M/s Trumboo Cement Industries PVT. LTD, Srinagar V. Assistant commissioner of Income Tax, Srinagar

ITA 34/ASR/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7773 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-07-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Depreciation; Cost of acquisition; Initiation of penalty proceedings
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 34/(ASR)/2017 AS SESSMENT YEAR: 2009-10 TRUMBOO CEMENT INDUSTRIES PVT. LTD., JAVIDAN BUILDING, 156-C, NEAR POST OFFICE, RAJBAGH, SRINAGAR (KASHMIR) [PAN: AABCT 3414F] VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3, SRINAGAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. K. MISHRA (C.A.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 12.07.2018 DATE OF PRONOUNCEMENT: 18.07.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE CON FIRMATION OF THE PENALTY LEVIED U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' HEREINAFTER) BY THE ASSESSING OFFICER (AO) FOR ASSESSMENT YEAR (AY) 200 9-10 VIDE HIS ORDER DATED 25.06.2015, BY THE COMMISSIONER OF INCOME TAX (APPE ALS), JAMMU ('CIT(A)' FOR SHORT) VIDE HIS ORDER DATED 19.07.2016. 2. THE ISSUE ARISING IN THE INSTANT APPEAL CONCERNS THE MAINTAINABILITY OF THE PENALTY U/S. 271(1)(C), LEVIED IN THE SUM OF RS.16, 64,060/- QUA TWO ADJUSTMENTS MADE BY THE AO TO THE ASSESSEES RETURNED INCOME IN ASSESSMENT U/S. 143(3) OF THE ACT DATED 26.12.2011 FOR THE RELEVANT YEAR, AS UNDE R: ITA NO. 34/ASR/2017 (AY 2009-10) TRUMBOO CEMENT INDUSTRIES PVT. LTD. V. ASST. CIT 2 (A) DISALLOWANCE U/S. 14A : RS.36,00,660/- (B) DISALLOWANCE OF DEPRECIATION : RS. 8,07,060/ - TOTAL : RS.44,07,720/- QUA THE FIRST DISALLOWANCE, THE ASSESSEES CASE IS THAT THERE IS NO SATISFACTION BY THE AO IN THE ASSESSMENT PROCEEDINGS, AS EVIDENT FROM T HE NON-RECORDING OF INITIATION OF PENALTY PROCEEDINGS IN ITS RESPECT, IN CONTRA-DI STINCTION TO THAT IN RESPECT OF DEPRECIATION (ON INVESTMENT SUBSIDY) AND DISALLOWANCE OF DEDUCTION U/S. 80-IB (ON EXCISE DUTY REFUND AND INTEREST INCOME), WHICH (THE LATTER ADJUSTMENT) THOUGH DID NOT SURVIVE THE APPELLATE PROCEEDINGS. TOWARD THIS, THE LD. AR, THE ASSESSEES COUNSEL, SHRI MISHRA, WOULD TAKE US THROUGH THE RELEVANT PARAS OF THE ASSESSMENT ORDER. WHILE THE DISCUSSIONS QUA THE DEPRECIATION ON INVESTMENT SUBSIDY AND DEDUCTION U/S. 80-IB WERE FOLLOWED BY INITIATION OF PENALTY PROCEEDINGS (FOR FURNISHING INACCURATE PARTICULARS OF INCOME), NO SU CH INITIATION FOLLOWED THE DISALLOWANCE U/S. 14A CONCLUDING AT PG. 24 OF THE A SSESSMENT ORDER. FURTHER, THOUGH THE LAST PAGE (PG. 26) OF THE ASSESSMENT ORD ER DOES BEAR, ONCE AGAIN, A NARRATION AS TO INITIATION OF PENALTY PROCEEDINGS U /S. 271(1)(C), IT WAS FOLLOWED BY THE WORDS AS DISCUSSED ABOVE, IMPLYING THAT THE A O WAS THEREBY ONLY REFERRING TO THE PENALTY PROCEEDINGS ALREADY INITIATED, I.E., AS INDICATED IN THE BODY OF THE ASSESSMENT ORDER; HE HAVING INITIATED PENALTY PROCE EDINGS ONLY QUA TWO OF THE EIGHT ADJUSTMENTS TO THE ASSESSEES RETURNED INCOME MADE IN ASSESSMENT. REFERENCE WAS MADE BY THE LD. COUNSEL TO CIT V. TRIVENI ENGINEERING & INDUSTRIES LTD. [2014] 369 ITR 660 (ALL), WHEREIN THE ASSESSING AUTHORITY HAD, SIMILARLY, USED THE WORDS AS DISCUSSED ABOVE, AND WHICH WERE CONSTRUED BY THE H ONBLE COURT TO IMPLY THAT NO PENALTY HAD BEEN INITIATED FOR THE HEADS OF INCOME FOR WHICH NO SPECIFIC INITIATION HAD BEEN MADE BY THE AO IN THE BODY OF HIS ORDER. ITA NO. 34/ASR/2017 (AY 2009-10) TRUMBOO CEMENT INDUSTRIES PVT. LTD. V. ASST. CIT 3 AS REGARDS DEPRECIATION, HE WOULD SUBMIT THAT THOU GH THE ASSESSEE HAD NOT REDUCED THE COST OF ACQUISITION OF THE RELEVANT BLO CK OF ASSETS (UNDER WHICH THE PLANT AND MACHINERY AND DG SET, ON WHICH THE CA PITAL SUBSIDY WAS RECEIVED BY THE ASSESSEE, FELL), THE AO HAD ERRED IN COMPUTING THE RESULTANT EXCESS CLAIM OF DEPRECIATION BY APPLYING THE PRESCRIBED (DEPRECIATI ON) RATE OF 15% ON THE TOTAL SUBSIDY OF RS.53.80 LACS. THE SAME BEING RECEIVED D URING THE FINANCIAL YEARS 2000- 01 AND 2001-02, THE IMPACT ON DEPRECIATION FOR THE CURRENT YEAR WOULD BE MUCH LOWER THAN THAT COMPUTED BY THE AO AS IT IS ONLY TH E COST (OF ACQUISITION) THAT IS TO BE REDUCED. THOUGH THE AMOUNT AS DISALLOWED BY THE AO STANDS CONFIRMED IN QUANTUM PROCEEDINGS, THAT WOULD NOT BE DETERMINATIV E OF THE MATTER AS PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WITH REGARD TO THE NON-INITIATION OF PENALTY PROCEE DINGS U/S. 271(1)(C) QUA DISALLOWANCE U/S. 14A, THE SAME IS IMMANENT FROM TH E RECORD. THE VERY FACT THAT THE AO HAS INITIATED PENALTY U/S. 271(1)(C) ITEM-WI SE, I.E., AFTER CONCLUDING A PARTICULAR DISALLOWANCE/ADJUSTMENT, AS OUGHT TO BE THE CASE, MAKES IT AMPLY CLEAR THAT HE INTENDED TO INITIATE PENALTY PROCEEDINGS U/ S. 271(1)(C) ONLY IN RESPECT OF THE RELEVANT DISALLOWANCE/ADJUSTMENT, WHICH INFERENCE G ETS FURTHER REINFORCED BY THE USE OF THE EXPRESSION AS DISCUSSED ABOVE BY HIM A T THE END OF THE ASSESSMENT ORDER WHILE AGAIN REFERRING TO THE INITIATION OF PE NALTY PROCEEDINGS U/S. 271(1)(C). IT IS THIS SATISFACTION WHICH FORMS THE BASIS, THE FUL CRUM, FOR ASSUMING JURISDICTION TO LEVY PENALTY U/S. 271(1)(C), AS WOULD BE APPARENT F ROM A MERE READING OF THE RELEVANT PROVISION. REFERENCE IN THIS REGARD MAY AL SO BE MADE TO THE DECISION IN D.M. MANASVI V. CIT [1972] 86 ITR 557 (SC), SINCE FOLLOWED PER ITS LATER DECISIONS BY THE APEX COURT. THE AMENDMENT PER SECT ION 271(1B) ONLY PROVIDES FOR SUCH SATISFACTION BEING CONSTRUED WHERE THE PEN ALTY PROCEEDINGS ARE INITIATED, ITA NO. 34/ASR/2017 (AY 2009-10) TRUMBOO CEMENT INDUSTRIES PVT. LTD. V. ASST. CIT 4 AND THEREFORE WOULD NOT COME TO THE RESCUE OF THE R EVENUE WHERE IT IS NOT INITIATED AT ALL. NO DOUBT, SUCH SATISFACTION MAY NOT BE REDU CED IN WRITING, AS EXPLAINED BY THE APEX COURT IN MAK DATA PVT. LTD. V. CIT [2013] 358 ITR 593 (SC), RELIED UPON IN TRIVENI ENGINEERING & INDUSTRIES LTD. (SUPRA); AS ALSO, AMONG OTHERS, CIT V . ATUL MOHAN BINDAL [2009] 317 ITR 1 (SC), WE DO NOT DISCERN ANY SUCH SATISFACTION UPON READING THE ASSESSMENT ORDER, AS IT MUST BE IN TERMS OF THE SAID DECISIONS. THE LEVY OF PENALTY QUA DISALLOWANCE U/S. 14A LACKS JURISDICTIONAL BASIS. THE LD. CIT(A) HAS NOT ADDRESSED THIS ASPECT, EVEN AS THE S AME WAS RAISED BY THE ASSESSEE BEFORE HIM PER ITS GROUND 3, AND MERELY PROCEEDED T O DISCUSS THE ASSESSEES CASE ON MERITS. IN FACT, EVEN ON MERITS, THE ASSESSEES CASE IS SUPPORTED BY DECISIONS BY THE TRIBUNAL, AS IN THE CASE OF RAINEY INVESTMENTS (P.) LTD. V. ASST. CIT [2013] 35 CCH 202 (MUM), AS THE INVESTMENT IN SHARE APPLICATI ON MONEY, QUA WHICH THE DISALLOWANCE STANDS MADE, IS INCAPABLE OF YIELDING ANY TAX-FREE INCOME. THE PENALTY IS ACCORDINGLY DELETED. AS REGARDS THE DISALLOWANCE OF DEPRECIATION, THE A SSESSEE DOES NOT DISPUTE THAT IT HAS , BY NOT REDUCING THE COST (OF ACQUISITION) OF THE R ELEVANT BLOCK OF ASSETS, IN TERMS OF SECTION 43(1), CLAIMED EXCESS DEPRECIAT ION FOR THE CURRENT YEAR. THE QUESTION IS THE EXTENT OF THAT EXCESS. THAT IS, ITS QUANTUM. THE DEPRECIATION ON A BLOCK OF ASSETS HAS TO BE ON ITS WRITTEN DOWN VALU E (WDV), DEFINED U/S. 43(6). THE TWO COMPONENTS THEREOF, RELEVANT FOR OUR PURPOS E, ARE THE COST OF ACQUISITION AND DEPRECIATION ACTUALLY ALLOWED, BOTH OF WHICH ARE WELL DEFINED. REFERENCE FOR THE FORMER MAY BE MADE TO SECTION 43(1), WHILE FOR THE LATTER THE DECISION BY THE APEX COURT EXPLAINING THE EXPRESSION ACTUALLY ALLO WED, AS IN CIT V. STRAW PRODUCTS LTD. [1966] 60 ITR 156 (SC). THE AO IS ACCORDINGLY DIRE CTED TO LEVY PENALTY ON THE AMOUNT OF DEPRECIATION EXCESS CLAIME D BY THE ASSESSEE FOR THE CURRENT YEAR, I.E., AS CLAIMED QUA INVESTMENT SUBSIDY, FOLLOWING THE WELL-SETTLED PRINCIPLES FOR COMPUTING THE SAME. ITA NO. 34/ASR/2017 (AY 2009-10) TRUMBOO CEMENT INDUSTRIES PVT. LTD. V. ASST. CIT 5 WE DECIDE ACCORDINGLY. 4 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 18, 2018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 18.07.2018 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: TRUMBOO CEMENT INDUSTRIES PV T. LTD., JAVIDAN BUILDING, 156- C, NEAR POST OFFICE, RAJBAGH, SRINAGAR (KASHMIR) (2) THE RESPONDENT: ASST. COMMISSIONER OF INCOM E TAX, CIRCLE-3, SRINAGAR (3) THE CIT(APPEALS), JAMMU (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER