M/S PIK PEN PRIVATE LIMITED, MUMBAI V. ITO-8(2)(4), MUMBAI

ITA 4437/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3684 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 23-03-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 03-06-2013
• Court: TRIBUNAL
• Department Lawyers: SANJAY BAREDR
• Keywords: Depreciation; Principle of natural justice; Wrong claim; Valuation report
• Section: 14A; 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NOS.4437 & 4438/MUM/2013 ASSESSMENT YEAR-2000-01 & 2007-08 M/S PIK PEN PRIVATE LIMITED, 7, PARSIAN BUILDING, V.P. ROAD, ANDHERI (W), MUMBAI-400058 / VS. ITO - 8(2)(4), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 PAN NO. AABCP0512A ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY SHRI RUSHABH MEHTA / REVENUE BY SHRI SANJAY BARE-DR / DATE OF HEARING : 19/05/2016 / DATE OF ORDER: 19/05/2016 ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDERS DATED 06/03/2013 FOR ASSESSMENT YEAR 2000-01 AND DA TED 05/02/2013 FOR ASSESSMENT YEAR 2007-08 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE ASSES SEE FOR ASSESSMENT YEAR 2007-08 (ITA NO.4438/MUM/2013), WHEREIN, THE ONLY GROUND ARGUED BY THE ASSESSEE IS WITH RESPECT TO UPHOLDING THE DISALLOWANCE OF DEPRECIATI ON OF RS.36,26,807/- CLAIMED ON TRADEMARK, ACQUIRED FROM M/S VEEKAY INDUSTRIES. 2.1. DURING HEARING, THE LD. COUNSEL FOR THE ASSES SEE, SHRI RUSHABH MEHTA, CONTENDED THAT THE TRIBUNAL FOR VARIOUS ASSESSMENT YEARS VIDE ORDER DATED 11/12/201 5 (ITA NO.7230 TO 7236/MUM/2012 AND 4384 TO 4386/ MUM/2013) IN THE CASE OF ASSESSEE ITSELF HAS DISCUS SED THE ISSUE AND ALLOWED THE APPEALS FOR STATISTICAL PURPO SES. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY SHRI SANJAY BARE, LD. DR. ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 3 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE AFORESAID O RDER OF THE TRIBUNAL DATED 11/12/2015 FOR READY REFERENCE A ND ANALYSIS:- THERE ARE 10 APPEALS UNDER CONSIDERATION INVOLV ING THE AYS 1990-2000 TO 2006-07; 2008-09 AND 2009-10. ALL THESE APPEALS ARE FILED BY THE ASSESSEE. SINCE, THE ISSUES INVOLVED IN ALL THESE APPEALS ARE SIMILAR AS WELL A S INTERCONNECTED, THEREFORE, CONSIDERING THE COMMONAL ITIY OF THE ISSUES INVOLVED AND FOR THE SAKE OF CONVENIENCE , ALL THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND DISPO SED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATIO N IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. THE CORE ISSUE RAISED IN ALL THESE APPEALS RELAT ES TO THE ALLOWABILITY OF DEPRECIATION ON THE ACTUAL COST O F THE ASSET ARRIVED AT BY VIRTUE OF REVALUATION OF THE TRADEMA RK. SINCE, THE AY 1999-2000 IS THE FIRST YEAR, WHERE SU CH REVALUATION WAS DONE, OUR DECISION ON THE CLAIM OF THIS YEAR WOULD HAVE CASCADING EFFECT ON THE REST OF THE AYS UNDER CONSIDERATION BY VIRTUE OF ALLOWABILITY OF DEPRECIA TION ON THE WDV VALUATION. THEREFORE, OUR DECISION ON THE RAISE D IN APPEAL FOR THE AY 1999-2000 BECOMES RELEVANT AND SIGNIFICANT FOR ADJUDICATION OF THE REST OF THE APP EALS UNDER CONSIDERATION. 3. FIRSTLY, WE SHALL TAKE UP THE ISSUES RAISED IN A PPEAL ITA NO.7230/M/2012 THE AY 1999-2000. BRIEFLY STATED REL EVANT FACTS OF THE CASE ARE THAT THE ASSESSEE CAME INTO E XISTENCE ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 4 IN THE FORM OF A FIRM NAMED VEEKAY INDUSTRIES AND THE SAME IS SUCCEEDED BY THE ASSESSEE-COMPANY AND THE TRADEMARK PIK WAS ACQUIRED BY THE ASSESSEE FOR A SUM OF RS. 5.25 CRS. THE SAID TRADEMARK WAS ORIGINALLY REG ISTERED BY M/S. BALAJI PEN PVT. LTD. SUBSEQUENTLY, ON 1.4.1 992, THE SAID TRADEMARK WAS PURCHASED BY THE FIRM M/S. VEEKA Y INDUSTRIES FOR A SUM OF RS. 100/-. THE SAID TRADEMA RK WAS VALUED BY AN APPROVED VALUER, WHO QUANTIFIED THE VA LUE OF THE TRADEMARK AT RS. 5.52 CRS VIDE ITS VALUATION RE PORT DATED 17.11.1998, RELEVANT FOR THE AY 1999-2000. TH E SAID AMOUNT WAS CREDITED TO THE INVESTMENT RESERVE ACCOU NT IN THE BOOKS OF ACCOUNT OF THE SAID FIRM ON 31.1.1999. THE FIRM IS THEN SUCCEEDED BY THE ASSESSEE-COMPANY ON 1.2.1999. ASSESSEE STARTED CLAIMED DEPRECIATION U/S 32 OF THE ACT ON THE SAID REVALUED TRADEMARK WORTH OF RS. 5.25 CRS. 4. IN THE BACKGROUND OF THESE FACTS, DURING THE SCR UTINY ASSESSMENT PROCEEDINGS, ASSESSING OFFICER DID NOT A LLOW THE CLAIM OF DEPRECIATION ON THE SAID REVALUED TRAD EMARK AMOUNTING TO RS. 5.25 CRS. IN THE PROCESS, AO INVOK ED THE PROVISIONS OF EXPLANATION-3 TO SECTION 43(1) OF THE ACT. THIS ISSUE TRAVELLED TO THE ITAT IN THE FIRST ROUND OF T HE SECOND APPELLATE PROCEEDINGS. BEFORE THE TRIBUNAL, ASSESSE E RAISED ADDITIONAL LEGAL GROUNDS AND THE SAME ARE EXTRACTED IN PAGE 3 OF THE ORDER OF THE TRIBUNAL IN ITA NO.2218/ M/2006 (AY 1999-2000), DATED 29.7.2009 AND THE SAID ADDITI ONAL GROUNDS READ AS UNDER: 1. THE LD AO ERRED ON FACTS AND IN LAW IN NOT OBTA INING THE APPROVAL OF THE JOINT COMMISSIONER OF INCOME TAX BE FORE SUBSTITUTING THE VALUE OF BRAND ACQUIRED BY THE APP ELLANT WHILE APPLYING EXPLANATION-3 TO SECTION 43(1). 2. THE LD AO FAILED TO APPRECIATE THAT WITHOUT OBTA INING THE APPROVAL OF THE JCIT, HE COULD NOT HAVE SUBSTITUTED THE VALUE OF BRAND AS PER EXPLANATION-3 TO SECTION 43(1 ) AS THE ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 5 MANDATORY CONDITION OF APPROVAL NOT BEING COMPLIED WITH THE ORDER PASSED BY THE AO SUBSTITUTING THE COST IS BAD IN LAW. 4. AFTER CONSIDERING THE SAID ADDITIONAL GROUNDS AS WELL AS THE ORIGINAL GROUNDS, THE TRIBUNAL SET ASIDE THE IS SUE RELATING TO THE ALLOWABILITY OF THE DEPRECIATION ON THE REVALUED COST OF THE TRADEMARK TO THE FILE OF THE C IT (A). PARA 7 OF THE SAID TRIBUNALS ORDER (SUPRA) IS RELE VANT IN THIS REGARD. IN THE ADDITIONAL GROUNDS, EXTRACTED A BOVE, IT IS EVIDENT THAT THE ASSESSEE QUESTIONED THE APPLICABIL ITY OF EXPLANATION-3 TO SECTION 43(1) OF THE ACT. IT IS TH E CLAIM OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS NOT OBT AINED THE APPROVAL OF THE JCIT, WHICH IS THE STATUTORY REQUIREMENT SPECIFIED IN THE SAID EXPLANATION-3 THE CONSEQUENCE OF THE SAME IS THAT THE ASSESSEES CLAI M OF DEPRECIATION SHOULD BE ALLOWED WITHOUT ANY SUBSTITU TION ON THE COST. IN THE SET ASIDE PROCEEDINGS, CIT (A) CON SIDERED THE ABOVE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE AND CALLED FOR THE RELEVANT RECORDS FOR ASCERTAINING TH E FACT OF OBTAINING THE APPROVAL OF THE JCIT. IT APPEARS THAT RELEVANT RECORDS ARE NOT AVAILABLE FOR HIS PERUSAL. CONSEQUE NTLY, CIT (A) DECIDED THE ISSUE BY INFERENCE AND THE RELEVANT LINES FROM PARA 1.7 OF HIS ORDER ARE EXTRACTED AS FOLLOWS :- 1.7. ......... ......... IN THE INSTANT CASE, THE AO HAS CLEARLY MENTIONED IN THE LAST SENTENCE OF THE FIRST PARA ON PAGE 8 THAT THE MAIN PURPOSE OF SUCH VALUATION WAS FOR RED UCTION OF LIABILITY TO TAX. HOWEVER, IN THE ABSENCE OF COM PLETE RECORDS IT CANNOT BE SAID THAT THE AO HAD OBTAINED PRIOR APPROVAL OF THE JCIT. HENCE, THE DISALLOWANCE OF CL AIM OF DEPRECIATION UNDER THIS SECTION IS ALSO NOT CORRECT . 5. BASING ON THE ABOVE CONCLUSION DRAWN BY THE CIT (A), SHRI DR. K. SHIVRAM, LD COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE AO FAILED TO OBTAIN THE PRIOR APPROVAL OF THE JCIT BEFORE THE REVALUED COST IS SUBSTITUTED. IN SUCH CIRCUMSTANCES, THE ORDER OF THE AO ON THIS ISSUE BE COMES ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 6 NULLITY. IN THIS REGARD, LD COUNSEL FOR THE ASSESSE E BROUGHT OUR ATTENTION TO GROUND NO.2 OF THE ORIGINAL GROUND S OF APPEAL WHICH READS AS UNDER:- 2. THE LD CIT (A) FAILED TO APPRECIATE THAT WHEN H E HAS GIVEN FINDING THAT THERE WAS NO APPROVAL OF JCIT, H E OUGHT TO HAVE ALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. 6. IMPROVING THE SAID GROUND NO.2, LD COUNSEL FOR T HE ASSESSEE ALSO FILED AN ADDITIONAL GROUND AND THE SA ME READS AS UNDER:- 6. THE LD CIT (A) FAILED TO APPRECIATE THAT WHEN H E HAS GIVEN A FINDING THAT THERE WAS NO APPROVAL OF THE J CIT, HE OUGHT TO HAVE HELD THAT EXPLANATION-3 OF SECTION 43 (1) CANNOT BE INVOKED AS ADJUSTMENT BEING NULLITY IN LA W, DISALLOWANCE OF DEPRECIATION BY THE ASSESSING OFFIC ER IS BAD IN LAW AND MAY BE DELETED. 7. FURTHER, DR. SHIVRAM SUBMITTED THAT HAVING GIVEN A FINDING ON THE ABSENCE OF APPROVAL OF THE JCIT AS S PECIFIED IN EXPLANATION-3 TO SECTION 43(1) OF THE ACT, DISAL LOWING THE CLAIM OF DEPRECIATION ON THE REVALUED COST OF ASSET , AS CLAIMED BY THE ASSESSEE, IS BAD IN LAW. FURTHER, BR INGING OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN THE F IRST ROUND OF THE PROCEEDINGS (SUPRA), LD COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE CIT (A) FAILED TO ADJUDICATE THE GROUND NO.2 BY PASSING A SPEAKING ORDER AS TO HOW THE CLAI M OF DEPRECIATION IS VALIDLY SUBSTITUTED BY THE AO WITHO UT HAVING TAKEN THE APPROVAL OF THE JCIT. ON THIS ISSUE, LD REPRESENTATIVES OF BOTH THE PARTIES IN THE LITIGATI ON SUBMITTED THAT THIS ISSUE REQUIRES REMANDING OF THE MATTER TO THE FILE OF THE CIT (A) FOR SECOND TIME FOR FRES H ADJUDICATION BY PASSING A SPEAKING ORDER. 8. FURTHER, LD COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSING OFFICER MERELY REJECTED THE VALUATION REP ORT DATED 17.11.1998 FURNISHED BY THE ASSESSEE WITHOUT ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 7 REFERRING THE ASSET TO THE DVO FOR HIS VALUATION, I F ANY, ON THE TRADEMARK. ASSESSING OFFICER IS NOT AN EXPERT O N THIS ISSUE AND THEREFORE, THE REJECTION OF THE VALUATION REPORT FURNISHED BY THE ASSESSEE IS NOT CORRECT. FOR THIS PROPOSITION, LD COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, AHMEDABAD IN THE CASE OF UNIM ED TECHNOLOGIES LTD VS. DCIT [2000] 73 ITD 150 (AHD.) AND THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN T HE CASE OF ASHWIN VANASPATI INDUSTRIES VS. CIT [2002] 255 I TR 26 (GUJ). THESE DECISIONS SUGGEST FOR ACCEPTING THE VA LUATION REPORT FURNISHED BY THE ASSESSEE AND DEPRECIATION S HOULD BE GRANTED ON THE ENHANCED COST OF THE ASSET. 9. FURTHER, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FACT THAT THE CIT (A) ERRONEOUSLY INVOKED THE 5TH PROVISO TO SECTION 32(1) OF THE ACT, WHEN S UCH PROVISO CAME INTO STATUTE ONLY FROM THE AY 2000-01. THE AMENDED PROVISION DO NOT APPLY TO THE TRADEMARK VAL UED VIDE THE VALUATION REPORT DATED 17.11.1998. 10. ON HEARING LD REPRESENTATIVES OF BOTH THE PARTI ES ON THE ISSUES RAISED BEFORE US FOR THE AY 1999-2000, W E FIND THE CIT (A) IN THE SECOND ROUND HAS LEFT SO MANY GA PS WITH REGARD TO THE FACT OF AOS FAILURE TO OBTAIN PRIOR APPROVAL OF THE JCIT AND THE CONSEQUENCES OF NOT OBTAINING SUCH APPROVAL ON THE CLAIM OF THE ASSESSEE. THE CIT (A) DID NOT CONSIDER THE FACT WHETHER THE PROVISIONS OF EXPLANA TION-3 TO SECTION 43(1) OF THE ACT ACTUALLY APPLY TO THE FACT S OF THE PRESENT CASE; WHETHER AO MERELY IGNORED THE CLAIM O F DEPRECIATION ON THE REVALUED COST OF THE TRADEMARK. FURTHER, CIT (A) HAS ALSO NOT CONSIDERED WHETHER TH ERE IS ANY SUBSTITUTION OF VALUATION AT ALL WHEN THE AO CO NSIDERED THE VALUE OF THE TRADEMARK AT ZERO. CIT (A) IS DI RECTED TO PASS A SPEAKING ORDER AS TO HOW THE EXPLANATION-3 T O ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 8 SECTION 43(1) OF THE ACT APPLIES TO THE FACTS OF TH E PRESENT CASE FROM ALL ANGLES IF THE CONDITIONS SPECIFIED IN THE SAID EXPLANTION-3 ARE FULLY SATISFIED OR NOT. HE IS ALSO DIRECTED TO PASS AN ORDER ON HOW THE AO IS PERMITTED TO REJECT THE VALUATION REPORT FURNISHED BY THE ASSESSEE WHEN THE AO DOES NOT HAVE ANY OTHER REPORT ON HAND FROM THE DVO OR OTHERWISE. FURTHER, CIT (A) IS ALSO DIRECTED TO EXA MINE THE APPLICABILITY OF THE CITED JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ASHWIN VANASPATI INDUSTRI ES (SUPRA) AND OTHERS. FURTHER ALSO, CIT (A) SHOULD EX AMINE THE APPLICABILITY OF THE 5TH PROVISO TO SECTION 32( 1) OF THE ACT AND GIVE REASONS IN WRITING ON HOW THE AMENDED PROVISIONS APPLY TO THE FACTS OF THE PRESENT CASE. THUS, WE REMAND THE WHOLE OF THE ISSUE RELATING TO THE CLAIM OF DEPRECIATION ON THE TRADEMARK TO THE FILE OF THE CI T (A) FOR THIRD ROUND OF THE PROCEEDINGS BEFORE HIM. THIS TIM E, THE CIT (A) IS DIRECTED TO EXAMINE EACH OF THE ISSUES D ISCUSSED ABOVE IN A TIME BOUND MANNER ATTENDING TO ALL THE ARGUMENTS RAISED BY THE LD COUNSEL FOR THE ASSESSEE BEFORE HIM IN THE SET ASIDE PROCEEDINGS. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GRANTED REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINC IPLES OF NATURAL JUSTICE. ACCORDINGLY, ALL THE ISSUES RAISED IN THE ORIGINAL GROUNDS AS WELL AS ADDITIONAL GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE FOR THE A Y 1999- 2000 IS ALLOWED FOR STATISTICAL PURPOSES. WE FIND THAT THE TRIBUNAL IN THE AFORESAID ORDER HA S OBSERVED THAT EVEN IN THE SECOND ROUND, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS LEFT SO MAN Y GAPS ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 9 WITH REGARD TO FACTS OF ASSESSING OFFICERS FAILURE TO OBTAIN PRIOR APPROVAL OF JCIT AND CONSEQUENCES OF NOT OBTA INING OF SUCH APPROVAL ON THE CLAIM OF THE ASSESSEE. THUS, CONSIDERING THE OBSERVATION MADE IN PARA-10 OF THE AFORESAID ORDER OF THE TRIBUNAL, ON THE SAME OBSERVATION/DIRECTION, WE DIRECT THE LD. COMMISSION ER OF INCOME TAX (APPEAL) TO OBEY/COMPLY WITH THE DIRECTI ON AND THUS, THE ISSUE IS ALLOWED FOR STATISTICAL PURPOSES . THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. 3. NOW, WE SHALL TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2000-01 (ITA NO.4437/MUM/2013), WITH RESPECT T O LEVYING PENALTY OF RS.8,08,500/- ON ACCOUNT OF DISA LLOWANCE OF DEPRECIATION ON BRAND. THE LD. COUNSEL CONTENDED THAT THE ASSESSEE DID NOT FURNISH INACCURATE PARTICULARS OF INCOME WARRANTING PENALTY U/S 271(1)(C) MERELY ON T HE GROUND THAT THE SAID CLAIM OF DEPRECIATION WAS REJE CTED BY THE ASSESSING OFFICER. ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 10 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE TRIBUNAL FOR ASSESSMENT YEAR 2001-02 (VIDE ITA NO.7232/MUM/2012) ORDER DATED 11/12/2015 SET-ASIDE THE ISSUE TO THE FILE OF THE LD. COMMISSIONER OF IN COME TAX (APPEAL) AS HAS BEEN REPRODUCED ABOVE WHILE DISPOSI NG OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2007 -08. IN THE AFORESAID ORDER, FOLLOWING OBSERVATION WAS MADE :- 10. ON HEARING LD REPRESENTATIVES OF BOTH THE PART IES ON THE ISSUES RAISED BEFORE US FOR THE AY 1999-2000, W E FIND THE CIT (A) IN THE SECOND ROUND HAS LEFT SO MANY GA PS WITH REGARD TO THE FACT OF AOS FAILURE TO OBTAIN PRIOR APPROVAL OF THE JCIT AND THE CONSEQUENCES OF NOT OBTAINING SUCH APPROVAL ON THE CLAIM OF THE ASSESSEE. THE CIT (A) DID NOT CONSIDER THE FACT WHETHER THE PROVISIONS OF EXPLANA TION-3 TO SECTION 43(1) OF THE ACT ACTUALLY APPLY TO THE FACT S OF THE PRESENT CASE; WHETHER AO MERELY IGNORED THE CLAIM O F DEPRECIATION ON THE REVALUED COST OF THE TRADEMARK. FURTHER, CIT (A) HAS ALSO NOT CONSIDERED WHETHER TH ERE IS ANY SUBSTITUTION OF VALUATION AT ALL WHEN THE AO CO NSIDERED THE VALUE OF THE TRADEMARK AT ZERO. CIT (A) IS DI RECTED TO PASS A SPEAKING ORDER AS TO HOW THE EXPLANATION-3 T O SECTION 43(1) OF THE ACT APPLIES TO THE FACTS OF TH E PRESENT CASE FROM ALL ANGLES IF THE CONDITIONS SPECIFIED IN THE SAID EXPLANTION-3 ARE FULLY SATISFIED OR NOT. HE IS ALSO DIRECTED TO PASS AN ORDER ON HOW THE AO IS PERMITTED TO REJECT THE VALUATION REPORT FURNISHED BY THE ASSESSEE WHEN THE AO DOES NOT HAVE ANY OTHER REPORT ON HAND FROM THE DVO OR ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 11 OTHERWISE. FURTHER, CIT (A) IS ALSO DIRECTED TO EXA MINE THE APPLICABILITY OF THE CITED JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ASHWIN VANASPATI INDUSTRI ES (SUPRA) AND OTHERS. FURTHER ALSO, CIT (A) SHOULD EX AMINE THE APPLICABILITY OF THE 5TH PROVISO TO SECTION 32( 1) OF THE ACT AND GIVE REASONS IN WRITING ON HOW THE AMENDED PROVISIONS APPLY TO THE FACTS OF THE PRESENT CASE. THUS, WE REMAND THE WHOLE OF THE ISSUE RELATING TO THE CLAIM OF DEPRECIATION ON THE TRADEMARK TO THE FILE OF THE CI T (A) FOR THIRD ROUND OF THE PROCEEDINGS BEFORE HIM. THIS TIM E, THE CIT (A) IS DIRECTED TO EXAMINE EACH OF THE ISSUES D ISCUSSED ABOVE IN A TIME BOUND MANNER ATTENDING TO ALL THE ARGUMENTS RAISED BY THE LD COUNSEL FOR THE ASSESSEE BEFORE HIM IN THE SET ASIDE PROCEEDINGS. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GRANTED REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINC IPLES OF NATURAL JUSTICE. ACCORDINGLY, ALL THE ISSUES RAISED IN THE ORIGINAL GROUNDS AS WELL AS ADDITIONAL GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. CONSIDERING THE AFORESAID OBSERVATION MADE BY THE TRIBUNAL. DIRECTION WAS ISSUED AS TO HOW THE ASSESS ING OFFICER PERMITTED TO REJECT THE VALUATION REPORT FU RNISHED BY THE ASSESSEE WHEN THE ASSESSING OFFICER DOES NOT HA VE ANY OTHER REPORT IN HAND FROM THE DVO OR OTHERWISE. IN VIEW, OF THE AFOREMENTIONED OBSERVATION, WE ARE OF THE VIEW THAT AT LEAST PENALTY U/S 271(1)(C) WILL NOT SURVIVE, BECAU SE, THE REVENUE HAS NOT SUBSTANTIATED THAT THE ASSESSEE EIT HER FURNISHED THE INACCURATE PARTICULARS OF CONCEALED I TS ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 12 INCOME, WHICH ARE NECESSARY INGREDIENTS FOR IMPOSIN G PENALTY U/S 271(1)(C) OF THE ACT. EVEN, IF A WRONG CLAIM IS MADE, IT IS THE DUTY OF THE ASSESSING OFFICER EITHE R TO REJECTED OR TO GUIDE THE ASSESSEE. THE DECISION IN RELIANCE PETRO PRODUCTS PVT. LTD. AND CIT VS AJAYB SINGH & COMPANY 253 ITR 630 (P & H) SUPPORTS THE CASE OF TH E ASSESSEE. THE HONBLE APEX COURT IN RELIANCE PETRO PRODUCTS LTD. OBSERVED AS UNDER:- 10. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF THE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RES PECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELA TION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED TH E CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORREC T; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITH ER OF THE TWO FORMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II) AN ITEM OF EXPENDITUR E MAY BE FALSELY (OR IN AN EXAGGERATED AMOUNT) CLAIME D, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONE'S INCOME AS WELL AS FURNISHING O F ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 13 INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCU RATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT IT S CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE H AD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPT ED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSEL F WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDE R SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF T HE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAI M MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECT ION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF TH E LEGISLATURE. IN THE LIGHT OF THE AFORESAID OBSERVATION FROM HON BLE APEX COURT AND THE FACTUAL MATRIX THAT THE TRIBUNAL EVEN REMANDED THE MATTER BACK TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) EVEN FOR THE TH IRD ROUND OF THE PROCEEDINGS, THE PENALTY IS DIRECTED T O BE DELETED. THUS, THIS APPEAL OF THE ASSESSEE IS ALLOW ED. FINALLY, I. THE APPEAL IN ITA NO.4438/MUM/2013 IS ALLOWED FOR STATISTICAL PURPOSES AND ITA NO.4437 & 4438/MUM/2013 M/S PIK PEN PRIVATE LIMITED. 14 II. THE APPEAL IN ITA NO.4437/MUM/2013 WITH RESPECT TO PENALTY U/S 271(1)(C) IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 19/05/2016. SD/- SD/- (RAJENDRA) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER MUMBAI; # DATED : 19/05/2016 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. %& '( / THE APPELLANT (RESPECTIVE ASSESSEE) 2. )*'( / THE RESPONDENT. 3. + + , ( %& ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI, 5. /01 )2 , + %& %23 , / DR, ITAT, MUMBAI 6. 14 5 / GUARD FILE. / BY ORDER, */& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI