DENIM CORPORATION, NEW DELHI V. ITO, WARD- 34(2), NEW DELHI

ITA 6684/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3912 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 06-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU MUKHERJEE
• Keywords: Depreciation; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER ITA NO.6684/DEL/2017 ASSESSMENT YEAR : 2013-14 DENIM CORPORATION, BP-64, SHALIMAR BAGH, NEW DELHI. VS. ITO, WARD- 34(2), NEW DELHI. PAN : AAFFD0019D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL JAIN, CA DEPARTMENT BY : MS. RANU MUKHERJEE, SR.DR DATE OF HEARING : 15-01-2018 DATE OF PRONOUNCEMENT : 19-01-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 31.08.2017 OF CIT(A)- 12, NEW DELHI RELATING TO ASS ESSMENT YEAR 2013-14. 2. SUSTAINING OF THE PENALTY OF RS.2,22,994/- BY TH E LD. CIT(A) OUT OF PENALTY OF RS.2,50,140/- LEVIED BY THE ASSESSING OF FICER U/S 271(1)(C) OF THE I.T. ACT IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A FIRM ENGAGED IN THE BUSINESS OF WHOLESALE DEALER OF FABRICS WHICH IS US ED BY THE GARMENT MANUFACTURES. IT BUYS FABRICS FROM FABRIC MANUFACT URES AND SUPPLIES IT TO VARIOUS GARMENTS MANUFACTURES. IT FILED ITS RETURN OF INCOME ON 30.09.2013 DECLARING TOTAL INCOME OF RS13,95,150/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED FROM TH E DEPRECIATION CHART FILED BY 2 ITA NO.6684/DEL/2017 THE ASSESSEE THAT THE ASSESSEE HAS CLAIMED DEPRECIA TION ON THE IMMOVABLE PROPERTY AMOUNTING TO RS.7,18,429/- AT THE RATE OF 10% ON THE TOTAL VALUE OF THE PROPERTY OF RS.71,84,291/- PURCHASED DURING THE YEA R. THE ASSESSEE FILED A LETTER DATED 08.03.2016 STATING THAT DEPRECIATION HAS BEEN CLAIMED WRONGLY AT THE RATE OF 10% OF THE VALUE OF THE PROPERTY AND OFFERED RS. 7,18,429/- TO BE DISALLOWED ON ACCOUNT OF SUCH WRONG CLAIM OF DEPRECIATION. IT WAS FURTHER SUBMITTED THAT THIS MISTAKE WAS DUE TO CLERICAL ERROR ON THE PART OF THE ASSESSEE AND WAS UNINTENTIONAL AND ACCORDINGLY AN AMOUNT OF RS.7,19, 429/- WAS OFFERED FOR TAXATION. THE ASSESSING OFFICER, THEREFORE, MADE A DDITION OF THE SAME. THE ASSESSING OFFICER FURTHER MADE ADDITION OF RS.91,07 2/- OUT OF MOTORCAR AND TELEPHONE EXPENSES BEING PERSONAL IN NATURE. 4. THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST T HE SAID ADDITION. THE ASSESSING OFFICER, THEREAFTER, INITIATED PENALTY PR OCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, 1961. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE ASSESSEE WAS NOT ABLE TO SUBSTAN TIATE AND FAILED TO PROVE HIS EXPLANATION AS BONA-FIDE, THE ASSESSING OFFICER LEV IED PENALTY OF RS.2,50,140/- BEING PENALTY OF 100% OF TAX SOUGHT TO BE EVADED. WHILE DOING SO, HE ALSO RELIED ON THE DECISION OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS. HARPARSHAD & CO. LTD. REPORTED IN (2010) 328 ITR 56 . 5. IN APPEAL, THE LD. CIT(A) UPHELD THE PENALTY SO LEVIED BY THE ASSESSING OFFICER. WHILE DOING SO, HE OBSERVED THAT THE ERRO R WAS POINTED OUT ONLY DURING THE SCRUTINY PROCEEDINGS WHEN THE ASSESSEE WOULD HA VE SENSED THE RIGORS OF 3 ITA NO.6684/DEL/2017 WRONG CLAIM OF DEPRECIATION. DISTINGUISHING THE VA RIOUS DECISIONS CITED BEFORE HIM AND RELYING ON THE DECISION IN THE CASE OF CIT VS. ESCORTS FINANCE LIMITED REPORTED IN (2010) 328 ITR 44 AND VARIOUS OTHER DEC ISIONS, THE LD. CIT(A) SUSTAINED THE PENALTY ON ACCOUNT OF WRONG CLAIM OF DEPRECIATION OF RS.2,22,994/- AS AGAINST RS.2,50,140/- LEVIED BY TH E ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT. HE, HOWEVER, DELETED TH E PENALTY LEVIED ON AD-HOC DISALLOWANCE OUT OF MOTORCAR AND TELEPHONE EXPENSES . 6. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. LD. COUNSEL FOR THE ASSESSEE STRONGLY OBJECTED T O THE PENALTY SUSTAINED BY THE LD. CIT(A). HE SUBMITTED THAT BEFORE BEING POI NTED OUT BY THE ASSESSING OFFICER, THE ASSESSEE SUO-MOTU FILED A LETTER BEFORE THE ASSESSING OFFICER STATIN G THAT DEPRECIATION WAS WRONGLY CLAIMED AND OFFERED T HE SAME FOR TAXATION. HE SUBMITTED THAT THE ASSESSEE IS A SMALL FIRM AND IS NOT AWARE OF THE VARIOUS TECHNICALITIES. HE SUBMITTED THAT THE MISTAKE WAS A BONA-FIDE MISTAKE AND WAS UNINTENTIONAL. HE SUBMITTED THAT THERE IS A DIFFER ENCE BETWEEN A WRONG CLAIM AND A FALSE CLAIM. REFERRING TO THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. REPORTED IN 322 ITR 158, HE SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE SAI D DECISION HAS HELD THAT MERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION OF IN TEREST EXPENDITURE, WHICH WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE I.T. ACT. HE SUBMITTED THAT IN THE CASE OF 4 ITA NO.6684/DEL/2017 THE ASSESSEE THE CLAIM OF DEPRECIATION WAS ON ENTIR E PURCHASE CONSIDERATION WITHOUT SEGREGATING PURCHASE VALUE IN LAND AND BUIL DING. DURING SUBSEQUENT YEAR, THE ERROR WAS DETECTED AND THE SAME WAS RECTI FIED DURING ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER WAS INFORMED OF THE ERROR. 8. SO FAR AS THE DECISION IN THE CASE OF ESCORTS FI NANCE LTD. (SUPRA) RELIED ON BY THE LD. CIT(A) IS CONCERNED, HE SUBMITTED THAT T HE FACTS OF THAT CASE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE SUBMITTED THAT IN THAT CASE THERE WERE THREE ADDITIONS OUT OF WHICH PENALTY ON TWO WERE DELETED BEING ADDITION ON ACCOUNT OF ENTERTAINMENT EXPENDITURE WHICH WAS MADE ON ESTIMATE BASIS AND THE SECOND ONE PERTAINS TO CL AIM OF LONG TERM CAPITAL LOSS WHICH WAS INADVERTENTLY COMPUTED ON HIGHER SIDE. C ONSEQUENTLY, SHORT TERM CAPITAL GAINS WERE DECLARED ON LOWER AMOUNT. THE A SSESSEE REDUCED THE INDEXED COST OF INVESTMENT FROM THE PROFIT AMOUNT INSTEAD O F THE SALE CONSIDERATION. THIS WAS HELD AS AN INADVERTENT ERROR AND NO PENALT Y WAS LEVIED. IT WAS ONLY ON CLAIM OF DEDUCTION OF SHARE ISSUE EXPENSES U/S 35D THAT PENALTY WAS SUSTAINED ON THE GROUND THAT THE SAME IS NOT AVAILABLE TO A F INANCE COMPANY AND THAT THE RETURN WAS NOT FILED ON THE ADVICE OF THE CHARTERED ACCOUNTANT WHO IN HIS ADVICE GIVEN TO THE COMPANY AS REQUIRED FOR INCLUSI ON IN PROSPECTUS STATED THAT SUCH DEDUCTION IS AVAILABLE TO THE COMPANY. THEREF ORE, IT WAS NOT A CASE OF BONA-FIDE ERROR BUT WAS A CASE OF A BOGUS CLAIM OR A FALSE CLAIM. HOWEVER, IN THE INSTANT CASE, THE CLAIM OF DEPRECIATION WAS WRO NG BUT NOT FALSE. 5 ITA NO.6684/DEL/2017 9. REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. VS. CIT REPORTED IN 348 ITR 306, HE SUBMITTED THAT THE HON'BLE SUPREME COURT IN THE SAI D DECISION HAS CANCELLED THE PENALTY ON THE GROUND THAT THE CLAIM WAS A CASE OF HUMAN ERROR WHICH EVERYBODY IS LIKELY TO COMMIT AND, THEREFORE, NO PE NALTY CAN BE LEVIED FOR SUCH ERROR. 10. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BRAHMPUTRA CONSORTIUM LTD. REPORTED IN 348 ITR 339, HE SUBMITTED THAT IN THAT CASE ALSO HIGHER DEPRECIATION WAS CLAIMED @ 40% ON EXCAVATORS AND TIPPERS AS AGAINST 25% AS PER I.T. RULES. THE CLAI M WAS REVISED DURING THE ASSESSMENT PROCEEDINGS. THE HONBLE HIGH COURT HEL D THAT SUCH A CLAIM WAS HUMAN ERROR AND PENALTY IS NOT LEVIABLE. LD. COUNS EL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE HIGHER RATE OF DEPRECIATION IN T HE INSTANT CASE WAS DUE TO CLERICAL ERROR COMMITTED BY THE ACCOUNTANT OF THE A SSESSEE FIRM WHICH ESCAPED THE ATTENTION OF THE TAX AUDITOR WHO COMPUTED THE D EPRECIATION BY CONSIDERING FULL PURCHASE VALUE OF BUILDING. RELYING ON VARIOU S DECISIONS, HE SUBMITTED THAT THE RELIANCE PLACED ON TAX AUDITOR AND TAX CONSULTA NT CANNOT BE HELD AGAINST THE ASSESSEE. 11. HE FURTHER SUBMITTED THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER DID NOT SPECIFY THE CHARGE ON THE ASSESSEE AS TO WHETHE R THE SAME IS FOR FURNISHING INACCURATE PARTICULARS OR FOR CONCEALMENT OF INCOME . EVEN THE ASSESSMENT ORDER DOES NOT CONTAIN ANY SPECIFIC CHARGE AGAINST THE AS SESSEE. RELYING ON VARIOUS 6 ITA NO.6684/DEL/2017 DECISIONS INCLUDING THE DECISION OF THE HONBLE KAR NATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING FATORY REPORTE D IN 359 ITR 565, WHEREIN THE SLP OF THE DEPARTMENT WAS DISMISSED BY THE HON BLE SUPREME COURT, HE SUBMITTED THAT EVEN ON THIS COUNT ALSO PENALTY IS N OT LEVIABLE. 12. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). 13. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECIS IONS CITED BEFORE ME. I FIND THE ASSESSEE IN THE INSTANT CASE HAS CLAIMED DEPREC IATION OF RS.71,84,291/- BEING 10% ON THE TOTAL VALUE OF PROPERTY OF RS.71,84,291/ - PURCHASED DURING THE YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE SUO-MOTU FILED A LETTER DATED 08.03.2016 BEFORE THE ASSESSING OFFICE R STATING THEREIN THAT THE DEPRECIATION HAS BEEN WRONGLY CLAIMED AND THIS MIST AKE WAS DUE TO CLERICAL ERROR ON THE PART OF THE ASSESSEE AND WAS UNINTENTI ONAL. I FIND THE ASSESSING OFFICER ACCORDINGLY MADE THE ABOVE ADDITION AND, TH EREAFTER, LEVIED PENALTY U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE IS NOT AB LE TO SUBSTANTIATE AND FAILED TO PROVE THE EXPLANATION AS BONA-FIDE. I FIND THE LD. CIT(A) SUSTAINED THE PENALTY SO LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF WR ONG CLAIM OF DEPRECIATION. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASS ESSEE THAT THE MISTAKE WAS AN INADVERTENT CLERICAL ERROR AND WAS BONA-FIDE. IT I S ALSO HIS SUBMISSION THAT THE NOTICE ISSUED U/S 274 FOR LEVY OF PENALTY DOES NOT SPECIFY AS TO WHETHER THE 7 ITA NO.6684/DEL/2017 ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 14. I FIND SOME FORCE IN THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE. ADMITTEDLY, THE ASSESSEE BEFORE BEING PO INTED OUT BY THE ASSESSING OFFICER VIDE LETTER DATED 08.03.2016 BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER REGARDING SUCH WRONG CLAIM OF DEPRECIATION AND SUBMITTED THAT THE MISTAKE WAS DUE TO CLERICAL ERROR ON THE PART OF TH E ASSESSEE AND WAS UNINTENTIONAL. I, THEREFORE, FIND MERIT IN THE ARG UMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE MISTAKE WAS A BONA-FIDE ONE AND T HERE IS NO INTENTION OF ANY CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. I FIND THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE P ETROPRODUCTS LTD. (SUPRA) HAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIM ED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE I.T. A CT. THE HON'BLE SUPREME COURT HAS FURTHER HELD THAT MAKING AN INCORRECT CLAIM CAN NOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. 15. THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS (SUPRA) HAS HELD THAT THE IMPOSITION OF PENALTY WOU LD BE UNWARRANTED IN A CASE WHERE THE ASSESSEE HAS COMMITTED AN INADVERTENT AND BONA-FIDE ERROR AND NOT INTENDED OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS. THE HONBLE DELHI HIGH COURT IN THE C ASE OF BRAHMPUTRA CONSORTIUM LTD. (SUPRA) AFTER CONSIDERING THE DECIS ION IN THE CASE OF ESCORTS 8 ITA NO.6684/DEL/2017 FINANCE (SUPRA) HAS HELD THAT THE PENALTY U/S 271(1 )(C) CANNOT BE IMPOSED ON SUBMITTING INACCURATE CLAIM UNDER BONA-FIDE BELIEF OR INADVERTENTLY SINCE THE SAME DOES NOT AMOUNT TO FURNISHING OF INACCURATE PA RTICULARS. IN VIEW OF THE ABOVE DISCUSSION AND IN VIEW OF THE VARIOUS DECISIO NS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE, COPIES OF WHICH ARE FILED IN THE PAPER BOOK, I AM OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR LE VY OF PENALTY U/S 271(1)(C). THEREFORE, I SET-ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY SO LEVIED. THE GROUN DS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH JANUARY, 2018. SD/- (R. K. PANDA) ACCOUNTANT MEMBER DATED: 19-01-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI