The DCIT, Circle-1(1), Baroda V. Chemcon Engineers Pvt.Ltd., Baroda

ITA 4558/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6704 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 27-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Keywords: Depreciation; Difference of opinion
• Section: 143(3); 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.4558/AHD/2007 A. Y.: 2003-04 THE D. C. I. T, CIR-1(1), AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA VS CHEMCON ENGINEERS PVT. LTD., C-3, SARDAR ESTATE, AJWA ROAD, BARODA PA NO. AAACC 7889 E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI H. P. MEENA, SR. DR RESPONDENT BY SHRI BHAVIN MARFATIA, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, BARODA DATED 14-09-2007 FOR ASSESSMENT YEAR 2003-04 CHALLENGING THE CANCELLATION OF PENALTY U/S 271 (1) ( C ) OF THE IT ACT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME AT RS.51,55,990/-. ASSESSME NT WAS COMPLETED U/S 143(3) OF THE IT ACT ASSESSING TOTAL INCOME AT RS.1,27,82,890/-. PENALTY PROCEEDINGS WERE INITIATE D U/S 271 (1) (C) OF ITA NO.4558/AHD/2007 THE DCIT, CIR-1(1), BARODA VS CHEMCON ENGINEERS PVT . LTD. 2 THE IT ACT ON THE ADDITIONS OF (I) LOSS ON FIRE AMO UNTING TO RS.47,90,740/-, (II) DISALLOWANCE OF DEDUCTION U/S 80 IB OF THE IT ACT AMOUNTING TO RS.2,15,665/- AND (III) DISALLOWANCE O F DEPRECIATION ON BOILER AMOUNTING TO RS.1,46,324/-. IT IS NOTED THAT ALL THE 3 ADDITIONS HAVE BEEN CONFIRMED BY THE LEARNED CIT(A) ON MERIT VIDE ORDER DATED 30-10-2006. THE AO VIDE SEPARATE ORDER LEVIED PENAL TY U/S 271(1) (C) OF THE IT ACT. IT WAS BRIEFLY SUBMITTED BEFORE THE LEARNED CIT(A) THAT SHOW-CAUSE NOTICE DATED 28-5-2007 WAS SERVED UPON T HE ASSESSEE ON 31-5-2007 AND THE ASSESSEE WAS REQUIRED TO FILE REPLY ON OR BEFORE 6-6-2007. THE AO WITHOUT WAITING FOR THE REPLY, PAS SED THE PENALTY ORDER ON 30-5-2007 EVEN BEFORE SERVICE OF THE NOTIC E, THEREFORE, THE IMPUGNED ORDER IS VOID ABINITIO. ON MERIT, IT WAS S UBMITTED THAT THE ASSESSEE FURNISHED ALL THE PARTICULARS BEFORE THE A O AND IT IS NOT A CASE OF THE AO THAT THE ASSESSEE HAD FAILED TO FURN ISH THE PARTICULARS OF INCOME OR HAD NOT FURNISHED EXPLANATION ABOUT TH E SAME. IT WAS SUBMITTED THAT ALL THE RELEVANT FACTS WERE FURNISHE D SUPPORTED BY EVIDENCES ON RECORD AND THE AO HAS NOT MADE OUT ANY CASE OF FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSES SEE AND NOTED THAT THE PENALTY ORDER IS PASSED WITHOUT WAITING FO R THE REPLY OF THE ASSESSEE AND EVEN WITHOUT PROPER SERVICE OF SHOW-CA USE NOTICE, THEREFORE, PENALTY ORDER IS VITIATED AND BAD IN LAW . THE LEARNED CIT(A) FURTHER NOTED THAT THE AO HAS NOT HELD THAT THE ASS ESSEE HAS FAILED TO FURNISH THE MATERIAL FACTS. IT WAS ALSO NOTED THAT DISALLOWANCES HAVE BEEN MADE ON ACCOUNT OF DIFFERENCE OF OPINION; THER EFORE, IT CANNOT BE A GROUND FOR LEVY OF THE PENALTY. PENALTY WAS ACCOR DINGLY CANCELLED AND THE APPEAL OF THE ASSESSEE WAS ALLOWED. ITA NO.4558/AHD/2007 THE DCIT, CIR-1(1), BARODA VS CHEMCON ENGINEERS PVT . LTD. 3 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT THE ASSESSEE PREFERRED QUANTUM APPEAL BEFORE T HE TRIBUNAL IN ITA NO. 2873/AHD/2006 AND VIDE ORDER DATED 23-07-2 010 THE TRIBUNAL DELETED THE ADDITION ON ACCOUNT OF LOSS ON FIRE OF RS.47,90,740/- AND ALSO ALLOWED THE DEDUCTION U/S 8 0 IB OF THE IT ACT. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECO RD. THE LEARNED COUNSEL FOR THE ASSESSEE, WITH REGARD TO DEPRECIATI ON ON BOILER SUBMITTED THAT UP TO ASSESSMENT YEAR 2002-03 THE DE PRECIATION ON HIGH EFFICIENCY BOILER WAS ALLOWED AT 100% AS PER T HE OLD APPENDIX- I AND FROM ASSESSMENT YEAR 2003-04 TO ASSESSMENT YEAR 2005-06 THE DEPRECIATION IS REDUCED TO 80%. COPIES OF OLD APPEN DIX I AND THE APPENDIX APPLICABLE TO THE ASSESSMENT YEAR UNDER AP PEAL HAVE BEEN FILED. HE HAS SUBMITTED THAT DUE TO BONA FIDE MISTA KE OLD APPENDIX WAS APPLIED FOR CLAIMING DEPRECIATION @ 100% AS AGA INST 80%. HE HAS, THEREFORE, SUBMITTED THAT PENALTY NOT TO BE IM POSED ON SUCH FACTS AND CIRCUMSTANCES. ON THE OTHER HAND, THE LEA RNED DR RELIED UPON THE ORDER OF THE AO AND DID NOT DISPUTE THE OR DER OF THE TRIBUNAL ON QUANTUM DATED 23-07-2010. THE LEARNED DR FURTHER SUBMITTED THAT THE LEARNED CIT(A) SHOULD NOT HAVE QUASHED THE PENA LTY ORDER ON THE GROUND OF SERVICE OF NOTICE AFTER PASSING OF THE IM PUGNED ORDER BECAUSE THE TWO NOTICES DATED 21-2-2006 AND 13-3-20 07 WERE EARLIER SERVED UPON THE ASSESSEE. HE HAS SUBMITTED THAT ADD ITIONAL GROUND IS RAISED IN THIS REGARD WHICH MAY BE ADMITTED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD AND DO NOT FIND ANY JUSTIFICATI ON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) IN CANCELING THE PE NALTY U/S 271 (1) ITA NO.4558/AHD/2007 THE DCIT, CIR-1(1), BARODA VS CHEMCON ENGINEERS PVT . LTD. 4 ( C ) OF THE IT ACT. THE AO IMPOSED THE PENALTY ON THE FIRST TWO ITEMS I.E. ON ACCOUNT OF LOSS ON FIRE AND DISALLOWANCE OF DEDUCTION U/S 80 IB OF THE IT ACT. THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL IN ITA NO. 2873/AHD/2006 AND BOTH THE ADDITIONS HAVE B EEN DELETED BY ALLOWING THE CLAIM OF THE ASSESSEE. SINCE THE ADDIT IONS ON MERIT HAVE BEEN DELETED AND THE APPEAL OF THE ASSESSEE HAS BEE N ALLOWED ON THESE ADDITIONS, THEREFORE, NOTHING SURVIVES FOR LE VY OF PENALTY ON THESE TWO ADDITIONS. PENALTY, THEREFORE, CANNOT BE IMPOSED ON SUCH ADDITIONS WHICH NO MORE SURVIVE. 5.1 AS REGARDS THE DISALLOWANCE OF DEPRECIATION ON BOILER, WE FIND FROM THE ASSESSMENT ORDER THAT THE LEARNED AO FOUND THAT THE ASSESSEE IS ELIGIBLE FOR 80% DEPRECIATION WHICH WAS ALSO ALLOWED. THE ASSESSMENT YEAR UNDER APPEAL IS ASSESSMENT YEAR 2003-04 IN WHICH DEPRECIATION OF HIGH EFFICIENCY BOILER WAS AL LOWABLE @80%. HOWEVER UP TO ASSESSMENT YEAR 2002-03, DEPRECIATION ON THE SAME WAS ALLOWABLE @100%. WE, THEREFORE ACCEPT THE CONTE NTION OF THE ASSESSEE THAT THERE MAY BE A BONA FIDE MISTAKE ON T HE PART OF THE ASSESSEE IN CLAIMING DEPRECIATION @100% ON THE BASI S OF OLD APPENDIX I OF IT RULES BECAUSE JUST UP TO THE PRECE DING YEAR, THE DEPRECIATION WAS ALLOWABLE @ 100%. IT IS REDUCED FO R THE FIRST TIME TO 80% IN THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, THE ASSESSEE MIGHT HAVE DUE TO MISUNDERSTANDING OR MISTAKE OF FA CTS HAVE CLAIMED DEPRECIATION @100% WHICH WAS APPLICABLE UP TO THE P RECEDING ASSESSMENT YEAR. ITA NO.4558/AHD/2007 THE DCIT, CIR-1(1), BARODA VS CHEMCON ENGINEERS PVT . LTD. 5 5.2. THE HONBLE SUPREME COURT IN THE CASE OF CIT V S RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C ) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HA S TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASS ESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) ( C ) WOULD EMBRACE THE DETA ILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETUR N IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RET URN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAI LS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENAL TY UNDER SECTION 271(1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM ITA NO.4558/AHD/2007 THE DCIT, CIR-1(1), BARODA VS CHEMCON ENGINEERS PVT . LTD. 6 MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFF IRMED. 5.3. THE HONBLE SUPREME COURT IN THE CASE OF M/S. RAJASTHAN SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SAHABAD CO -OP. SUGAR MILLS LTD. 322 ITR 73 (P&H) HELD THAT MAKING OF WRO NG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INFORM ATION, WHICH MAY CALL FOR LEVY OF PENALTY U/S 271 (1) ( C ) OF THE A CT. THE HONBLE PUNJAB & HARYANA HIGH COURT AGAIN IN THE CASE OF CIT VS SI DHARTHA ENTERPRISES 322 ITR 80 (P & H) HELD THAT LOSS SUFFE RED ON SALE OF MACHINERY WRONGLY TAKEN AGAINST PROFIT OF BUSINESS. ASSESSEE ON REALIZATION MISTAKE COMMITTED BY THE COUNSEL ACCEPT ED THE DECISION OF THE AO. NO DELIBERATE DEFAULT. APPELLATE AUTHORI TIES JUSTIFIED IN DELETING THE PENALTY U/S 271 (1) ( C ) OF THE IT AC T. 5.4. CONSIDERING THE FACTS OF THE CASE AS NOTED ABO VE, IN THE LIGHT OF THE ABOVE DECISIONS AND IN THE LIGHT OF THE FINDING S OF THE LEARNED CIT(A), WE ARE OF THE VIEW THAT IT IS NOT A FIT CAS E FOR IMPOSITION OF PENALTY. THE LEARNED CIT(A) HAS ON PROPER APPRECIAT ION OF FACTS AND MATERIAL ON RECORD RIGHTLY CANCELLED THE PENALTY U/ S 271 (1) ( C ) OF THE IT ACT. WE ACCORDINGLY CONFIRM HIS FINDINGS AND DIS MISS THE APPEAL OF THE REVENUE. 6. SINCE WE HAVE HELD ON MERIT THAT PENALTY IS NOT LEVIABLE THERE IS NO NEED TO ADMIT THE ADDITIONAL GROUND OF APPEAL OF THE REVENUE ITA NO.4558/AHD/2007 THE DCIT, CIR-1(1), BARODA VS CHEMCON ENGINEERS PVT . LTD. 7 BECAUSE IT IS ACADEMIC IN NATURE ONLY AND EVEN IF I T IS ADMITTED FOR HEARING, IT WOULD NOT CHANGE THE RESULT OF THE CASE . 7. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 29-04-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 29-04-2011 LAKSHMIKANT/ LAKSHMIKANT/ LAKSHMIKANT/ LAKSHMIKANT/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD