GOPALRAJ T, KAPOOR, MUMBAI V. ITO 11(1)(1), MUMBAI

ITA 6076/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4476 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 05-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO
• Keywords: Depreciation; Initiation of penalty proceedings; Bonafide mistake
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER / I .T A NO. 6076/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 SHRI GOPALRAJ T. KAPOOR, D - 603, REMI, B - 13 COURT, OFF VEERA DESAI ROAD, ANDHERI (W), MUMBAI - 400 053 / VS. THE ITO 11(1)(1), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AERPK 4749R ( / APPELLANT ) .. ( / RESPONDENT ) / A PPELLANT BY: SHRI MAYUR KISNADWALA / RESPONDENT BY: SHRI SHRIKANT NAMDEO / DATE OF HEARING : 0 5 . 01 . 201 6 / DATE OF PRONOUNCEMENT : 05 . 0 1 .201 6 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 3, MUMBAI DATED 16.09 .2013 PERTAINING TO ASSESSMENT YEAR 2009 - 10. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED BY THE AO U/S. 271(1)(C) OF THE ACT. ITA. NO. 6076/M/2013 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMMISSION AGENT FOR SALES OF IMPO RTED DISC - OPTICAL MACHINES AND SPARES. RETURN FOR THE YEAR UNDER CONSIDERATION WAS SCRUTINIZED U/S. 143(3) OF THE ACT AND THE RETURNED INCOME OF RS. 41,78,967/ - WAS ASSESSED AT RS. 54,22,740/ - . THE ENHANCED INCOME INTER ALIA INCLUDES DEPRECIATION OF RS. 6,43,810/ - 3.1. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS DEDUCTED AN AMOUNT OF RS. 6,43,810/ - ON ACCOUNT OF DEPRECIATION, WITHOUT FIRST ADDING BACK THE SAM E TO THE NET PROFIT FROM THE BUSINESS. THE SAME WAS ADDED BACK BY THE ASSESSING OFFICER. THE AO WAS CONVINCED THAT BY CLAIMING THIS DEDUCTION OF DEPRECIATION , T HE ASSESSEE HAS CLAIMED THE DEDUCTION OF DEPRECIATION TWICE , ONCE IN ITS PROFIT AND LOSS ACCOU NT AND SECOND IN ITS COMPUTATION OF INCOME. THIS AMOUNTED TO FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. PENALTY PROCEEDINGS WERE ACCORDINGLY INITIATED. 3.2. DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE ASSESSEE WAS CONF RONTED WITH THE SAME SET OF FACTS. THE ASSESSEE QUESTIONED THE INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT STATING THAT IN THE NOTICE, THE AO HAS NOT INDICATED WHETHER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE CONTENTION OF THE ASSESSEE WAS RUBBISHED BY THE AO WHO PROCEEDED BY LEVYING THE PENALTY OF RS. 2,18,831/ - FOR FILING INACCURATE PARTICULARS LEADING TO CONCEALMENT OF INCOME. ITA. NO. 6076/M/2013 3 4. AGGRIEVED BY THIS, THE ASSESS EE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. ONCE AGAIN, THE LD. COUNSEL FOR THE ASSESSEE RAISED THE ISSUE OF THE VALIDIT Y OF NOTICE STATING THAT THE AO HAS NOT MENTIONED CLEARLY WHY THE NOTICE U/S. 271(1)(C) HAS BEEN ISSUED. IT IS NOT KNOWN WHETHER THE NOTICE HAS BEEN ISSUED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ON MERITS OF THE CA SE, THE LD. COUNSEL STATED THAT IT WAS THE PAST PRACTICE OF THE ASSESSEE TO ADD DEPRECIATION WHILE COMPUTING THE INCOME AND THEN CLAIM THE SAME AS DEDUCTION AS PER THE PROVISIONS OF THE LAW. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE LD. COUNSEL F OR THE ASSESSEE STATED THAT INADVERTENTLY THE DEPRECIATION AMOUNT REMAIN TO BE ADDED THOUGH THE SAME WAS CLAIMED AS DEDUCTION. WHEN THIS MISTAKE WAS POINTED OUT TO THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FAIRLY ACCEPTED THE ERROR AND DID NOT PURSUE THE MATTER BEFORE HIGHER APPELLATE FORUM. IT IS THE SAY OF THE LD. COUNSEL THAT THE MISTAKE WAS INADVERTENT AND THE SAME SHOULD BE ACCEPTED AS A REASONABLE AND SUFFICIENT CAUSE FOR NON LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT . 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE DEPRECIATION HAS BEEN DEDUCTED ITA. NO. 6076/M/2013 4 WHILE COMPU TING THE INCOME. IT IS ALSO AN UNDISPUTED FACT THAT THE DEPRECIATION WAS ALREADY CHARGED TO THE PROFIT & LOSS ACCOUNT. CONSIDERING THE PECULIAR FACTS OF THE CASE, THIS CAN BE ACCEPTED AS A HUMAN ERROR. OUR VIEW IS FORTIFIED BY THE FACT THAT THE ASSESSEE HAS SHOWN THE CLAIM OF DEPRECIATION IN ITS RETURN OF INCOME, PROFIT & LOSS ACCOUNT, DEPRECIATION CHART AND AT THE APPROPRIATE COLUMNS IN ITR - IV. CONSIDERING THE DETAILS FILED BY THE ASSESSEE, IT CANNOT BE SAID THAT THE CLAIM OF DEPRECIATION WAS INTENTION AL. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DUE TO OVERSIGHT, THIS AMOUNTS REMAIN TO BE ADDED BACK H AS SOME FORCE IN IT BECAUSE THE ASSESSEE NOT ONLY ADMITTED ITS MISTAKE BUT THE MATTER ENDED THEN AND THERE ONLY. MEANING THEREBY, THAT THE ASSESSEE DID NOT CARRY THIS ISSUE IN APPEAL IN QUANTUM PROCEEDINGS. I N ANY EVENT, IT IS NOT DISPUTED THAT IT IS A BONAFIDE MISTAKE ON THE PART OF THE ASSESSEE. WE DRAW SUPPORT FROM THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CASE OF P RICE WATERHOUSE COOPERS PVT. LTD. IN CIVIL APPEAL NO. 6924 OF 2012 ARISING OUT OF SLP (C) NO. 10700 OF 2009. NOTWITHSTANDING THE FACT THAT THE ASSESSEE IS UNDOUBTEDLY A REPUTED FIRM AND HAS GREAT EXPERTISE AVAILABLE WITH IT, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A SILLY MISTAKE. THE FACT THAT THE TAX AUDIT REPORT WAS FILED ALONGWITH THE RETURN AN D THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE U/S. 40A(7) INDICATES THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. APART FROM THE ASSESSEE, EVEN THE AO WHO FRAMED THE ORIGINAL ASSESSMENT ORDER MADE A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDIT REPORT. T HE CONTENTS OF THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QUESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. ALL THAT HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONAFIDE AND INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE ITA. NO. 6076/M/2013 5 SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF E ITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. CONSEQUENTLY, GIVEN THE PECULIAR FACTS OF THIS CASE, THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. RESPECTFULLY FOLLOWING THE AFOREMENTIONED OBSERVATIONS OF THE H ONBLE SUPREME COURT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON 5 TH JANUARY , 201 6 . SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 5 TH JANUARY , 201 6 . . ./ RJ , SR. PS / 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI