DCIT, New Delhi V. M/s. IUP Jindal Metals and Alloys Ltd., New Delhi

ITA 6298/DEL/2013

• Counselvise Citation: 629820114 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 2
• Next Hearing Date: 24-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 27-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YATENDRA SINGH
• Keywords: Capital asset; Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER ITA NO. 6298/DEL/2013 ASSTT. YRS: 2006-07 DCIT, CIRCLE 11(1), VS. IUP JINDAL METALS & ALLOY S LTD., NEW DELHI. 28, NAJAFGARH ROAD, NEW DELHI. PAN: AABCI 2731E ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI YATENDRA SINGH SR. DR RESPONDENT BY : SHRI VED JAIN ADV. DATE OF HEARING : 24/07/2015. DATE OF ORDER : 09/09/2015. O R D E R PER S.V. MEHROTRA, A.M.. : THIS APPEAL, PREFERRED BY THE REVENUE, IS DIRECTE D AGAINST THE ORDER OF LD. CIT(A)-XV, NEW DELHI DATED 6-4-2013 PASSED IN APPEA L NO. 13/12-13/CIT(A)- XV, RELATING TO A.Y. 2006-07, WHEREBY THE LD. CIT(A ) DELETED THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE I.T. ACT.. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY HAD FILED RETURN OF INCOME DECLARING LOSS AT RS. 37,90,078/-. FROM THE DETAILS FURNISHED, THE AO NOTICED THAT ASSESSEE HAD DEBITED A SUM OF RS. 13,9 1,339/- TO ITS P&L A/C, ALTHOUGH THE EXPENSES WERE OF PRE-OPERATIVE NATURE. ON ENQUI RY BEING RAISED FROM THE ASSESSEE, THE ASSESSEES REPRESENTATIVE SUBMITTED T HAT THE AMOUNT HAD WRONGLY BEEN DEBITED TO THE P&L A/C. ACCORDINGLY, AO HAD DISALLO WED THE SUM OF RS. 13,91,339/- BEING PRE-OPERATIVE EXPENSES. THE AO I NITIATED PENALTY PROCEEDINGS 2 ITA 6298/DEL/2013 DCIT VS. IOP JINDAL METALS & ALLOYS LTD. U/S 271(1)(C) BY ISSUING SHOW CAUSE NOTICE DATED 2- 3-2012. THE ASSESSEE FILED ITS REPLY DATED 12-3-2012. AFTER CONSIDERING IT, HE LEV IED PENALTY OF RS. 4,68,325/- BEING 100% OF THE TAX SOUGHT TO BE EVADED. LD. CIT( A) DELETED THE PENALTY TAKING NOTE OF THE FACTS THAT IN SCHEDULE 6 TO THE ACCOUN T, THE IMPUGNED AMOUNT WAS SHOWN AS PRE-OPERATIVE EXPENSES AS THE COMPANY HAD NOT STARTED BUSINESS. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE CHANGED ITS STAND AND AGREED TO TREAT THE ABOVE EXPENSES AS CAP ITAL EXPENSES, HOWEVER, SOUGHT RELIEF FROM THE AO TO ALLOW DEPRECIATION ALLOWANCE THEREON BY TREATING THE SAME AS CAPITAL ASSET IN NATURE. HE, THEREFORE, RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS LTD. 3 22 ITR 158, CANCELLED THE PENALTY. 3. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES. THE ASSESSEE IN ITS REPLY DATED 12-3-2012 CONTAINED AT PAGES 68 TO 72 H AS, INTER ALIA, POINTED OUT THAT ASSESSEE COMPANY WAS PROMOTED BY P.R. JINDAL GROUP IN COLLABORATION WITH ARCELLOR STAINLESS INTERNATIONAL OF FRANCE THROUGH ITS SUBSIDIARY IMPHY UNGINE PRECISION, TO PUT UP A COLD ROLLING PLANT AT BAHADU RGARH, HARYANA. THE PROJECT WAS UNDER INSTALLATION SINCE LAST YEAR. INSTALLATION OF PLANT WAS COMPLETED DURING THE YEAR. TRIAL RUNS WERE CONDUCTED FOLLOWED BY COMMERC IAL PRODUCTION IN THE MONTH OF FEBRUARY 2006. AS THE CONSTRUCTION WAS IN PROGRE SS ALL DIRECT AND INDIRECT EXPENSES INCURRED IN PRECEDING YEAR AND DURING THE YEAR UPTO THE DATE OF COMMERCIAL PRODUCTION WERE GROUPED UNDER THE HEAD P REOPERATIVE EXPENSE TO BE CAPITALIZED LATER. OUT OF THESE EXPENSES A SUM OF R S. 13,91,339/- WAS GROUPED UNDER THE HEAD PREOPERATIVE EXPENSES LAST YEAR. THI S YEAR, WHILE AUDITING THE ACCOUNTS, THE AUDITORS PLACED THESE EXPENSES IN P&L A/C ON THE PREMISE THAT THEY WERE OF REVENUE NATURE AND ONCE THE COMMERCIAL PROD UCTION HAD STARTED, THE SAME SHOULD BE CLAIMED AS REVENUE. HOWEVER, WHEN THE QUE RY WAS RAISED BY AO, 3 ITA 6298/DEL/2013 DCIT VS. IOP JINDAL METALS & ALLOYS LTD. REALIZING THE MISTAKE, THE ASSESSEE SURRENDERED THI S CLAIM AND CLAIMED THAT THIS AMOUNT BE TREATED AS CAPITAL IN NATURE AND DEPRECIA TION BE ALLOWED. THEREFORE, LD. CIT(A) HAS RIGHTLY HELD THAT THIS COULD NOT BE TREA TED AS THE CASE OF FURNISHING OF INACCURATE PARTICULARS, BECAUSE THE CLAIM WAS ADVAN CED ON ACCOUNT OF WRONG ADVICE OF AUDITORS. THE ASSESSEE HAD CLASSIFIED THESE EXPE NSES AS PRE-OPERATIVE EXPENSES AND, THEREFORE, MERELY BECAUSE ASSESSEE ADVANCED A CLAIM TREATING IT AS OPERATIVE EXPENSES, UNDER A BONA FIDE BELIEF THAT SINCE THE P LANT HAD STARTED COMMERCIAL PRODUCTION, THEREFORE, IT WAS REVENUE EXPENDITURE, THE PENALTY CANNOT BE LEVIED IN VIEE OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF RELIANCE PETROPRODUCTS LTD. (SUPRA). I, THEREFORE, DO NOT F IND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A), CANCELLING THE PENALTY IN QUES TION. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09/09/2015.. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 09/09/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.