASSESSEE WOUL D NOT HAVE GAINED ANY TAX BENEFIT BY CLAIMING IT AS A REVENUE EXPENDITURE. THEREFORE , THE TREATMENT OF INTEREST WAS A REVENUE NEUTRAL TRANSACTION. AGGRIEVED WITH SUCH OR DER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL A VAILABLE ON RECORD. WE FIND THE ASSESSING OFFICER, IN THE INSTANT CASE, HAS LEV IED PENALTY OF RS.45,59,500/- ON ACCOUNT OF NON-CAPITALISATION OF INTEREST ON TERM L OAN TO THE EXTENT OF RS.1,34,14,210. WE FIND THE LD.CIT(A) DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAD HUGE UNABSORBED DEPREC IATION WHICH WAS ALLOWED TO BE CARRIED FORWARD AND THE ASSESSEE WOULD NOT HAVE GAI NED ANY TAX BENEFIT BY CLAIMING EXEMPTION AS REVENUE EXPENDITURE AND THE TREATMENT OF INTEREST WAS A REVENUE NEUTRAL TRANSACTION. RELYING ON THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (SUPRA) , HE CANCELLED THE PENALTY LEVIED BY THE ASSESSING OFFICER. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. IT IS AN ADMITTED FACT THAT THE GENUINENESS OF THE TERM LOAN TAKEN FOR THE PURPOSE OF PLANT & MACHINERY AND THE GENUINENESS OF THE INTEREST PAID ON THE SAID TERM LOAN IS NOT IN DISPUTE. THE PAYMENT OF INTEREST HAS ALSO BEEN DIS CLOSED IN THE PROFIT & LOSS ACCOUNT ITA NO.3021/DEL/2015 6 AND THIS FACT EMANATES FROM THE RETURN FILED BY THE ASSESSEE. THE ONLY DISPUTE IS REGARDING THE TREATMENT OF THE INTEREST EXPENDITURE AS REVENUE AS AGAINST CAPITALIZATION OF THE SAME TO THE PLANT & MACHINERY. WE FIND THE ASSESSEE, BEFORE THE ASSESSING OFFICER, HAS SUBMITTED THAT IT WAS INADVERTENTLY CL AIMED AS REVENUE EXPENDITURE AND THE ASSESSEE HAS NOT GAINED ANYTHING BY CLAIMING TH E SAME AS REVENUE EXPENDITURE. A PERUSAL OF THE RECORD SHOWS THAT ALL FACTS WERE ALR EADY AVAILABLE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NOTHING IS HIDDEN OR CONCEALED. UNDER THESE CIRCUMSTANCES, WE ARE OF TH E CONSIDERED OPINION THAT THE LD.CIT(A) WAS FULLY JUSTIFIED IN CANCELLING THE PEN ALTY BY RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (SUPRA) . WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) AND T HE GROUND RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS DISMISSED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 3 0.01.2019. SD/- SD/- (K. NARASIMHA CHARY) (R .K. PANDA) JUDICIAL MEMBER ACCOUN TANT MEMFBER DATED: 30 TH JANUARY, 2019 DK ITA NO.3021/DEL/2015 7 COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI