The DCIT, Circle-5, Ahmedabad V. M/s. Rasranjan Food Products Pvt. Ltd., Ahmedabad

ITA 603/AHD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50496 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: P H SHAH
• Keywords: Depreciation; Revenue expenditure
• Section: 271(1)(c); 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD BENCH A, AHMEDABAD BEFORE SHRI D.K.TYAGI, J.M. AND SHRI R.C.SHARMA, A. M. PAN NO. : AABCR8988Q I.T.A.NO. 603/AHD/2011 A.Y. : 2004-05 DY. CIT, RASRANJAN FOOD PRODUCTS PVT.LTD., CIRCLE 5, VS RASRANJAN COMPLEX, AHMEDABAD NEAR VIJAY CHAR RASTA, NAVRANGPURA, AHMEDABAD APPELLANT RESPONDENT C.O.NO. 70/AHD/2011 (ARISING OUT OF I.T.A.NO. 603/AHD/2008) A.Y. : 2004-05 RASRANJAN FOOD PRODUCTS PVT.LTD., DY. CIT, RASRANJAN COMPLEX, VS CIRCLE 5, NEAR VIJAY CHAR RASTA, NAVRANGPURA, AHMEDABAD AHMEDABAD CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SHRI S.K.MEENA, SR. DR ASSESSEE BY : SHRI P.H. SHAH, A. R. DATE OF HEARING : 05.08.2011 DATE OF PRONOUNCEMENT : 26 TH AUGUST, 2011. -: 2: - 2 O R D E R PER BENCH APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FIL ED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT( A) DATED 20 TH DECEMBER, 2010, FOR THE ASSESSMENT YEAR 2004-05, IN THE MATTER OF PENALTY IMPOSED U/S 271(1)(C) OF THE INCO ME-TAX ACT, 1961. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS FINALI ZED BY THE ASSESSING OFFICER U/S 143(3) ON 26.12.2006 DETERMI NING TOTAL INCOME AT RS. 80,58,352/-. WHILE FINALIZING THE ASS ESSMENT ORDER, THE AO MADE FOLLOWING DISALLOWANCES/ADDITION S TO THE INCOME DECLARED BY THE ASSESSEE. (I) ADDITION ON ACCOUNT OF ESTIMATION OF G.P. RS. 66,24,611 (II) ADDITION ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE RS. 67,518 (III) EXCESS DEPRECIATION CLAIMED ON BUILDING RS. 31,361 (IV) DEPRECIATION ON VEHICLE. RS. 80,926 -: 3: - 3 (V) DELAYED PAYMENT OF PF CONTRIBUTION RS.,43,342 3. IN THE QUANTUM PROCEEDINGS, THE LD. CIT(A) CONFIRME D THE FOLLOWING ADDITIONS :- (I) ADDITION ON ACCOUNT OF G.P. ESTIMATION RS. 8,04,739 (II) ADDITION ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE RS. 67,518 (III) EXCESS DEPRECIATION ON BUILDING RS. 31,361 4. IN RESPECT OF THE ADDITIONS CONFIRMED, THE AO LEVIE D THE PENALTY OF RS. 3,24,200/- U/S 271(1)(C) OF THE INC OME-TAX ACT, 1961. PENALTY IN RESPECT OF GROSS PROFIT ADDITION W AS DELETED BY THE LD. CIT(A) AFTER HAVING THE FOLLOWING OBSERVATI ONS :- 3.3 IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT T HE ADDITION WAS ON ACCOUNT OF ESTIMATION OF BOTH SALES AND GROSS PROFIT RATE. NO MATERIAL/EVIDENCE WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER, TO SAY THAT THE APPELLANT FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED INCOME. PENALTY PROCEEDINGS ARE DISTINCT FROM ASSESSMENT PROCEEDINGS. AS HELD BY THE APEX COURT IN THE CASE OF ANANTHRAMAN VEERASINGHAIAH & CO. VS. CIT, (123 ITR 457), THE FINDING IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSED OF PENALTY PROCEEDINGS. IT IS NECESSARY TO RE-APPRECIATE AND RECONSIDER THE MATTER. KEEPING IN VIEW THE FACTS OF THE CASE AND IN THE LIGHT OF THE SAID JUDGMENT, I A M -: 4: - 4 OF THE VIEW THAT PENALTY U/S 271(1)(C) IS NOT EXIGI BLE IN THE INSTANT CASE. 5. THE LD. CIT(A), HOWEVER, ALSO UPHELD THE PENALTY IN RESPECT OF EXCESS CLAIM OF DEPRECIATION ON BUILDING AFTER HAVING THE FOLLOWING OBSERVATIONS :- AS SEEN FORM THE WRITTEN SUBMISSIONS (PAGE 6 OF THIS ORDER) APPELLANT ADMITS TO THE MISTAKE BUT CLAIMS IT TO BE BONA FIDE. APPELLANT DID NOT PREFER APPEAL ON THIS ISSUE. HAVING CONSIDERED THE FACTS, I AM NOT INCLINED TO ACCEPT THE CONTENTIONS. THE BASI S ON WHICH DEPRECIATION WAS CLAIMED IS NOT CLARIFIED EITHER ON FACTS OR IN LAW. THUS, IT IS CLEAR THAT INACCURATE PARTICULARS OF INCOME WAS FURNISHED BY CLAIMING DEPRECIATION ON VEHICLES NOT OWNED BY THE APPELLANT. SINCE THE ISSUE PERTAINS TO FURNISHING FACTUALLY INACCURATE PARTICULARS (VIS--VIS MAKING CLAIM FOR DEDUCTION, ALLOWANCE ETC.), THE CASE LAWS RELIED ON BY APPELLANT ARE OF NO ASSISTANCE. HENCE, LEVY OF PENALTY W.R. TO DISALLOWANCE OF DEPRECIATIO N IS UPHELD. 6. BY FOLLOWING ASSESSEES OWN CASE FOR THE EARLIER YE AR, THE CIT(A) ALSO DELETED PENALTY IMPOSED WITH RESPEC T TO ADDITION ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE AFTER HAVING THE FOLLOWING OBSERVATIONS :- -: 5: - 5 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE AO IN THE PENALTY ORDER. IT IS SEEN THAT WITH REFERENC E TO ADDITIONS (I) ON ACCOUNT OF ESTIMATION OF GROSS PRO FIT, AND (II) ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE , PENALTY WAS LEVIED BY THE ASSESSING OFFICER IN THE APPELLANTS OWN CASE FOR IMMEDIATELY PRECEDING ASSESSMENT YEAR ALSO. THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THE ABOVE ADDITIONS WAS CANCELLED BY ME VIDE THE ORDER IN APPEAL NO. CIT(A) - XI/206/08-09 DATED 17.3.2010. 7. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS I N FURTHER APPEAL BEFORE US AND ASSESSEE HAS ALSO FILE D CROSS OBJECTION WITH REFERENCE TO SUSTAINING THE PENALTY ON DEFERRED REVENUE EXPENDITURE. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. F ROM THE RECORD, WE FOUND THAT THE AO HAS LEVIED PENALTY WIT H RESPECT TO ESTIMATED ADDITION SUSTAINED ON ACCOUNT OF GROSS PR OFIT, ADDITION ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE AND ADDITION FOR DEFERRED REVENUE EXPENDITURE. FROM THE RECORD, WE -: 6: - 6 FOUND THAT ESTIMATED ADDITION MADE ON ACCOUNT OF GR OSS PROFIT TO THE EXTENT OF RS. 66.24 LAKHS WAS FINALLY CONFIR MED TO THE EXTENT OF RS. 8.04 LAKHS. THE LD. CIT(A) IN THE QUA NTUM PROCEEDINGS, WHILE DELETING THE ESTIMATION OF SALES MADE BY THE ASSESSING OFFICER, DIRECTED HIM TO ACCEPT THE SALE SHOWN BY THE COMPANY AND ALSO REDUCED THE ESTIMATED ADDITION MAD E ON ACCOUNT OF GROSS PROFIT FROM 32 % TO 31 %. IN FURTH ER APPEAL, THE I.T.A.T. ALSO ESTIMATED SALES AND REDUCED THE A LLEGED GROSS PROFIT ESTIMATED BY THE LD. CIT(A) FROM 31% TO 30 % . THUS, THE ADDITION CONFIRMED BY THE LD. CIT(A) TO THE EXTENT OF RS. 8.07 LAKHS OUT OF TOTAL ADDITION MADE BY THE ASSESSING O FFICER IS ALSO BASED PURELY ON ESTIMATE. THUS, THERE WAS NO C ASE OF EITHER FURNISHING INACCURATE PARTICULARS OF INCOME OR ANY CONCEALMENT OF INCOME, SO AS TO LEVY PENALTY U/S 27 1(1)(C) OF THE INCOME-TAX ACT, 1961, WITH RESPECT TO SUCH ESTI MATED GROSS PROFIT ADDITION. HON'BLE I.T.A.T. IN THE CASE OF SUDESH KHANNA, 98 TTJ 106, HELD THAT WHEN THE ADDITION HAS BEEN CONFIRMED ON ACCOUNT OF FALL IN GROSS PROFIT, IT CO ULD NOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. UNDER T HOSE -: 7: - 7 CIRCUMSTANCES, THE ASSESSEE WAS NOT REQUIRED TO BE VISITED WITH PENALTY U/S 271(1)(C) OF THE ACT. HON'BLE GUJA RAT HIGH COURT IN THE CASE OF JUMMA BHAI PREM CHAND, HUF, 24 2 ITR 812, HELD THAT ONLY ON THE BASIS OF ESTIMATE OF EXP ENSES, THE ORDER OF PENALTY WAS PASSED AGAINST THE ASSESSEE, W HICH WAS NOT LEGAL AND VALID. 9. IN THE INSTANT CASE, AFTER DISCUSSING VARIOUS CASE LAWS, THE LD. CIT(A) RECORDED FINDING TO THE EFFECT THAT THERE WAS NO MATERIAL/EVIDENCE ON RECORD TO SHOW THAT THE ASSESS EE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCE ALED INCOME. WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LD. CIT(A) FOR DELETING THE PENALTY WITH RESPECT TO EST IMATED ADDITION IN GROSS PROFIT. 10. WITH REGARD TO ADDITION ON ACCOUNT OF DEFERRED REVE NUE EXPENDITURE AMOUNTING TO RS. 67,518/-, WE FOUND THA T THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING ACCORDING TO WHICH ANY EXPENDITURE INCURRED IN A PA RTICULAR YEAR, HAS TO BE CLAIMED IN THE SAME YEAR. FOLLOWING THIS PRINCIPLE OF ACCOUNTING, THE ASSESSEE HAS SPREAD TH E EXPENDITURE OVER THE YEARS DURING WHICH IT EXPECTED TO GET -: 8: - 8 BENEFIT OUT OF INCURRENCE OF SAID EXPENDITURE. INST EAD OF CHARGING EXPENSES, IN WHICH IT HAS BEEN PAID THE AS SESSEE HAS ACTUALLY AMORTIZED OVER THE PERIOD DURING WHICH IT EXPECTED TO REAP BENEFIT OF THE SAID EXPENDITURE. ANY DISALLOWA NCE BY THE ASSESSING OFFICER ON ACCOUNT OF THE PROPORTIONATE E XPENSE CHARGED DURING THE YEAR DOES NOT AMOUNT TO CONCEALM ENT OF ANY INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE PENALTY WITH RESPECT TO DEFERRED REVEN UE EXPENDITURE. 11. IN THE CROSS OBJECTION, THE ASSESSEE IS AGGRIEVED B Y THE ORDER OF CIT(A) FOR CONFIRMING IMPOSITION OF PENALT Y WITH RESPECT OF DISALLOWANCE OF DEPRECIATION ON BUILDING AMOUNTING TO RS. 31,361/-. FROM THE RECORD, WE FOUND THAT EXC ESS CLAIM OF DEPRECIATION WAS ON ACCOUNT OF BONA FIDE MISTAKE ON THE PART OF ASSESSEE AND THE SAME WAS NOT DISPUTED BEFO RE CIT(A). IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT.LTD., 322 ITR 158, NO P ENALTY IS LEVIABLE FOR DENIAL OF INCORRECT CLAIM IN LAW. ACCO RDINGLY, WE DO -: 9: - 9 NOT FIND ANY MERIT IN LEVYING PENALTY U/S 271(1)(C) WITH RESPECT TO ASSESSEES CLAIM OF DEPRECIATION. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED, WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE I S ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2011. SD/- SD/- (D.K. TYAGI) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH AUGUST, 2011.