The DCIT,Ahmedabad Circle-1, Ahmedabad V. Anjani Synthetics Ltd., Ahmedabad

ITA 560/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60460 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Bonafide belief; Wrong claim; Revenue expenditure
• Section: 143(3)

Judgement Text

ITA NO.560/ AHD/2012 A.YR.. 2005 -06 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, JM & SHRI ANIL CHATURVEDI A.M.) I.T.A. NO. 56 0/AHD/2012. (ASSESSMENT YEAR: 2005-06) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, KENDRIYA PRATYAKSHA BHAVAN, NEAR PANJARA POLE, AMBAWADI, AHMEDABAD. (APPELLANT) VS. ANJANI SYNTHETICS LTD., 252,NEW CLOTH MARKET , OUTSIDE RAIPUR GATE, NEAR MAHIPATASHRAM AHMEDABAD. (RESPONDENT) PAN: AABCA 2789E BY REVENUE : SHRI VINOD TANWANI. BY ASSESSEE : SHRI GAURAV NAHTA. ( )/ ORDER DATE OF HEARING : 30-4-2012. DATE OF PRONOUNCEMENT : 31-5-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE CIT (A)- VI, AHMEDABADS ORDER DATED 1-12-2011 FOR THE ASSES SMENT YEAR 2005-06. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE R EADS AS UNDER:- 1. THE LD. CIT (A) ERRED IN LAW AND FACTS IN DELET ING THE PENALTY U/S. 271(1)(C) LEVIED BY THE A.O. ON THE ADDITION O F ADDITIONAL DEPRECIATION. ITA NO.560/ AHD/2012 A.YR.. 2005 -06 2 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURN OF INCOME ON 30-10-2005 DECLARING TOTAL INCOME AT RS.1,61,86,160 /-.THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS CO MPLETED U/S. 143(3) OF THE ACT ON 17-12-2007 DETERMINING THE TOTAL INCOME AT RS. 1,87,91,250/- AFTER MAKING TWO ADDITIONS (1) DISALLOWANCE OF ADDI TIONAL DEPRECIATION AMOUNTING TO RS.18,42,527/-, (2) DISALLOWANCE OF I NTEREST EXPENSES OF RS. 7,62,565/-. AGAINST THESE TWO ADDITIONS THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A) AS WELL AS BEFORE THE TRI BUNAL. 4. THE TRIBUNAL IN QUANTUM APPEAL FOR THESE TWO ADD ITIONS VIDE ORDER DATED 25-2-2011 IN ITA NO.1459/AHD/2009 HAS DELETED THE ADDITION ON ACCOUNT OF INTEREST EXPENSES AMOUNTING TO RS.7,62,5 65/- AND SUSTAINED THE ADDITION ON ACCOUNT OF ADDITIONAL DEPRECIATION OF R S.18,42,527/-. THE REASON FOR SUSTAINING THE ADDITION ON ACCOUNT OF AD DITIONAL DEPRECIATION WAS THAT THE ASSESSEE FAILED TO PROVE THAT ITS INSTALLE D CAPACITY HAS INCREASED AT ANY POINT OF TIME AS COMPARED WITH EARLIER YEARS. IT IS ON THE AFORESAID ADDITION, THE A.O. LEVIED PENALTY U/S. 271(1)(C ) V IDE ORDER DATED 29-3-2010 FOR CONCEALMENT OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE CIT (A). 5. CIT (A) VIDE ORDER DATED 1-12-2011 DELETED THE P ENALTY FOR THE REASON THAT THE ISSUE OF ADDITIONAL DEPRECIATION WAS DEBAT ABLE IN VIEW OF THE FACT THAT IN THE CASE OF MADHU INDUSTRIES LTD., VS. ITO 132 TTJ 233 (AHD), THE ITA HAD ALLOWED THE CLAIM OF ADDITIONAL DEPRECIATIO N. THE ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION WAS BASED ON THE CERTIFI CATE OF THE AUDITOR AND THEREFORE THE CLAIM OF ASSESSEE CANNOT BE SAID TO B E BOGUS OR FRIVOLOUS CLAIM. ACCORDINGLY, LD. CIT (A) DELETED THE PENALTY LEVIED BY A.O. ITA NO.560/ AHD/2012 A.YR.. 2005 -06 3 AGGRIEVED BY THE DECISION OF CIT (A) THE REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, THE LD. D.R., SUBMITTED THAT THE A.O. IN THE ASSESSMENT ORDER HAS GIVEN A FINDING THAT THE CERTIFICATE OF C HARTERED ACCOUNTANT WAS ERRONEOUS. THE ASSESSEE COULD NOT PRODUCE ANY DETAI LS OR EVIDENCE EITHER BEFORE A.O. OR BEFORE CIT (A) AS TO HOW THE INSTALL ED CAPACITY WAS INCREASED IN EXCESS OF 10%. NO EVIDENCE WAS PRODUCE D EVEN AT THE TIME OF PENALTY PROCEEDINGS. LD. D.R. POINTED OUT TO THE FA CT THAT THE DIRECTORS REPORT STATES THAT INSTALLED CAPACITY OF CURRENT YE AR AND PREVIOUS YEAR ARE NOT ASCERTAINABLE. IT IS THEREFORE CLEAR THAT THE I NSTALLED CAPACITY WERE NOT ASCERTAINABLE WAS KNOWN TO DIRECTOR. DESPITE THAT T HE ACT OF ASSESSEE CLAIMING ADDITIONAL DEPRECIATION BY CLAIMING AN INC REASED INSTALLED CAPACITY CLEARLY SHOWS A WILLFUL INTENT ON THE PART OF ASSES SEE TO MAKE A FALSE CLAIM AND THEREBY REDUCE THE TAX LIABILITY. IT WAS THUS S UBMITTED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND CONCEALED THE PARTICULARS OF INCOME. IT ALSO RELIED ON THE DECISI ON OF CIT VS. ZOOM COMMUNICATION (P) LTD. (2010) 327 ITR 510. 7. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT I T HAD CLAIMED ADDITIONAL DEPRECIATION BASED ON THE CERTIFICATE OF CHARTERED ACCOUNTANT. ALL THE NECESSARY FACTS WERE SHOWN IN THE FINANCIAL STA TEMENT. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT IT IS ELIGIBLE FOR DEDUCTION OF ADDITIONAL DEPRECIATION AND THEREFORE THE DEDUCTION WAS CLAIME D. IT WAS FURTHER SUBMITTED THAT ON IDENTICAL ISSUE, THE AHMEDABAD TR IBUNAL IN THE CASE OF MADHU INDUSTRIES (SUPRA) HAD ALLOWED THE CLAIM BASE D ON CHARTERED ACCOUNTANTS CERTIFICATE. THE ASSESSEE RELIED ON TH E DECISION OF APEX COURT ITA NO.560/ AHD/2012 A.YR.. 2005 -06 4 IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) L TD., 230 CTR 449 (SC) WHERE IT HAS BEEN HELD THAT MERE MAKING OF THE CLAI M WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FUR NISHING OF INACCURATE PARTICULARS. IT WAS FURTHER SUBMITTED THAT ADDITIO N MADE TO INCOME IN THE ASSESSMENT PROCEEDINGS WILL NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THE AMOUNT ADDED WAS CONCEALED INCOME. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSE D THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSES SEES CLAIM FOR ADDITIONAL DEPRECIATION OF RS.18,42,527/- WAS DISALLOWED BY TH E A.O. AND WAS ALSO CONFIRMED BY CIT (A). CO-ORDINATE BENCH OF ITAT ALS O AFFIRMED THE ACTION OF A.O. FOR THE REASON THAT ASSESSEE FAILED TO PROVE T HAT ITS INSTALLED CAPACITY HAS INCREASED AT ANY POINT OF TIME. IT IS A FACT TH AT THE ASSESSEE HAD PURCHASED NEW PLANT AND MACHINERY ON WHICH IT CLAIM ED ADDITIONAL DEPRECIATION. THIS FACT IS NOT CONTROVERTED BY REVE NUE NOR HAS IT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT ASSESSEE HAD NOT PURCHASED MACHINERY. THE ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION WAS BASED ON THE CERTIFICATE OF THE AUDITOR WHEREIN IT WAS CERTIFIED THAT THE INSTALLED CAPACITY HAS INCREASED BY MORE THAN 10%. IN THE CASE OF MAD HU INDUSTRIES (SUPRA), THE CLAIM OF ADDITIONAL DEPRECIATION WAS ALLOWED BY THE CO-ORDINATE BENCH BASED ON THE CHARTERED ACCOUNTANTS CERTIFICATE WHI CH IMPLIES THAT THE ISSUE IS DEBATABLE AND TWO OPINIONS ARE POSSIBLE. T HE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT IT IS ELIGIBLE FOR DEDUCTION AND ACCORDINGLY IT CLAIMED THE DEDUCTION. 9. IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS L TD.(SUPRA), THE HONBLE COURT HAS HELD MERE MAKING THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITA NO.560/ AHD/2012 A.YR.. 2005 -06 5 ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME. 10. IN THE PRESENT CASE THE ADDITION HAS BEEN CONF IRMED BY ITAT ON THE BASIS OF DIRECTORS REPORT. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME. THE FACTS IN THE CASE OF ZOOM COMMUNICATION ARE THAT THE ISSUE OF IN COME TAX PAID BY IT COULD BE CLAIMED AS REVENUE EXPENDITURE WAS NOT DEB ATABLE. FURTHER, THE ASSESSEE WAS ALSO NOT UNDER A BONAFIDE BELIEF THAT THE AMOUNT COULD BE CLAIMED AS REVENUE EXPENSE. THUS THE FACTS IN THE C ASE OF ZOOM COMMUNICATION ARE DISTINGUISHABLE TO THAT OF PRESEN T CASE AND THEREFORE THE RATIO OF IT CANNOT BE APPLIED TO THAT IN THE PR ESENT CASE. IN VIEW OF THE AFORESAID FACTS AND RELYING ON THE DECISION OF HON BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) WE ARE OF TH E CONSIDERED VIEW THAT PENALTY CANNOT BE LEVIED ON THE CLAIM OF ADDITIONAL DEPRECIATION. WE THEREFORE, DELETE THE PENALTY. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 -5 - 2012. SD/- S D/- (D. K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO.560/ AHD/2012 A.YR.. 2005 -06 6 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-VI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 11 - 5 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 28 / 5 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 30 - 5 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 31 - 5 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 31 - 5 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3 1 - 5 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..