DCIT 9(2), MUMBAI V. KHANNA INDUSTRIAL PIPES P.LTD, MUMBAI

ITA 5949/MUM/2012

• Counselvise Citation: 594919914 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 28-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADEEP S ARYA
• Keywords: Depreciation; Wrong claim; Revised return
• Section: 115JB; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 5949/MUM/2012 (ASSESSMENT YEAR: 2008-09) D C I T - 9(2) VS. KHANNA INDUSTRIAL PIPES P. LTD. ROOM NO. 218, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 11, SATYAM, 318, LINKING ROAD KHAR (W), MUMBAI 400052 PAN - AAACK2240D APPELLANT RESPONDENT APPELLANT BY: SHRI PRADEEP S. ARYA RESPONDENT BY: SHRI K. GOPAL DATE OF HEARING: 02.09.2014 DATE OF PRONOUNCEMENT: 02.09.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-20, MUMBAI AND IT PERTAINS TO AY 2008-09. 2. PENALTY OF ` 58,03,923/- LEVIED BY THE AO UNDER SECTION 271(1)(C ) BUT CANCELLED BY THE LEARNED CIT(A) IS THE SUBJECT MATT ER OF DISPUTE BEFORE US. 3. ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURE OF M.S. PIPES. IN RESPECT OF PREVIOUS YEAR RELEVANT TO AY 2 008-09 ASSESSEE DECLARED TOTAL INCOME OF ` 1,58,48,748/-. THE RETURN WAS ORIGINALLY PROCESSED UNDER SECTION 143(1) BUT THEREAFTER SELECTED FOR SCRUTINY ON 05.08.2009. E-RETURN WAS FILED ON 29 TH SEPTEMBER, 2008 WHEREIN THE ASSESSEE DEBITED A SUM OF ` 83,79,859/- UNDER THE HEAD PROFIT AND LOSS OF WIND MILL UNDERTAKING. THE AO NOTICED, FROM SCHEDULE 16, THAT A SUM OF ` 1,70,75,385/- WAS CHARGED AS DEPRECIATION ON WINDMILL UNDER COMPANIES ACT AND UP ON TAKING INTO CONSIDERATION THE DEPRECIATION, THE NET PROFIT/LOSS WAS SHOWN FOR INCOME TAX PURPOSES. IT IS ALSO NOTICED THAT THE ASSESSEE DEDU CTED ` 4.21 CRORES AS DEPRECIATION ON WINDMILL AS PER I.T. ACT BUT DEPREC IATION CHARGED AS PER ITA NO. 5949/MUM/2012 KHANNA INDUSTRIAL PIPES P. LTD. 2 COMPANIES ACT WAS NOT ADDED BACK IN THE FINAL COMPU TATION OF INCOME. IT DESERVES TO BE NOTICED THAT THOUGH THE E-RETURN WAS FILED ON 29 TH SEPTEMBER, 2008, THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT, STATUTORY NOTICE UNDER SECTION 143(2) WAS ISSUED ON 05.08.200 9 AFTER SELECTING THE CASE FOR SCRUTINY, ASSESSEE NEVER BOTHERD TO VERIFY AS TO WHAT IS THE AMOUNT OF DEPRECIATION CLAIMED IN THE RETURN OF INCOME. IN OTHER WORDS, DOUBLE DEDUCTION CLAIMED WAS NOT LOOKED INTO. ONLY WHEN TH E ASSESSEE WAS ASKED TO EXPLAIN THE DISCREPANCY AS TO WHY DEPRECIATION O N COMPANIES ACT SHOULD NOT BE ADDED BACK TO THE TOTAL INCOME, VIDE LETTER DATED 15.11.2010 THE ASSESSEE CONCEDED THE DOUBLE CLAIM MADE AND ACCORDI NGLY OFFERED TO TAX THE ENTIRE SUM OF ` 1,70,75,385/- WHEREAS ONLY THE DIFFERENTIAL FIGURE OUGHT TO HAVE BEEN OFFERED. SINCE THE ASSESSEE ACCEPTED THE DISALLOWANCE OF ` 1,70,75,385/- ASSESSMENT WAS MADE UNDER SECTION 143 (3) OF THE ACT BUT SUBSEQUENTLY WHEN THE ASSESSEE FILED A PETITION UND ER SECTION 154 OF THE ACT THE AO RECTIFIED THE MISTAKE VIDE ORDER DATED 22 ND FEBRUARY, 2012 WHEREIN THE EXCESS RETURNED INCOME OF ` 83,79,859/- WAS SET ASIDE. IN THE ORDER PASSED UNDER SECTION 154 OF THE ACT THE BOOK PROFIT WAS TAKEN AT ` 5,03,54,791/- AND DISALLOWANCE OF DEPRECIATION ON W INDMILL WAS WORKED OUT AT ` 1,70,75,385/-. 4. CONSEQUENT TO THE DISALLOWANCE MADE IN THE ASSESSME NT ORDER THE AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT READ WITH EXPLANATION (1) ON THE GROUND THAT THE ASSESSEE FIL ED INCORRECT PARTICULARS OF INCOME. VIDE LETTER DATED 19.05.2011 THE ASSESSEE S UBMITTED THAT IT HAD FURNISHED ALL FACTS. ADDITIONS/DISALLOWANCES ARE MA DE ON THE BASIS OF THE DETAILS FURNISHED EITHER IN THE RETURN OF INCOME OR FINANCIAL STATEMENTS AND THEREBY SUBMITTED THAT NO ADDITIONAL INFORMATION HA S BEEN UNEARTHED ON THE BASIS OF WHICH ANY DISALLOWANCE OR ADDITION HAS BEE N MADE. IT WAS THEREFORE SUBMITTED THAT IT IS NOT A CASE OF FURNISHING INACC URATE PARTICULARS OF INCOME. 5. THE AO OBSERVED THAT THE ASSESSEE MADE A CONSCIOUS ATTEMPT TO EVADE TAXES BY FURNISHING INACCURATE PARTICULARS OF INCOM E AND HENCE PROVISIONS OF SECTION 271(1)(C) READ WITH EXPLANATION (1) THERETO ARE APPLICABLE TO THE ITA NO. 5949/MUM/2012 KHANNA INDUSTRIAL PIPES P. LTD. 3 INSTANT CASE. IN THIS REGARD HE OBSERVED THAT EXPLA NATION (1) TO SECTION 271(1)(C) AUTOMATICALLY COMES INTO OPERATION IN SUC H CASES AND THE ONUS TO ESTABLISH THAT IT WAS NOT A CASE OF FURNISHING INAC CURATE PARTICULARS, AND NOT CONCEALED INCOME, IS ON THE ASSESSEE. ASSESSEE COMP ANY IS COVERED BY THE PROVISIONS OF SECTION 44AB OF THE ACT AND HAS GOT I TS ACCOUNTS AUDITED BY A CHARTERED ACCOUNTANT. THE DEPRECIATION IN RESPECT O F ASSETS OTHER THAN WINDMILL IS CLAIMED AS PER COMPANIES ACT AND WAS AD DED BACK IN THE COMPUTATION AND DEPRECIATION AS PER I.T. RULES WAS CLAIMED IN THE COMPUTATION. HOWEVER, IN THE SAME COMPUTATION THE A SSESSEE FAILED TO ADD BACK DEPRECIATION ON WINDMILL AS CLAIMED UNDER COMP ANIES ACT BUT HAS GONE AHEAD AND CLAIMED DEPRECIATION THEREON AS PER I.T. RULES. IN THE OPINION OF THE AO THIS CANNOT BE CONSTRUED AS AN AC T OF UNINTENDED OMISSION BUT IT IS CLEARLY A DELIBERATE ACT OF WILF UL OMISSION WITH THE INTENT TO REDUCE THE TAXABLE INCOME. HAVING REGARD TO THE CIR CUMSTANCES OF THE CASE HE LEVIED PENALTY EQUIVALENT TO 100% OF THE TAX SOU GHT TO BE EVADED. 6. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THA T SOME CLERICAL MISTAKE HAS CREPT IN INADVERTENTLY WHILE FILING THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION AND ASSESSEE FILED A REVIS ED COMPUTATION OF INCOME, VIDE LETTER DATED 15 TH NOVEMBER, 2010, DECLARING TOTAL INCOME AT ` 2.35 CRORES UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF ` 5.03 CRORES UNDER SECTION 115JB OF THE ACT. IT WAS ALSO CONTENDED THAT THE AO ADDED BACK THE DEPRECIATION ON WINDMILL UNDERTAKING AT ` 1.70 CRORES WITHOUT GIVING DUE CREDIT FOR DEPRECIATION OF ` 83,79 LAKHS ON WINDMILL UNDERTAKING WHICH HAD ALREADY BEEN ADDED BY THE ASS ESSEE FROM THE BEGINNING, IN THE RETURN OF INCOME. THE ORDER PASSE D BY THE AO UNDER SECTION 154 OF THE ACT WAS ALSO PLACED BEFORE THE L EARNED CIT(A) TO SUBMIT THAT THE ASSESSEE WAS GRANTED RELIEF TO THE EXTENT OF ` 83,79,859/- AND HENCE PENALTY CANNOT BE LEVIED AT LEAST IN RESPECT OF THE SAID AMOUNT. IT WAS THUS CONTENDED THAT THE EFFECTIVE DISALLOWANCE ON DEPREC IATION OF WINDMILL WORKS OUT TO ` 86,95,526/-. IT WAS CONTENDED THAT IT WAS AN UNINTE NDED, BONAFIDE AND INADVERTENT MISTAKE WHICH HAD CREPT IN WHILE FI LING THE RETURN OF INCOME AND IT CANNOT BE TREATED TO BE WITH AN INTENTION TO DEFRAUD THE REVENUE. TO ITA NO. 5949/MUM/2012 KHANNA INDUSTRIAL PIPES P. LTD. 4 BUTTRESS THE CONTENTION IT WAS STATED THAT THE ASSE SSEE HAD NOT ONLY ADDED BACK THE DEPRECIATION ON OTHER ASSETS AS PER COMPAN IES ACT, 1956 AGGREGATING TO ` 77,09,695/- BUT ALSO ADDED BACK THE DEPRECIATION O N WINDMILL TO THE EXTENT OF ` 83,79,859/-; THE MOMENT THE INADVERTENT MISTAKE WAS NOTICED THE ASSESSEE IMMEDIATELY INFORMED THE A O, VIDE LETTER DATED 15 TH NOVEMBER, 2010, WHICH ESTABLISHES THAT THE ASSESSEE MADE COMPLETE DISCLOSURE OF ALL THE FACTS RELEVANT FOR COMPUTING ITS TAXABLE INCOME FOR THE YEAR UNDER CONSIDERATION. RELIANCE WAS PLACED UPON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CONTENTION THAT WHEN THE ASSESSEE VOLUNTARILY RECTIFIED THE MISTAKE OF SHORT ADDITION OF DEPRECIATION IT CANNOT BE EQUATED TO FURNISHING OF INACCURATE PARTICULARS OF INCOME: - I) CIT VS. RELIANCE PETROPRODUCTS PVT. LTD (322 ITR 15 8) (SC) II) CANBAY SOFTWARE INDIA PVT. LTD. (122 TTJ 721) III) DILIP N. SHROFF VS. JCIT (291 ITR 519) (SC) 7. THE LEARNED CIT(A) HAS NOT CONSIDERED THE SUBMISSIO N OF THE ASSESSEE AND, IN A RATHER CRYPTIC ORDER, ASSUMED THAT THE MI STAKE OF ADDING LESS AMOUNT IS JUST A REPORTING ERROR COMMITTED BY THE TAX CONSULTANT. HE OBSERVED IN THIS REGARD AS UNDER: - 4.1 HOWEVER, INADVERTENTLY ` 83,79,859/- WAS ADDED BY PICKING UP WRONG LINE ITEM PERTAINING TO PROFIT/LOSS OF WINDMI LL UNDERTAKING. THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS INFORME D THE ASSESSING OFFICER ABOUT THIS MISTAKE WHICH HAD CREPT IN WHILE FILING RETURN OF INCOME AND ALSO SUBMITTED THE REVISED COMPUTATION O F INCOME ACCEPTING THE SAME. THUS, THE MISTAKE OF ADDING LESS AMOUNT T OWARDS DEPRECIATION ON WINDMILL UNDERTAKING AS PER THE COM PANIES ACT, 1956 TO THE EXTENT OF ` 86,95,526/- WAS JUST A REPORTING ERROR COMMITTED BY THE TAX CONSULTANT WHILE COMPUTING THE TAXABLE INCO ME. 8. HE FURTHER OBSERVED THAT DEPRECIATION ON WINDMILL U NDERTAKING IS WORKED OUT UNDER COMPANIES ACT AS WELL AS UNDER THE INCOME TAX ACT WHICH IS EVIDENT FROM SCHEDULE V, ANNEXURE B OF THE TAX AUDIT REPORT. HE ASSUMED THAT THE DISALLOWANCE IS MADE IN THE FINANC IAL STATEMENT OF THE ASSESSEE ON THIS ISSUE AND THEREFORE MERE SHORT ADD ITION ON DEPRECIATION ON WINDMILL UNDERTAKING AS PER COMPANIES ACT, 1956 HAS ALL THE HALLMARKS OF A HUMAN BONAFIDE CLERICAL MISTAKE AND CANNOT LEAD TO A CONCLUSION THAT THE ITA NO. 5949/MUM/2012 KHANNA INDUSTRIAL PIPES P. LTD. 5 ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME. HE THUS CANCELLED THE PENALTY. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. 9. THE LEARNED D.R. ADVERTED OUR ATTENTION TO PARAS 4. 1 AND 4.2 OF THE ORDER OF THE LEARNED CIT(A) TO HIGHLIGHT THAT THE D ECISION WAS RENDERED BY THE LEARNED CIT(A) ON A WRONG ASSUMPTION OF FACTS AND T HEREFORE THE SAME DESERVES TO BE SET ASIDE. 10. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE ADVERTED OUR ATTENTION TO PAGES 7, 18, 42, 83, 37, 88, 90 AND 98 OF THE PAPER BOOK TO SUBMIT THAT IT WAS AN ERROR ON THE PART OF THE ASSE SSEE COMPANY AND NOT OF THE TAX CONSULTANT IN CLAIMING DOUBLE DEDUCTION. IT WAS ALSO CONTENDED THAT IT WAS A BONAFIDE ERROR AND SOON AFTER IT WAS BROUG HT TO THE NOTICE THE ASSESSEE ACCEPTED THE MISTAKE. HE ALSO PLACED RELIA NCE UPON THE DECISION OF THE APEX COURT IN THE CASE OF PRICE WATERHOUSE COOP ERS PVT. LTD. VS. CIT 348 ITR 306 IN SUPPORT OF HIS CONTENTION THAT WHEN THER E IS COMPLETE DISCLOSURE OF FACTS MERELY BECAUSE THERE IS A WRONG CLAIM IT C ANNOT BE TERMED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE ASSESSEE FILED E-RETURN ON 29 TH SEPTEMBER, 2008 AND THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. WITH IN ONE YEAR FROM THE DATE OF FILING OF THE RETURN THE ASSESSEE CAN REVIS E ITS RETURN WHEREAS THE ASSESSEE DID NOT CHOOSE TO REVISE THE RETURN. BY 20 10 THE ASSESSEE MUST HAVE FILED RETURNS FOR SUBSEQUENT YEARS BUT IT CLAI MS THAT IT HAS NOT NOTICED THIS SO CALLED DEFECT. THOUGH THE LEARNED CIT(A) RE CORDED IN PARA 3.2.1 THAT THE ASSESSEE VOLUNTARILY INFORMED THE AO ABOUT THE INADVERTENT MISTAKE AND FILED A REVISED RETURN THE FACT REMAINS THAT IT CAN NOT BE CONSIDERED AS A REVISED RETURN. IT WAS ONLY UPON EXAMINATION OF THE RETURN AND THE AO HAVING CALLED UPON THE ASSESSEE TO EXPLAIN THE DISC REPANCY, THE ASSESSEE CAME FORWARD TO ACCEPT THE DEFAULT ON ITS PART. THU S, IT COULD BE NOTICED THAT THE ORDER PASSED BY THE LEARNED CIT(A) WAS NOT ONLY CRYPTIC BUT ALSO BASED ON INCORRECT FACTS. IN PARA 4.1 HE OBSERVED THAT CL AIMING DOUBLE DEPRECIATION WAS A REPORTING ERROR COMMITTED BY THE TAX CONSULTA NT WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT I T WAS NOT AN ERROR ON THE ITA NO. 5949/MUM/2012 KHANNA INDUSTRIAL PIPES P. LTD. 6 PART OF THE TAX CONSULTANT BUT IT WAS A BONAFIDE ER ROR ON THE PART OF THE ASSESSEE COMPANY. THERE ARE MANY OTHER ASPECTS WHIC H NEED TO BE CONSIDERED AND APPRECIATED PROPERLY BEFORE APPRECIA TING AS TO WHETHER IT CAN BE TERMED AS BONAFIDE ERROR OR IT AMOUNTS TO FURNIS HING OF INACCURATE PARTICULARS OF INCOME. SINCE THE LEARNED CIT(A) PRI MA FACIE COMMITTED AN ERROR IN BASING HIS CONCLUSIONS ON WRONG ASSUMPTION OF FACTS, WE REFRAIN FROM MAKING ANY OBSERVATION ON THE OTHER ASPECTS OF THE CASE. SUFFICE TO SAY THAT THE ORDER PASSED BY THE LEARNED CIT(A) DESERVE S TO BE SET ASIDE BECAUSE OF INCORRECT APPRECIATION OF FACTS. WE HEREBY DIREC T THE LEARNED CIT(A) TO RECONSIDER THE MATTER AFRESH BY TAKING INTO CONSIDE RATION THE FACTS ON RECORD. 12. IN THIS CONTEXT WE MAY REFER TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DAULAT RAM RAWATMULL 8 7 ITR 349 WHEREIN THE HON'BLE COURT OBSERVED THAT WHEN A COURT OF FACT A CTS ON MATERIAL PARTLY RELEVANT AND PARTLY IRRELEVANT, IT IS IMPOSSIBLE TO SAY TO WHAT EXTENT THE MIND OF THE COURT WAS AFFECTED BY THE IRRELEVANT MATERIA L USED BY IT IN ARRIVING AT ITS FINDING. SUCH A FINDING IS VITIATED BECAUSE OF THE USE OF INADMISSIBLE MATERIAL ......... IN THE INSTANT CASE ALSO THE LE ARNED CIT(A) NOT ONLY PASSED A CRYPTIC ORDER BUT HAD ALSO TAKEN INTO CONSIDERATION CERTAIN FACTS WHICH WERE NOT ADDRESSED BY THE ASSESSEE, AS ADMITTED BY THE L EARNED COUNSEL FOR THE ASSESSEE. WITH THESE OBSERVATIONS THE ORDER PASSED BY THE LEARNED CIT(A) IS SET ASIDE AND HE IS DIRECTED TO RECONSIDER THE MATT ER IN ACCORDANCE WITH LAW. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND SEPTEMBER, 2014. SD/- SD/- ( RAJENDRA ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 2 ND SEPTEMBER, 2014 ITA NO. 5949/MUM/2012 KHANNA INDUSTRIAL PIPES P. LTD. 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20, MUMBAI 4. THE CIT 9, MUMBAI CITY 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.