M/s. Morgan Synthetics (P) Ltd., JAIPUR V. DCIT, BHILWARA

ITA 369/JODH/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9473 (ITAT-JODHPUR)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVADESH KUMR
• Assessee Lawyers: VARUN BANSAL
• Keywords: Depreciation
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI V.D. RAO, JUDICIAL MEMBER ITA NO. 369/JU/2010 ASSTT. YEAR :2005-06 M/S. MORGAN SYNTHETICS (P) LTD., VS. D.C.I.T., C IRCLE, F-275, RIICO INDUSTRIAL AREA, BHILWARA. BHILWARA (PAN AAACM 9298 H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VARUN BANSAL, A.R. RESPONDENT BY : SHRI AVADESH KUMR, D.R. O R D E R PER S.V. MEHROTRA, A.M : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R DATED 16.03.2010 OF LEARNED CIT(A), AJMER, SUSTAINING THE PENALTY OF RS.2,75,42 5/- IMPOSED BY ASSESSING OFFICER U/S. 271(1)(C) OF THE IT ACT. 2. THE ASSESSEE-COMPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE MANUFACTURING AND TRADING OF SYNTHETIC CLOTHS. IT F ILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. (-) 15,39,968/- (UNABSORBED DEPRECIAT ION) AND PAID TAX U/S. 115JB ON BOOK PROFIT OF RS.6,28,166/-. THE ASSESSING OFFICER COMP LETED THE ASSESSMENT UNDER NORMAL PROVISIONS OF INCOME-TAX ACT BY MAKING DISALLOWANCE S OF RS.14,91,207/- AND REDUCING THE TOTAL LOSS TO RS.48,761/- AS UNDER : TOTAL INCOME AS PER RETURN OF INCOME RS.(-)15,3 9,968/- (A). TRADING ADDITION RS.5,00,000/- (B). ADDITION U/S. 68 OF IT ACT RS.7,52,684/- (C). DISALLOWANCE AGAINST EXPENSES RS.1,00,000/- (D). DEPRECIATION ON P & M RS.1,38,523/- RS.14,91,207/- RS.(-) 48,761/- 2 HE INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER IMPOSED A PE NALTY OF RS.2,75,425/- VIDE ORDER DATED 08.07.2009. THE LEARNED CIT(A) CONFIRMED THE PENALTY. 3. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED TH E FACTS AND POINTED OUT THAT THE ASSESSING OFFICER HAS ACCEPTED THE BOOK PROFIT AS P ER SECTION 115JB AND PENALTY HAS BEEN LEVIED ONLY WITH REFERENCE TO THE ADDITION MADE UND ER THE REGULAR PROVISIONS OF THE ACT. HE RELIED ON THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. NALWA SONS INVESTMENTS LTD. 327 ITR 543 WHEREIN IT HAS BEEN HE LD THAT WHERE THE INCOME COMPUTED IN ACCORDANCE WITH THE NORMAL PROVISIONS IS LESS TH AN THE INCOME DETERMINED BY LEGAL FICTION, NAMELY, THE BOOK PROFITS UNDER SECTION 115 JB OF THE ACT AND THE INCOME OF THE ASSESSEE IS ASSESSED UNDER SECTION 115JB AND NOT UN DER THE NORMAL PROVISIONS, THE CONCEALMENT OF INCOME WOULD HAVE NO ROLE TO PLAY. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE RECORD OF THE CASE. WE FIND THAT THE HONBLE DELHI HIGH COURT AFTER CONSID ERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. GOLD COIN HEAL TH FOOD LTD., 304 ITR 308 (SC), OBSERVED AS UNDER : UNDER THE SCHEME OF THE INCOME-TAX ACT, 1961, THE TOTAL INCOME OF THE ASSESSEE IS FIRST COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT AND TAX PAYABLE ON SUCH TOTAL INCOME IS COMPARED WI TH THE PRESCRIBED PERCENTAGE OF THE BOOK PROFITS COMPUTED UNDER SECTI ON 115JB OF THE ACT. THE HIGHER OF THE TWO AMOUNTS IS REGARDED AS TOTAL INCOME AND TAX IS PAYABLE WITH REFERENCE TO SUCH TOTAL INCOME. IF THE TAX PAYABLE UNDER THE NORMAL PROVISIONS IS HIGHER, SUCH AMOUNT IS THE TOT AL INCOME OF THE ASSESSEE, OTHERWISE, THE BOOK PROFITS ARE DEEMED AS THE TOTAL INCOME OF THE ASSESSEE IN TERMS OF SECTION 115JB OF THE ACT. WHER E THE INCOME COMPUTED 3 IN ACCORDANCE WITH THE NORMAL PROCEDURE IS LESS THA N THE INCOME DETERMINED BY LEGAL FICTION, NAMELY, THE BOOK PROFI TS UNDER SECTION 115JB OF THE ACT AND THE INCOME OF THE ASSESSEE IS ASSESS ED UNDER SECTION 115JB AND NOT UNDER THE NORMAL PROVISIONS, THE TAX IS PAI D ON THE INCOME ASSESSED UNDER SECTION 115JB OF THE ACT. CONCEALMEN T OF INCOME WOULD HAVE NO ROLE TO PLAY AND WOULD NOT LEAD TO TAX EVAS ION. THEREFORE, PENALTY CANNOT BE IMPOSED ON THE BASIS OF DISALLOWANCES OR ADDITIONS MADE UNDER THE REGULAR PROVISIONS. 5. IN THE PRESENT CASE, WE FIND THAT THE INCOME DET ERMINED UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT IS LESS THAN THE I NCOME IN TERMS OF SECTION 115JB OF THE ACT. THEREFORE, FOLLOWING THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. NALWA SONS INVESTMENTS LTD. (SUPRA), NO PENALTY IS LEVIABLE U/S. 271(1)(C) OF THE ACT. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.02.11. SD/- SD/- (V.D. RAO) (S.V. MEHROTRA) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED : 9 TH FEBRUARY, 2011 *AKS/- COPY FORWARDED TO:- 1. APPELLANT, 2. RESPONDENT, 3. INCOME-TAX OFFICER, 4. CIT, 5. D/R 6. GUARD FILE