PARAMAOUNT MINERALS AND CHEMICALS LTD, MUMBAI V. DCIT CEN CIR 46, MUMBAI

ITA 5992/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9414 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Depreciation; Wrong claim
• Section: 143(3); 54; 154; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.5992/MUM/2013 (A.Y.2008-09) PARAMOUNT MINERALS AND CHEMICALS LTD. 33, OLD HANUMAN 1 ST CROSS LANE, KALBADEVI ROAD MUMBAI-400 002. GIR NO./PAN : AAACP 2721 Q (APPELLANT ) VS. THE A CIT - 46 , MUMBAI.. (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI NEIL PHILIP - DR DATE OF HEARING : 25 /02/2015 DATE OF PRONOUNCEMENT : 25 /02/2015 ORDER PER CHANDRA POOJARI, A.M: THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECTE D AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 23/08/2013 FOR THE ASSES SMENT YEAR 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. (A) THE LEARNED CIT (A) ERRED IN CONFIRMING THE IMPOSITION OF PENALTY OF RS.2,80,000/- U/S. 271 (1)(C ) OF THE IN COME TAX ACT, 1961. (B) THE A.O. AND THE LEARNED CIT (A) ERRED IN NOT A PPRECIATING THE FACT THAT THE ALLEGED CONCEALED INCOME AT RS.8,12,5 40/- WHICH REPRESENTS THE DIFFERENCE IN FOREIGN EXCHANGE FLUCT UATIONS AND HAS THE EFFECT OF REDUCING THE COST OF FIXED ASSETS ENT ITLED FOR DEPRECIATION. 2 ITA NO.5992/M /13 (C) THE A.O. AND THE LEARNED CIT (A) FAILED TO APPR ECIATE THAT THE APPELLANT WAS ASSESSED U/S. 143 (3) OF THE ACT TO T HE INCOME DISCLOSED IN THE RETURN WHICH PROVES IPSO FACTO THA T THE APPELLANT HAD NEITHER CONCEALED THE PARTICULARS OF ITS INCOME NOR FURNISHED INACCURATE PARTICULARS OF ITS INCOME IN THE RETURN FILED U/S. 139 (1) OF THE ACT. (D) THE A.O. AND THE LEARNED CIT (A) ERRED IN NOT A PPRECIATING THE FACT THAT NO PENALTY CAN BE LEVIED WHEN THERE W AS NO INITIATION OF THE PENALTY PROCEEDING IN THE ORDER FRAMED U/S.1 54 OF THE ACT. 2. NONE APPEARED FOR THE ASSESSEE. WE HAVE TAKEN UP THE CASE TO ADJUDICATE THE ISSUE IN DISPUTE AFTER HEARING THE L D. DR. 3. THE FACTS OF THE CASE ARE THAT, THE ASSESSEE IS CARRYING ON THE BUSINESS ACTIVITY OF MANUFACTURING OF OPTICAL WHITE NING CHEMICAL. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.9.2008 DE CLARING TAXABLE INCOME AT RS. 1,76,81,326/-. THE ASSESSMENT U/S. 143(3) TH E ACT WAS COMPLETED ON 31.12.2010 ACCEPTING THE RETURNED INCOME OF RS.1 ,76,81,326/-. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE WAS ASKED TO EXPLAIN THE EFFECT GIVEN BY THE COMPANY FOR THE FOREIGN EXCHANGE RATE ON FOREIGN CURRENCY TERM LOAN. THE ASSESEE REPLIED THAT NO EFFECT HAS B EEN GIVEN IN THE BOOKS OF ACCOUNT ON REPAYMENT OF FOREIGN CURRENCY LOAN DU E TO FLUCTUATION IN EXCHANGE RATE U/S 43A. FURTHER, DIFFERENCE DUE TO E XCHANGE RATE WAS WORKED OUT TO RS.8,12,540/- BY THE COMPANY AND REVI SED DEPRECIATION WORKING ALONGWITH REVISED COMPUTATION WAS FILED DUR ING THE ASSESSMENT PROCEEDINGS. PENALTY PROCEEDINGS U/S.271(1)(C) OF T HE ACT WERE ALSO INITIATED. THE ASSESSMENT ORDER WAS RECTIFIED BY PA SSING ORDER U/S 154 OF THE I. T. ACT ON 18.1.2011 DETERMINING TOTAL INCOME AT RS.1,78,49,610/-. 3 ITA NO.5992/M /13 SUBSEQUENTLY, THE PENALTY PROCEEDINGS WERE INITIATE D FOR CONCEALMENT OF INCOME. DURING THE PENALTY PROCEEDINGS, THE ASSESS EE CONTENDED THAT IT IS THE DUTY OF THE ASSESSING OFFICER TO CHECK AND VERI FY THE DEPRECIATION WORKING FILED BY THE ASSESSEE COMPANY AND TO ALLOW THE CORRECT QUANTUM OF DEPRECIATION AS PER LAW. IT WAS ALSO CONTENDED T HAT THE REWORKING OF DEPRECIATION CANNOT BE TREATED AS CONCEALMENT. 3.1 THE A.O DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT THE ADMISSION OF WRONG CLAIM OF DEPRECA TION IS DUE TO ENQUIRIES CARRIED OUT DURING THE SCRUTINY ASSESSMEN T. THE ASSESSEE DID NOT FILE REVISED DEPRECIATION ON HIS OWN PRIOR TO SCRUT INY ASSESSMENT. HAD THERE BEEN NO SCRUTINY, THE ASSESEE WOULD HAVE CONCEALED THE FALSE CLAIM OF DEPRECATION. THE ASSESSEE ALSO ACCEPTED THE ORDER P ASSED U/S 143(3) & 154 OF THE I. T. ACT AND NO APPEAL HAS BEEN FILED A GAINST THE SAID ORDERS. THE ASSESSEE HAD CONCEALED PARTICULARS OF DEPRECATI ON AND ACCEPTANCE OF THE SAME CANNOT AVOID PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT. THE A.O LEVIED CONCEALMENT PENALTY U/S. 271(1)(C) OF TH E ACT AMOUNTING TO RS.2,80,000/- @ 100% OF THE TAX SOUGHT TO BE EVADED. 4. ON APPEAL THE LD. CIT(A) OBSERVED AS UNDER :- 7.2 THE APPELLANT HAS TAKEN A CLEAR POSITION AS PE R THE AUDIT REPORT NOT TO GIVE EFFECT EXCHANGE RATE FLUCTUATION ON ACCOUNT OF REPAYMENT O F FOREIGN CURRENCY LOAN AT THE TIME OF FILING THE RETURN OF I NCOME. THE APPELLANT CAME FORWARD TO ACCEPT THE WRONG CLAIM DURING THE COURSE OF SCRUTINY PROCEEDINGS AND ACCEPTED THE ADDITIONS MADE ON THIS GROUND. AS STATED BY THE ASSESSING OFFICER THE ASSESSEE COULD NOT HAVE COME FORWARD TO ACCEPT THE WRONG CLAIM BUT FOR THE ENQUIRY CONDUCTED AT TH E TIME OF SCRUTINY PROCEEDINGS. THE APPELLANTS ARGUMENT THAT IT IS THE DUTY OF THE ASSESSING OFFICER TO WORK OUT THE CORRECT DEPRECIATION ON THE BASIS OF THE DETAILS AVAILABLE ON RECORD IS TRUE ONLY IF THE CASE HAS BE EN SELECTED FOR THE SCRUTINY 4 ITA NO.5992/M /13 AND ONLY A FEW PERCENTAGES OF THE RETURN ARE SELECT ED FOR THE SCRUTINY AND MOST OF THE RETURNS ARE ACCEPTED WITHOUT ANY VERIFI CATION. WHILE ON THE ONE HAND THE APPELLANT DEMANDS THAT IT IS THE DUTY OF T HE ASSESSING OFFICER TO ALLOW THE RIGHT CLAIM ON THE BASIS OF THE AUDITOR'S REPORT WHILE ON THE OTHER HAND THE APPELLANT CONVENIENTLY OMITTED TO MA KE THE CORRECT CLAIM IN THE RETURN OF INCOME FILED. 7.3 THE APPELLANT ALSO CLAIMS THAT THE REMARKS MADE IN THE AUDITOR'S REPORT WOULD NOT HAVE BEEN LOST SIGHT OFF AS THERE ARE IN BUILT MECHANISMS SUCH AS AUDIT BY INTERNAL AUDIT PARTY, AUDIT BY CAG , INSPECTION, REVIEW BY HIGHER AUTHORITIES ETC. THIS CLAIM OF THE APPELLANT IS ALSO NOT TRUE AND THE AUDIT AND INSPECTIONS ARE USUALLY CARRIED OUT O NLY IN RESPECT OF SCRUTINY CASES AND VERY RARELY AUDIT OR INSPECTION IS CARRIE D OUT IN RESPECT OF NON SCRUTINY CASES. THERE ARE HIGH PROBABILITIES OF NOT NOTICING SUCH WRONG CLAIMS IN THE PRESENT MECHANISM EXCEPT PERHAPS UNDER THE S CRUTINY. THE APPELLANT ALSO ARGUES THAT THE INITIATION OF PENALT Y PROCEEDINGS IN THE ASSESSMENT ORDER IS OVER TAKEN BY THE NON INITIATIO N OF PENALTY PROCEEDINGS IN THE ORDER U/S 154 THEREBY COMING TO THE CONCLUSION THAT THE ASSESSING OFFICER SUO MOTO DROPPED THE INITIATION O F PENALTY PROCEEDINGS IS NOT ACCEPTABLE FOR THE REASON THAT THE INITIATION OF PE NALTY IN THE ORIGINAL ORDER WILL LIVE THROUGH THE SUBSEQUENT ORDERS UNTIL OTHERWISE IT WAS SPECIFICALLY DROPPED AND IF THE INITIATION HAS BEEN SUO MOTO DROPPED BY THE ASSESSING OFFICER HE COULD NOT HAVE PROCEEDED T O LEVY THE PENALTY FOR THE SAME GROUND FOR WHICH THE PENALTY PROCEEDIN GS WERE INITIATED BY HIM. FURTHER APPELLANT'S ARGUMENT THAT THE MENS REA IS REQUIRED TO LEVY PENALTY IS NOT ANY MORE GOOD LAW IN VIEW OF THE DEC ISION OF SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS 306 I TR 277 BY HOLDING THAT THE PENALTY IS A CIVIL LIABILITY AND THEREFORE WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING THE CIVIL LI ABILITY. IT WAS POINTED OUT THAT THE DIVISION BENCH IN THE CASE OF DILIP N. SHROFF F AILED TO NOTICE A CONCEPTUAL AND CONTEXTUAL DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 271C. THE CASE LAWS CITED BY THE ASSESSEE ARE DISTINGUISHABLE AND DO NOT APPLY TO THE FACTS OF THE CASE OF THE APPELLANT. 7.4 THE APPELLANTS GROUND THAT THE QUANTUM OF PENA LTY HAS TO BE ON THE QUANTUM OF DEPRECIATION AND NOT ON THE QUANTUM OF D IFFERENCE IN FOREIGN EXCHANGE FLUCTUATION IS ALSO NOT CORRECT. THE DIFFE RENCE IN FOREIGN EXCHANGE FLUCTUATION ON ACCOUNT OF REDUCTION OF REP AYMENT OF FOREIGN EXCHANGE LOAN WILL GO TO REDUCE THE COST OF THE FIX ED ASSET AS PER THE PROVISIONS OF SEC.43A OF THE ACT WHICH WILL IN TURN HAVE INHERENT BENEFIT IN THE CAPITAL ACCOUNT SUCH AS REDUCED CAPITAL GAIN ON THE DIFFERENCE IN VALUE OF AN ASSET AT THE TIME OF TRANSFER. THE GAIN OR LO SS WILL BE ATTRIBUTABLE TO THE COST OF THE ASSET. ANY CHANGE IN THE COST OF TH E ASSET WILL HAVE A BEARING ON THE GAIN AT THE TIME OF TRANSFER. THEREFORE, FURNISHING OF INACCURATE 5 ITA NO.5992/M /13 PARTICULARS ACTUALLY RELATES TO THE DIFFERENCE IN T HE COST OF THE ASSET AND NOT RESTRICTED TO THE CLAIM OF ELIGIBLE DEPRECIATIO N. IN VIEW OF THE ABOVE, THE PENALTY OF RS.2,80,000/- LEVIED U/S 271(1)(C) O F THE ACT BY THE ASSESSING OFFICER IS HEREBY CONFIRMED. 4.1 AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFOR E US. 5. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA L AVAILABLE ON RECORD. IN THIS CASE THE ASSESSEE FAILED TO GIVE EF FECT TO CHANGE IN THE RATE OF EXCHANGE ON ACCOUNT OF REPAYMENT OF FOREIGN EXCH ANGE CURRENCY LOAN U/S. 43A OF THE ACT. IN THE RETURN OF INCOME FILED BY THE ASSESSEE, THIS FACT WAS REPORTED BY THE AUDITORS IN THE AUDIT REPORT. W HEN THIS WAS ENQUIRED INTO BY THE AO DURING THE COURSE OF SCRUTINY PROCEE DINGS, THE ASSESSEE CAME FORWARD TO ADMIT THE WRONG CLAIM AND ACCORDING LY SUBMITTED REVISED DEPRECIATION CLAIM. THE AO LEVIED PENALTY U/S. 271( 1)(C) OF THE ACT ON THE GROUND THAT PROVISIONS REGARDING CLAIM OF DEPRECIAT ION HAS BEEN CONCEALED. THE ASSESSEES CLAIM WAS THAT THIS WILL NOT AMOUNT TO CONCEALMENT OF INCOME OR FALSE CLAIM. A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO B E CONCEALMENT OF PARTICULARS OF INCOME OF THE ASSESSEE . SECONDLY, T HE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE PRESENT CASE IT IS NOT THE CASE OF CONCEALMENT OF INCOME. IT IS ALSO TO BE NOT ED THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR IN ACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAILS SUPPLIED WERE FOU ND TO BE INCORRECT. HENCE, AT LEAST, PRIMA FACIE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS OR CONCEALING INC OME SO AS TO INVOKE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 6 ITA NO.5992/M /13 5.1 IN ORDER TO IMPOSE PENALTY ON THE ASSESSEE, THE CASE IS TO BE STRONGLY COVERED BY THE PROVISION OF SECTION 271(1)(C) OF TH E ACT. IT CANNOT BE SAID THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT BE TAN TAMOUNT TO FURNISHING INACCURATE PARTICULARS. THEREFORE, IT IS OBVIOUS TH AT IT MUST BE SHOWN THAT THE CONDITION U/S. 271(1)(C) OF THE ACT MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WO ULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT WHER E THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. MERELY BECAU SE, THE ASSESSEE CLAIMED EXCESSIVE DEPRECIATION, FAILING TO CONSIDER THE CHA NGE IN THE RATE OF EXCHANGE ON ACCOUNT OF REPAYMENT OF FOREIGN CURRENC Y LOAN U/S. 43A OF THE ACT, IN RETURN OF INCOME WHICH HAS NOT BEEN ACCEPTE D BY THE AO, PENALTY U/S. 271(1)(C) CANNOT BE IMPOSED. OTHERWISE, MERE M AKING OF A WRONG CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WI LL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING OF I NCOME OF THE ASSESSEE. ACCORDINGLY, WE ARE INCLINED TO DELETE THE PENALTY LEVIED BY LOWER AUTHORITIES U/S.271(1)(C) OF THE ACT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 5992/MUM/2013 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/ 02/ 2015 !' # $%& 25/02/2015 ! ' SD/- SD/- ( . . / I.P. BANSAL) ( / CHANDRA POOJARI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; $% DATED 25/02/2015 . % . ./JV, SR. PS 7 ITA NO.5992/M /13 ()* ()* ()* ()* +*') +*') +*') +*') / COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. (.,- / THE RESPONDENT. 3. / ( ) / THE CIT(A)- 4. / / CIT 5. *0' ()% , , / DR, ITAT, MUMBAI 6. '1 2 / GUARD FILE. % % % % / BY ORDER, .*) () //TRUE COPY// 3 33 3 / 4 4 4 4 5 5 5 5 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI