DCIT, New Delhi V. M/s. Duli Chand Narender Kumar Exports Pvt. Ltd., New Delhi

ITA 3791/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4472 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 10-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Capital asset; Depreciation; Additional depreciation; Wrong claim; Bonafide mistake; Revenue expenditure
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SMT. BEENA A PILLAI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 3791 /DEL/201 5 AY: 20 0 9 - 10 DCIT, CIRCLE 7(2) ROOM NO.403 C.R.BUILDING I.P.ESTATE NEW DELHI VS . M/S DULI CHAND NARENDER KUMAR EXPORTS PVT.LTD. (PRESENTLY KNOWN AS DUNAR FOODS LTD.,) E - 254, GREATER KAILASH II NEW DELHI PAN: AACCD2928F (APPELLANT) (RESPONDENT) D EPARTMENT BY : MS. NAINA SOIN KAPIL, SR. D.R. ASSESSEE BY : NONE DATE OF HEARING : 29 /01/2019 DATE OF PRONOUNCEMENT : 08 /02/2019 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT PENALTY APPEAL HA S BEEN FILED BY REVENUE AGAINST ORDER DATED 02/03/2015 PASSED BY LD.CIT(A) - 14, NEW DELHI FOR A SSESSMENT Y EAR 200 9 - 10 ON FOLLOWING GROUNDS OF APPEAL: ITA NO. 3791/DEL/2015 A.Y.: 2009 - 10 DCIT VS. DULI CHAND NARENDER KUMAR EXPORTS PVT.LTD. 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 271(1)(C) OF RS.25,83,572/ - IMPOSED BY THE AO? 2. THE APPELLANT CRAVES TO LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE T IME OF THE HEARING. 2. BRIEF FACTS OF CASE ARE AS UNDER : A SSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT YEAR ON 30/09/09 DECLARING TOTAL INCOME OF RS.23,97,18,510/ - . LD. AO COMPLETED ASSESSMENT UNDER SECTION 143(3) OF I.T.ACT, 1961 ( THE A CT ) ON 17/12/ 11 AT TAXABLE INCOME OF RS. 24,73,90,490/ - . LD. AO MADE FOLLOWING ADDITIONS: I) EXCESS CLAIM OF DEPRECIATION DISALLOWED - RS. 40, 79, 973/ - II) FOREIGN EXCHANGE FLUCTUATION CAPITALISED - RS. 34, 56, 005/ - III) FOREIGN EXCHANGE LOSS DISALLOWED - RS. 65,000/ - 2.1. A SSESSEE ACCEPTED ADDITIONS MADE BY LD.AO AND DID NOT PREFER ANY APPEAL BEFORE LD.CIT(A). FOLLOWING WHICH LD. AO INITIATED PENALTY PROCEEDINGS AGAINST ASSESSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME UNDER SECTION 271(1) (C) OF THE A CT. LD. AO HA S ISSUED NOTICES UNDER SECTION 274 OF THE A CT CALLING UPON ASSESSEE TO SUBMIT DETAILS REGARDING REASON FOR DEPRECIATION BEING CLAIMED AT 120% ON AIR POLLUTION CONTROL OF EQUIPMENTS ON ITEMS OVER 120 DAYS AND 60% FOR ITEMS BELOW 120 DAYS. 2.2. IN RESPONSE , ASSESSEE SUBMITTED THAT IT WAS UNDER BONA FIDE BELIEF THAT DEPRECIATION WORKED OUT BY SOFTWARE WHILE FILING ONLINE RETURNS W AS CALCULATED CORRECTLY. IN RESPONSE TO FOREIGN EXCHANGE FLUCTUATION ASSESSEE SUBMITTED THAT COMPANY HAD TO PAY ADD ITIONAL ITA NO. 3791/DEL/2015 A.Y.: 2009 - 10 DCIT VS. DULI CHAND NARENDER KUMAR EXPORTS PVT.LTD. 3 AMOUNT OF RS. 33,31,408/ - AND 4,04,813/ - DUE TO FLUCTUATION OF US D OLLAR RATE , AND AS PER A CCOUNTING S TANDARDS 11 EXCHANGE DIFFERENCE WAS TO BE BOOKED IN PROFIT AND LOSS ACCOUNT. 2.3. LD. AO AFTER CONSIDERING EXPLANATION OFFERED BY ASSESSEE RE JECTED THE SAME AND IMPOSED PENALTY OF RS. 25,83,572/ - FOR FURNISHING OF IN ACCURATE PARTICULARS. 3. AGGRIEVED BY PENALTY ORDER , ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A), WHO DELETED PENALTY LEVIED. 4. AGGRIEVED BY ORDER OF LD.CIT(A), REVENUE PREFERRED APPEAL BEFORE THIS T RIBUNAL. 5. AT THE OUTSET IT IS RECORDED THAT , NONE HAS APPEARED ON BEHALF OF ASSESSEE AND FROM RECORDS PLACED BEFORE US NOTICE ISSUED BY THIS OFFICE HAS NOT BEEN RETURNED BACK. CONS IDERING SMALLNESS OF CASE AND THAT APPEAL HAS BEEN FILED IN YEAR 2015, WE DO NOT FIND IT FIT TO KEEP IT PENDING. ACCORDINGLY WE ARE DISPOSING OF THIS APPEAL AS UNDER. 6 . LD.SR.DR SUBMITTED THAT ASSESSEE HAS NOT FURNISHED REASON FOR CLAIMING 100% ON ADDI TION, FOR LESS THAN 180 DAYS. SHE SUBMITTED THAT DEPRECIATION ALLOWABLE ON SAME IS ONLY 50%. SHE FURTHER SUBMITTED THAT FOREIGN EXCHANGE FLUCTUATION LOSS SHOULD HAVE BEEN CAPITALI S ED, INSTEAD OF TREATING SAME AS REVENUE EXPENDITURE. SHE PLACED RELIANCE UPON ORDER OF LD.AO. 7. WE HAVE PERUSED SUBMISSIONS ADVANCED BY LD.SR.DR IN LIGHT OF RECORDS PLACED BEFORE US. 8. FROM SUBMISSIONS MADE BY ASSESSEE BEFORE LD.CIT(A), IT IS OBSERVED THAT, ASSESSEE WAS UNDER BONA FIDE BELIEF THAT DEPRECIATION ITA NO. 3791/DEL/2015 A.Y.: 2009 - 10 DCIT VS. DULI CHAND NARENDER KUMAR EXPORTS PVT.LTD. 4 CALCULATED BY SOFTWARE WAS CORRECT. THUS IN OUR VIEW ASSESSEE WAS IN BONA FIDE BELIEF THAT IT IS ELIGIBLE FOR DEPRECIATION AT 120% AND THAT FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF PURCHASE OF SALE WAS A REVENUE EXPENDITURE. IT IS OBSERVED THAT EXPLANATION OF FERED BY ASSESSEE HAS NOT BEEN FOUND TO BE FALSE BY LD.AO. IN OUR CONSIDERED OPINION, IT IS A CASE OF WRONG CLAIM, WHICH CANNOT BE CATEGORISED WITHIN AMBIT OF FILING OF INACCURATE PARTICULARS. 8.1. LD.CIT(A) DELETED PENALTY BY OBSERVING AS UNDER: 5.3 NOW, ADVERTING TO THE CASE OF THE APPELLANT, IT IS OBSERVED THAT THE AO HAS IMPOSED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY WAY OF CLAIM OF ADDITIONAL DEPRECIATION OF RS. 40,79,973/ - ON AIR POLLUTION EQUIPMENTS @ 120% AND FOREIGN EXCHANGE FLUCTUATION LOSSES AS REVENUE EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. IT IS NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAD ACCEPTED ITS MISTAKE OF CLAIMING ADDITIONAL DEPRECIATION @120% ON AIR POLLUTION EQUIPMENTS AN D FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF PURCHASE OF ASSETS AS REVENUE EXPENDITURE. THE APPELLANT COMPANY EXPLAINED THAT DUE TO THE INADVERTENT MISTAKE, THE SOFTWARE USED BY THE APPELLANT COMPANY COMPUTED ADDITIONAL DEPRECIATION @ 120% INSTEAD OF 100% DEPRECIATION ON AIR POLLUTION EQUIPMENTS. SIMILARLY, THE APPELLANT COMPANY EXPLAINED THAT THE FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF PURCHASE OF CAPITAL ASSETS WAS INADVERTENTLY CLAIMED AS REVENUE EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT DU E TO BONAFIDE MISTAKE IN THE UNDERSTANDING OF ACCOUNTING STANDARD 11 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT. HOWEVER, DURING THE COURSE OF ASSESSMENT, THE APPELLANT COMPANY AGREED TO THE ADDITIONS MADE ON THE AFORESAID ACCOUNTS AND PAID THE DUE TA X ALONG WITH INTEREST ON THE RESULTANT INCOME AND DID NOT PREFER ANY APPEAL IN ORDER TO AVOID UNNECESSARY LITIGATION. ITA NO. 3791/DEL/2015 A.Y.: 2009 - 10 DCIT VS. DULI CHAND NARENDER KUMAR EXPORTS PVT.LTD. 5 EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE AO, BETWEEN REPORTED AND ASSESSED I NCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY HIM, THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE IN COME AND NOT OTHERWISE. IN THIS CASE, UNDISPUTEDLY, THE APPELLANT HAS OFFERED EXPLANATION REGARDING THE INCORRECT CLAIM OF ADDITIONAL DEPRECIATION AND THE FOREIGN EXCHANGE FLUCTUATION LOSS AS REVENUE EXPENDITURE. HOWEVER, THE AFORESAID EXPLANATION OF THE A PPELLANT COMPANY WAS NOT ACCEPTED BY THE ASSESSING OFFICER DUE TO THE FOLLOWING REASONS: - I. THAT THE FOREIGN EXCHANGE FLUCTUATION LOSS SHOULD HAVE BEEN CAPITALIZED INSTEAD OF TREATING THE SAME AS REVENUE EXPENDITURE AND; II. THE ADDITIONAL DEPRECIATION SHOULD NO T HAVE BEEN CLAIMED ON THE ANTI POLLUTION EQUIPMENT @ 120%. IT IS NOTED THAT IT IS NOT A CASE OF THE ASSESSING OFFICER THAT EITHER THE BOGUS DEPRECIATION HAS BEEN CLAIMED OR THE ASSETS IN THE FORM OF AIR POLLUTION EQUIPMENTS HAS NOT BEEN PURCHASED BY THE A PPELLANT COMPANY. SIMILARLY, THE GENUINENESS OF FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF PURCHASE OF ASSETS HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ONLY THE CLAIM OF DEDUCTION ON ACCOUNT OF ADDITI ONAL DEPRECIATION AND FOREIGN EXCHANGE FLUCTUATION LOSS HAS BEEN DISALLOWED AS THE SAME WAS NOT FOUND TO BE ALLOWABLE AS PER THE INCOME TAX ACT. THUS, IT IS A CASE OF MERE DISALLOWANCE OF CLAIM OF DEDUCTION ON ACCOUNT OF ADDITIONAL DEPRECIATION AND FOREIGN EXCHANGE FLUCTUATION LOSS. AS DISCUSSED ABOVE, IN THE CASE OF RELIANCE PETRO PRODUCT LTD. (SUPRA) MERE DISALLOWANCE OF CLAIM OF EXPENDITURE DOES NOT ATTRACT PENALTY U/S 271(1)(C). RELYING UPON THE DECISION OF RELIANCE PETRO PRODUCTS ITA NO. 3791/DEL/2015 A.Y.: 2009 - 10 DCIT VS. DULI CHAND NARENDER KUMAR EXPORTS PVT.LTD. 6 LTD., THE ASSESSING OF FICER IS HEREBY DIRECTED TO DELETE THE IMPUGNED PENALTY. 9. WE DO NOT FIND ANY INFIRMITY IN VIEW OF LD.CIT(A) AND SAME IS UPHELD. 9.1. ACCORDINGLY GROUNDS RAISED BY REVENUE STANDS DISMISSED. 10. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 T H FEBRUARY, 2019. S D / - S D / - ( PRASHANT MAHARISHI) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 0 8 T H FEBRUARY, 2019 GMV COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO. 3791/DEL/2015 A.Y.: 2009 - 10 DCIT VS. DULI CHAND NARENDER KUMAR EXPORTS PVT.LTD. 7 DATE DRAFT DICTATED ON 05.02.19 & 06.02.19 DRAFT PLACED BEFORE AUTHOR 06.02.19 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 0 7 . 0 2 . 1 9 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON & ORDER UPLOADED ON : 0 8 . 0 2 . 1 9 FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.