M/s. Borana Filaments Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(1), Ahmedabad

ITA 67/AHD/2012

• Counselvise Citation: 6720514 RSA 2012
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 10-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Wrong claim
• Section: 147

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI MUKUL KR. SHRAWAT - JM AND SHRI T R MEENA - AM ITA NOS.67, 68 & 69/AHD/2012 (ASSESSMENT YEARS:-2003-04, 2004-05 & 2004-05) M/S BORANA FILAMENTS PVT. LTD., S-1236, SURAT TEXTILE MARKET, RING ROAD, SURAT V/S THE INCOME-TAX OFFICER, WARD-1(1), SURAT PAN: AABCB 8050 D [APPELLANT] [RESPONDENT] ASSESSEE BY :- NONE REVENUE BY:- SHRI SAMIR TEKRIWAL, SR, DR DATE OF HEARING:- 12-03-2012 DATE OF PRONOUNCEMENT:- 16-03-2012 O R D E R PER BENCH:- THESE THREE APPEALS HAVE BEEN FILED BY THE ASSESSEE ARISING FROM THE ORDERS OF CIT(A)-I, SURAT ALL DATED 10- 10-2011. THE ASSESSEE HAS CHALLENGED THE CONFIRMATI ON OF PENALTY LEVIED U/S 271(1)(C) RESPECTIVELY OF RS.3,53,580/-, RS.2,78,35/- AND RS.1,41,960/-. 2 THE LEAD ASSESSMENT YEAR IS 2003-04, HENCE, WE HA VE NARRATED THE FACTS OF THIS YEAR WHICH SHALL BE APPL ICABLE FOR REST OF THE TWO YEARS AS WELL. THE FACTS IN BRIEF AS EM ERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S 271(1)(C) DA TED 23-03- 2 2011 AND THE ASSESSMENT ORDER PASSED U/S 143 READ W ITH SECTION 147 DATED 15-12-2009 WERE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF TWISTING OF YARN. THE COMPANY WA S INCORPORATED ON 23-05-3003, THEREFORE, ASSESSMENT Y EAR 2003-04 WAS STATED TO BE THE FIRST YEAR OF OPERATION OF BUS INESS. THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.19,24,247/- ON PLANT AND MACHINERY. AS PER THE AO, THE RATE OF DEPRECIATION CLAIMED BY THE ASSESSEE WAS @ 50%, HOWEVER, ALLOWABLE RATE OF DEPRECIATION ON TWISTING MACHINERY WAS @ 25%. THEREFORE, A QUER Y WAS RAISED FROM THE SIDE OF THE REVENUE THAT WHY THE EX CESS DEPRECIATION SHOULD NOT BE DISALLOWED. WE HAVE BEEN INFORMED THAT THE AO HAS DISALLOWED THE EXCESS DEPRECIATION WHICH WAS ALSO CONFIRMED BY THE FIRST APPELLATE AUTHORITY. DU RING THE PENALTY PROCEEDINGS, IT WAS HELD BY THE AO THAT THE ASSESSEE- COMPANY WAS NOT ELIGIBLE FOR 50% DEPRECIATION ON PL ANT AND MACHINERY WHICH WAS PURCHASED UNDER TUF SCHEME. BY REFERRING TO THE DECISION IN THE CASE OF DHARMENDRA TEXTILE P ROCESSORS & OTHERS (2008) 306 ITR 277 (SC), THE AO HAS CONCLUDE D THAT THE ASSESSEE HAD DELIBERATELY FURNISHED INACCURATE PART ICULARS OF INCOME REGARDING THE CLAIM OF DEPRECIATION, HENCE, CONCEALED THE INCOME. FINALLY FOR AY 2003-04, ON THE AMOUNT OF RS .9,62,123/-, EXCESSIVE CLAIM OF DEPRECIATION, A PENALTY OF RS.3, 53,580/- WAS IMPOSED. 3 LIKEWISE FOR AY 2004-05, ON EXCESSIVE CLAIM OF DEPRECIATION OF RS.7,75,902/-, A PENALTY OF RS.2,78 ,355/- WAS LEVIED. IN THE LIKE MANNER FOR AY 2005-06, ON EXCES SIVE CLAIM OF 3 DEPRECIATION OF RS.3,87,951/-, A PENALTY OF RS.1,41 ,960/- WAS LEVIED. 4 WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPE LLATE AUTHORITY, THE LEARNED CIT(A) HAS PASSED A CRYPTIC DECISION BY HOLDING THAT THERE WAS CONSIDERABLE FORCE IN THE AR GUMENTS OF THE AO AND BY GIVING COGENT REASON, THE AO HAS RIGHTLY LEVIED THE PENALTY. 5 ON THE DATE OF HEARING, NO ONE HAS APPEARED FROM THE SIDE OF THE ASSESSEE. FROM THE SIDE OF THE REVENUE, THE LEARNED DR MR. SAMIR TEKRIWAL HAS SUPPORTED THE ORDERS OF THE AO AND THE LEARNED CIT(A). SINCE THE ISSUE INVOLVED IN ALL THE THREE YEARS IS TRIFLE IN NATURE, THEREFORE, WE HAVE DECIDED TO PRO CEED EX-PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DR. 6 THE ADMITTED FACTUAL POSITION IS THAT THE PENALTY U/S 271(1)(C) WAS LEVIED BECAUSE OF DISALLOWANCE OF DEP RECIATION. THE CLAIM OF DEPRECIATION AT THE RATE OF 50% WAS ON THE BASIS OF A REASONING THAT SINCE THE PLANT AND MACHINERY WAS PU RCHASED UNDER TUF SCHEME, THEREFORE, ALSO ENTITLED FOR THE BENEFIT OF ADDITIONAL DEPRECIATION WHICH WAS PROVIDED TO WEAVI NG, PROCESSING AND GARMENT SECTOR. HOWEVER, LATER ON TH E AO HAS TAKEN A VIEW THAT THE IMPUGNED ADDITIONAL DEPRECIAT ION WAS NOT ADMISSIBLE FOR TWISTING ACTIVITY. ON THE OTHER HAND , THE ASSESSEE WAS UNDER THE IMPRESSION THAT THE TWISTING ACTIVITY WAS ALSO A PART OF WEAVING OF THE FABRIC, THEREFORE, CLAIMED T HE DEPRECIATION. IT WAS ALSO ARGUED BEFORE THE AO THAT THE HIGHER DE PRECIATION WAS 4 GIVEN TO GARMENT SECTOR, THEREFORE, THE WORD SEC TOR WAS TREATED AS THE TWISTING ACTIVITY OF THE ASSESSEE AS WELL. THE ASSESSEE HAS CLAIMED THE SAID DEPRECIATION UNDER TH E IMPRESSION THAT SINCE THE SUBSIDY WAS GRANTED ON THE MACHINERY WHICH WAS SANCTIONED UNDER TUF SCHEME, THEREFORE, ALSO ENTITL ED FOR THE BENEFIT OF ADDITIONAL DEPRECIATION. FROM THESE FAC TS, IT IS THEREFORE APPARENT THAT AN EXPLANATION WAS OFFERED BY THE ASSESSEE AND THAT EXPLANATION WAS NOT ALTOGETHER FA LSE. THERE WAS A CONFUSION IN THE MIND OF THE ASSESSEE IN RESPECT OF THE CLAIM OF DEPRECIATION AND THERE COULD BE A DIFFERENCE OF OPI NION IN RESPECT OF THE BENEFIT GRANTED UNDER THE SAID SCHEME. WE AR E OF THE CONSIDERED VIEW THAT IN THE PRESENT CASE, THE REVEN UE HAS NOT DEMONSTRATED THAT THERE WAS FALSE CLAIM OF DEPRECIA TION BUT THE CASE OF THE REVENUE IS THAT THERE WAS A WRONG PERCE NTAGE OF A CLAIM OF DEPRECIATION. THE ADMITTED FACTUAL POSITIO N IS THAT NO FACTS IN RESPECT OF THE CLAIM OF DEPRECIATION AND A BOUT THE MACHINERY WERE FOUND TO BE FALSE OR ANY PART OF THE INVESTMENT WAS FOUND TO BE CONCEALED. IN TERMS OF EXPLANATION 1 TO SECTION 271(1)(C), THE ASSESSEE HAS OFFERED THE EXPLANATION AND THAT EXPLANATION WAS SUBSTANTIATED BY THE COGENT EVIDENC E WHICH WAS NOT FOUND TO BE FALSE AND THAT EXPLANATION WAS OTHE RWISE A BONA FIDE EXPLANATION, HENCE, IN OUR CONSCIOUS OPINION, IT IS NOT A FIT CASE FOR LEVY OF PENALTY. WE HEREBY DIRECT TO DELET E THE PENALTY. THE GROUNDS RAISED FOR ALL THE THREE YEARS ARE ALLO WED. 5 7 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 16-03-2012 SD/- SD/- (T R MEENA) ACCOUNTANT MEMBER (MUKUL KR. SHRAWAT) JUDICIAL MEMBER DATE : 16-03-2012 COPY OF THE ORDER FORWARDED TO: 1. M/S BORANA FILAMENTS PVT. LTD., S-1236, SURAT TE XTILE MARKET, RING ROAD, SURAT 2. THE INCOME-TAX OFFICER, WARD-1(1), SURAT 3. CIT CONCERNED 4. CIT(A)-I, SURAT 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD