The DCITAnand Circle, Anand V. Shri Bhikhubhai B.Patel, Anand

ITA 40/AHD/2010

• Counselvise Citation: 4020514 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A L THAKKAR
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 40/ AHD/2010 (ASSESSMENT YEAR 2005-06) DCIT, ANAND CIRCLE ANAND VS. SHRI BHIKHUBHAI B PATEL, SATNAM, MAHADEV ROAD, VALLABHVIDYANAMGAR, TAL. ANAND PAN/GIR NO. : ADOPP8500B (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI SAMIR TEKRIWAL, SR. DR RESPONDENT BY: SHRI A.L. THAKKAR, AR DATE OF HEARING: 21.11.2011 DATE OF PRONOUNCEMENT: 21.12.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) IV, BARODA DATED 07.10.2009 FOR THE ASSESSME NT YEAR 2005-06. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE PENALT Y LEVIED U/S 271(1)(C) IN RESPECT OF THE ADDITION OF RS. 15,43,2 82/-ON THE UNABSORBED DEPRECIATION , THOUGH THE SAME WAS ALREA DY SET OFF WHILE FINALIZING THE ASSESSMENT U/S 143(3) OF THE I NCOME TAX ACT FOR THE A.Y. 2002-03, AND OVERLOOKING THE RATIO LAI D DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEX TILE PROCESSORS 306 ITR 277 (SC). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE P ENALTY LEVIED U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF INTEREST IN COME U/S 36(1) I.T.A.NO.40 /AHD/2010 2 (III) OF RS. 1,29,600/- THOUGH THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE LOAN ADVANCED TO SEVASI LAND WAS USED FOR THE B USINESS PURPOSE, AND OVERLOOKING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PRO CESSORS 306 ITR 277 (SC). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE PENALT Y LEVIED U/S 271(1)(C) IN RESPECT OF ADDITION MADE U/S 40(A)(IA) OF RS. 3,02,800/- THOUGH THE ASSESSEE HIMSELF ADMITTED TO MAKE DISALLOWANCE AT 20% AT THE TIME OF ASSESSMENT PROCE EDINGS, AND OVERLOOKING THE RATIO LAID DOWN BY THE HON'BLE SUPR EME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS 306 ITR 2 77 (SC). 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE PENALT Y LEVIED U/S 271(1)(C) IN RESPECT OF ADDITION MADE IN RESPECT OF PAYMENT OF PENALTY AND FINE OF RS. 27,222 THOUGH THE ASSESSEE DISPUTED THE NATURE OF EXPENSES DURING THE ASSESSMENT PROCEEDING S, AND OVERLOOKING THE RATIO LAID DOWN BY THE HON'BLE SUPR EME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS 306 ITR 2 77 (SC). 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A. O. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE A.O. IM POSED PENALTY OF RS.1,68,956/- U/S 271(1)(C) OF THE ACT IN RESPECT O F THE FOLLOWING DISALLOWANCES: I) UNABSORBED DEPRECIATION RS.15,43,282/- II) DISALLOWANCE U/S 36(1)(III) RS.01,29,600/- III) PAYMENT OF TDS U/S 40(A)(IA) RS.03,02,800/- IV) PAYMENT OF PENALTY & FINE RS.00,27,292/- RS.20,02,974/- 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO DELETED THE ENTIRE PENALTY SO IMPOSE D BY THE A.O. AND NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. LD. D.R. OF THE REVENUE SUPPORTED THE PENALTY OR DER WHEREAS, LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT (A). RELIANCE WAS PLACED BY HIM ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF ACIT VS I.T.A.NO.40 /AHD/2010 3 BHORUKA LOGISTICS (P) LTD., AS REPORTED IN 34(II) I TCS 552 (MUM B TRIB.) AND HE ALSO PLACED RELIANCE ON ANOTHER TRIBU NAL DECISION RENDERED IN THE CASE OF ACIT VS SEAWAYS SHIPPING LTD. IN I.T.A. NO. 80/H/2011 DATED 17.06.2011. HE SUBMITTED COPIES OF BOTH THES E TRIBUNAL DECISIONS WHICH ARE AVAILABLE ON RECORD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISIONS CITED BY THE LD. A.R. WE FIND T HAT THE ISSUE REGARDING PENALTY ON SET OFF OF UNABSORBED DEPRECIATION OF RS .15,43,282/- HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 3.1.2 OF HIS ORDE R WHICH READS AS UNDER: 3.1.2. I HAVE CONSIDERED THE MATTER. APPELLANT HAD CLAIMED SET OFF OF BROUGHT FORWARD DEPRECIATION LOSS OF RS.15,43,28 2/- IN THE RETURN OF INCOME FILED FOR A.Y.2005-06 ON THE BASIS OF RET URNS OF INCOME FILED BY THE APPELLANT FOR EARLIER YEARS. THE FACT THAT AMOUNT OF BROUGHT FORWARD UNABSORBED DEPRECIATION TO BE SET O FF GOT ALTERED DUE TO ALLOWANCE OF HIGHER BROUGHT FORWARD DEPRECIA TION IN EARLIER YEARS, DUE TO ADDITIONS TO APPELLANT'S INCOME IN TH OSE YEARS BY THE ASSESSING OFFICER, DOES NOT MEAN THAT APPELLANT FUR NISHED INACCURATE PARTICULARS OF INCOME. THESE ADDITIONS I N EARLIER YEARS, IN ANY CASE, HAD NOT BECOME FINAL AT THE TIME OF FI LING OF RETURN OF INCOME FOR A.Y.2005-06. WHILE THE ASSESSING OFFICER WAS JUSTIFIED IN ALLOWING SET OFF OF BROUGHT FORWARD DE PRECIATION AS PER ASSESSMENTS MADE FOR EARLIER YEARS, SET OFF BY THE APPELLANT OF BROUGHT FORWARD DEPRECIATION ON THE BASIS OF RETURN S FILED FOR EARLIER YEARS CANNOT BE SAID TO REPRESENT CONCEALED INCOME. 7. IN THE PRESENT CASE, THE RETURN OF INCOME WAS FI LED BY THE ASSESSEE ON 31.10.2005 AND IT IS NOTED BY THE A.O. IN PARA 5 .1 OF THE ASSESSMENT ORDER THAT EXTRA DEPRECIATION LOSS WAS ADJUSTED IN ASSESSMENT YEAR 2002- 03. THIS IS NOT BROUGHT ON RECORD BY THE A.O. THAT THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2002-03 IN WHICH EXTRA DEPR ECIATION LOSS WAS ADJUSTED, HAD BEEN PASSED PRIOR TO 31.10.2005 BEING THE DATE OF FILING OF I.T.A.NO.40 /AHD/2010 4 RETURN OF INCOME OF THE PRESENT YEAR. IN THE ABSEN CE OF THIS, WE FEEL THAT IT CANNOT BE SAID THAT THERE IS ANY CONCEALMENT OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN THE PRESENT YEA R ON THIS ACCOUNT AND HENCE, NO INTERFERENCE IS CALLED FOR IN THE ORDER O F LD. CIT(A) ON THIS ASPECT. WE WOULD ALSO LIKE TO OBSERVE THAT AS NOTE D BY THE LD. CIT(A) IN PARA 3.2.2 OF HIS ORDER, THE TRIBUNAL HAS SET ASIDE THE ASSESSMENT ORDER IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200 2-03 AND HAS RESTORED BACK THE MATTER TO THE FILE OF THE A.O. FOR A FRESH DECISION AND HENCE, THE EXTRA ADJUSTMENT OF DEPRECIATION IN ASSESSMENT YEAR 2002-03 HAS NOT BECOME FINAL AND FOR THIS REASON ALSO, THE PENALTY IN THIS RESPECT IS NOT JUSTIFIED. 8. THE 2 ND DISALLOWANCE FOR WHICH PENALTY IS IMPOSED BY THE A .O. AND DELETED BY LD. CIT(A) IS REGARDING DISALLOWANCE OF RS.1,29,600/- U/S 36(1)(III) OF THE ACT. THIS ASPECT HAS BEEN DECIDE D BY THE LD. CIT(A) IN PARA 3.2.2 OF HIS ORDER WHICH IS REPRODUCED BELOW: 3.2.2. I HAVE CONSIDERED THE MATTER. INTEREST OF R S.1,29,600/- WAS DISALLOWED IN THE ASSESSMENT IN RESPECT OF ADVANCE PAID FOR ACQUIRING SEVASI LAND. THE ASSESSING OFFICER WAS NO T SATISFIED WITH APPELLANT'S CLAIM THAT THE SAID LAND WAS BEING PURC HASED TO INSTALL HOTMIX PLANT. APPELLANT'S CONTENTION THAT HE HAD AD VANCED RS.10.8 LAKH FOR PURCHASE OF SEVASI LAND, ON WHICH NO HOTMI X PLANT WAS TO BE ERECTED, HAS BEEN DOUBTED BY THE ASSESSING OFFIC ER, BUT NOT PROVEN TO BE FALSE. THE CIT(A) CONFIRMED THE ADDITI ON OF RS.1,29,600/- ONLY BY FOLLOWING HER PREDECESSOR CIT (A)'S ORDER IN APPELLANT'S CASE FOR A.Y.2002-03. THE ASSESSMENT OR DER FOR A.Y.2002-03 HAS BEEN SET ASIDE BY THE ITAT IN ITA NO.L99/AHD/2006 THROUGH ORDER DATED 27.3.2009. THE BASIS FOR CONFIRMING ADDITION OF RS.1,29,600/- BY CIT(A) IN A .Y.2005-06 WAS BY FOLLOWING APPELLATE ORDER IN A.Y.2002-03, WH ICH NO LONGER SURVIVES DUE TO SETTING OF THE MATTER BY ITAT TO TH E ASSESSING OFFICER. EVEN OTHERWISE, APPELLANT'S CONTENTION REG ARDING AVAILABILITY OF SUFFICIENT INTEREST FREE FUNDS TO C OVER THE INTEREST FREE ADVANCES HAS NOT BEEN EXAMINED IN THE LIGHT OF DECISION OF ITAT, AHMEDABAD IN THE CASE OF TORRENT FINANCIERS. CONSIDERING I.T.A.NO.40 /AHD/2010 5 ALL THESE ASPECTS, THE ADDITION OF RS.1,29,600/- CA NNOT BE SAID TO REPRESENT APPELLANT'S CONCEALED INCOME. 9. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT THE BASIS OF LD. CIT(A) FOR CONFIRMING THE ADDITION OF RS.1,29,600/- IN THE PRE SENT YEAR BY FOLLOWING THE APPELLATE ORDER IN ASSESSMENT YEAR 2002-03 NO L ONGER SURVIVES BECAUSE THE TRIBUNAL HAS SET AIDE THE MATTER TO THE FILE OF THE A.O. IN THAT YEAR. ONE MORE REASON IS GIVEN BY LD. CIT(A) THAT THERE WAS AVAILABLE INTEREST FREE FUNDS TO COVER THE INTEREST FREE ADVA NCES. UNDER THESE FACTS, WE FEEL THAT ON THIS ASPECT ALSO, NO INTERFERENCE I S CALLED FOR IN THE ORDER OF LD. CIT(A). 10. THE 3 RD ISSUE ON WHICH THE PENALTY WAS IMPOSED BY THE A.O. AND DELETED BY LD. CIT(A) IS THE DISALLOWANCE OF RS.3,0 2,800/- U/S 40(A(IA). THIS ASPECT HAS BEEN DECIDED BY LD. CIT(A) AS PER P ARA 3.2.4 OF HIS ORDER WHICH IS REPRODUCED BELOW: 3.2.4. I HAVE CONSIDERED THE MATTER. APPELLANT HA D GOT ITS ACCOUNTS AUDITED U/S.44AB. IN THE TAX AUDIT REPORT, IN FORM 3CD, THERE IS A SPECIFIC COLUMN, WHERE THE AUDITOR IS TO IDENTIFY AMOUNT INADMISSIBLE U/S.40(A)(IA). AS NOTED BY THE ASSESSI NG OFFICER IN THE PENALTY ORDER, THE TAX AUDITORS INDICATED AMOUNTS I NADMISSIBLE U/S.40(A)(IA) IN COL.L6(F) OF TAX AUDIT REPORT AT R S.NIL. WHEN THE TAX AUDITOR, WHO WAS SUPPOSED TO POINT OUT THE AMOU NTS INADMISSIBLE U/S.40(A)(IA) IN THE PRESCRIBED STATUT ORY FORM, AFTER COMPLETING THE TAX AUDIT, FAILED TO DO SO, NOT MAKI NG OF THE DISALLOWANCE U/S.40(A)(IA) IN THE COMPUTATION OF IN COME FILED WITH THE RETURN CANNOT BE SAID TO AMOUNT TO CONCEALMENT OF INCOME OR OF FURNISHING INACCURATE PARTICULARS OF INCOME BY THE APPELLANT. IT WAS HELD IN THE CASE OF S. D. RICE MILLS (2005) 275 ITR 206 (P&H), THAT WHERE THE CLAIM OF DEDUCTION WAS SUPPORTED BY CERTIFICATE OF C.A. IN THE PRESCRIBED FORMAT, NO FAULT COULD BE FO UND WITH THE CLAIM OF THE ASSESSEE THAT IT HAD CLAIMED THE DEDUC TION IN A BONA FIDE MANNER. APPELLANT'S CONTENTION THAT JOT MAKING OF DISALLOWANCE U/S.40(A)(IA) IN THE COMPUTATION OF IN COME FILED WITH THE RETURN OF INCOME WAS A BONA FIDE MISTAKE, IS AC CEPTED. IT IS HELD I.T.A.NO.40 /AHD/2010 6 THAT ADDITION OF RS.3,02,800/- U/S 40(A(IA) CANNOT BE SAID TO AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. 11. ON THIS ASPECT, THE TRIBUNAL DECISION CITED BY THE LD. A.R. BEING RENDERED IN THE CASE OF SEAWAYS SHIPPING LTD. (SUPR A) IS SQUARELY APPLICABLE BECAUSE IN THAT CASE ALSO, DISALLOWANCE WAS MADE U/S 40(A)(IA) AND IT WAS HELD BY THE TRIBUNAL THAT IN RESPECT OF THIS DISALLOWANCE, IT CANNOT BE SAID THAT ASSESSEE HAS FURNISHED INACCURA TE PARTICULAR OF INCOME AND HENCE, PENALTY IS NOT JUSTIFIED. BY RESPECTFUL LY FOLLOWING THIS TRIBUNAL DECISION, WE HOLD THAT IN THE PRESENT CASE ALSO, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ASPECT ALSO. 12. NOW, THE REMAINING ONE ASPECT ON WHICH PENALTY WAS IMPOSED BY THE A.O. IS PAYMENT FOR RS.27,292/- ON ACCOUNT OF P AYMENT OF PENALTY & FINE. THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) AS PER PARA 3.3.2 OF HIS ORDER. WHICH HIS REPRODUCED BELOW: 3.3.2. I HAVE CONSIDERED THE MATTER. ON GOING THRO UGH APPELLANT'S SUBMISSIONS BEFORE CIT(A) DURING THE QUANTUM ADDITI ON PROCEEDINGS FOR A.Y.2005-06, IT IS SEEN THAT THE AP PELLANT HAD MADE A SUBMISSION THAT PENALTY AND FINE OF RS.27,222/- W AS NOT FOR INFRACTION OF ANY LAW BUT WAS ACCOUNT OF DEDUCTION BY THE GOVERNMENT. PROOF REGARDING THE SAME ALSO FILED BEF ORE CIT(A), FROM WHICH IT IS ESTABLISHED THAT DEDUCTIONS WERE I N THE NATURE OF FINE IMPOSED ON THE APPELLANT IN RUNNING ACCOUNT BI LLS BY CPWD FOR THE WORK DONE. THESE FINES WERE THEREFORE, FOR NOT COMPLETING THE WORK AS PER CONTRACT AND WERE NOT FOR ANY OFFEN SE PROHIBITED BY LAW CONTEMPLATED IN EXPLANATION BELOW SECTION 37(1) . AS SUCH, NO DISALLOWANCE WAS CALLED FOR IN RESPECT OF THE SAME. EVEN OTHERWISE, AS HELD FOR DISALLOWANCE U/S.40(A)(IA), IF THE TAX AUDITOR DID NOT IDENTIFY ANY AMOUNT DISALLOWABLE UNDER A PARTICULAR PROVISION OF THE I. T. ACT IN THE TAX AUDIT REPORT, DESPITE THER E BEING A SPECIFIC COLUMN FOR THAT PURPOSE, THE TAX PAYER CANNOT BE SA ID TO HAVE CONCEALED PARTICULARS OF HIS INCOME DUE TO NOT MAKI NG OF DISALLOWANCE OF SUCH EXPENSES. IN VIEW OF THIS, IT IS HELD THAT I.T.A.NO.40 /AHD/2010 7 DISALLOWANCE OF RS.27,222/- CANNOT BE SAID TO AMOUN T TO CONCEALMENT OF INCOME. 13. WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CI T(A) THAT FINES WERE FOR NOT COMPLETING THE WORK AS PER CONTRACT AND WER E NOT FOR ANY OFFENCE PROHIBITED BY LAW CONTEMPLATED IN EXPLANATION BELOW SECTION 37(1) OF THE ACT. IN VIEW OF THIS, WE FEEL THAT NO INTERFER ENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON HIS ISSUE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 15. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 15/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 19/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 19/12 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/12 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/12/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..