ASST CIT 5(3)(2), MUMBAI V. THE MOBILE STORE LTD, MUMBAI

ITA 3784/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0593 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: NARENDRA BAHETI
• Keywords: Depreciation
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 3784 / MUM/20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) ASST CIT 5(3)(2) R.NO.519, AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 VS. THE MOBILE STOR E LTD., ESSAR HOUSE KESHVRAO HHADYE MARG MAHALAXMI MUMBAI 400 034 PAN/GIR NO. AACCT9399N ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY SHRI M.C. OMI NINGSHEN ASSESSEE BY SHRI NARENDRA BAHETI DATE OF HEARING 19 / 11 /201 8 DATE OF PRONOUNCEMENT 30 / 11 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDER OF CIT(A) - 10, MUMBAI DATED 12/02/2016 FOR A.Y.2011 - 12 IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF RETAILING AND MARKETING OF TELECOM PRODUCTS & SERVICES INCLUDING MOBILE HANDSETS, ACCESSORIES, CONNECTIONS, RECHARGE TALK TIME, ENTERTAINMENT, REPAIRS AND AFTER SALES SERVICES. THE ASSESSEE HAS FILED ITS RETURN FOR A.Y.2011 - 12 ON 30/09/2011 DISCLOSING TOTAL LOSS AT ( - )RS. ITA NO. 3784/MUM/2016 THE MOBILE STORE LTD., 2 124,81,38,481/ - . THE ORDER U/S 143(3) WAS PASSED ON 26/03/2014 DETERMINING TOTAL LOSS AT ( - )RS.122,76,10 ,300/ - AFTER MAKING AN ADDITION OF RS.2,05,28,182/ - ON ACCOUNT OF EXCESS DISALLOWANCE OF DEPRECIATION CLAIMED ON OFFICE EQUIPMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS NOTICED THAT - THE ASSESSEE HAD CLAIMED DEPRECIATION @15% ON OFFICE EQU IPMENT EVEN THOUGH THE OFFICE EQUIPMENT FALLS INTO THE CATEGORY OF FURNITURE & FIXTURE ON WHICH APPLICABLE RATE OF DEPRECIATION IS ONLY 10%. THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM. THEREFORE, EXCESS DEPRECIATION CLAIMED ON OFFICE EQUIPMENT WHICH WOR KED OUT TO RS.2,05,28,182/ - WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST THIS ADDITION. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO IMPOSE PENALTY OF RS.68,18,950/ - U/S 271(1)(C) OF THE IT. ACT, 1961. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL. 4. BY THE IMPUGNED ORDER CIT(A) DELETED THE PENALTY AFTER OBSERVING AS UNDER: - 4.2. I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISIONS RELIED ON BY T HE ID.AR. AS PER THE PROVISIONS OF THE ACT PENALTY U/S 271(1) (C) CAN BE LEVIED ON TWIN CONDITIONS - I. IF CONCEALED THE PARTICULARS OF INCOME, OR II. IF FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. RENALTY CAN BE LEVIED IF EITHER OF THE CONDITIONS ARE F ULFILLED AND THE AO SHOULD BE CLEAR WHICH OF THE TWIN CONDITIONS ARE APPLICABLE IN THE APPELLANT'S CASE BEFORE LEVYING PENALTY. COURTS HAVE MADE IT AMPLY CLEAR THAT THE AO SHOULD BE CLEAR IN HIS MIND UNDER WHICH OF THESE TWIN CONDITIONS THE PENALTY IS BEIN G LEVIED. WHEN ONE AO HAS INITIATED PENALTY FOR FURNISHING OF INACCURATE PARTICULARS, THE OTHER AO WHILE LEVYING PENALTY HAS STATED THAT 'THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. THIS CLEARLY INDICATES THAT THE AO WAS NOT CLEAR IN HIS MIND WHICH ONE OF THE TWIN CONDITIONS ARE APPLICABLE IN APPELLANT'S CASE. BY USING THE CONJECTURE 'OR' (AS USED IN THE ACT) HE MADE AS TO UNDERSTAND THAT HE HAS LEVIED THE PENALTY VERY CASUALLY WITHOUT REALISING ITS SIGNIFICANCE. THIS ALSO SHOWS THAT THE AO HAS VERY CASUALLY LEVIED THE PENALTY WITHOUT APPLICATION OF MIND. THE ITA NO. 3784/MUM/2016 THE MOBILE STORE LTD., 3 DECISIONS RELIED ON BY THE APPELLANT WITH REGARD TO APPLICATION OF MIND AS TO WHICH PART OF THE TWIN CONDITIONS ATTRACT IN LEVYING PENALTY A LSO GOES TO ITS FAVOUR. IN THE DECISIONS RELIED ON BY THE ID.AR THE FOLLOWING POINTS ARE MADE VERY CLEAR - I. FIXING THE TWIN CHARGES IS NOT PERMITTED UNDER THE LAW, II. FIXING THE CHARGE IN A VAGUE AND CASUAL MANNER IS NOT PERMITTED UNDER THE LAW, III. THE AO CANNOT LEVY PENALTY CASUALLY SINCE THE DISALLOWANCE WAS CONFIRMED BY CIT(A) AS THE ASSESSMENT PROCEEDINGS ARE INDEPENDENT OF THE PENALTY PROCEEDINGS, IV. IN A GIVEN SITUATION, THE ASSESSEE MAY BE LIABLE FOR THE ASSESSMENT OF HIS TAXABLE INCOME, BUT THE RE WOULD NOT NECESSARILY AND AUTOMATICALLY MAKE THE AS SESSEE LIABLE FOR PENALTY AS WE LL ON THE INCOME ASSESSED. THE ASSESSEE MAY BE LIABLE TO BE TAXED FOR WANT OF SUBSTANTIATION OF THE CLAIM BUT FOR LEVYING OF PENALTY THE AO MAY BE REQUIRED TO DISPROVE THE CLAIM OR TO SHOW THAT THE CLAIM MADE BY THE ASSESSEE WAS BOGUS, V. IF THE PENALTIES LEVIED AUTOMATICALLY IN A MECHANISED AND CASUAL MANNER IT WILL GIVE RISE TO AVOIDABLE HARDSHIPS TO THE TAXPAYERS WHICH SHOULD BE AVOIDED. AS SEEN FROM THE ABOVE DISCUSSIO N LEVYING OF PENALTY MECHANICALLY BY THE AO IN THE INSTANT CASE IS NOT PROPER. THEREFORE THE SAME IS DELETED. 4.2.1 SINCE THE PENALTY LEVIED HAS NO LEGS TO STAND ON LEGAL GROUNDS, I DO NOT WISH TO GO INTO THE MERITS AS TO WHETHER THE RATE OF DEPRECIATION C LAIMED BY THE APPELLANT IS PROPER OR NOT. IN VIEW OF THE ABOVE THE GROUND IS ALLOWED. 5. IN THE RESULT, THE APPEAL IS ALLOWED 5. REVENUE IS IN FURTHER APPEAL BEFORE US. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT CIT(A) HAS DELETED THE PEN ALTY BY OBSERVING THAT NOTICE ISSUED U/S.274 WAS VAGUE AND CASUAL MANNER IS NOT PERMITTED UNDER LAW. HE CONCLUDED THAT AO HAS LEVIED THE PENALTY MECHANICALLY AND HELD THAT FIXING THE TWIN CHARGE IS NOT PERMITTED UNDER THE LAW. FOR DEFECT IN NOTICE LD. AR C ITED VARIOUS DECISIONS OF CO - ORDINATE BENCH AND HIGH COURT, WHEREIN LEVY OF PENALTY WAS HELD TO BE NOT JUSTIFIED. 6. WE ALSO FOUND THAT PENALTY HAS BEEN LEVIED ONLY WITH RESPECT TO RATE OF DEPRECIATION CHARGED BY THE ASSESSEE. ASSESSEE HAS CHARGED ITA NO. 3784/MUM/2016 THE MOBILE STORE LTD., 4 DEPRECIA TION AT 15% WHICH WAS ALLOWED BY THE AO AT 10%. THERE WAS FULL DISCLOSURE OF ALL THE MATERIAL FACTS MERELY BECAUSE ASSESSEES CLAIM OF DEPRECIATION AT 15% WAS NOT ACCEPTED CANNOT BE MADE THE REASON FOR LEVY OF PENALTY. ACCORDINGLY, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC), NO PENALTY IS LEVIED FOR DISALLOWING THE CLAIM MADE BY THE ASSESSEE IN THE RETURN OF INCOME. 7. WE ALSO OBSERVE THAT ASSESSEE WAS HAVING SUBSTANTIAL LOSS OF RS. 12 4.81 CRORES. EVEN AFTER MAKING PART DISALLOWANCE OF DEPRECIATION , ASSESSMENT WAS COMPLETED AT LOSS OF RS.122.76 CRORES, THUS THERE WAS NO INTENTION OF EVADING THE TAX WHICH ASSESSEE IS LIABLE TO PAY. THIS ALSO INDICATES ASSESSEES CONTENTION OF NOT CONSIDE RING ANY MATERIAL FACT FROM THE RETURN OF INCOME. 8. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING THE PENALTY. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 / 11 /201 8 SD/ - ( AMARJIT SINGH) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 30 / 11 /201 8 KARUNA SR. PS ITA NO. 3784/MUM/2016 THE MOBILE STORE LTD., 5 COPY OF THE ORDER FORWAR DED TO : BY ORDER, ( A SSTT. 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//