DCIT CEN CIR 8(4), MUMBAI V. SAVITA OIL TECHNOLOGIES LTD, MUMBAI

ITA 5410/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0396 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 01-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V VIDYADHAR
• Keywords: Depreciation; Deemed to accrue or arise in india
• Section: 14A; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 5410/MUM/2016 (ASSESSMENT YEAR: 2009-10) DCIT, CENTRAL CIRCLE - 8(4) ROOM NO. 658, 6TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 VS. M/S. SAVITA OIL TECHNOLOGIES LTD. 66/67, NARIMAN BHAVAN NARIMAN POINT MUMBAI 400021 PAN AAACS7934A APPELLANT RESPONDENT APPELLANT BY: SHRI V. VIDYADHAR RESPONDENT BY: SHRI DHARAN GANDHI DATE OF HEARING: 21.02.2018 DATE OF PRONOUNCEMENT: 23.02.2018 O R D E R PER C.N. PRASAD, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-50, MUMBAI DATED 02.05.2016 FOR A.Y. 2009-10 RESTRICTING THE PENALTY TO ` 51,499/-. 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF DISALLOWANCE U/S . 14A TO RS.51,499/- AS AGAINST THE PENALTY LEVIED OF RS.9,5 9,000/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S 271(1) (C) OF THE INCOME TAX ACT, 1961 LEVIED OF RS.5,57,200/- ON ACC OUNT OF EXCESS DEPRECIATION CLAIMED ,WITHOUT DISCUSSING THE SAID ISSUE.' 3. WITH REFERENCED TO GROUND NO. 2, THE LEARNED COUNS EL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT IN SO FAR AS LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (HERE INAFTER THE ACT) IN ITA NO. 5410/MUM/2016 M/S. SAVITA OIL TECHNOLOGIES LTD. 2 RESPECT OF DISALLOWANCE MADE TOWARDS EXCESS DEPRECI ATION IS CONCERNED, THE COORDINATE BENCH VIDE ORDER IN ITA NO. 155/MUM/ 2014 DATED 04.08.2017 DELETED THE DISALLOWANCE. THE LEARNED CO UNSEL REFERRING TO PARA 9 OF THE SAID ORDER SUBMITTED THAT SINCE THIS DISAL LOWANCE IS DELETED THE PENALTY LEVIED ON SUCH DISALLOWANCE WILL NOT STAND. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE PENALTY WAS LEVIED IN TH E ASSESSMENT ORDER IN RESPECT OF DISALLOWANCE MADE WHILE COMPUTING THE IN COME UNDER NORMAL PROVISIONS OF THE ACT BUT ULTIMATELY THE INCOME WAS ASSESSED UNDER MAT PROVISIONS. THE LEARNED COUNSEL, REFERRING TO THE C BDT CIRCULAR NO. 25/2015 DATED 31.12.2015, SUBMITTED THAT PRIOR TO 0 1.04.2016 IF THE INCOME TAX PAYABLE ON THE TOTAL INCOME IS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT IS LESS THAN THE TAX PAYABLE ON THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT THEN PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS NOT ATTRACTED WITH REFERENCE TO THE ADDITION/ DISAL LOWANCE MADE UNDER NORMAL PROVISIONS. THEREFORE, HE SUBMITTED THAT EVE N BY VIRTUE OF THIS CIRCULAR THE PENALTY LEVIED ON THE ADDITION/ DISALL OWANCE MADE IN THE NORMAL COMPUTATION WILL NOT STAND. 4. COMING TO GROUND NO. 1, I.E. RESTRICTING THE PENALT Y LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOW ANCE UNDER SECTION 14A OF THE ACT THE LEARNED COUNSEL SUBMITTED THAT THE C IT(A) WORKED OUT THE PENALTY LEVIABLE AT ` 51,499/- FOR DISALLOWANCE UNDER SECTION 14A WHILE COMPUTING BOOK PROFITS. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE CIT(A) DID NOT GIVE AN OPPORTUNITY TO THE ASSESSEE BEFORE LEVYING PENALTY ON THE ADDITION MADE UNDER SECTION 14A OF THE ACT IN T HE MAT PROCEEDINGS. BEFORE INITIATING PENALTY NO NOTICE IS GIVEN TO THE ASSESSEE. THE CIT(A) SIMPLY COMPUTED THE PENALTY TO BE LEVIED UNDER SECT ION 271(1)(C) OF THE ACT AT ` 51,499/- ON DEEMED INCOME UNDER MAT PROVISIONS. THE LEARNED COUNSEL FURTHER REFERRING TO THE ORDER OF THE COORD INATE BENCH SUBMITTED THAT THE COORDINATE BENCH HAS RESTORED THE ISSUE OF DISALLOWANCE UNDER SECTION 14A TO THE FILE OF THE AO FOR RE-COMPUTATIO N. 5. THE LEARNED D.R., ON THE OTHER HAND, VEHEMENTLY SUP PORTED THE ORDER OF THE ASSESSING OFFICER. ITA NO. 5410/MUM/2016 M/S. SAVITA OIL TECHNOLOGIES LTD. 3 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE AUTHORITIES BELOW AND THE DECISIONS RELIED UPON. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL, IN VIEW OF THE CBDT CIRCULAR N O PENALTY IS LEVIABLE ON THE ADDITION/DISALLOWANCE MADE WHILE COMPUTING INCO ME UNDER THE NORMAL PROVISIONS OF THE ACT WHEN THE INCOME IS ASSESSED U LTIMATELY UNDER SECTION 115JB OF THE ACT AND WE OBSERVE THAT THE CIT(A) HAS RIGHTLY DELETED THE PENALTY IN SO FAR AS ADDITION/DISALLOWANCE MADE UND ER THE NORMAL PROVISIONS. IN ANY CASE THE TRIBUNAL HAS DELETED TH E DISALLOWANCE OF EXCESS DEPRECIATION CLAIM MADE BY THE ASSESSEE HENCE NO PE NALTY IS ATTRACTED. 7. COMING TO THE PENALTY LEVIED FOR DISALLOWANCE MADE UNDER SECTION 14A WHILE COMPUTING THE BOOK PROFIT, FIRSTLY THE AO NEITHER INITIATED NOR LEVIED ANY PENALTY ON THIS ADDITION/DISALLOWANCE MA DE UNDER SECTION 14A WHILE COMPUTING BOOK PROFITS. SECONDLY IF THE CIT(A ) WANTED TO INITIATE PENALTY PROCEEDINGS FOR SUCH ADDITION/DISALLOWANCE HE HAS TO ISSUE NOTICE TO THE ASSESSEE. THE CIT(A) SHOULD GIVE AN OPPORTUNITY TO THE ASSESSEE BEFORE IMPOSING PENALTY. IN THIS CASE NO SUCH NOTICE IS IS SUED NOR AN OPPORTUNITY IS GIVEN TO THE ASSESSEE. THEREFORE THE PENALTY OF ` 51,499/- WAS LEVIED BY THE CIT(A) WITHOUT ADHERING TO THE PRINCIPLES OF NATURA L JUSTICE. FURTHER, THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V S. VIREET INVESTMENT P. LTD. (58 ITR (TRIB) 313) IT HAS BEEN HELD THAT THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2) IS TO BE M ADE WITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED UNDER SECTION 14A R .W. RULE 8D OF I.T. RULES, 1962. THE DISALLOWANCE UNDER SECTION 14A WHI LE COMPUTING BOOK PROFIT CANNOT BE MADE APPLYING THE PROVISIONS OF RU LE 8D. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY, 2018. SD/ - SD/ - (A.L. SAINI) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23 RD FEBRUARY, 2018 ITA NO. 5410/MUM/2016 M/S. SAVITA OIL TECHNOLOGIES LTD. 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -50, MUMBAI 4. THE PR. CIT, CENTRAL-4, MUMBAI 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.