DCIT, New Delhi V. M/s. Steel Authority of India Ltd., New Delhi

ITA 4439/DEL/2013

• Counselvise Citation: 443920114 RSA 2013
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 1999-2000
• Appeal Filed On: 23-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Keywords: Depreciation; Audit objection

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR ITA NOS. 4439 & 4440/DEL/2013 ASSTT. YRS: 1999-2000 & 2000-01 DCIT, CIRCLE 9(1), VS. M/S STEEL AUTHORITY OF IN DIA LTD., NEW DELHI. ISPAT BHAWAN, LODHI ROAD, NEW DELHI. PAN: AAACS 7062 F ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SMT. RENUKA JAIN GUPTA SR. DR RESPONDENT BY : SHRI M.P. RASTOGI ADV. O R D E R PER R.P. TOLANI, J.M: : THESE ARE TWO REVENUES APPEALS AGAINST SEPARATE O RDERS OF CIT(A)- XII, CHALLENGING THE DELETION OF PENALTY LEVIED U/S 271(1)(C) OF THE INCOME- TAX ACT, 1961 AMOUNTING TO RS. 128.10 LACS FOR A.Y. 1999-2000 & RS. 19.25 LACS FOR A.Y. 2000-01. 2. BRIEF FACTS ARE : THE ASSESSEE, A PSU, OPERATES INTEGRATED STEEL PLANTS AND IS INTO VARIOUS TYPE OF ACTIVITIES FOR STEEL MA NUFACTURING AND HAS CONSIDERABLE CAPITALIZATION OF ASSETS ON ACCOUNT O F EXPANSION, MODERNIZATION. THE ACQUISITION, INSTALLATION, ERECT ION, COMMISSIONING AND MODERNIZATION OF MACHINERY INVOLVES HUGE GESTATION TIME. THE CAPITALIZATION AFTER STATUTORY AUDIT IS FURTHER SUBJECTED TO AUDIT OF VARIOUS AUTHORITIES LIKE CVC, CAG ETC. SUCH AGENCIES MANY A TIME JOINTLY REC ORD OBJECTIONS ABOUT 2 THE AMOUNT OF CAPITALIZATION BEING MORE OR LESS BAS ED ON VARIATION IN DATES OR AVERAGE RAT OF FUNDS ETC. 2,1. IN COMPLIANCE OF AUDIT OBJECTIONS OF CVC AND C AG IN THIS BEHALF THE EXCESS INTEREST IS DE-CAPITALIZED BY DEBITING INTER EST OR THE SHORT FALL IS FURTHER CAPITALIZED BY CREDITING INTEREST. SUCH ADJUSTMENTS ARE REFLECTED IN THE P&L A/C AS ADJUSTMENT RELATING TO EARLIER YEARS. DU RING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER MADE CERTAIN ADJU STMENTS AND HELD THAT PART OF THE INTEREST CLAIMED PERTAINED TO EARLIER YEARS, THEREFORE, IT WAS DISALLOWED. PENALTY PROCEEDINGS U/S 271(1)(C) IN T HIS BEHALF WERE INITIATED. 2.2. IN PENALTY PROCEEDINGS, THE ASSESSING OFFICER REJECTING ASSESSEES EXPLANATION, IMPOSED THE IMPUGNED PENALTIES. IN FI RST APPEAL THE CIT(A) DELETED THESE PENALTIES BY FOLLOWING OBSERVATIONS: I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPEL LANT AND PERUSED THE FACTS STATED IN PENALTY ORDER. THE COMP ANY HAS LARGE ADDITIONS TO ASSETS WHICH ARE CAPITALIZED ALO NG WITH THE INTEREST RELATABLE TO THE BORROWINGS FOR THEM FROM THE DATE OF ACQUISITION TO THE DATE OF PUTTING THE ASSET TO USE WHICH IS ACCORDING TO THE PRINCIPLES LAID IN THE ACCOUNTING STANDARDS AS WELL AS THE INCOME TAX ACT. THE CAPITALIZATION IS SUBJECTED TO AUDIT BY A NUMBE R OF AUTHORITIES LIKE CVC AND CAG ETC. WHICH ARE SUBJECT TO THE STATUTORY AUDIT AND THEY HAD POINTED OUT THAT THE I NTEREST HAS BEEN CAPITALIZED MORE THAN WHAT WAS REQUIRED. IN OR DER TO COMPLY WITH SUCH AUDIT FINDING THE EXCESS INTEREST WAS DE- CAPITALIZED BY DEBITING INTEREST AND CREDITING THE ASSETS. THE IMPACT OF BOTH SUCH ADJUSTMENTS IS REFLECTED IN THE PROFIT & LOSS A/C AS AN ADJUSTMENT RELATING TO AN EARLIER Y EARS SINCE THE TRANSACTION RELATES TO AN EARLIER YEAR- THOUGH THE DECISION IS TAKEN DURING THE CURRENT YEAR. THIS WAS DISALLOWED AS PRIOR PERIOD EXPENSE BY TH E AO IN THIS REASSESSMENT ORDER THOUGH IT WAS NOT DISTURBED IN THE REGULAR ASSESSMENT ORDER. THE CIT(APPEALS) VIDE HIS ORDER DATED 28-1-2011 AND 31-1- 2011 IN APPEAL NOS. 125/06-07 & 162/07-08 FOR A.Y. 1999- 3 2000 AND AY 2000-01 AGAINST THE RE-ASSESSMENT ORDER , THOUGH NOT AGREEING WITH THE AO HELD THAT ONCE INTEREST I S CAPITALIZED, IT CANNOT BE DE-CAPITALIZED SUBSEQUENTLY BUT DIRECT ED ALLOWANCE OF DEPRECIATION SINCE THE INTEREST WAS CAPITAL IN N ATURE. THE AO HAS LEVIED PENALTY ON THE SAID INTEREST DE- CAPITALIZED U/S 271(1)(C) BY HOLDING THAT THE ASSESSEE HAS CONC EALED PARTICULARS OF INCOME AND HAS ALSO FURNISHED INACCU RATE PARTICULARS OF INCOME. THE APPELLANT CONTENDED THAT : THE PENALTY ORDER SHOWS THAT THE AO IS NOT SURE WH ETHER IT IS A CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE COMPANY HAD ADEQUATELY DISCLOSED THE PARTICULARS IN THE ACCOUNTS AS WELL AS IN THE COMPU TATION OF TAXABLE INCOME, WHICH WAS NOT DISTURBED IN THE ASSE SSMENT ORDER U/S 143(3). THE AO PASSING THE RE-ASSESSMENT ORDER SIMPLY DISALLOWED ALL THE DEBITS IN THE SCHEDULE OF ADJUSTMENT RELATING TO AN EARLIER YEARS- AS PRIOR PERIOD EXPE NSE WITHOUT BRINGING ANY FRESH MATERIALS OR GIVING A FINDING TH AT THE FACTS FURNISHED ARE FALSE OR CONCEALED. THE CIT(APPEALS) IN APPEAL AGAINST THE RE=ASSESSMENT ORDER, THOUGH NOT AGREEIN G WITH THE AO HELD THAT SINCE INTEREST IS CAPITALIZED, IT CANN OT BE DE- CAPITALIZED SUBSEQUENTLY BUT DIRECTED ALLOWANCE OF DEPRECIATION SINCE THE INTEREST WAS CAPITAL IN NATURE. THE APPELLANT HAS RELIED ON A NUMBER OF JUDGMENTS ( IN THEIR SUBMISSIONS REPRODUCED HEREIN ABOVE) WHICH HOLD THA T PENALTY IS NOT LEVIABLE IN THE GIVEN CIRCUMSTANCES. CIT(A) PLACED RELIANCE ON THE FOLLOWING CASES: - KHANNA & ANNADHANAM VS. CIT DELHI HIGH COURT (2013 85 DTR (DEL) 164 DT. 29-1-2013; - RELIANCE PETROPRODUCTS (P) LTD. 322 ITR 158 (SC); - BSEL INFRASTRUCTURE REALTY LTD. VS. ACIT (ITA NO. 6 559/MUM/2011 (2012) 78 DTR (MUM.) (TRIB.) 147). AFTER OBSERVATIONS AND RELIANCE ON JUDICIAL CITATIO NS, LD. CIT(A) CONCLUDED AS UNDER: 4 AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUB MISSIONS OF THE APPELLANT WHICH HAVE SUFFICIENT FORCE, I AM INC LINED TO HOLD THAT THE APPELLANT HAS NEITHER CONCEALED INCOME NOR FURNISHED INACCURATE PARTICULARS FOR AY 2000-01. THE ENTRIES HAVE BEEN PASSED IN THE BOOKS OF ACCOUNT IN A BONA FIDE MANNE R AND AS PER THE GUIDELINES OF THE AUDITORS AND THERE IS NO CASE FOR PENALTY. HENCE THE PENALTY OF RS. 19,25,000/- IMPOS ED BY THE ASSESSING OFFICER IS HEREBY DELETED. ON SIMILAR LINES PENALTY FOR A.Y. 1999-2000 WAS ALS O DELETED. 3. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER AND CONTENDS THAT THE MISTAKES COMMITTED BY ASSESSEE IN CLAIMING PRIOR PE RIOD INTEREST EXPENSES AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF I NCOME OF THE ASSESSEE AND PENALTIES HAVE BEEN RIGHTLY IMPOSED BY ASSESSING OF FICER. 3.1. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND CONTENDS THAT THE ASSESSEES METHOD OF ACCOUNTING, POLICIES, HEADS O F REPORTING INTEREST EXPENDITURE ARE ALL DETERMINED BY THE GOVERNMENT AP POINTED AUDITORS WITH THE APPROVAL OF THE CONCERNED NODAL AGENCIES OF TH E FINANCE AND ACCOUNTING DEPARTMENTS. THUS, APROPOS THE CLAIM OF INTEREST, I T IS NOT A ONE MAN DECISION. THE DECISIONS ARE TAKEN BY THE ORGANIZATI ON BEING A GIANT THE ACCOUNTING FINANCE DEPARTMENT AND CONTROL IS DIVERS IFIED AS A MATTER OF POLICIES WHICH ARE ULTIMATELY AND ACCEPTED BY THE C OMPETENT AUTHORITIES APPOINTED BY THE CENTRAL GOVERNMENT. IT HAS NOT BEE N DISPUTED THAT THE ROLE OF CVC/ CAG COMES AFTER THE STATUTORY AUDIT. THEREF ORE, THE CHANGES SUGGESTED BY THE CVC AND CAG ARE STATUTORY MANDATES WHICH ARE TO BE 5 IMPLEMENTED BY THE ASSESSEE. ANY VARIATION IN CAPIT ALIZATION OR DE- CAPITALIZATION OF INTEREST IS CONSEQUENT TO THIS S TATUTORY REGIME AND NOT A VOLITION OF THE ASSESSEE UNILATERALLY. FURTHER, AL L THE RELEVANT CHANGES ARE REPORTED IN THE P&L A/C WITH RELEVANT NOTES OF THE STATUTORY AUDIT AND ANNUAL REPORTS. THEREFORE, IT CANNOT BE HELD THAT THE ASSE SSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN ANY MANNER. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) HAS S QUARELY HELD AS UNDER: WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING PENALTY U/S 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS . 3.2. FURTHER RELIANCE IS PLACED ON: - ADDL. CIT VS. DELHI CLOTH & GENERAL MILLS LTD. 157 ITR 822 (DEL); - CIT VS. CALCUTTA CREDIT CORP. 166 ITR 29 (CAL.); - CIT VS. GARG ENGINEERING CO. 235 ITR 451 (DEL.) 4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT HAS NOT BEEN DISPUTED THAT THE CHANGES I N CAPITALIZATION OR DE- CAPITALIZATION OF INTEREST WERE EFFECTED BY THE AS SESSEE CONSEQUENT TO WELL CONTROLLED AND REGULATED STATUTORY REGIME UNDER THE AEGIS OF CENTRAL GOVERNMENT. THE ASSESSEES BOOK RESULTS AFTER STATU TORY AUDIT ARE SUBJECTED TO AUDIT AND CORRECTION OF CVC AND CAG. THE CHANGE S CARRIED OUT BY THE 6 ASSESSEE ARE IN CONSONANCE TO THE RECOMMENDATIONS O F CVC AND CAG. BESIDES, THESE DETAILS WERE FILED ALONG WITH THE R ETURN OF INCOME. ALL THESE FACTORS MAKE THE ASSESSEES CASE SQUARELY FALLING W ITHIN THE PURVIEW OF SUPREME COURT JUDGMENT IN THE CASE OF RELIANCE PETR OPRODUCTS (SUPRA) AND OTHER CASE LAWS CITED BY THE ASSESSEE. ON OVER ALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) DELETING THESE PENALTIES. HIS ORDERS ARE UPHELD. 5. IN THE RESULT, REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24-01-2014. SD/- SD/- ( T.S. KAPOOR ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: _24-01-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR