ITO, New Delhi V. M/s Rajiva Export PVt. Ltd, New Delhi

ITA 43/DEL/2009

• Counselvise Citation: 4320114 RSA 2009
• Duration Of Justice: 3 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 22-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 07-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUKHVEER CHAUDHARY
• Assessee Lawyers: RAVI GUPTA; PRAKASH YADAV
• Keywords: Depreciation; Speculation loss; Unabsorbed depreciation
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI RP TOLANI, JM AND SHRI J.SUDHAKAR REDDY, AM ITA NO. 4638/DEL/2011 ASSESSMENT YEAR : 2003-04 RAJIVA EXPORTS LTD. VS. ACIT, CIRCLE 15(1) 308, SINCERE TOWER NEW DELHI 4, PREET VIHAR COMPLEX NEW DELHI PAN: AAACR0312F ITA NO. 43/DEL/2009 ASSESSMENT YEAR : 2005-06 ACIT, CIRCLE 15(1) VS. RAJIVA EXPORTS LTD. NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY:- SH.PRAKASH YADAV, ADV.& SH.RAVI GUPTA DEPARTMENT BY:- SH.SUKHVEER CHAUDHARY , SR.D.R. O R D E R PER J.SUDHAKAR REDDY, AM ITA 4638/DEL/2009 IS FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 CHALLENGING THE CONFIRMATION OF PENALT Y UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 BY THE COMMIS SIONER OF INCOME TAX (APPEALS)-XVIII, NEW DELHI VIDE ORDER DT. 25.11 .2011. WHEREAS ITA 43/DEL/2009 IS AN APPEAL FILED BY THE REVENUE FOR T HE ASSESSMENT YEAR 2005-06 CHALLENGING THE DELETION OF PENALTY UNDER S ECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 BY THE COMMISSIONER OF INCOME TAX (APPEALS)- XVIII, NEW DELHI VIDE ORDER DT. 14.10.2008.AS THE I SSUES ARISING IN BOTH ITA NO. 4638/DEL/2011 PAGE 2 OF 6 ASSESSMENT YEAR 2003-04 AND ITA NO.43/DEL/2009 ASSESSMENT YEAR 2005-06 RAJIVA EXPORTS LTD. THESE APPEALS ARE COMMON, FOR THE SAKE OF CONVENIEN CE THEY ARE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORD ER. 2. FACTS OF THE CASE LEADING TO LEVY OF PENALTY A RE BROUGHT OUT AT PARA 1 OF ORDER UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT, 1961 FOR THE ASSESSMENT YEAR 2003-04, WHICH IS EXTRACTED FOR A R EADY REFERENCE. RETURN DECLARING INCOME OF RS.NIL WAS FILED BY T HE ASSESSEE ON 31.10.2003. THE ASSESSEE PAID TAXES AT BOOK PROFIT OF RS.11,33,369/-. THE CASE WAS PROCESSED UNDER SECTI ON 143(1) OF THE INCOME TAX ACT, 1961 ON 29.1.2004. THE CASE WA S REOPENED AS IT WAS OBSERVED THAT THE ASSESSEE HAD BEEN FOLLOWIN G THE PRACTICE OF NOT SETTING OFF THE ALREADY ADJUSTED UNABSORBED LOS SES IN THE PRECEDING YEARS AND WAS CLAIMING CREDIT OF UNABSORB ED LOSSES AGAIN AND AGAIN. DURING THIS YEAR THE ASSESSEE HAD SET O FF BROUGHT FORWARD LOSSES TO THE EXTENT OF RS.11,69,697/- WHER EAS THE AVAILABLE LOSSES WERE ONLY RS.4,74,378/-. THE ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3)/147 OF THE INCOME TA X ACT, 1961 AT AN INCOME OF RS.7,15,056/- AND PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 WAS INTERALIA INITIATED BY ISSUE OF A SHOW CAUSE NOTICE UNDER SECTION 271(1)(C) READ WITH SEC.274 OF THE INCOME TAX ACT, 1961 ON 30.08.2010. 3. THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTI ON 271(1)(C) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE ASSESSE E FURNISHED INACCURATE PARTICULARS OF TOTAL INCOME. ON APPEAL THE FIRST APPELLATE AUTHORITY CONFIRMED THE PENALTY BY RELYING ON THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ZO OM COMMUNICATIONS P.LTD. (2010) 233 CTR 465 (DEL.). AGGRIEVED THE AS SESSEE FILED THIS APPEAL BEFORE US. FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE REQUESTED THE COMMISSIONER OF INCOME TAX (APPEALS) TO REOPEN THE ASSESSMENT, AS IT HAS COME TO ITS KNOWLEDGE THAT TH E SET OFF OF LOSSES ITA NO. 4638/DEL/2011 PAGE 3 OF 6 ASSESSMENT YEAR 2003-04 AND ITA NO.43/DEL/2009 ASSESSMENT YEAR 2005-06 RAJIVA EXPORTS LTD. WERE CLAIMED IN A WRONG MANNER. THIS WAS DONE VIDE LETTER DT. 3.10.2007. THEREAFTER THE ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 ON 30.10.20 10. PENALTY WAS LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE ASSESSEE HAS W ILLFULLY CLAIMED SET OFF OF LOSSES WHICH WERE ALREADY ADJUSTED BY THE AS SESSEE IN THE EARLIER YEAR TO AVOID LEGITIMATE TAX DUES TO THE EXCHEQUER. ON APPEAL THE FIRST APPELLATE AUTHORITY DELETED THE PENALTY BY HOLDING THAT MERELY BECAUSE ASSESSEES CLAIM AND EXPLANATION IS REJECTED AS UN ACCEPTABLE IT DOES NOT FOLLOW THAT PENALTY IS LEVIABLE. AGGRIEVED THE REV ENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD MR. PRAKASH YADAV, THE LD.COUNSEL FOR THE ASSESSEE AND MR.SUKHVEER CHAUDHARY, SR.D.R. ON BEHALF OF TH E REVENUE. IN THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 2005- 06 THE ASSESSEE HAS GIVEN THE FOLLOWING NOTES. NOTE:- 1. SINCE MAT BECOME APPLICABLE C/F SPECULATIVE LOSS OF RS.55,686/- (ASSESSMENT YEAR 2000-2001) WILL BE TREATED AS NOT ADJUSTED AND SET OFF AGAINST CURRENT SPECULATION PROFIT AND THUS FULL AMOUNT OF C/F SPECULATIVE LOSS OF RS.55,686/- WILL BE CARRIED FORWARD TO BE SET OFF AGAINST SPECULATIVE PROFITS, IF ANY ARISING IN FUTURE EIGHT YEARS (UPTO ASSESSMENT YEAR 2007-08). 2. ALTHOUGH THE TOTAL INCOME AS ABOVE AFTER ADJUSTEMEN T OF UNABSORBED LOSS COMES TO NIL. BUT SINCE MAT UNDER SECTION 115 JB BECOMES APPLICABLE. THEREFORE, UNABSORBED LOSS WILL BE TREATED AS NOT ADJUSTED AND FULL AMOUNT OF LOSS ADJUSTMENT SUBJECT TO MAXIMUM UPTO ASSESSMENT YEAR 2008-09. 3. UNABSORBED DEPRECIATION OF RS.2,96,744/- (ASSESSMEN T YEAR 2001- 02) CARRIED FORWARD FOR ANY PERIOD TILL ADJUSTEMENT . ITA NO. 4638/DEL/2011 PAGE 4 OF 6 ASSESSMENT YEAR 2003-04 AND ITA NO.43/DEL/2009 ASSESSMENT YEAR 2005-06 RAJIVA EXPORTS LTD. DETAILS OF THE DEDUCTED : RS. 58,627.00 RS. 23,427.00 RS. 15,630.00 ----------------- RS. 97,684.00 =========== 5. THE COMMISSIONER OF INCOME TAX (APPEALS) AT PAGE 2 OF HIS ORDER RECORDS THAT DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE ASSESSEES COUNSEL SRI D.RASTOGI VEHEMENTLY SUBMITTED THAT ACC ORDING TO HIM THIS WAS THE CORRECT INTERPRETATION OF LAW AND HE WAS EN TITLED TO SET OFF THE LOSSES ALREADY ADJUSTED BY THE ASSESSEE IN THE EARL IER YEAR AND THAT THE ASSESSING OFFICER HELD THAT THIS WAS AN INCORRECT I NTERPRETATION OF LAW. THIS ASPECT IS ALSO CLEAR FROM PAGE 2 OF THE ORDER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 PASSED BY THE ASSESSING OFFICER ON 17.9.2007 FOR THE ASSESSMENT YEAR 2005-06. IT IS R ECORDED AS FOLLOWS:- IN THE NOTE BELOW THE COMPUTATION THE ASSESSEE COM PANY HAS STATED THAT SINCE THE MAT BECAME APPLICABLE C/F OF SPECULATIVE LOSSES, UNABSORBED DEPRECIATION AND UNA BSORBED LOSSES WILL NOT BE TREATED AS ADJUSTED AND CARRIED FORWARD FOR FUTURE ADJUSTMENTS SUBJECT TO MAXIMUM UP TO ASSESSM ENT YEAR 2008-09. DURING THE COURSE OF ASSESSMENT PROC EEDINGS THE ASSESSEES COUNSEL SHRI D.RASTOGI, VEHEMENTLY S UBMITTED THAT ACCORDING TO HIM THIS IS THE ASSESSEE IN THE E ARLIER YEAR. MY PREDECESSOR HELD THAT THIS WAS AN INCORRECT INTE RPRETATION OF LAW. BENEFIT OF ADJUSTMENT OF SAME LOSSES CANNO T BE ENJOYED AGAIN AND AGAIN. SET OFF OF THE LOSSES AMO UNTING TO RS.20,55,842/- WAS, THEREFORE, DENIED TO THE ASSESS EE. BY SETTING OFF THE LOSSES, WHICH HAD ALREADY BEEN SET OFF DURING THE ASSESSMENT YEAR 2004-05, THE ASSESSEE HAD FURNI SHED INACCURATE PARTICULARS AND TRIED TO AVOID THE LEGIT IMATE TAXES DUE TO THE EXCHEQUER. 6. A PLAIN READING OF THE ABOVE CLEARLY SHOWS THAT IT IS A LEGAL CLAIM MADE BY THE ASSESSEE BASED ON INTERPRETATION OF LAW . IN SUCH ITA NO. 4638/DEL/2011 PAGE 5 OF 6 ASSESSMENT YEAR 2003-04 AND ITA NO.43/DEL/2009 ASSESSMENT YEAR 2005-06 RAJIVA EXPORTS LTD. CIRCUMSTANCES THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (2010) 322 ITR 1 58 (S.C.) APPLIES IN ALL FORCE AND THE PENALTY CANNOT BE SUSTAINED. THIS IS A CASE WHERE ALL THE INFORMATION AND PARTICULARS ARE DISCLOSED AND A CON SCIOUS LEGAL CLAIM WAS MADE. MERELY BECAUSE THE ASSESSING OFFICER DID NOT AGREE WITH THE INTERPRETATION OF LAW MADE BY THE ASSESSEE, IT DOES NOT LEAD TO A CONCLUSION THAT THE ASSESSEE FURNISHED INACCURATE P ARTICULARS OF INCOME. THUS, WE UPHOLD THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2005-06, WHEREIN THE PENALT Y LEVIED IS CANCELLED, AND REVERSE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2003-04 BY DELETING THE PENALT Y CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS). 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE FOR T HE ASSESSMENT YEAR 2003-04 IS ALLOWED AND THE APPEAL OF THE REVENUE FO R THE ASSESSMENT YEAR 2005-06 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DECEMBER,2012. SD/- SD/- (R.P.TOLANI) (J.SUDHA KAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: THE 7 TH DECEMBER, 2012 *MANGA ITA NO. 4638/DEL/2011 PAGE 6 OF 6 ASSESSMENT YEAR 2003-04 AND ITA NO.43/DEL/2009 ASSESSMENT YEAR 2005-06 RAJIVA EXPORTS LTD. COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR 1. DATE OF DICTATION: 2. DRAFT PLACED BEFORE THE AUTHOR ON: 3. DRAFT PROPOSED AND PLACED BEFORE SECOND MEMBER ON: 4. DRAFT DISCUSSED/APPROVED BY THE SECOND MEMBER ON: 5. APPROVED DRAFT CAME TO SR.P.S. ON: 6. DATE OF PRONOUNCEMENT : 7. FILE SENT TO BENCH CLERK ON : 8. DATE ON WHICH FILE GIVEN TO HEAD CLERK ON: 9. DATE OF DISPATCHING THE ORDER ON :