DCIT, New Delhi V. Hari Machines Ltd., New Delhi

ITA 5043/DEL/2013

• Counselvise Citation: 504320114 RSA 2013
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 30-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH C CC C : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO. .. .5043/DEL/2013 5043/DEL/2013 5043/DEL/2013 5043/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2005 2005 2005 2005- -- -06 0606 06 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), 12(1), 12(1), 12(1), NEW DEL NEW DEL NEW DEL NEW DELHI. HI.HI. HI. VS. VS. VS. VS. M/S HARI MACHINES LIMITED, M/S HARI MACHINES LIMITED, M/S HARI MACHINES LIMITED, M/S HARI MACHINES LIMITED, 4, SCINDIA HOUSE, 4, SCINDIA HOUSE, 4, SCINDIA HOUSE, 4, SCINDIA HOUSE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN : PAN : PAN : PAN : AAACH0868C. AAACH0868C. AAACH0868C. AAACH0868C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATPAL SINGH, SR.DR. RESPONDENT BY : SHRI M.L. DUJARI, CA. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF LEARNED CIT(A)-XV, NEW DELHI DATED 25 TH JUNE, 2013 FOR THE AY 2005-06. 2. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER:- 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING THE PENALTY TO THE EXTENT OF RS.4,32,443/- LEVIED BY THE AO U/S 271(1)(C) OF THE I.T. ACT, 1961 BASED ON THE DISALLOW ANCE MADE BY AO ON ACCOUNT OF DEPRECIATION WHICH WAS CONFIRMED TO THE EXTENT OF RS.11,93,714/- BY THE CIT (A) AND THE ITAT AS WELL ? 2. WHETHER LD.CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN HOLDING THAT THE EXCESSIVE CLAIM OF DEPRECIATION CANNOT BE TREATED AS INACCURATE PARTICULARS OF INCOME DESPITE THE FACT THA T THE ASSESSEE HAD DELIBERATELY CLAIMED EXCESSIVE DEPRECIATION AND THE MISTAKE COMMITTED BY IT CANNOT BE SAID TO BE BONAFIDE AS HELD BY DELHI HIGH COURT IN ZOOM COMMUNICATION (2010) 191 TAXMANN 179 ? ITA-5043/DEL/2013 2 3. IN THIS CASE, THE ASSESSING OFFICER HAD LEVIED THE PEN ALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 AMOUN TING TO ` 5,29,887/- IN RESPECT OF THE FOLLOWING DISALLOWANCES:- (A) DISALLOWANCE ON ACCOUNT OF CAPITAL EXPENDITURE O F RS.2,68,984/- WAS CONFIRMED, HOWEVER, LD.CIT(A) HAS HE LD THAT DEPRECIATION IS ALLOWABLE ON THE SAME. (B) DISALLOWANCE ON ACCOUNT OF DEPRECIATION WAS CONFI RMED TO THE EXTENT OF RS.11,93,714/- (7.5% OF 1,57,41,437/- + 7.5% OF 1,74,752/-) ON HB-8 BORING MACHINE AND PATTERN AND DIES. 4. THE FACTUAL DETAIL WITH REGARD TO THE ABOVE DISAL LOWANCES IS GIVEN BY THE LEARNED CIT(A) IN PARAGRAPH 6.5 OF HIS ORDER WHICH IS REPRODUCED BELOW FOR READY REFERENCE:- 6.5 ON CAREFUL CONSIDERATION OF THE VARIOUS GROUNDS O N WHICH ADDITIONS WERE MADE BY THE LD.AO, (THAT HAVE B EEN SUSTAINED BY THE ITAT) IT IS TO BE ASCERTAINED WHETHER THE APPELLANT HAD CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. ON CAREF UL CONSIDERATION OF THE FACTS OF THE CASE, IT IS EVIDENT T HAT THE APPELLANT HAD FURNISHED THE DETAILS RELATING TO VARIO US EQUIPMENTS AND MACHINERY, WHICH WERE INSTALLED FOR PUTTING IN USE THE NEW FACTORY SHED. THE DETAILS ARE ALSO EVIDENT IN THE AUDIT REPORT IN FORM NO.3CD. THE HO NBLE ITAT HAS ALSO CONFIRMED THESE FACTS. THE DISALLOWANCE W AS ONLY IN RESPECT OF ONE BILL FOR INSTALLATION OF A HB- 8 BORING MACHINE, IN RESPECT OF WHICH THE APPELLANTS CLAIM WA S THAT THE CONTRACT FOR THE SAME WAS GIVEN TO THE CONTRACTOR ON 20.02.2005, WHILE THE BILL WAS RAISED BY THE CONTRACT OR ON COMPLETION ON 31.03.2005. IN THE ABSENCE OF ANY OTH ER EVIDENCE THAT THIS MACHINE WAS PUT TO USE BEFORE 31.03.2005, THE HONBLE ITAT HELD THAT THE APPELLAN T COULD NOT PROVE THAT THE SAID MACHINE WAS PUT TO USE DURIN G THE YEAR AND HENCE UPHELD THE DECISION OF THE HONBLE CI T(A)- X, NEW DELHI ON THIS GROUND. IT IS EVIDENT THAT ALL MATERIAL ITA-5043/DEL/2013 3 FACTS IN THIS REGARD WERE DULY DISCLOSED BY THE APPELL ANT AND HENCE IT CANNOT BE SAID THAT THE APPELLANT HAD CONCEALED THE PARTICULARS OF INCOME IN RESPECT OF THI S ITEM OF DISALLOWANCE. SECONDLY, REGARDING THE SECOND ITEM OF ADDITION RELA TING TO DISALLOWANCE OF AN AMOUNT OF RS.2,68,984/-, WHICH WAS HELD BY THE LD.AO AS CAPITAL IN NATURE, DETAILS OF VA RIOUS EXPENSES IN THE NATURE OF REPAIRS WERE FURNISHED BEFORE THE LD.AO. THUS, FOR THIS ITEM ALSO IT CANNOT BE HELD THA T THE APPELLANT HAD CONCEALED THE PARTICULARS OF INCOME EV EN THOUGH IT HAD CONCEDED THAT EXPENSES AMOUNTING TO RS.2,68,984/- MAY BE TREATED AS CAPITAL IN NATURE, DU RING THE COURSE OF ASSESSMENT PROCEEDING. IT IS EVIDENT THAT THE RELEVANT DETAILS WERE DULY DISCLOSED BY THE APPELLANT. 5. LEARNED CIT(A) CANCELLED THE PENALTY RELYING UPO N THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT.LTD. [2010] 322 ITR 158 (SC). THE REVENUE, AGGRIEVE D WITH THE ORDER OF LEARNED CIT(A), IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING, LEARNED DR HAS RELIED UPO N THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION P.LTD. 327 ITR 510 AND SUBMITTED THAT THE CLAIM OF THE ASSESSEE WITH REGARD TO DEPRECIATION AS WELL AS REPA IR EXPENSES WAS NOT BONA FIDE . HE, THEREFORE, SUBMITTED THAT THE ORDER OF LEARNE D CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFIC ER MAY BE RESTORED. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND T HAT HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ZOOM COMMUNICATION P.LTD. (SUPRA) HELD AS UNDER:- IN THE CASE OF RELIANCE PETROPRODUCTS P.LTD. [2010] 322 ITR 158 (SC), THE ADDITION MADE BY THE ASSESSING OFFICE R IN RESPECT OF THE INTEREST CLAIMED AS A DEDUCTION UNDER ITA-5043/DEL/2013 4 SECTION 36(1)(III) OF THE ACT WAS DELETED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THOUGH IT WAS LAT ER RESTORED, BY THE TRIBUNAL, TO THE ASSESSING OFFICER. TH E APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL WAS ADMITTED BY THE HIGH COURT. IT WAS, IN THESE CIRCUMSTANCES, THAT THE TRIBUNAL CAME TO THE CONCLUSIO N THAT THE ASSESSEE HAD NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS THEREOF. IN RECORDING THIS FINDING, THE TRIBUNAL FELT THAT IF TWO VIEWS OF THE CLAIM OF THE ASSESSEE WERE POSSIBLE, THE EXPLANATION OFFERED BY IT COULD NOT BE SAID TO BE FALSE. THIS, HOWEVER, IS NOT T HE FACTUAL POSITION IN THE CASE BEFORE US. THE FACTS OF T HE PRESENT CASE THUS ARE CLEARLY DISTINGUISHABLE. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCUR ATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN L AW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ON LY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS A ND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A C LAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUND ATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT A CTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEIN G ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RET URN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD B E ASSESSED ON THE BASIS OF SELF-ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED F OR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX , WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CA SES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE ITA-5043/DEL/2013 5 DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN TH E ACT HAVE. WE FIND THAT THE ASSESSEE BEFORE US DID NOT EXPLAIN EITHER TO THE INCOME-TAX AUTHORITIES OR TO THE INCOM E-TAX APPELLATE TRIBUNAL AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF WHOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS CASE WERE NOT ADDED, WHILE COMPUTIN G THE INCOME OF THE ASSESSEE-COMPANY. WE CANNOT LOSE SIGHT OF THE FACT THAT THE ASSESSEE IS A COMPANY WHICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATION OF ITS INCOME, AND ITS ACCOUNTS ARE COMPULSORILY SUBJECTED TO AUDIT. IN THE ABSENCE OF ANY DETAILS FROM THE ASSESSEE, WE FAIL TO APPRECIATE HOW SUCH DEDUCTIONS COULD HAVE BEE N LEFT OUT WHILE COMPUTING THE INCOME OF THE ASSESSEE-COMPANY AND HOW IT COULD ALSO HAVE ESCAPED THE ATTENTION OF T HE AUDITORS OF THE COMPANY. 8. THUS, AFTER CONSIDERING THE DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA), IT WAS STATED BY THE HONBLE JURISDICTIONAL HIGH COURT THAT MERE SUBMITTING A CLAI M WHICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCUR ATE PARTICULARS OF THE INCOME OF THE ASSESSEE BUT IF THE CLAIM, BESIDES BEIN G INCORRECT IN LAW IS MALA FIDE , EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INT O PLAY. IF THE ASSESSEES CLAIM IS BONA FIDE, THEN HE WILL NOT BE LIABLE FOR PENALTY. THEREFORE, THE PRECISE QUESTION TO BE ADJUD ICATED BY US IS WHETHER THE ASSESSEES CLAIM WAS BONA FIDE OR MALA FIDE . 9. ON THE FACTS OF THE ASSESSEES CASE, WE DO NOT FIND ANY MATERIAL TO HOLD THAT THE CLAIM OF THE ASSESSEE WAS NOT BONA FIDE . WE FIND THAT THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF DEPREC IATION AMOUNTING TO ` 82,07,445/-, OUT OF WHICH, THE ITAT SUSTAINED THE DISALLOWANCE ONLY TO THE EXTENT OF ` 11,93,714/-. THE CIT(A) HAS RECORDED THE FINDING THAT THE ASSESSEE HAS FURNISHED COM PLETE DETAILS WITH REGARD TO ACQUISITION OF EQUIPMENT AND MACHINER Y, THEIR INSTALLATION ETC. THE DETAILS FURNISHED BY THE ASSESSEE WERE NOT FOUND TO BE FALSE OR INACCURATE. THAT MERELY BECAUSE IN RE SPECT OF ONE ITA-5043/DEL/2013 6 MACHINERY THE ASSESSING OFFICER OR THE APPELLATE AUTHOR ITY WAS OF THE OPINION THAT THE SAME WAS NOT PUT TO USE BEFORE 31 ST MARCH, 2005, IT CANNOT BE SAID THAT THE ASSESSEE EITHER CONCEALED THE IN COME OR FURNISHED INACCURATE PARTICULARS OF INCOME. SIMILARL Y, MERELY BECAUSE THE EXPENDITURE OF ` 2,68,984/- WHICH WAS CLAIMED AS AN EXPENDITURE ON REPAIRS IS TREATED AS CAPITAL EXPENDITURE, IT CANNOT B E SAID THAT ASSESSEE EITHER CONCEALED THE INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME. ON THE FACTS OF THE ASSESSEES CA SE, IN OUR OPINION, THE DECISION OF HONBLE APEX COURT IN THE C ASE OF RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA) WOULD BE SQUARELY APPLICABLE WHEREIN THEIR LORDSHIPS HELD AS UNDER:- WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED B Y THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING TH E PENALTY UNDER SECTION 271(1)(C). A MERE TAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AM OUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOM E OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 10. IN VIEW OF THE ABOVE, WE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OR RELIANCE PETROPRODUCTS PVT.LTD. (SUPRA), UPHOLD THE ORDER OF LEARNED CIT(A) AND DISM ISS THE APPEAL FILED BY THE REVENUE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. DECISION PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2014. SD/- SD/- ( (( (ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY ABY T. VARKEY) )) ) (G.D.AGRA (G.D.AGRA (G.D.AGRA (G.D.AGRAWAL) WAL) WAL) WAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 28.02.2014 VK. ITA-5043/DEL/2013 7 COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TAX , DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 2. RESPONDENT : M/S HARI MACHINES LIMITED, M/S HARI MACHINES LIMITED, M/S HARI MACHINES LIMITED, M/S HARI MACHINES LIMITED, 4, SCINDIA HOUSE, NEW DELHI 4, SCINDIA HOUSE, NEW DELHI 4, SCINDIA HOUSE, NEW DELHI 4, SCINDIA HOUSE, NEW DELHI 110 001. 110 001. 110 001. 110 001. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR