CANA GLASS LTD, MUMBAI V. ITO WD 9(1)(2), MUMBAI

ITA 3395/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9539 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: RAJESH KESHAV PILLAI
• Keywords: Depreciation; Wrong claim
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH , JUDICIAL MEMBER ITA NO. 3395/MUM/2016 : A.Y : 2007 - 08 CANA GLASS LIMITED PREDPL, 52, NATASHA HOUSE, HILL ROAD, MUMBAI 400 050. PAN : AAACC5587D (APPELLANT) VS. ITO, WARD - 9(1)(2), MUMBAI (RESPONDENT) APPELLANT BY : SHRI RAJESH KESHAV PILLAI RESPONDENT BY : SHRI V. JUSTIN DATE OF HEARING : 23/08/2017 DATE OF PRONOUNCEMENT : 15 /09/2017 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 20 , MUMBAI DATED 08.02.2016 , PERTAINING TO THE ASSESSMENT YEAR 2007 - 08 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER, MUMBAI DATED 19.03.2012 IMPOSING PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO. 3395/MUM/2016 CANA GLASS LIMITED 2. IN THIS APPEAL, THE ONLY ISSUE IN DISPUTE IS THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT ON ACCOUNT OF TAX SOUGHT TO BE EVADED WITH RESPECT TO DENIAL OF CLAIM OF DEPRECIATION OF RS.14,10,070/ - . 3. IN BRIEF, THE RELEVANT FACTS ARE THAT DURING THE COURSE OF ASSESSMENT FINALISED U/S 143(3) OF THE ACT DATED 25.11.2009, THE ASSESSING OFFICER NOTED THAT ASSESSEE - COMPANY HAD CLAIMED DEPRECIATION ON PLANT AND MACHINERY WHEREAS THERE WAS NO BUSINESS ACTIVITY CARRIED OUT DURING THE YEAR. NOTABLY, THE BUSINESS OF THE ASSESSEE WAS MANUFACTURING OF BOTTLE AND VIALS FOR INJECTIBLES, WHICH WAS LYING DISCONTINUED SINCE FEBRUARY, 2003 ON ACCOUNT OF LABOUR TROUBLE. THEREFORE, THE PLANT AND MACHINERY NOT HAVING BEEN PUT TO USE, THE CLAIM OF DEPRECIATION AMOUNTING TO RS. 14,10,070/ - WAS DISALLOWED, WHICH HAS SINCE BECOME FINAL. SUBSEQUENTLY, THE ASSESSING OFFICER HAS LEVIED PENALTY U/S 271(1)(C) OF THE ACT WITH RESPECT TO THE TAX SOUGHT TO BE EVADED ON SUCH INCOME. TH E CIT(A) HAS ALSO AFFIRMED THE ACTION OF THE ASSESSING OFFICER. 4. BEFORE US, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS DISCONTINUATION OF BUSINESS PRIMARILY ON ACCOUNT OF LABOUR TROUBLE, AND DUE TO CONSEQUENTIAL FINANCIAL SIC KNESS , THE ASSESSEE WAS REFERRED TO THE BIFR IN THE YEAR 2009. THE LEARNED REPRESENTATIVE POINTED OUT THAT THE ONLY ACTIVITY CARRIED OUT DURING THE YEAR WAS PAYMENT OF WORKMEN COMPENSATION, ETC. AND THAT DUE TO FINANCIAL HARDSHIP, SUITABLE PROFESSIONAL AD VICE WAS ALSO NOT AVAILABLE 3 ITA NO. 3395/MUM/2016 CANA GLASS LIMITED DUE TO WHICH THE RETURN OF INCOME WAS PREPARED BY AN A CCOUNTANT LEVEL EMPLOYEE ONLY. THEREFORE, THERE WAS A MISTAKE OF CLAIMING DEPRECIATION INSPITE OF THE FACT THAT THE PLANT AND MACHINERY WAS NOT PUT TO USE. THE LEARNED REPR ESENTATIVE POINTED OUT THAT IT WAS A BONA FIDE MISTAKE CONSIDERING THE PECULIAR CIRCUMSTANCES OF THE CASE AND, IN ANY CASE, ASSESSEE WAS HAVING HUGE LOSSES AND NO BENEFIT WOULD HAVE ARISEN BY DELIBERATELY MAKING A WRONG CLAIM OF DEPRECIATION . IN THIS CONT EXT, THE LEARNED REPRESENTATIVE REFERRED TO THE COMPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERATION WHEREIN ASSESSEE - COMPANY HAS TABULATED THE UNABSORBED LOSSES OF EARLIER YEARS. IT HAS BEEN POINTED OUT THAT THE EVEN SAID LOSSES HAVE BECOME TIME - BARRED AND, THEREFORE, THERE WAS NO UNDUE ADVANTAGE SOUGHT TO BE CLAIMED BY THE ASSESSEE BY CLAIMING THE IMPUGNED DEPRECIATION ALLOWANCE. 5. ON THE OTHER HAND, THE LD. DR POINTED OUT THAT THE CLAIM OF DEPRECIATION WAS P ATENTLY WRONG INASMUCH AS NO BUSINESS ACTIVITY WAS CARRIED OUT AND THUS, IT WAS QUITE CLEAR THAT THE PLANT AND MACHINERY WAS NOT PUT TO USE AND, THEREFORE, SUCH A WRONG CLAIM SHOULD BE VISITED WITH PENALTY U/S 271(1)(C) OF THE ACT. 6. WE HAVE CONSIDERED T HE RIVAL SUBMISSIONS. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE HAS EXPLAINED THE CIRCUMSTANCES IN WHICH THE RETURN OF INCOME WAS FILED BY THE ASSESSEE, INCLUDING THE FACT THAT PROPER PROFESSIONAL ADVICE WAS NOT AVAILABLE . IT HAS ALSO BEEN EXPLAINED TH AT THE BUSINESS OF THE ASSESSEE WAS LYING DISCONTINUED ON ACCOUNT OF LABOUR TROUBLE AND IT WAS FACING FINANCIAL HARDSHIP S ALSO . IT IS 4 ITA NO. 3395/MUM/2016 CANA GLASS LIMITED ALSO EMERGING FROM THE RECORD THAT ASSESSEE HAD SIGNIFICANT PAST LOSSES. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, IN O UR VIEW, A MERE MISTAKE IN MAKING OF A CLAIM IN THE RETURN OF INCOME WOULD NOT IPSO FACTO LEAD TO THE CONCLUSION OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR THE PURPOSES OF SEC. 271(1)(C) OF THE ACT. QUITE CLEARLY, IN TH E PRESENT CASE, THE WRONG CLAIM OF DEPRECIATION MADE BY THE ASSESSEE CANNOT BE CONSTRUED TO HAVE BEEN MADE WITH AN INTENTION TO EVADE TAX ES INASMUCH AS EVEN BEFORE THE ALLOWANCE OF DEPRECIATION, THE RESULTANT INCOME OF THE ASSESSEE IS A LOSS AND IT HAD SIG NIFICANT PAST LOSSES, WHICH HAVE ALSO REMAINED UNABSORBED. IT HAS BEEN POINTED OUT BY THE ASSESSEE THAT SUCH LOSSES HAVE LAPSED ON ACCOUNT OF NOT BEING SET - OFF AGAINST INCOME WITHIN THE STIPULATED PERIOD. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, IN OUR VIEW, THE DISALLOWANCE OF DEPRECIATION IN THE INSTANT YEAR IS A MISTAKE AND DOES NOT INVITE THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT. NOTABLY, THE ASSESSING OFFICER HAD ALSO DISALLOWED CERTAIN EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT FOR THE REAS ON THAT THE BUSINESS OF THE ASSESSEE WAS DISCONTINUED, AND ON SUCH DISALLOWANCE ALSO THE ASSESSING OFFICER HAD LEVIED PENALTY. THE PENALTY IN RELATION TO DISALLOWANCE OF EXPENSES HAS BEEN DELETED BY THE CIT(A). CLEARLY , THE BASIS FOR DISALLOWANCE OF DEPR ECIATION AS WELL AS THE EXPENSES WAS SIMILAR, I.E. NON - CARRYING OUT OF ANY BUSINESS ACTIVITY IN THE INSTANT YEAR. THUS, IF THE BASIS OF THE DISALLOWANCE OF THE TWO CLAIMS WAS SIMILAR, AND IF ONE HAS BEEN FOUND TO BE NOT EXIGIBLE TO PENALTY U/S 271(1)(C) O F THE ACT BY THE CIT(A) , WE FIND NO JUSTIFIABLE REASON FOR THE CIT(A) NOT TO DELETE THE PENALTY WITH RESPECT TO THE OTHER CLAIM. THEREFORE, FOR ALL THE AFORESAID REASONS, WE 5 ITA NO. 3395/MUM/2016 CANA GLASS LIMITED DEEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY IMPOSED IN RELATION TO THE DENIAL OF CLAIM OF DEPRECIATION ALSO. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 5 T H SEPTEMBER, 2017. SD/ - SD/ - ( PAWAN SINGH ) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER MUMBAI, DATE : 1 5 T H SEPTEMBER , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, E BENCH, MUMBAI 6) GUARD FILE BY ORDER ASSTT. REGISTRAR /SR. PRIVATE SECRETARY I.T.A.T, MUMBAI