My Fair Lady Ltd., New Delhi V. ITO, New Delhi

ITA 421/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8174 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 01-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 04-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO.421/DEL/2009 ASSESSMENT YEAR : 2001-02 M/S. FAIR LADY LTD., INCOME-TAX OFFICER, 6, SHAHPUR JAT, VS. WARD 5(4), NEW DELHI . NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED J AIN, CA RESPONDENT BY : SHRI JASDEEP SINGH, SR. DR. O R D E R PER B.P. JAIN, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, NEW DELH I, DATED 17.12.2008 PERTAINING TO THE ASSESSMENT YEAR 2001-02 IN AN APP EAL AGAINST PENALTY ORDER UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. GROUND NOS.1 & 2 RAISED BY THE ASSESSEE ARE BEIN G TAKEN UP TOGETHER BEING THE ISSUE IDENTICAL AS UNDER:- 1. THE LD. A.O. HAS ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE ON RECORD BY IMPOSING THE PENALTY U/S 271(1)(C ) OF THE INCOME TAX ACT. 2 2. THE LD. A.O. HAS IMPOSED THE PENALTY WITHOUT FIN ALIZING THE ASSESSMENT ORDER AS PER THE DIRECTIONS OF THE LD. C IT(A) VIDE APPELLATE ORDER DT. 17/04/006. 3. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON TH E FACTS OF THE CASE ON RECORD BY CONFIRMING THE PENALTY U/S 271(1) (C) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S STATED TO BE ENGAGED IN MANUFACTURING AND TRADING IN COSMETIC DURING THE YE AR. THE ASSESSMENT IN THE IMPUGNED YEAR HAS BEEN MADE UNDER SECTION 144 O F THE ACT. THE ASSESSEE HAS CLAIMED RS.15,78,712/- ON LOSS ON SALE OF ASSETS IN THE PROFIT & LOSS ACCOUNT, WHICH FOR WANT OF DETAILS WAS DISALLO WED BY THE ASSESSING OFFICER AND ADDED TO INCOME OF THE ASSESSEE. BEFOR E THE LD. CIT(A), THE ASSESSEE DID NOT PRESS THE GROUND RAISED AND THE SA ME WAS DISMISSED ACCORDINGLY. 4. THE A.O. VIDE HIS ORDER DATED 28.03.2008 LEVIED THE PENALTY BY OBSERVING THAT SINCE THE ASSESSEE HAS NOT PRESSED T HE GROUND BEFORE THE CIT(A), THEREFORE, IT IS APPARENT THAT ASSESSEE HAS FILED INACCURATE PARTICULARS AND HAS CLAIMED THE DEDUCTION ON ACCOUNT OF LOSS ON SALE OF ASSETS. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT AS SOON AS IT WAS NOTICED THAT THE LOSS APPEARING IN THE PROFIT & LOSS ACCOUNT IS AS P ER COMPANIES ACT AND NOT AS PER INCOME-TAX ACT DUE TO DIFFERENCE IN DEPRECIA TION, ACCORDINGLY THE ASSESSEE REVISED THE COMPUTATION BEFORE THE LEARNED CIT(A) IN THE QUANTUM 3 PROCEEDINGS AND PLEADED BEFORE THE LEARNED CIT(A) T HAT ORDER PASSED BY THE A.O. WAS NOT ON PROPER FACTS OF THE CASE. BEFORE T HE LEARNED CIT(A), THE LEARNED COUNSEL FOR THE ASSESSEE PLEADED THAT THERE WAS A LOSS ON SALE OF ASSETS AND THERE WAS NO CONCEALMENT OF INCOME. HE CONCEDED TO ERROR COMMITTED BEFORE THE A.O. BUT THERE WAS NO INTENTIO N TO FURNISH INACCURATE PARTICULARS OF INCOME. NO BENEFIT ACCRUED TO ASSES SEE AS THERE ARE HUGE ACCUMULATED LOSSES. HE SUBMITTED THE COMPUTATION A FTER ADJUSTING CARRIED FORWARD LOSSES IN THIS REGARD. HE RELIED UPON DECI SION OF VARIOUS COURTS OF LAW IN SUPPORT OF HIS ARGUMENTS AS UNDER:- 1. CIT VS. J.H. PRABHA (TRANSPORT) PVT. LTD. (2006) 28 4 ITR 36 (GUJ.); 2. BTX CHEMICAL PVT. LTD. VS. CIT (2007) 288 ITR 196 ( GUJ.); 3. CIT VS. NELLAI TRADING AUTOMOBILE AGENCY (2007) 288 ITR 558 (MAD.) & 4. CIT VS. NATH BROTHERS EXIM INTERNATIONAL LTD. (2007 ) 288 ITR 670 (DEL). THE LEARNED CIT(A) WAS NOT SATISFIED WITH THE EXPLA NATION OF THE ASSESSEE AND CONFIRMED THE ACTION OF THE A.O. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSE HAS CLAIMED THE LOSS ON THE SALE OF ASS ETS AT RS.15,78,712/- IN THE P&L ACCOUNT AND IN THE COMPUTATION OF INCOME BEFORE THE A.O. THE ASSESSMENT HAS BEEN MADE EX PARTE UNDER SECTION 144 OF THE ACT AND VIDE PARA 8 OF THE ASSESSMENT ORDER, THE LOSS CLAIMED HA S BEEN DISALLOWED AND THE SAME HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE F OR WANT OF DETAILS. THE 4 LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT SINCE THE ASSESSMENT HAS BEEN MADE EX PARTE, THEREFORE, ON THE VERY FIRST OCCASIO N BEFORE THE LEARNED CIT(A) IN THE QUANTUM PROCEEDINGS ON NOTICING THAT LOSS ON SALE OF FIXED ASSETS IS AN ITEM TO BE ADJUSTED AGAINST THE BLOCK OF FIXED ASSETS AND ACCORDINGLY FILED A REVISED COMPUTATION OF INCOME B EFORE THE LEARNED CIT(A). THESE FACTS HAVE BEEN OBSERVED VIDE PARA 4 .1 BY THE LEARNED CIT(A) IN PENALTY PROCEEDINGS. BEFORE BOTH THE AUT HORITIES BELOW IN THE PENALTY PROCEEDINGS IT WAS ARGUED THAT IT WAS AN ER ROR BY THE ASSESSEE THAT HE CLAIMED THE LOSS ON SALE OF ASSETS BEFORE THE AO. MOREOVER, THE ASSESSEE CANNOT DERIVE ANY BENEFIT BY CLAIMING THE SAME AS L OSS ON SALE OF ASSETS FOR THE 2 REASONS I.E. THE ASSESSEE HAS SUFFERED HEAVY ACCUMULATED LOSSES WHICH WERE PLACED ON RECORD AND ACCORDINGLY HE SUBMITTED A REVISED COMPUTATION OF INCOME IN THE PENALTY PROCEEDINGS THAT THE TAX E FFECT AFTER CLAIM OF LOSS OF ASSETS EVEN IF DISALLOWED, THERE IS NO POSITIVE INC OME AVAILABLE WITH THE ASSESSEE. SECONDLY, THE ASSESSEE HAS REVISED COMPU TATION OF INCOME SINCE LOSS ON SALE OF ASSETS IS ADJUSTED TOWARDS BLOCK OF SIMILAR ASSETS. THE LEARNED DR SHRI JASDEEP SINGH ON THE OTHER HAND, RELIED UPO N THE ORDERS OF BOTH THE AUTHORITIES BELOW. 6. WE ARE CONVINCED WITH THE ARGUMENTS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE SHRI VED JAIN, CA THAT THE ASSESSMENT IN THE PRESENT CASE HAS 5 BEEN MADE EX PARTE AND BEFORE THE LEARNED CIT(A) TH E ASSESSEE FILED THE REVISED COMPUTATION OF INCOME IN WHICH THE CLAIM OF THE LOSS OF ASSETS WAS NOT MADE. MOREOVER, THE QUESTION REMAINING TO BE A NSWERED IS WHETHER THE LOSS ON SALE OF ASSETS IS AT ALL ALLOWABLE IN COMPU TING THE TAXABLE INCOME OR NOT. THE ANSWER IS CERTAINLY IN NEGATIVE SINCE TH E LOSS ON SALE OF ASSETS HAS TO BE ADJUSTED IN THE SIMILAR BLOCK OF ASSETS AND T HEREFORE, SUCH LOSS IS NOT LIABLE TO REDUCE THE INCOME OF THE ASSESSEE WHEN IT HAS TO BE ADJUSTED AGAINST THE BLOCK OF ASSETS. PENALTY PROCEEDINGS ARE SEPAR ATE FROM THE ASSESSMENT PROCEEDINGS. THOUGH THE ADDITIONS HAVE BEEN MADE B Y THE AO FOR WANT OF DETAILS AND THE GROUND HAS BEEN DISMISSED BY THE LE ARNED CIT(A) BEING NOT PRESSED BY THE ASSESSEE. BUT IN THE PENALTY PROCEE DING THE EXPLANATION GIVEN BY THE ASSESSEE APPEARS TO BE SATISFACTORY BECAUSE THE ASSESSEE HAS FURNISHED THE REVISED COMPUTATION OF INCOME BEFORE THE LEARNE D CIT(A) ON NOTICING THAT THE LOSS IN THE P&L ACCOUNT HAD BEEN CLAIMED A S PER COMPANIES ACT AND NOT AS PER INCOME-TAX ACT DUE TO DIFFERENCE IN DEPR ECIATION AND THEREFORE, REVISED COMPUTATION OF INCOME WAS FILED BEFORE THE LEARNED CIT(A) IN THE QUANTUM PROCEEDINGS. AS REGARDS MENS REA OF THE AS SESSEE AS OBSERVED BY THE LEARNED CIT(A), THERE APPEARS TO BE NO MENS REA SINCE THE ASSESSEE HAS FILED THE REVISED COMPUTATION BEFORE THE LEARNED CI T(A) AS OBSERVED HEREINBEFORE AND EVEN THE LOSS ON SALE OF ASSETS IS DISALLOWED, THE ASSESSEE 6 GETS NO BENEFIT OF TAX AND THEREFORE, ELEMENT OF GU ILT IS NOT ESTABLISHED. THE EXPLANATION OF THE ASSESSEE APPEARS TO BE BONA FIDE FOR WHICH HE HAS SUBMITTED SATISFACTORY EXPLANATION AND HE HAS SUBMI TTED ALL THE FACTS BEFORE THE LEARNED CIT(A) IN THE QUANTUM PROCEEDINGS AND T HEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, THE LEARNED CI T(A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY IMPOSED BY THE AO. THE SAME IS DIRECTED TO BE CANCELLED. THUS GROUND NOS. 1 TO 3 RAISED BY THE A SSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 1 ST FEBRUARY, 2010. SD/- SD/- (A.D. JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 ST FEBRUARY, 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.