PATAN SOLAR PVT. LTD., MUMBAI V. DCIT - 13(1)(2), MUMBAI

ITA 5943/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1445 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 05-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RA I NA KARTIKIY E N
• Assessee Lawyers: TANMAY PHADKE A RS
• Keywords: Capital asset; Business income; Depreciation; Principle of natural justice
• Section: 32

Judgement Text

P A G E | 1 ITA NO. 5943/MUM/2017 A.Y. 2012 - 13 M/S PATAN SOLAR PVT. LTD.VS. THE DCIT - 13(1)(2) IN THE INCOME TAX APPELLATE TRIBUNAL ' C ' BENCH, MUMBAI BEFORE SHRI G.MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 5943/MUM/201 6 (ASSESSMENT YEAR: 2012 - 13 ) M/S PATAN SOLAR PVT. LTD., 602, WESTERN EDGE - 1, WESTERN EXPRESS HIGHWAY, BORIWALI (EAST), MUMBAI - 400 066, VS. THE DCIT - 13(1)(2), AAYAKAR BHAVAN, MUMBAI. PAN AAFCP6744A APPELLANT RESPONDENT APPELLANT BY: SHRI K. GOPAL & SHRI TANMAY PHADKE, A.RS RESPONDENT BY: SHRI ABI RA I NA KARTIKIY E N , D .R DATE OF HEARING: 09 .10.2018 DA TE OF PRONOUNCEMENT: 1 6 . 11 .2018 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 21, MUMBAI, DATED 28.07.2016, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 271(1 ) (C) OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT), DATED 30.09.2015 FOR A.Y 2012 - 13. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE US: 1. THE L D. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS LEVIED PENALTY U/S 271(1)(C) OF RS.4,04,397/ - ON DISALLOWANCE OF DEPRECIATION ON FACTORY BUILDING OF RS. 12,46,408/ - . 2 THE ORDER UNDER APPEAL IS NOT ONLY BAD IN LAW BUT ALSO AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND EQUITY. 3. LD. CIT(A) HAS ERRED IN NOT CONSIDERING VARIOUS FACTS, SUBMISSIONS, EXPLANATIONS AND CLARIFICATIONS AS GIVEN BY THE APPELLANT AND FURTHER ERRED IN NOT APPRECIATING THE FACTS AND LAW IN THEIR PROPER PERSPECTIVE. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, EDIT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. P A G E | 2 ITA NO. 5943/MUM/2017 A.Y. 2012 - 13 M/S PATAN SOLAR PVT. LTD.VS. THE DCIT - 13(1)(2) FURTHER, THE ASSESSEE HAD ALSO RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: 1. THE PENALTY NOTICE DATED 14.03.2015 ISSUED UNDER SEC. 271(1)(C) R.W.S 274 OF THE ACT IS BAD IN LAW SINCE NO PROPER SATISFACTION WAS EVER RECORDED BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS WITH REGARD TO THE INITIATION OF THE THE PE NALTY PROCEEDINGS WHETHER THE SAME WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. 2. THE PENALTY NOTICE DATED 14.03.2015 ISSUED UNDER SECTION 274 R.W.S 271 OF THE ACT IS VOID AB INITIO AS THE SAID NOTICE DOES NOT SPECIFY WHETHER THE PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. WITHOUT PREJUDICE TO ABOVE, THE PENALTY NOTICE DATED 14.03.2015 AND THE PENALTY ORDER DATED 30.09.2015 PASSED UNDER SEC TION 271(1)(C) ARE BAD IN LAW AS THE PENALTY WAS INITIATED AND LEVIED BY THE LEARNED ASSESSING OFFICER ON BOTH THE LIMBS (I.E FURNISHING INACCURATE PARTICULARS AS WELL AS CONCEALMENT OF INCOME) WHICH IS NOT PERMISSIBLE IN THE LAW AS PER THE PROVISIONS OF S ECTION 271(1)(C). WE FIND THAT AS THE ASSESSEE BY RAISING THE AFORESAID ADDITIONAL GROUNDS OF APPEAL HAS SOUGHT OUR INDULGENCE FOR ADJUDICATI NG A LEGAL ISSUE BASED ON THE FACTS AVAILABLE FROM RECORD, THEREFORE, THE SAME ARE BEING ADMITTED IN THE BACKDROP OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. VS. CIT (1998) 229 ITR 383 (SC). 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING & MANUFACTURING OF SOLAR PANELS HAD E - FILED ITS RETURN OF INCOME FOR A.Y 2012 - 13 ON 23.09.2012, DECLARING AN INCOME OF RS. 3,14,78,010/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER S E C. 143(2) OF THE ACT. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD SHOWN THE RENTAL INCOME OF RS. 10,50,000/ - IN RESPECT OF A FACTORY PREMISES THAT WAS LET OUT TO M/S POLYGEL TECHNOLOGIES (INDIA) PVT. LTD AS ITS INCOME FROM BUSINESS. THE A.O WAS OF THE VIEW THAT THE RENTAL INCOME RECEIVED BY THE ASSESSEE AS THE OWNER OF THE PROPERTY WAS LIABLE TO BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ON THE B ASIS OF HIS AFORESAID CONVICTION THE A.O ASSESSED THE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND AFTER ALLOWING THE STATUTORY DEDUCTION UNDER SEC. 24(A) OF RS. 3,15,000/ - BROUGHT THE BALANCE INCOME OF RS. 7,35,000/ - TO TAX. ON ACCOUNT P A G E | 3 ITA NO. 5943/MUM/2017 A.Y. 2012 - 13 M/S PATAN SOLAR PVT. LTD.VS. THE DCIT - 13(1)(2) OF CHANGE OF THE HEAD OF INCOME THE CLAIM OF DEPRECIATION OF RS. 12,46,408/ - THAT WAS RAISED BY THE ASSESSEE UNDER SEC. 32 IN RESPECT OF THE PROPERTY UNDER CONSIDERATION W A S DISALLOWED BY THE A.O . THE INCOME OF THE ASSESSEE SUBJECT TO CERTAIN OTHER ADDITION/ DISALLOWANCE WAS ASSESSED AT RS. 4,43,13,280/ - . THE A.O WHILE CULMINATING THE ASSESSMENT ALSO INITIATED PENALTY PROCEEDINGS UNDER SEC. 271(1)(C) OF THE ACT AND ISSUED A SHOW CAUSE NOTICE UNDER SEC. 274 R.W.S 271(1)(C) TO THE ASSESSEE. 4. SUBSEQU ENTLY, THE A.O OBSERVING THAT THE ASSESSEE HAD SUBMITTED INACCURATE PARTICULARS OF ITS INCOME AND THEREBY CONCEALED ITS INCOME FOR THE YEAR UNDER CONSIDERATION IMPOSED A PENALTY OF RS. 4,04,397/ - UNDER SEC. 271(1)(C) OF THE ACT. 5. AGGRIEVED, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE SAME AND DISMISSED THE APPEAL. 6. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED THAT NO PENALTY FOR MERE CHANGE OF HEAD OF INCOME WAS PERMISSIBLE UNDER LAW. T H E LD. A.R SUBMITTED THAT INVOLVING IDENTICAL FACTS , PE NALTY ON DISALLOWANCE OF CLAIM OF DEPRECIATION WAS IMPOSED ON THE ASSESSEE FOR THE IMMEDIATELY PRECEDING YEAR I.E A.Y 2011 - 12, WHICH HOWEVER ON APPEAL WAS DELETED BY THE CIT(A). (COPY PLACED ON RECORD). FURTHER, THE LD. A.R IN ORDER TO FORTIFY HIS CONTENTI ON THAT NO PENALTY UNDER SEC. 271(1)(C) COULD BE IMPOSED FOR CHANGE OF HEAD OF INCOME, RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. BENNET COLEMAN & COMPANY LIMITED (2013) 87 DTR 368 (BOM). FURTHER, THE LD. A.R SUBMITT ED THAT AS THE A.O HAD ERRED IN LAW BY INITIATING THE PENALTY FOR BOTH THE DEFAULTS I.E FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME THUS THE SAME CANNOT BE SUSTAINED AND WAS LIABLE TO BE VACATED. IN SUPPORT OF HIS CONTENTIO N THE LD. A.R RELIED ON THE ORDER OF THE COORDINATE BENCHES OF THE TRIBUNAL VIZ. (I). M/S CENZAR INDUSTRIES LTD. VS ITO - 5(1), MUMBAI [ITA NO. 1970/MUM/2015; DATED 29.12.2017); AND (II). FURTHER, IT WAS AVERRED BY THE LD. A.R THAT PENALTY CANNOT BE INITIA TED FOR ONE DEFAULT AND THEREAFTER IMPOSED FOR BOTH THE DEFAULTS I.E P A G E | 4 ITA NO. 5943/MUM/2017 A.Y. 2012 - 13 M/S PATAN SOLAR PVT. LTD.VS. THE DCIT - 13(1)(2) CONCEALMENT OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME . THE LD. A.R SUPPORTED HIS CONTENTION BY RELYING ON THE ORDER OF THE THIRD MEMBER DECISION OF THE ITAT, AMRITSAR IN THE CASE OF HPCL MITTAL ENERGY LTD. VS. ADDL. CIT [ITA NO. 554 & 555/ASR/2014; DATED 07.05.2018]. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE ISSUE INVOLVED IN THE PRESENT APPEAL IS AS TO WHETHER A CHANGE OF HEAD OF INCOME IN RESPECT OF CERTAIN INCOME DISCLOSED BY THE ASSESS EE IN ITS RETURN OF INCOME , LEADING TO A CONSEQUENTIAL DISALLOWANCE OF DEPRECIATION WOULD INVITE PENALTY UNDER SEC. 271(1)(C). ADMITTEDLY, IN THE CASE BEFORE US THE ASSESSEE HAD DISCLOSED THE RENTAL INCOME OF RS. 10,50,000/ - IN RESPECT OF THE FACTORY BUI LDING THAT WAS LET OUT TO M/S POLYGEL TECHNOLOGIES LTD. AS ITS INCOME FROM BUSINESS IN THE RETURN OF INCOME. FURTHER, THE ASSESSEE TREATING THE FACTORY BUILDING AS A CAPITAL ASSET HAD CLAIMED DEPRECIATION OF RS. 12,46,408/ - ON THE SAME. THE A.O BROUG HT THE RENTAL INCOME TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND WITHDREW THE CLAIM OF DEPRECIATION SO RAISED BY THE ASSESSEE. IN SO FAR, THE CHANGE OF HEAD OF INCOME IS CONCERNED, WE ARE IN AGREEMENT WITH THE VIEW OF THE LOWER AUTHORITIES THA T THE SAME WAS LIABLE TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND NOT AS THE BUSINESS INCOME OF THE ASSESSEE . HOWEVER, WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE LEVY OF PENALTY UNDER SEC. 271(1)(C) ON THE WITHDRAWAL /DECLINING OF THE CLAIM OF DEPRECIATION ON ACCOUNT OF CHANGE OF HEAD OF INCOME. WE ARE OF THE CONSIDERED VIEW THAT AS THE ASSESSEE HAD DULY DISCLOSED ITS RENTAL INCOME FROM THE PROPERTY IN ITS RETURN OF INCOME , THEN MERELY BECAUSE THE CLAIM OF THE ASSESSEE THAT THE SAID I NCOME WAS LIABLE TO BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM BUSINESS WAS REJECTED BY THE A.O , AND WAS SUBJECTED BY HIM TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY, WOULD BY NO MEANS SUFFICE LEVY OF PENALTY UNDER SEC. 271(1)(C) IN THE HANDS OF THE ASSESSEE. WE FIND THAT OUR VIEW THAT A MERE CHANGE OF HEAD OF INCOME WOULD NOT CALL FOR LEVY OF PENALTY UNDER SEC. 271(1)(C) STANDS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. BENNET COLEMAN & COMPANY P A G E | 5 ITA NO. 5943/MUM/2017 A.Y. 2012 - 13 M/S PATAN SOLAR PVT. LTD.VS. THE DCIT - 13(1)(2) LIMITED (201 3) 87 DTR 368 (BOM). THE HONBLE HI GH COURT OBSERVING THAT WHERE THE INCOME RECEIVED HAD BEEN DISCLOSED BY THE ASSESSEE IN ITS COMPUTATION OF INCOME AND THERE IS ONLY A CHANGE OF HEAD OF INCOME, THEN IN THE ABSENCE OF ANY FACT THAT THE CLAIM OF THE ASSESSE E WAS NOT BONAFIDE NO PENALTY CAN BE IMPOSED U/S 271(1)(C), HA S HELD AS UNDER: SO FAR AS QUESTION (II) IS CONCERNED, THE RESPONDENT - ASSESSEE HAD CLAIMED PREMIUM ON REDEMPTION OF DEBENTURES AS INCOME FROM CAPITAL GAINS. WHEREAS THE ASSESSING OFFICER HELD THAT THE REDEMPTION OF DEBENTURES IS REVENUE RECEIPT ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE RESPONDENT - ASSESSEE DID NOT FILE ANY FURTHER APPEAL ON THE QUANTUM PROCEEDINGS. THEREAFTER, THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE AC T ON THE RESPONDENT - ASSESSEE. THE CIT(A) ALSO CONFIRMED THE LEVY OF PENALTY UPON THE RESPONDENT - ASSESSEE. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE RESPONDENT - ASSESSEE HAD DISCLOSED THAT THE AMOUNT RECE IVED AS PREMIUM ON REDEMPTION OF DEBENTURES IN ITS COMPUTATION OF INCOME. FURTHER, THE TRIBUNAL RECORDS THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE RESPONDENT - ASSESSEE HAD CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF IN COME BY STATING INCORRECT FACTS. THE ASSESSING OFFICER CONSIDERED THE SAID PREMIUM RECEIVED ON REDEMPTION OF DEBENTURES TO BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE THE RESPONDENT - ASSESSEE CONSIDERED THE SAME TO BE TAXABLE UNDER THE HEAD CA PITAL GAINS. IN VIEW OF THE FACT THAT THERE IS ONLY A CHANGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY FACTS THAT THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE, THE TRIBUNAL DELETED THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THAT THE FINDING OF THE TRIBUNAL IS PERVERSE. IN THESE CIRCUMSTANCES, WE SEE NO REASON TO ENTERTAIN THE PROPOSED QUESTION (II) . FURTHER, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) HAD OBSERVED THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. 8. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THEIR VIEW THAT A CHANGE OF HEAD OF INCOME LEADING TO A CONSEQUENTIAL DISALLOWANCE OF DEPRECIATION WOULD JUSTIFY LEVY OF PENALTY UNDER SEC. 271(1)(C) I N THE HANDS OF THE ASSESSEE. WE THUS NOT BEING IN AGREEMENT WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES SET ASIDE THE ORDER OF THE CIT(A) AND QU ASH THE PENALTY OF RS. 4,04,397/ - IMPOSED BY THE A.O UNDER SEC. 271(1)(C) . IN THE BACKDROP OF THE FACT THAT THE PENALTY IMPOSED ON THE ASSESSEE UNDER SEC. 271(1)(C) HAD BEEN QUASHED ON MERITS, THUS WE REFRAIN FROM ADVERTING P A G E | 6 ITA NO. 5943/MUM/2017 A.Y. 2012 - 13 M/S PATAN SOLAR PVT. LTD.VS. THE DCIT - 13(1)(2) TO AND THEREIN ADJUDICATING THE ADDITIONAL GROUND S OF APPEAL RAISED BY THE ASSESSEE BEFORE US. 9 . ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 6 /11/2018. S D / - S D / - ( G.MANJUNATHA) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 16.11.2018 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 7 ITA NO. 5943/MUM/2017 A.Y. 2012 - 13 M/S PATAN SOLAR PVT. LTD.VS. THE DCIT - 13(1)(2)