Golden Aqua Farms (P) Ltd, Balasore V. ACIT, Balasore

ITA 359/CTK/2011

• Counselvise Citation: 35922114 RSA 2011
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-07-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SETHM SETH ARS
• Keywords: Depreciation; Cost of acquisition; Wrong claim
• Section: 32

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 359/CTK/2011 (ASSESSMENT YEAR 2004 - 05) GOLDEN AQUA FARMS (P) LTD., AZIMABAD, BALASORE 756 001 PAN: AAACG 6407 C VERSUS ASST .COMMISSIONER OF INCOME - TAX , BALASORE CIRCLE, BALASORE. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SETH/M.SETH, ARS FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 16.11.2011 DATE OF PRONOUNCEMENT : 18.11.2011 ORDER SHRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSEE IS ON THE SOLITARY ISSUE OF CONFIRMING THE PENALTY BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IMPOSED AT 4,37,590 BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE INCOME - TAX ACT,1961 FOR THE ASSESSMENT YEAR 2004 - 05. 2. THE BRIEF FACTS ARE THAT THE ASSESSEE FILED THE RETURN INCOME OF 2,90,720 WHICH WAS ASSESSED U/S.143(3)/147 AT 15,40,970. THE ADDITIONS WERE BEING NOT CHALLENGED BY THE ASSESSEE BEING THE CLAIM OF DEPRECIATION DISALLOWED WHI CH GOT LINKED TO THE CLAIM OF SHORT TERM CAPITAL LOSS WHICH COMBINED EFFECT OF 12,50,252 WAS SUBJECTED TO LEVY OF PENALTY AS CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE PENALTY ORDER OF THE ASSESSING OFFICER IS SELF EXPLANATORY TO THE EXTENT THAT THE CLAIMS WERE MADE BY THE ASSESSEE ON THE AUDITORS JUSTIFYING THE CLAIM IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT, WHICH WAS SOUGHT TO BE DI SALLOWED BY THE ASSESSING OFFICER AS MENTIONED ABOVE. HE SUBMITTED THAT THE DISALLOWANCE OF DEPRECIATION WAS NOT BECAUSE IT WAS EITHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS INSOFAR AS THE VERY DUMPERS WHICH HAVE BEEN SOLD AL L WERE SUBJECTED TO LOSS IN 2 ACCORDANCE WITH THE PROVISIONS OF SECTION 32 WHEN THE BALANCING CHARGE TO THE B LOCK OF ASSETS WAS REPORTED. THE LEARNED ASSESSING OFFICER RELYING ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF A.M.SHAH & CO. V. CIT (108 TAXMANN 137) HELD THE SAME WORTHY FOR LEVY OF PENALTY WHICH THE LEARNED CIT(A) UPHELD BY FURTHER PLACING RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ESCORTS FINANCE LTD (328 ITR 44) WHICH WAS FURTHER FORTIFIED BY THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS (P) LTD (322 ITR 158). 4. HE SUBMITTED THAT THE JUDICIAL PRONOUNCEMENTS HAVE BEEN MISINTERPRETED BY THE AUTHORITIES BELOW INSOFAR AS THE FACTUAL ASPECTS BROUGHT ON RECORD BY THEM CLEARLY INDICATE THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS (P) LTD (322 ITR 158) SQUARELY APPLIES TO THE CASE OF THE ASSESSEE. NON - FILING OF APPEAL AGAINST THE ADDITIONS BEING THE DISALLOWANCE OF DEPRECIATION AN D SHORT TERM CAPITAL LOSS IS NOT A GUILT OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. AS THE VERY NAME SUGGESTS THAT THE CLAIMS ARE IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT THERE COULD NEVER BE CONCEALMENT OF INCOME NOR FURNISH ING OF INACCURATE PARTICULARS. THE LEARNED CIT(A) THEREFORE MISDIRECTED HIMSELF TO HOLD THAT THE CASE LAW ANNUNCIATED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ESCORTS FINANCE LTD (328 ITR 44) IS SQUARELY APPLICABLE. HE FURTHER AGREED TO THE SUBMIS SION OF THE ASSESSEE APPELLANT BEFORE HIM BUT NOTED THAT IT WAS NOT A WRONG CLAIM BUT A FALSE CLAIM. HE SUBMITTED THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS (P) LTD (322 ITR 158) CLARIFIES ALL THE ISSUES AS PER TH E FACTUAL ASPECT OF THE ASSESSEE INSOFAR AS IT WAS NOT THE CASE OF EITHER FURNISHING INACCURATE PARTICULAR OR CONCEALMENT OF INCOME TO AVOID PAYMENT OF TAX, AS BOTH ARE INTERLINKED. HE 3 PRAYED FOR CANCELLATION OF THE IMPUGNED PENALTY LEVIED U/S.271(1)(C) OF THE I.T.ACT. 5. THE LEARNED DR SUBMITTED THAT THE PENALTY HAS BEEN JUSTIFIED BY THE ASSESSING OFFICER AND THE LEARNED CIT(A) ON THE BASIS OF JUDICIAL PRONOUNCEMENT WHICH HE FULLY SUPPORTED FOR HIS PART OF SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL CONTENTION S AND PERUSED THE MATERIAL AVAILABLE ON RECORD . ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES AND THE CASE LAWS RELIED ON BY THE ASSESSEE AS WELL AS BY THE DEPARTMENT, WE ARE INCLINED TO HOLD THAT THE DECISION OF HONBLE APEX COURT IN THE CASE O F CIT V. RELIANCE PETRO PRODUCTS (P) LTD (322 ITR 158) IS SQUARELY APPLICABLE TO THE ASSESSEES CASE. THE FACTS ARE THAT THE ASSESSEE HAD SCHEDULE OF FIXED ASSETS REVEALED WDV OF DUMPERS AS ON 1.4.2003, AT 42,57,606.IT WAS NOTICED THAT THE ENTIRE BLOCK O F ASSETS CONSISTING OF FIVE DUMPERS WERE SOLD DURING THE ACCOUNTING PERIOD. IN OTHER WORDS, THE BLOCK OF ASSETS CEASED TO EXIST AS SUCH FOR THE REASONS THAT ALL THE ASSETS IN THAT BLOCK HAD BEEN TRANSFERRED DURING THE PREVIOUS YEAR. IT WAS ALSO NOTICED THA T THE ASSESSEE HAD MADE CLAIM OF DEPRECIATION ALLOWANCE TO THE TUNE OF 5,31,076 VIDE CALCULATION SHEET OF DEPRECIATION AS PER I.T.RULES. THE DEPRECIATION ALLOWANCE WAS CHARGEABLE IF THE ASSET/BLOCK OF ASSETS EXISTED AT THE END OF THE PERIOD. IN THIS CASE , THE DUMPERS CEASED TO EXIST AT THE END OF THE ACCOUNTING PERIOD. THEREFORE, NO DEPRECIATION ALLOWANCE WAS DEDUCTIBLE AS PER THE PROVISION OF SEC.32 OF THE I.T.ACT. IN VIEW OF THIS, THE CLAIM OF DEPRECIATION BY THE ASSESSEE AMOUNTING TO 5,31,076 WAS DIS ALLOWED AT THE TIME OF ASSESSMENT U/S.143(3)/147 DT.27.12.2006. FURTHER UNDER THE HEAD ADMINISTRAT IVE, SELLING AND OTHER EXPENSES VIDE SC HEDULE 14 OF THE AUDITED REPORT, 7,19,1 75 WAS CLAIMED AS LOSS ON DISPOSAL OF DUMPERS. AS PER THE PROVISIONS OF SEC.5 0(2) OF THE I. T. ACT WHERE ANY BLOCK OF ASSETS CEASED TO EXIST AS SUCH FOR THE REASON THAT ALL THE 4 ASSETS IN THAT BLOCK WERE TRANSFERRED DURING THE PREVIOUS YEAR THE COST OF ACQUISITION OF BLOCK OF ASSETS WOULD BE THE WDV OF BLOCK OF ASSETS AS AT THE BEGI NNING OF THE PREVIOUS YEAR. THE INCOME RECEIVED OR ACQUIRING AS A RESULT OF SUCH TRANSFER SHOULD BE DEEMED TO BE THE CAPITAL GAIN ARISING FROM THE SHORT TERM CAPITAL GAINS. UNDER NO CIRCUMSTANCES, THERE WOULD BE SHORT TERM CAPITAL LOSS. THEREFORE, THE CLAI M OF SHORT - TERM CAPITAL LOSS BY THE ASSESSEE TO THE TUNE OF 7,19,176 WAS NOT ALLOWABLE AS PER THE PROVISIONS OF THE ACT. HENCE, THE SAID AMOUNT WAS ADDED TO THE INCOME FOR THE ACCOUN TI NG PERIOD. 7. A CLEAR UNDERSTANDING OF THE FACTUAL ASPECTS AS BROUGH T ON RECORD, WOULD INDICATE THAT IT WAS NEITHER A WRONG CLAIM OR FALSE CLAIM. THE ACCOUNTING OF THE TRANSACTIONS HAVE BEEN REPORTED IN ITS RIGHT EARNEST WHICH EITHER WAY WOULD HAVE RESULTED AS A NULLITY WHEN THE ULTIMATE EXPLANATION GIVEN BY THE ASSESSEE W OULD RESULT IN A FINDING THAT THERE WAS NO INCOME TO BE TAXED WHICH THE ASSESSEE HAD EITHER FURNISHED INACCURATE PARTICULARS OR CONCEALED INCOME. PARTICULARS WERE AVAILABLE IN THE DULY AUDITED FINANCIAL STATEMENTS AND IT WAS A MERE OPINION WHICH WOULD NOT HAVE DISTURBED THE ACTUAL HAPPENING OF EV ENTS BY THE ASSESSEE INSOFAR AS THE ASSESSING OFFICER HAS LEVIED PENALTY WHEN HE COULD NOT ESTABLISH INACCURATE FURNISHING OF PARTICULARS BY MERELY RELYING ON JUDICIAL PRONOUNCEMENT THAT SUCH RESULT CAME UP DUE TO S UCH FILING OF RETURN. UNABLE TO SATISFY OURSELVES WITH THE PROPOSITIONS OF THE AUTHORITIES BELOW, WE ARE INCLINED TO HOLD THAT ON THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE THERE IS NO JUSTIFICATION TO INVOKE THE PENALTY PROVISION U/S.271(1)(C) OF THE I.T.ACT. THE RELIANCE PLACED BEFORE THE LEARNED CIT(A) ON THE DECISION OF HONBLE APEX COURT WAS MISINTERPRETED BY THE LEARNED CIT(A). THEREFORE, FOR THE REASONS DISCUSSED ABOVE, THE IMPUGNED PENALTY SO LEVIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) IS CANCELLED. 5 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 18 TH NOVEMBER, 2011 H.K.PADHEE, SENIOR PRI VATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: GOLDEN AQUA FARMS (P) LTD., AZIMABAD, BALASORE 756 001 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX , BALASORE CIRCLE, BALASORE. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.