DCIT, New Delhi V. M/s. GSC Toughened Glass P. Ltd., New Delhi

ITA 6392/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4938 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VARMA SH SHARAVAN GOTRU
• Assessee Lawyers: S R WADHWA
• Keywords: Depreciation; Additional depreciation; Onus to prove
• Section: 143(3); 80IB; 27; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6392 /DEL/201 3 A.Y. : 20 0 4 - 0 5 DCIT, CIRCLE 12(1), NEW DELHI VS. M/S GSC TOUGHENED GLASS P. LTD., 802, ARJUN NAGAR, NEW DELHI (PAN: AAACG0050D) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. VIJAY VARMA, CIT(DR)/ SH. SHARAVAN GOTRU, SR. DR ASSESSEE BY : SH. S.R. WADHWA, ADV. ORDER PER H.S. SIDHU, JM THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 06/9/2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XV, NEW DELHI ON THE FOLLOWING GROUNDS:- 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN RESTRICTING T HE PENALTY OF RS. 16,59,587/- TO RS. 39,324/- LEVIED BY 2 AO ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME? 2. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 01.11.2014 DECLARING INCOME OF R S. 4,52,50,855/-. CERTAIN ADDITIONS WERE MADE IN THE A SSESSMENT ORDER PASSED U/S. 143(3) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED AS THE ACT), WHICH WAS CHALLENGED BEFORE TH E LD. CIT(A)- XII, WHO VIDE ORDER DATED 16.8.2010 CONFIRMED THE FO LLOWING ADDITIONS: I) DISALLOWANCE ON ACCOUNT OF ADDITIONAL DEPRECIATI ON. II) RESTRICTION OF THE DEDUCTION UNDER SECTION 80IB TO RS. 64,54,637/- BY EXCLUDING THE INTEREST EARNED ON BAN K DEPOSITS AND BY APPORTIONING LOSS OF RS. 12,56,947/- FROM THE SHOWROOM TOWARDS UNITS ELIGIBLE UNDER SECTIO N 80IB. III) DISALLOWANCE OF RS. 26,422/- ON ACCOUNT OF DON ATIONS. 3 FOLLOWING THIS, A NOTICE U/S. 274 READ WITH SECTION 2 71(1)(C) WAS ISSUED. THE ASSESSEES REPLY WAS THAT THE DEDUC TION UNDER SECTION 80IB WAS CLAIMED ON THE BASIS OF AN AUDIT REPO RT SIGNED BY A CHARTERED ACCOUNTANT AND THE ASSESSEE HAD ACCORDIN GLY FILED COMPLETE AND CORRECT PARTICULARS OF INCOME, WAS NOT AC CEPTED BY THE AO. ON THE SAME GROUND, THE EXPLANATION OF THE ASSESS EE THAT THE CLAIM OF ADDITIONAL DEPRECIATION WAS BASED ON THE A UDIT REPORT SIGNED BY THE CA SUPPORTED BY THE REPORT OF CHARTERED ENGINEER, WAS ALSO NOT ACCEPTED BY THE AO. THE AO, NOT SATISFIE D WITH THE SAME, LEVIED PENALTY @100% OF TAX SOUGHT TO BE EVADED B Y RELYING UPON THE DECISIONS OF THE HONBLE SUPREME COURT IN T HE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS (S C) 306 ITR 227 AND OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD., AMOUNTING TO RS. 16,59,587/ - U/S. 271(1) OF THE I.T. ACT, 1961 VIDE ORDER DATED 21.3.20 12. 3. AGGRIEVED BY THE PENALTY ORDER DATED 21.3.2012, A SSESSEE FILED APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 06.9.2013. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITERA TED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND REQ UESTED THAT THE APPEAL OF THE REVENUE MAY BE ALLOWED. 4 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECO RDS AVAILABLE WITH US, ESPECIALLY THE ORDER OF THE LD. CIT(A), WE FIND THAT SECTION 271(1)(C) OF THE ACT PROVIDES FOR IMPOSI TION OF PENALTY IN THE CASE THE AO, IN THE COURSE OF ANY PROCEEDING U NDER ACT, IS SATISFIED THAT: (I) ANY PERSON HAD CONCEALED PARTICULARS OF HIS I NCOME OR (II) HAD FURNISHED INACCURATE PARTICULARS OF SUCH INC OME. FURTHER, AFTER INSERTION OF EXPLANATION 1 TO SECTION 27 1(1)(C), THE ONUS IS ON THE ASSESSEE TO SHOW THAT THERE WAS NO INTENTION OF CONCEALMENT AND NOT ON THE REVENUE. MENS REA WAS CONS IDERED TO BE A NECESSARY INGREDIENT FOR LEVY OF PENALTY AS LAI D DOWN BY THE SUPREME COURT IN CIT VS ANWAR ALI (1970) 76 ITR 696. BUT AFTER THE INTRODUCTION OF EXPLANATION 1 TO SECTION 271(1)(C), THE HONBLE SUPREME COURT HELD THAT THE REQUIREMENT OF PROOF OF MEN S REA ON THE PART OF THE REVENUE, WOULD NO LONGER BE NECESSARY AS HELD IN ADDL. CIT VS JEEVAN LAL SHAH (1994) 205 ITR 244 (SC ) AND B.A. BALASUBRAMANIAM AND BROS. CO. VS CIT (1999) 236 ITR 977 (SC). 5.1 THE ROLE OF THE EXPLANATION, WAS ONLY TO PLACE TH E BURDEN OF PROOF SQUARELY ON THE TAXPAYER. IT IS HOWEVER OBSERVED THAT THE EXPLANATION HAS BEEN OFTEN OVERWORKED BY THE ASSESSING OFFICERS, SO AS TO JUSTIFY PENALTY IN EACH AND EVERY CASE OF DIFFE RENCE, EVEN 5 WHERE AN ADDITION WAS MERELY ON ESTIMATED BASIS OF FOR BONA FIDE OMISSIONS. 5.2 ADDITIONS DISPUTED ON INTERPRETATION OF LAW WERE A LSO INVARIABLY SUBJECTED TO PENALTY BY RELYING ON THE EXPLANATION. TH E VARIOUS HONBLE HIGH COURTS IN THE COUNTRY UNDERSTOOD THE EFFE CT OF THE EXPLANATION DIFFERENTLY OFTEN LEADING TO CONFLICTING DECISIONS. IN THIS CONTEXT TWO LANDMARK JUDGMENTS WERE GIVEN BY APEX C OURT IN DILIP N. SHROFF VS JOINT CIT (2007) 291 ITR 519 (SC) AND T . ASHOK PAI VS CIT (2007) 292 ITR 11 (SC), WHICH SPELL OUT MAINLY THE FOLLOWING RULES FOR THE PURPOSE OF PENALTY IMPOSABLE: (I) BOTH THE EXPRESSIONS- 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS' INDICATE SOME DELIBERATION ON THE PART OF THE ASSESSEE, THOUGH THE WORD 'DELIBERATELY' AND THE WORD 'WILLFULLY' ARE NO LONGER PART OF THE STATUE. (II) MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSIIO VERI OR SUGGESTIO FALS I. (III) PRIMARY BURDEN OF PROOF IS ON THE REVENUE. T HE STATUTE REQUIRES SATISFACTION ON THE PART OF THE ASSESSING OFFI CER. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO S HOW THAT THERE IS PRIMARY EVIDENCE TO ESTABLISH THAT THE 6 ASSESSEE HAD CONCEALED THE AMOUNT OR FURNISHED INACCURATE PARTICULARS AND THIS ONUS IS TO BE DISCHARG ED BY THE DEPARTMENT. (IV) THE ASSESSING OFFICER WHILE CONSIDERING LEVY OF PENALTY SHOULD CONSIDER WHETHER THE ASSESSEE HAS BEEN ABLE T O DISCHARGE HIS PART OF THE BURDEN. HE SHOULD NOT BEGI N WITH THE PRESUMPTION THAT THE ASSESSEE IS GUILTY. (V) THOUGH PENALTY PROCEEDINGS UNDER THE INCOME-TAX L AW MAY NOT BE CRIMINAL IN NATURE, THEY ARE STILL QUASI- CRIMINAL REQUIRING THE DEPARTMENT TO ESTABLISH THAT TH E ASSESSEE HAS CONCEALED HIS INCOME. (VI) IT HAS TO BE UNDERSTOOD THAT THE EXPLANATION TO SEC TION 271(1)(C) IS AN EXCEPTION TO THE GENERAL RULE RAISING A LEGAL FICTION BY WHICH THE BURDEN WHICH IS ORDINARIL Y WITH THE DEPARTMENT IS SOUGHT TO BE PLACED ON THE ASSESSEE. THIS BURDEN ON THE ASSESSEE IS SUBJECT TO 'CONDITIONS PRECEDENT', WHICH ARE REQUIRED TO BE SATISFIED BEFOR E THE EXPLANATION COULD BE APPLIED. IT WAS ALSO POINTED OUT AS HELD BY SUPREME COURT IN K.C. BUILDERS VS ACIT . (2 004) (265 ITR 562) (SC) THAT 'DELIBERATENESS' IS IMPLIED I N THE CONCEPT OF CONCEALMENT. 7 5.3 WE FURTHER FIND THAT AFTER THE DECISION LAID DO WN IN DILIP N. SHROFF (SUPRA), T. ASHOK PAI (SUPRA) IN A DISPUTE UN DER CENTRAL EXCISE LAW THE APEX COURT IN THE CASE OF UOI VS DHAR AMENDRA TEXTILE PROCESSORS (2008) (306 ITR 277) (SC) HELD TH AT DEFAULT MERITED PENALTY WITHOUT HAVING TO CONSIDER ANY INTEND OF THE ASSESSEE TO EVADE TAX. THE MENS REA IS ESSENTIAL ONLY FOR MATTERS OF PROSECUTOR & NOT PENALTY.' THUS AFTER THE DECISION IN THE CASE OF DHARAMENDRA TEXTILE PROCESSOR (SUPRA), 'MENS REA IS NOT NECESSARY TO BE PROVED BY REVENUE FOR CIVIL PENALTIES.' 5.4 HOWEVER WITH THE RECENT DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD (2010) (322 ITR 158) (SC), IT IS CLEAR THAT THE HONBLE SUPREME COU RT BY GIVING THE RULING IN DHARMENDRA TEXTILE PROCESSOR'S CASE (SU PRA) HAS NOT OVERRULED THEIR DECISION IN DILIP N. SHROFF'S CASE E XCEPT FOR ITS MENTION OF MENSREA THEREIN. 5.5 IT IS ALSO PERTINENT TO MENTION HERE THAT AFTER THE RULING OF DHARAMENDRA TEXTILE PROCESSOR, THE HONBLE SUPREME C OURT HAS COME OUT WITH THE RULING IN 2 DIFFERENT CASE OF CIT V S ATUL MOHAN BINDAL (2009) (317 ITR1) AND UOI VS RAJASTHAN SPINNI NG & WEAVING MILLS (2010) (1GSTR66) (SC) AND HAVE GIVEN A FINDIN G THAT' THAT FOR APPLICABILITY OF SECTION 271(L)(C) THE CONDITIONS STA TED THEREIN MUST 8 EXIST.' EVEN IN THE RECENT DECISION IN THE CASE OF C IT(LTU) VS. MTNL, ITA NO.626/2011 DATED 10.10.2011, THE JURISDICTIONAL DELHI HIGH COURT HAS UPHELD THE SAME VIEW. 5.6 THUS, FROM THIS IT IS VERY CLEAR THAT FOR IMPOSIN G PENALTY UNDER SECTION 271(1)(C), THE AO HAVE TO BE SATISFIED THAT: (A) ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOM E OR (B) ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O F SUCH INCOME. 5.7 THUS IN VIEW OF THE ABOVE DISCUSSION AND IN VIEW OF THE HON'BLE SUPREME COURT IN RELIANCE PETROPRODUCTS (SUPRA), IT IS CLEAR THAT THE LEGISLATURE DID NOT INTEND TO IMPOSE PENALTY ON EVERY ASSESSEE WHOSE CLAIM WAS REJECTED BY THE ASSESSING OFFICER. W HAT IS SOUGHT TO BE COVERED UNDER SECTION 271(1)(C) IS CONCEALMENT OF 'PARTICULARS OF INCOME' OR FURNISHING OF' INACCURATE PARTICULARS OF INCOME' AND NOT MAKING OF AN UNTENABLE CLAIM. 5.8 FROM THE VARIOUS JUDICIAL PRECEDENTS IT IS SEEN THAT THE FACTS AND CIRCUMSTANCES IN EACH CASE HAS TO BE SEEN IN THE CONTEXT AND THEN PENALTY PROVISION SHOULD BE APPLIED TO SEE WHETHE R THERE WAS THE CONCEALMENT OF PARTICULARS OF INCOME OR THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS SO AS TO CALL FOR TH E PENAL ACTION UNDER SECTION 271(1)(C). 9 5.9 ON CAREFUL CONSIDERATION OF THE VARIOUS GROUNDS ON WHICH ADDITIONS WERE MADE BY THE LD. AO, IT IS EVIDENT THAT ON ALL GROUNDS ON WHICH PENALTY WAS LEVIED, THERE IS NO DISPUTE THAT THE ASSESSEE HAD NOT SUPPRESSED ANY FACTS AND THE CLAIM HAS BEEN M ADE ON THE BASIS OF AUDITED ACCOUNTS AND ON THE BASIS OF AUDIT RE PORT, DULY SIGNED BY THE CA. HENCE PENALTY ON THE GROUND OF CONC EALMENT OF PARTICULARS OF INCOME COULD NOT HAVE BEEN LEVIED. 510. ALTERNATIVELY, WHETHER ANY INACCURATE PARTICULAR S WERE FILED, WAS EXAMINED ON THE BASIS OF THE FACTS RELATING TO EACH DISALLOWANCE. REGARDING THE DISALLOWANCE OF CLAIM O F ADDITIONAL DEPRECIATION ALLOWANCE UNDER SECTION 32(1)(IIA), WE FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE HAD ACQUI RED CERTAIN PLANT AND MACHINERY WHICH WAS OWNED BY THE ASSESSEE AND W AS ALSO PUT TO USE DURING THE CURRENT YEAR. THE ASSESSEE IS, THER EFORE ELIGIBLE TO CLAIM DEPRECIATION THEREON UNDER SECTION 32. HOWEVER , THE ASSESSEE HAD INTERPRETED THE TERM 'INSTALLED CAPACITY' TO MEAN ' TOTAL INSTALLED CAPACITY' OF ALL UNITS TAKEN TOGETHER WHEREAS THE AO H AS TAKEN THE 'INSTALLED CAPACITY' TO MEAN INSTALLED CAPACITY OF THE ELIGIBLE UNITS ONLY. THE IMPACT OF THIS ACTION OF THE AO IS THAT THE AP PELLANT WILL BE ENTITLED FOR HIGHER WDV ON THIS AMOUNT AND SHALL BE A BLE TO CLAIM HIGHER AMOUNT OF DEPRECIATION ALLOWANCE IN THE SUBSE QUENT YEARS. THUS, IN VIEW OF THE ABOVE, IT IS EVIDENT THAT IN VIEW OF DEBATABLE 10 NATURE OF THE ISSUE, IT CANNOT BE HELD THAT INACCURATE PA RTICULARS WERE FILED BY THE APPELLANT, SINCE THE CLAIM OF THE AP PELLANT REGARDING DEPRECIATION ALLOWANCE WAS ON A DIFFERENT I NTERPRETATION OF THE TERM 'INSTALLED CAPACITY' AS COMPARED TO THE VIEW TAK EN BY THE LD. AO. IT IS EVIDENT THAT SUCH A VIEW COULD BE DEBAT ABLE AND HENCE IN THE ABSENCE OF ANY INACCURACY IN THE CLAIM OF THE APPELLANT, IT CANNOT BE HELD THAT THE APPELLANT HAD FILED INACCURATE PARTICULARS OF INCOME ON THIS ISSUE. 5.11 REGARDING REDUCTION OF THE AMOUNT OF DEDUCTION UN DER SECTION 80 IB BY EXCLUSION OF INTEREST INCOME FROM THE COMPUTATI ON OF ELIGIBLE PROFIT, THE APPELLANT HAD PLEADED THAT INTER EST RECEIVED FROM CUSTOMERS ON DELAYED PAYMENT (RS.1,04,34) AND ON SEC URITY DEPOSITS PLEDGED WITH' SUPPLIERS OF RAW MATERIALS (RS. 39,808/- WAS EARNED FOR THE PURPOSE OF THE BUSINESS OF THE APPELLA NT AND INTEGRALLY LINKED TO THE BUSINESS OF THE APSSESSEE. ACC ORDINGLY, IT WAS PLEADED THAT ONLY INTEREST ON DEPOSITS IN BANK OF R S.30,824 MAY BE CONSIDERED TO BE TAXED AS 'INCOME FROM OTHER SOURC ES. ON CAREFUL CONSIDERATION, AS THE INTEREST INCOME FROM DEP OSITS MADE WITH SUPPLIERS AND INTEREST FROM THE CUSTOMERS ON DE LAYED PAYMENT, IS DERIVED FROM THE BUSINESS OF THE APPELLANT, IT CA NNOT BE SAID WITH CERTAINTY THAT THE SAME HAD TO BE TAXED UNDER 'INCOME F ROM OTHER SOURCES'. ACCORDINGLY, NO PENALTY CAN BE LEVIED ON THE SAME. 11 HOWEVER, SINCE ASSESSEE HAD ADMITTED TO TREAT INTEREST FROM BANK DEPOSITS AS 'INCOME FROM OTHER SOURCES', THE AMOUNT OF PENALTY IS RESTRICTED TO THE ADDITION IN RESPECT OF INTEREST ON DE POSIT IN BANK OF RS.30,824 ONLY. 5.12 REGARDING THE DISALLOWANCE OF DONATION, WE FIN D THAT THE USE OF NOMENCLATURE 'DONATION' IS THE ROOT CAUSE OF THIS DIS PUTE. THIS AMOUNT COMPRISES OF PAYMENT OF RS.16,857 TO A WIDOW OF AN EMPLOYEE OF THE APPELLANT COMPANY, WHICH WAS INCURRED FOR THE PURPOSE OF MAINTAINING HARMONIOUS RELATIONSHIP WITH THE STAFF AND IT IS MORE IN THE NATURE OF 'STAFF WELFARE' THAN 'DONATIO N'. REGARDING THE BALANCE AMOUNT OF OF RS.6,OOO, PAID TO HELPAGE (I NDIA), NO RECEIPT WAS FURNISHED BEFORE ME. FURTHER, NO RECEIPT IN RESPECT OF OTHER DONATIONS OF RS.2,5OO WAS FILED. IN VIEW OF THE SAME, THE INACCURACY IN FILING PARTICULARS OF INCOME WAS ESTABL ISHED TO THE EXTENT OF RS.8,5OO ON THIS GROUND. IN VIEW OF THE ABO VE, THE LEVY OF PENALTY WAS RIGHTLY CONFIRMED TO THE EXTENT OF INACCURA TE PARTICULARS OF INCOME FILED BY THE ASSESSEE IN RESPECT OF INCOME AMOUNTING TO RS.39,324 ONLY BY THE LD. CIT(A), WHICH DOES NOT NE ED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER O F THE LDC. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUN DS RAISED BY THE REVENUE. 12 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2017. SD/- SD/- (PRASHANT MAHARISHI) [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 01/09/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES