Dy.CIT, Circle-2(3), Hyderabad V. M/s Taher Ali Industries & Projects Private Limited, Hyderabad

ITA 638/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69789 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 02-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MALLIKARJUN
• Assessee Lawyers: K C DEVADAS
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 638/HYD/2013 ASSESSMENT YEAR 2006-07 THE D CIT CIRCLE-2(3) HYDERABAD VS. M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD PAN: AABCT4110E APPELLANT RESPONDENT ITA NO. 460/HYD/2013 ASSESSMENT YEAR 2006-07 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD PAN: AABCT4110E VS. THE ACIT CIRCLE-2(3) HYDERABAD APPELLANT RESPONDENT REVENUE BY: SRI MALLIKARJUN ASSESSEE BY: SRI K.C. DEVADAS DATE OF HEARING: 2 2 .0 8 .2013 DATE OF PRONOUNCEMENT: 05.09.2013 O R D E R PER CHANDRA POOJARI, AM: THE ABOVE APPEALS ARE CROSS APPEALS, BY THE REVENU E AND THE ASSESSEE, DIRECTED AGAINST THE ORDER OF THE CIT (A)-III DATED 12.2.2013 FOR ASSESSMENT YEAR 2006-07. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW IN GRANTING RELIEF TO T HE ASSESSEE. 2. THE LD. CIT(A) ERRED IN LAW IN HOLDING THAT PENALTY CANNOT BE LEVIED ON ESTIMATED DISALLOWANCE. 3. THE LD. CIT(A) ERRED IN LAW IN NOT CONSIDERING THAT ADDITION OF RS. 75 LAKHS MADE ONLY ON ACCOUNT OF CONCEALMENT OF FACTS BY THE ASSESSEE BY WAY OF NOT PROVING EXPENDITURE. ITA NOS. 638 & 460/HYD/2013 M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 2 3. THE ASSESSEE RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS WRONG INASMUCH AS IT IS BASED ON SUSPICION, SURMISES AND CONJECTURES AND NOT ON ANY TANGIBLE EVIDENCE AND AS SUCH DESERVES TO BE SET ASIDE. 2. THE CIT(A) HAS UPHELD THE PENALTY U/S. 271(1)(C) OF IT ACT, 1961 ON DISALLOWANCE OF DEPRECIATION ON LEASED ASSETS TAKEN ON FINANCE LEASE FROM IVRCL AMOUNTING TO RS. 10,41,610 WITH AN ALLEGATION UNDER PARA-5 OF THE IMPUGNED ORDER DATED 12.2.2013. 3. THE CIT(A) IS WRONG, BASELESS AND IS PROCEEDED ENTIRELY ON INCORRECT FACTS AND IS NOT SUPPORTED BY ANY TANGIBLE EVIDENCE. 4. FACTS OF THE CASE ARE THAT THERE IS ONLY ONE ISSUE IN APPEAL RELATING TO IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961 AMOUNTING TO RS. 33,49,763. THE ASSESSEE -COMPANY IS IN THE BUSINESS OF MANUFACTURE OF PIPES FOR WATE R SUPPLY AND SEWERAGE. THE ASSESSMENT WAS COMPLETED ON 31 ST MARCH 2006 U/S. 143(3) OF THE ACT BY MAKING THE FOLLOWING ADDI TIONS: (A) ADDITION WITH RESPECT TO DEPRECIATION CLAIM AMOUNTI NG TO RS. 41,15,000. (B) ADDITION WITH RESPECT TO UNVOUCHED EXPENDITURE AMOUNTING TO RS. 50,00,000. 5. THE ASSESSING OFFICER FOR THE A.Y. 2006-07 MADE AN ADDITION OF RS. 50 LAKHS TOWARDS UNVOUCHED EXPENDIT URE IN RESPECT OF JOINTING, LABOUR, SUPERVISION CHARGES, S ITE PREPARATION, ETC. HE ALSO MADE ADDITION AT RS. 41. 15 LAKHS BY DISALLOWING DEPRECIATION ON PLANT AND MACHINERY WHI CH WERE TAKEN ON LEASE BY THE ASSESSEE FROM M/S. IVRCL. IN RESPECT OF THESE DISCREPANCIES NOTICED BY THE ASSESSING OFFICE R, HE LEVIED PENALTY U/S. 271(1)(C) OF THE ACT TOWARDS THIS. ON APPEAL, THE CIT(A) DELETED THE PENALTY IN RESPECT OF DISALLOWAN CE OF ITA NOS. 638 & 460/HYD/2013 M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 3 EXPENDITURE. HOWEVER, HE CONFIRMED THE PENALTY IN RESPECT OF DEPRECIATION DISALLOWANCE. 6. AGAINST DELETION OF PENALTY, THE DEPARTMENT IS IN A PPEAL BEFORE US FOR A.YS. 2003-04 AND 2004-05. FOR SUSTA INING PENALTY IN RESPECT OF DISALLOWANCE OF DEPRECIATION, THE ASSESSEE IS IN APPEAL BEFORE US FOR THE SAME ASSESSMENT YEAR S. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. WITH REGARD TO LEVY OF PENALTY ON DISALL OWANCE OF DEPRECIATION, THE TRIBUNAL DELETED THE PENALTY ON T HIS ISSUE FOR A.YS. 2003-04 AND 2004-05 IN ITA NOS. 129 & 130/201 3 & OTHERS VIDE ORDER DATED 30.8.2013 BY HOLDING AS FOL LOWS: '31. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. REGARDING THE PENALTY ON DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY THE PENALTY WAS LEVIED BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL IN ITA NO. 843/HYD/2008 DATED 21.1.2011 FO R A.Y. 2004-05 WHEREIN THE TRIBUNAL CONFIRMED DISALLOWANCE OF DEPRECIATION AS CITED ABOVE. 32. FOR LEVYING PENALTY U/S. 271(1)(C) OF THE ACT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME OF BY AS SESSEE OR FURNISHING OF INACCURATE PARTICULARS OF ITS INCO ME. IN THE PRESENT CASE, IT IS NOT THE CASE OF CONCEALMENT OF INCOME AND ALSO IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE AS SESSEE CLAIMED DEPRECIATION ON PLANT AND MACHINERY TAKEN O N LEASE FROM M/S. IVRCL. IT IS ON THE BASIS OF LEASE AGREEMENT ENTERED BY THE ASSESSEE ON 30 TH MARCH, 2001 WITH M/S. IVRCL. IT IS IN CONSONANCE WITH THE AGREE MENT. HOWEVER, THE TRIBUNAL NOT AGREED WITH THE CONTENTIO N OF THE ASSESSEE'S COUNSEL IN ITS APPEAL IN QUANTUM ADD ITION. THE FACTS REMAIN THAT THE ASSESSEE IS HAVING BONA-F IDE BELIEF THAT IT IS ENTITLED FOR DEPRECIATION AS PER THE LEASE AGREEMENT AND THE ASSETS HAVE BEEN DULY REFLECTED I N THE BALANCE SHEET. THE ASSESSEE HAS FURNISHED THE ENTI RE FACTS RELATING TO THIS ISSUE WHICH WAS NOT FOUND FAVOURABLE WITH THE DEPARTMENT. THE REVENUE AUTHOR ITIES REJECTED THE CLAIM OF GRANTING OF DEPRECIATION. IT WAS UP TO THE REVENUE AUTHORITIES TO ACCEPT OR REJECT THE CLA IM OF THE ASSESSEE. MERELY IT WAS REJECTED, IT DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE IS LIABLE FOR PENALTY. IN OUR OPINION, THE DISALLOWANCE OF DEPRECIATION THAT ITSE LF CANNOT ITA NOS. 638 & 460/HYD/2013 M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 4 BE SAID THAT IT IS FALSE SO THAT THE JUDGEMENT RELI ED ON BY THE DEPARTMENT IN THE CASE OF CIT VS. VIDYA GAURI NATVERLAL & ORS. (238 ITR 91) CANNOT BE APPLIED TO THE FACTS OF THE CASE. ACCORDINGLY, WE DELETE THE PENA LTY ON THIS ISSUE BY PLACING RELIANCE ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., WHEREIN HELD THAT MERELY BECAUS E THE ASSESSEE CLAIM OF DEDUCTION OF EXPENDITURE WHICH WA S NOT ACCEPTED BY THE REVENUE AUTHORITIES, PENALTY U/S. 271(1)(C) OF THE ACT IS NOT ATTRACTED; MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, WILL NOT AM OUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OF T HE ASSESSEE. 33. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINE D TO DELETE THE PENALTY ON THIS ISSUE. THE ASSESSEE APP EALS IN ITA NOS. 129/HYD/2013 AND 130/HYD/2012 ARE ALLOWED ON THIS ISSUE.' 8. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL, WE ARE INCLINED TO DELETE THE PENALTY. 9. REGARDING DELETION OF PENALTY IN CASE OF AD-HOC DISALLOWANCE OF EXPENDITURE THE SAME WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA NOS. 104 AND 105/HYD/ 2013 & OTHERS. THE TRIBUNAL VIDE ORDER DATED 30.8. 2013 CONFIRMED THE DELETION OF PENALTY BY CIT(A) BY HOLD ING AS FOLLOWS: '34. REGARDING LEVY OF PENALTY ON AD-HOC DISALLOWAN CE OF EXPENSES LIKE JOINTING, LABOUR, SUPERVISION CHARGES , SITE PREPARATION, ETC., THIS WAS DISALLOWED ON THE REASO N THAT THE EXPENDITURE WAS NOT PROPERLY VOUCHED AND THE DISALLOWANCE OF EXPENDITURE IS ON AD-HOC BASIS. TH ERE IS NO CONCLUSIVE PROOF THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME. THE ASSESSEE WAS NOT ABLE T O FILE ALL VOUCHERS AND BILLS AND THAT LED TO DISALLOWANCE AND THE LUMP SUM DISALLOWANCE WAS MADE ON ESTIMATE BASI S WHICH CANNOT BE A REASON FOR LEVY OF PENALTY. THE AO COULD NOT POINT OUT WHICH ITEM OF EXPENDITURE WAS N OT VERIFIABLE. HAD THE AO PINPOINTED THE PARTICULAR EXPENDITURE THAT IS NOT VERIFIABLE THEN THE CASE WI LL BE DIFFERENT. THE ASSESSING OFFICER WITHOUT EXAMINING THE RECIPIENTS OF THE PAYMENTS, IT IS NOT APPROPRIATE T O COME TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS ITA NOS. 638 & 460/HYD/2013 M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 5 OF INCOME. THE PENALTY PROCEEDINGS ARE QUASI CRIMI NAL PROCEEDINGS AND THE CONSIDERATION THAT ARISE IN PEN ALTY PROCEEDINGS ARE DIFFERENT FROM THOSE ARISING IN THE ASSESSMENT PROCEEDINGS. THOUGH THE FINDING GIVEN I N THE ASSESSMENT ORDER IS A GOOD FINDING, THE SAME IS NOT CONCLUSIVE IN PENALTY PROCEEDINGS. WHAT IS REQUIRE D TO BE SEEN IS WHETHER THE ADDITION HAS BEEN PASSED ON THE MATERIAL FROM WHICH DEFINITE INFERENCE CAN BE DRAWN THAT THE ASSESSEE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IN THIS CASE ADD ITION IS MADE PURELY ON ESTIMATE/AD-HOC BASIS WITHOUT ANY BA SIS AND WITHOUT ANY MATERIAL TO SUPPORT THAT THE ASSESS EE HAD INCOME MORE THAN THAT DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME. IN RESPECT OF SUCH ESTIMATED ADDITION OR DISALLOWANCE, IMPOSITION OF PENALTY WILL NOT BE JUSTIFIED. BEING SO, WE ARE INCLINED TO CONFIRM THE DELETION O F PENALTY BY THE CIT(A). THIS GROUND IN REVENUE APPE AL IS DISMISSED. 35. THE ASSESSEE'S APPEALS IN ITA NO. 129/HYD/2013 AND ITA NO. 130/HYD/2013 ARE ALLOWED. REVENUE APPEALS IN ITA NOS. 104 AND 105/HYD/2013 ARE DISMISSED. THE COS BY THE ASSESSEE IN CO NOS. 15 A ND 16/HYD/2013 ARE DISMISSED.' 10. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBU NAL, WE ARE INCLINED TO CONFIRM THE DELETION OF PENALTY. 11. IN THE RESULT, REVENUE APPEAL IN ITA NO. 638/HYD/20 13 IS DISMISSED AND ASSESSEE'S APPEAL ITA NO. 460/HYD/201 3 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH SEPTEMBER, 2013. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 5 TH SEPTEMBER, 2013 TPRAO ITA NOS. 638 & 460/HYD/2013 M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 6 COPY FORWARDED TO: 1. THE DCIT, CIRCLE - 2(3), 8 TH FLOOR, 'B' BLOCK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD-500 004 2 . M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD., 1 - 11251/ 4/B, 6 TH FLOOR, TIRUMALA HEIGHTS, BEHIND SHOPPERS STOP, BEGUMPET, HYDERABAD-16 3 . THE ACIT, CIRCLE - 2(3), 8 TH FLOOR, 'B' BLO CK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD-500 004 4 . THE CIT(A) - III, HYDERABAD 5 . THE CIT - II , HYDERABAD 6 . THE DR ' B ' BENCH, ITAT, HYDERABAD