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

ITA 3397/MUM/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7009 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Depreciation; Wrong claim
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E, BENC H MUMBAI BEFORE SHRI PAWAN SINGH, JM & SHRI G. MANJUNATHA, AM ITA NO.3397/MUM/2016 ( ASSESSMENT YEAR :2010-11 ) CANA GLASS LTD. PREDPL, 52, NATASHA HOUSE HILL ROAD, MUMBAI - 400 050 VS. ITO WARD 9(1)(2) AAYAKAR BHAVAN, MUMBAI 400 020 PAN/GIR NO. AA ACC5587D APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI HARI S. RAHEJA REVENUE BY SHRI MANOJ KUMAR SINGH DATE OF HEARING 10 / 07 /201 9 DATE OF PRONOUNCEMENT 31 /07/2019 / O R D E R PER G.MANJUNATHA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST ORDER OF THE COMMISSIONER OF INCOME TAX APPEALS 20, MUMBAI DATED 09/02/2016 AND IT PERTAINS TO THE ASSESSMENT YEAR 2 010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIF IED IN CONFIRMING THE LEVY OF PENALTY OF UNDER SECTION 271(1)(C) OF I NCOME TAX, 1961 FOR IN RESPECT OF THE WRONG CLAIM OF DEPRECIATION AND H OLDING THE SAME FURNISHING INACCURATE PARTICULARS OF INCOME. 2. THE APPELLANT SUBMITS THAT THE APPELLANT HAS NOT FURNISHED INACCURATE PARTICULARS OF INCOME AND AS SUCH THE LEVY OF PENAL TY U/S 271(1) IS UNWARRANTED ON THE FACTS ON THE CIRCUMSTANCES OF TH E CASE. 3. THE APPELLANT CRAVES LAVE TO, ADD TO, ALTER OR V ARY THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. ITA NO.3397/MUM/2016 M/S. CANA GLASS LTD., 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF GLASS BOT TLES. AS PER THE DIRECTORS REPORT, THE ASSESSEE COMPANY HAS DISCONTI NUED ITS BUSINESS OPERATIONS SINCE 20/02/2003. HOWEVER, THE ASSESSEE COMPANY HAD DEBITED DEPRECIATION OF RS. 9,07,153/- AND OTHER EX PENSES OF RS.8,55,459/- INTO PROFIT AND LOSS ACCOUNT. THE AO DISALLOWED EXPENSES AND DEPRECIATION CLAIMED ON PLANT MACHINERY ON THE GROUND THAT WHEN BUSINESS OPERATIONS WERE DISCONTINUED THE QUESTION OF ALLOWANCES OF EXPENSES AND DEPRECIATION DOES NOT ARISES. THEREAFT ER THE AO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) AND AFTER CONSID ERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELIED UPON TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUN ICATION (P) LTD. [2010] (327 ITR 510) LEVIED PENALTY OF RS. 5,50,000 /- WHICH WORKS OUT TO 100% OF TAX SOUGHT TO BE EVADED. THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE CIT(A), BUT COULD NOT SUCCEED. TH E CIT(A), FOR THE DETAILED REASONS RECORDED IN THIS APPELLATE ORDER C ONFIRMED PENALTY LEVIED BY THE AO IN RESPECT OF WRONG CLAIM OF DEPRECIATION AMOUNTING TO RS. 9,07,153/- HOWEVER, DELETED THE PENALTY LEVIED IN R ESPECT OF CLAIM BY EXPENSES OF RS. 8,55,459/-. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3. LD. AR FOR THE ASSESSEE, AT THE TIME OF HEARING, SUBMITTED THAT THIS IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF ITAT D BENCH ITA NO.3397/MUM/2016 M/S. CANA GLASS LTD., 3 MUMBAI, IN ASSESSEES OWN CASE FOR AY 2009-10 WHERE UNDER IDENTICAL SET OF FACTS ON SIMILAR ADDITIONS, THE TRIBUNAL DEL ETED PENALTY LEVIED BY THE AO. THE LD DR, ON THE OTHER HAND, FAIRLY ACCEPTED T HAT A SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR EARLIER YEAR, HOWEVER, HE STRONGLY SUPPORTED ORDER OF THE AO AS WELL AS THE C IT(A). 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT, IN RESPECT OF WRONG CLAIM OF DEPRECATION ON PLANT MACHINERY AND AFTER CONSIDERIN G RELEVANT SUBMISSIONS HELD THAT WHEN THE BASIS FOR DISALLOWA NCE OF EXPENSES AS WELL AS DEPRECIATION WAS SIMILAR, THAT IS NON CARRY ING OUT OF BUSINESS ACTIVITY IN THE INSTANT YEAR AND ALSO FACT THAT PEN ALTY LEVIED IN RESPECT OF DISALLOWANCE EXPENSES HAS BEEN DELETED BY THE CIT(A ), THERE IS NO REASON FOR THE LD. CIT(A) TO SUSTAINED PENALTY IN R ESPECT OF WRONG CLAIM OF DEPRECIATION ON PLANT MACHINERY. THE RELEVANT FINDI NGS OF THE TRIBUNAL ARE AS UNDER: 6. WE HAVE CAREFULLY PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE CONTENTIONS OF THE PARTIES. THE LD. CIT(A) HAS CONF IRMED THE PENALTY ON DISALLOWANCE OF CLAIM OF DEPRECIATION HOLDING THAT SINCE THE ASSETS WERE NOT USED AND THERE WERE NO BUSINESS ACTIVITIES DURI NG THE PREVIOUS YEAR THE ASSESSEE IS NOT ENTITLED FOR THE SAID CLAIM, TH EREFORE THE ASSESSEE IS LIABLE TO BE PENALIZED U/S 271(1)(C) OF THE ACT FOR CLAIMING WRONG AND INADMISSIBLE CLAIM. WE FURTHER NOTICE THAT THE COOR DINATE BENCH OF THE TRIBUNAL HAS DELETED THE PENALTY LEVIED IN THE SIMI LAR SET OF FACTS AND CIRCUMSTANCES OF THE CASE IN ASSESSEES OWN CASE FO R THE ASSESSMENT YEAR 2007-08 AFORESAID. THE OPERATIVE PART OF THE S AID ORDER READS AS UNDER:- 6.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS . THE LEARNED REPRESENTATIVE FOR THE ASSESSEE HAS EXPLAINED THE C IRCUMSTANCES IN WHICH THE RETURN OF INCOME WAS FILED BY THE ASSESSE E, INCLUDING THE FACTS THAT PROPER PROFESSIONAL ADVICE WAS NOT AVAILABLE. IT HAS ALSO BEEN EXPLAINED THAT THE BUSINESS OF THE ASSESSEE WAS LYI NG DISCONTINUED ON ITA NO.3397/MUM/2016 M/S. CANA GLASS LTD., 4 ACCOUNT OF LABOUR TROUBLE AND IT WAS FACING FINANCI AL HARDSHIPS ALSO. IT IS ALSO EMERGING FROM THE RECORD THAT ASSESSEE HAD SIG NIFICANT PAST LOSSES. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, IN OUR V IEW, A MERE MISTAKE IN MAKING OF CLAIM IN THE RETURN OF INCOME WOULD NOT I PSO FACTO LEAD TO THE CONCLUSION OF CONCEALMENT OF INCOME OR FURNISHING O F INACCURATE PARTICULARS OF INCOME FOR THE PURPOSE OF SEC.271(1) (C) OF THE ACT. QUITE CLEARLY, IN THE PRESENT CASE THE WRONG CLAIM OF DEP RECIATION MADE BY THE ASSESSEE CANNOT BE CONSTRUED TO HAVE BEEN MADE WITH AN INTENTION TO EVADE TAXES INASMUCH AS EVEN BEFORE THE ALLOWANCE O F DEPOSITION, THE RESULTANT INCOME OF THE ASSESSEE IS A LOSS AND IT H AD SIGNIFICANT PAST LOSSES, WHICH HAVE ALSO REMAINED UNABSORBED. IT HAS BEEN POINTED OUT BY THE ASSESSEE THAT SUCH LOSSES HAVE LAPSED ON ACCOUN T OF NOT BEING SET OFF AGAINST INCOME WITHIN THE STIPULATED PERIOD. CO NSIDERING THE ENTIRETY OF CIRCUMSTANCES, IN OUR VIEW, THE DISALLOWANCE OF DEP RECIATION IN THE INSTANT YEAR IS A MISTAKE AND DOES NOT INVITE THE PROVISION S OF SCE271(1)(C) OF THE ACT. NOTABLY, THE ASSESSING OFFICER HAD ALSO DISALL OWED CERTAIN EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR THE REAS ON THAT THE BUSINESS OF THE ASSESSEE WAS DISCONTINUED, AND ON SUCH DISALLOW ANCE ALSO THE ASSESSING OFFICER HAD LEVIED PENALTY. THE PENALTY I N RELATION TO DISALLOWANCE OF EXPENSES HAS BEEN DELETED BY THE CI T(A). CLEARLY, THE BASIS FOR DISALLOWANCE OF DEPRECIATION AS WELL AS E XPENSES WAS SIMILAR, I.E. NON-CARRYING OUT OF ANY BUSINESS ACTIVITY IN T HE INSTANT YEAR. THUS, IF THE BASIS OF DISALLOWANCE OF THE TWO CLAIMS WAS SIM ILAR, AND IF ONE HAS BEEN FOUND NOT ELIGIBLE TO PENALTY U/S 271(1)(C) OF 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 AFOR ESAID REASONS, WE DEEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER T O DELETE THE PENALTY IMPOSED IN RELATION TO THE DENIAL OF CLAIM OF DEPRE CIATION ALSO. 7. SINCE, THE COORDINATE BENCH HAS DELETED THE PENA LTY CONFIRMED BY THE CIT(A) IN A SIMILAR SET OF FACTS AND CIRCUMSTANCES IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE VIEW TAKEN BY THE COORDINATE BENCH. HENCE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH WE S ET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE P ENALTY IMPOSED IN RELATION TO THE DENIAL OF CLAIM OF DEPRECIATION IN THIS CASE. 5. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH V IEW TAKEN BY THE CO- ORDINATE BENCH, WE ARE OF THE CONSIDERD VIEW THAT T HE AO AS WELL AS LD. CIT(A) WERE INCORRECT IN LEVYING PENALTY U/S 271(1) (C) OF THE I.T.ACT, 1961 IN RESPECT OF DISALLOWANCE OF THE DEPRECIATION. HEN CE, WE DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S.271(1)(C) OF THE INCO ME TAX ACT, 1961. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31/07/2 019 ITA NO.3397/MUM/2016 M/S. CANA GLASS LTD., 5 SD/- (PAWAN SINGH) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 31/07/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//