The DCIT, Bharuch Circle, Bharuch V. M/s. Gujarat Borosil Ltd., Bharuch

ITA 3285/AHD/2011

• Counselvise Citation: 328520514 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI
• Keywords: Depreciation; Deemed to accrue or arise in india; Unabsorbed depreciation
• Section: 115JB

Judgement Text

I.T.A. NO.: 3285 /AHD/2011 ASSESSMENT YEARS: 2005 - 06 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO. : 3285 /AHD/2011 ASSESSMENT YEAR S : 2005 - 06 DEPUTY COMMISSIONER OF INCOME TAX BHARUCH CIRCLE, BHARUCH .APPELLANT VS. GUJARA T BOROSIL LIMITED . RESPONDENT VILLAGE: GOVALI, TEH: JHAGADIA BHARUCH [PAN: AAACG8440M] APPEARANCES BY: G C DAXINI , FOR THE APPELLANT SUNIL TALATI FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : SEPTEMBER 29 , 2015 DATE OF PRONOUNCING THE ORDER : DECEMBER 28 , 201 5 O R D E R PER PRAMOD KUMAR AM : 1. THIS APPEAL, FILED BY THE ASSESSING OFFICER , CHALLENGES CORRECTNESS OF THE ORDER DATED 12 TH OCTOBER 2011 PASSED BY THE LEARNED CIT(A), IN THE MATTER OF PENALTY UNDER SECTION 271(1 )(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2005 - 06 . 2. GRIEVANCE RAISED IN THIS APPEAL IS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, (I) THE LEARNED CIT(A) ERRED IN LAW IN DELETING THE PENALTY OF RS 25,54,8 90 RIGHTLY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, IN VIEW OF THE PROVISIONS LAID DOWN THEREIN; AND (II) THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE PENALTY LEVIED IS ON ADDITION RESULTING FROM DELIBERATE MISCLASSIFICATION OF INCOME WITH THE INTENTION TO EVADE PROPER TAX. I.T.A. NO.: 3285 /AHD/2011 ASSESSMENT YEARS: 2005 - 06 PAGE 2 OF 5 3. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPASS OF MATERIAL FACTS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS SHOWN OTHER INCOME OF RS 103.66 LAKHS, WHICH INCLUDED , INTER ALIA, INTEREST OF RS 69.64 LAKHS AND RENT OF RS 18,000. THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS INCOME SHOULD BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND THAT, IN VIEW OF THE PROVISIONS OF SECTION 32(2)(III) AS AMENDED W.E.F. 1 ST APRIL 1997, THE UNABSORBED DEPRECIATION FOR EARLIER YEARS CANNOT BE ALLOWED TO BE SET OFF AGAINST INCOME FROM OTHER SOURCES . THE STAND SO TAKEN, TO THIS EXTENT, REACHED FINALITY. IT WAS IN THIS BACKDROP THAT THE PENALTY UNDER SECTION 271(1)(C) WAS IMPOSED BY OBSERVING THAT THE ASSESSING OFFICER IS SATISFIED THAT THE ASSESSEE HAS CONCEALED ITS INCOME TO THE TUNE OF RS 69.82 LAKHS AND TRIED TO EVADE ITS TAXABLE INCOME AND THEREBY AVOIDED THE LEGITIMATE TAX PAYABLE . AGGRIE VED BY THE PENALTY OF RS 25,54,890 SO IMPOSED BY THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) DELETED THE IMPUGNED PENALTY FOR MORE REASONS THAN ONE. HIS FIRST REASON OF DELETING THE IMPUGNED PENALTY WAS TH AT THE FINAL ASSESSMENT OF INCOME OF THE ASSESSEE WAS DONE UNDER SECTION 115JB BUT THE AO HAD NOT INITIATED THE PENALTY IN RESPECT OF ADJUSTMENTS TO THE BOOK PROFITS. RELYING UPON HON BLE DELHI HIGH COURT S JUDGMENT IN THE CASE OF CIT VS NALWA INVESTMENTS LTD (327 ITR 543) , AND NOTING THAT THE ASSESSMENT IS COMPLETED UNDER SECTION 115 JB AND THE INCOME ASSESSED UNDER REGULAR PROVISIONS IS LESS THAN BOOK PROFITS, LEARNED CIT(A) DELETED THE PENALTY. IN ADDITION TO THIS REASON, LEARNED CIT(A) ALSO NOTED THAT I T IS ONLY A CHANGE OF HEAD OF INCOME, AND THAT, AS HELD BY A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF DCT VS JMD ADVISORS PVT LTD (124 ITD 223) PENALTY UNDER SECTION 271(1)(C) CANNOT BE LEVIED IN A SITUATION IN WHICH THERE IS ONLY A CHANGE OF THE HEAD OF INCOME. THE PENALTY WAS DELETED FOR THIS REASON ALSO. THE ASSESSING OFFICER IS AGGRIEVED OF THE PENALTY BEING SO DELETED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONS IDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. I.T.A. NO.: 3285 /AHD/2011 ASSESSMENT YEARS: 2005 - 06 PAGE 3 OF 5 5. WE FIND THAT THE LEGAL POSITION IS FAIRLY WELL SETTLED THAT WHEN ASSESSMENT WAS MADE ON INCOME COMPUTED UNDER SECTION 115JB AND TAX HAS BEEN PAID ON INCOME SO COMPUTED, PENALTY UND ER SECTION 271(1)(C) CANNOT BE IMPOSED WITH REFERENCE TO THE ADDITIONS THAT WOULD HAVE BEEN MADE TAKING INTO ACCOUNT CONCEALMENT MADE BY THE ASSESSEE WHILE MAKING ASSESSMENT UNDER NORMAL PROCEDURE. THAT IS WHAT WAS HELD BY HON BLE DELHI HIGH COURT IN THE C ASE OF NALWA SONS INVESTMENT LTD (SUPRA). THE SPECIAL LEAVE PETITION FILED AGAINST THIS JUDGMENT HAS SINCE BEEN DISMISSED BY HON BLE SUPREME COURT ON 4 TH MAY 2012. IN THE CASE OF CIT VS CITI TILES LTD [(2015) 370 ITR 127 (GUJARAT)]. HON BLE JURISDICTIONAL HIGH REITERATED THE SAME PRINCIPLE, AND REFERRED TO, WITH CONCURRENCE, THE VIEWS EXPRESSED BY HON BLE DELHI HIGH COURT. THEIR LORDSHIPS OBSERVED AS FOLLOWS: 10. HAVING THUS HEARD THE LEARNED COUNSEL FOR THE PARTIES, WE NOTICE THAT UNDER SECTION 271 OF TH E ACT, IF THE INCOME - TAX AUTHORITY PRESCRIBED THEREIN IS SATISFIED THAT IF ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY PENALTY, WHICH SHALL NOT BE LESS THAN BUT SHALL NOT EXCEED THREE TIMES OF THE AMOUNT OF TAX SOUGHT TO BE AVOIDED BY THE REASONS OF THE CONCEALMENT OF THE PARTICULARS OF HIS INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. CLAUSE (C) OF EXPLANATION 4 TO SECTION 271(1) OF THE ACT PROVIDES THAT FOR THE PURPOSE OF CLAUSE 3 OF THE SAID SUB - SECTION, THE EXPRESSION AMOUNT OF TAX SOUGHT TO BE AVOIDED MEANS THE DIFFERENCE BETWEEN TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. IT IS IN CONTEXT OF SUCH PENALTY PROVISIONS WE HAVE TO EXAMINE THE VIEW OF THE TRIBUNAL BEARING IN MIND THE FACTS OF THE CASE . IF, THEREFORE, EVEN AFTER THE CONCEALMENT IS UNEARTHED OR THE ASSESSEE S ACT OF SUPPLYING INACCURATE PARTICULARS COMES TO LIGHT, THE TAX LIABILITY BEFORE OR AFTER SUCH CONCEALMENT OR PROVIDING OF INACCURATE PARTICULARS REMAINS THE SAME; BY VIRTUE OF CLAU SE (C) OF EXPLANATION 4 TO SECTION 271(1) OF THE ACT, THERE WOULD BE NO PENALTY IMPOSABLE. THIS IS SO BECAUSE THE PENALTY IS TO BE COMPUTED IN TERMS OF THE AMOUNT OF TAX SOUGHT TO BE AVOIDED, SUCH EXPRESSION AMOUNT OF TAX SOUGHT TO BE AVOIDED' IS EXPLAINE D IN EXPLANATION 4. WE HAVE NOTICED THAT CLAUSE (C) THEREOF WHEN APPLIED TO SUCH A CASE, THE AMOUNT OF TAX SOUGHT TO BE AVOIDED WOULD BE NIL . IF THIS IS SO, THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WOULD NOT BE POSSIBLE TO BE IMPOSED. THIS IS PRECI SELY WHAT THE DELHI HIGH COURT ALSO HELD IN THE CASE OF NALWA & SONS INVESTMENTS LTD. (SUPRA ). IT WAS OBSERVED AS UNDER: 25. JUDGMENT IN THE CASE OF GOLD COINS (SUPRA), OBVIOUSLY, DOES NOT DEAL WITH SUCH A SITUATION. WHAT IS HELD BY THE SUPREME COURT IN THAT CASE IS THAT I.T.A. NO.: 3285 /AHD/2011 ASSESSMENT YEARS: 2005 - 06 PAGE 4 OF 5 EVEN IF IN THE INCOME TAX RETURN FILED BY THE ASSESSEE LOSSES ARE SHOWN, PENALTY CAN STILL BE IMPOSED IN A CASE WHERE ON SETTING OFF THE CONCEALED INCOME AGAINST ANY LOSS INCURRED BY THE ASSESSEE UNDER OTHER HEAD OF INCOME OR BROUGHT FORW ARD FROM EARLIER YEARS, THE TOTAL INCOME IS REDUCED TO A FIGURE LOWER THAN THE CONCEALED INCOME OR EVEN A MINUS FIGURE. THE COURT WAS OF THE OPINION THAT THE TAX SOUGHT TO BE EVADED? WILL MEAN THE TAX CHARGEABLE NOT AS IF IT WERE THE TOTAL INCOME. ONCE, W E APPLY THIS RATIONALE TO EXPLANATION 4 GIVEN BY THE SUPREME COURT, IN THE PRESENT CASE, IT WILL BE DIFFICULT TO SUSTAIN THE PENALTY PROCEEDINGS. REASON IS SIMPLE. NO DOUBT, THERE WAS CONCEALMENT BUT THAT HAD ITS REPERCUSSIONS ONLY WHEN THE ASSESSMENT WAS DONE UNDER THE NORMAL PROCEDURE. THE ASSESSMENT AS PER THE NORMAL PROCEDURE WAS, HOWEVER, NOT ACTED UPON. ON THE CONTRARY, IT IS THE DEEMED INCOME ASSESSED UNDER SECTION 115 JB OF THE ACT WHICH HAS BECOME THE BASIS OF ASSESSMENT AS IT WAS HIGHER OF THE TWO . TAX IS THUS PAID ON THE INCOME ASSESSED UNDER SECTION 115 JB OF THE ACT. HENCE, WHEN THE COMPUTATION WAS MADE UNDER SECTION 115 JB OF THE ACT, THE AFORESAID CONCEALMENT HAD NO ROLE TO PLAY AND WAS TOTALLY IRRELEVANT. THEREFORE, THE CONCEALMENT DID NOT LE AD TO TAX EVASION AT ALL. 26. THE UPSHOT OF THE AFORESAID DISCUSSION WOULD BE TO SUSTAIN THE ORDER OF THE TRIBUNAL, THOUGH ON DIFFERENT GROUNDS. THEREFORE, WHILE WE DO NOT AGREE WITH THE REASONING AND APPROACH OF THE TRIBUNAL, FOR OUR REASONS DISCLOSED AB OVE, WE ARE OF THE OPINION THAT PENALTY COULD NOT HAVE BEEN IMPOSED EVEN IN RESPECT OF CLAIM OF DEPRECIATION MADE BY THE ASSESSEE. THIS APPEAL IS ACCORDINGLY DISMISSED 6. IN VIEW OF THESE DISCUSSIONS, AND WITH THE BENEFIT OF GUIDANCE OF HON BLE COURTS ABO VE, WE HOLD THAT LEARNED CIT(A) WAS QUITE JUSTIFIED IN DELETING THE IMPUGNED PENALTY. WE UPHOLD HIS ACTION, FOR THIS SHORT REASON ALONE, AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 28 TH DAY OF DECEMBER, 2015. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 28 TH DAY OF DECEMBER, 201 5 . I.T.A. NO.: 3285 /AHD/2011 ASSESSMENT YEARS: 2005 - 06 PAGE 5 OF 5 COPIES TO : (1) THE APPE LLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD