M/s Swagat Ceramics, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5 (4), Morbi

ITA 31/RJT/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1270 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: RM MANEK
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH : E COURT, AT AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.31/RJT/2016 [ASSTT.YEAR 2010-11] M/.SWAGAT CERAMIC C/O. M.N. MANEK &CO. 7, JANAK CHAMBERS OP0P: GIRNAR CINEMA RAJKOT 360 001. VS ITO, WARD - 5(4) MORBI. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI R.M. MANEK, AR REVENUE BY : SHRI AVINASH KUMAR, SR.DR / DATE OF HEARING : 05/05/2016 / DATE OF PRONOUNCEMENT: 11 /05/2016 !'/ 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)-3, RAJKOT DATED 14.10.2015 PASSED FOR THE ASST.YEAR 2010- 2011. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.62,789/- IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 BY THE AO. ITA NO.31/RJT/2016 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ELECTRONICALLY ON 26.9.2010 DECLARING TOTAL INCOME AT RS.5,47,746/-, AND AFTER GIVING SET OFF OF UNABSORB ED DEPRECIATION LOSS PERTAINING TO THE ASSTT.YEAR 2005-06, THE TOTAL INC OME WAS SHOWN AT NIL. THE LD.AO HAS PASSED THE ASSESSMENT ORDER UND ER SECTION 143(3) OF THE ACT ON 12.3.2013, DETERMINING THE TOTAL INCO ME AT NIL. HOWEVER, THE LD.AO HAS OBSERVED THAT UNABSORBED DEPRECIATION LOSS FOR THE ASSTT.YEAR 2005-06 WAS CLAIMED BY THE ASSESSEE AT R S.7,18,472/- WHEREAS AVAILABLE TO DO SO WAS OF RS.5,15,272/-. I N THE OPINION OF THE AO, THE ASSESSEE HAS MADE EXCESS CLAIM OF RS.2,03,2 00/-. HE INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALING THE INCOME. THE AO HAS IMPOSED PENALTY OF RS.62,789/- WHICH WAS CONFIR MED BY THE LD.CIT(A). 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREF ORE, 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. ITA NO.31/RJT/2016 3 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 (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. 5. 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 QUA NTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THI S 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 FURNIS HING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF T HIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SEC TION NOT ONLY ITA NO.31/RJT/2016 4 COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CON CEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUAT ION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEMING FI CTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; ( A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCO ME 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 THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME . UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY I F THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MA TERIAL 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 COMPUTATIO N OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITU ATIONS PROVIDED IN ITA NO.31/RJT/2016 5 EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES I T CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE AB OVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUT ING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C ) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INAC CURATE PARTICULARS HAVE BEEN FURNISHED. 6. IN THE LIGHT THE ABOVE, LET US EXAMINE THE FACTS OF THE PRESENT CASE. A PERUSAL OF THE RECORD WOULD INDICATE THAT RIGHT F ROM THE ASSTT.YEAR 2005-06 AND 2008-09, THE ASSESSEE HAS LOSS IN ALL T HE YEARS. HIS INCOME WAS ALMOST NIL. IN THE ASSTT.YEAR 2010-11 ALSO EVE N IF REDUCED CLAIM OF DEPRECIATION WAS SET OFF AGAINST THE CURRENT YEA R INCOME, THEN ULTIMATE INCOME DETERMINED BY THE AO WAS A LOSS. THE ASSESS EE HAS DECLARED NIL INCOME, AND IT WAS DETERMINED NIL BY THE AO. T HE ASSESSEE HAS PLEADED BEFORE THE AO THAT UNABSORBED DEPRECIATION FOR THE ASSTT.YEAR 2005-06 SET OFF AS CLAIMED IN THE RETURN OF INCOME FOR THE ASSTT.YEAR 2005-06 WAS A BONA FIDE MISTAKE COMMITTED BY THE PERSON WHO PREPARED THE RETURN BY TAKING THE FIGURE OF RETURNED INCOME AND CLAIMED THE DEPRECATION INSTEAD OF TAKING THE FIGURE OF ASSESSE D INCOME IN THE ASSTT.YEAR 2005-06. IN OTHER WORDS, IN THE ASSTT.Y EAR 2005-06, THERE WAS AN ASSESSMENT ORDER UNDER SECTION 143(3) WHEREBY TH E LOSSES WERE REDUCED. THIS FIGURE OUGHT TO HAVE BEEN CONSIDERED WHILE CLAIMING THE DEPRECIATION IN THE ASSTT.YEAR 2010-11. THE DETAIL S OF DEPRECIATION FOR OTHER ASSESSMENT YEARS, VIZ. A.Y.2006-07 TO 2009-10 WERE ALREADY BEFORE THE REVENUE AUTHORITIES. THUS, THERE WAS NO MALA FIDE INTENTION AT THE END OF THE ASSESSEE. IT WAS JUST A HUMAN ER ROR IN TAKING ONE FIGURE ITA NO.31/RJT/2016 6 FROM EARLIER YEARS. CONSIDERING THESE ASPECTS, WE ARE OF THE VIEW THAT THE ASSESSEE DOES NOT DESERVE TO BE VISITED WITH PE NALTY. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 11 TH MAY, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER