M/s. First Leasing Company of India Ltd., CHENNAI V. DCIT, CHENNAI

ITA 68/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51879 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: V BALASUBRAMANYAN
• Keywords: Depreciation; Tax effect
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI U.B. BEDI, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NO. 68/MDS/2010 ASSESSMENT YEAR 2006-07 M/S FIRST LEASING COMPANY OF INDIA LTD, NO. 749, ANNA SALAI CHENNAI 600 002. PAN NO. AAACF 1162 F VS. DY.C.I.T COMPANY CIRCLE II(1) CHENNAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. BALASUBRAMANYAN DEPARTMENT BY : SHRI K.E.B. RENGARAJAN JR. STANDING COUNSEL O R D E R PER N.S. SAINI, A.M :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A)-III, CHENNAI DATED 30.11.2 009 FOR ASSESSMENT YEAR 2006-07. PAGE 2 OF 5 ITA. NO. 68 /MDS/2010 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN NINE GRO UNDS OF APPEAL IN ALL. HOWEVER, THE SOLE ISSUE INVOLVED IN ALL TH E GROUNDS OF APPEAL RAISED IS THAT THE LD. CIT(A) ERRED IN LAW AND ON F ACTS AND CIRCUMSTANCES OF THE CASE IN SUSTAINING LEVY OF PEN ALTY OF RS. 42,54,624/- U/S 271(1)(C) OF THE INCOME-TAX ACT, 19 61 [IN SHORT, THE ACT]. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED BY THE ASSESSING OFFICER OF RS. 42,54,624/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS. 1,26,40,000/-. THE ASSESSEE CLA IMED DEPRECIATION ON WIND MILL @ 100% WHEREAS SUCH DEPRE CIATION WAS ALLOWED @ 80% AND THEREFORE, THE ASSESSING OFFICER, IN THE INSTANT CASE, FOUND THAT THE ASSESSEE HAS CLAIMED EXCESS DE PRECIATION OF RS. 1,26,40,000/-. AGAINST THE ABOVE EXCESS CLAIM OF D EPRECIATION, THE ASSESSING OFFICER LEVIED PENALTY U/S 271(1)(C) OF T HE ACT, WHICH WAS CONFIRMED BY THE LD. CIT(A). PAGE 3 OF 5 ITA. NO. 68 /MDS/2010 4. BEFORE US, THE LD. A.R. OF THE ASSESSEE SUBMITT ED THAT THE RATE OF DEPRECIATION ON WIND MILL WAS 100% UPTO THE ASSE SSMENT YEAR 2002-03 ONLY. W.E.F ASSESSMENT YEAR 2003-04, SUCH A RATE WAS REDUCED TO 80%. FURTHER ACCOUNTS OF THE ASSESSEE W ERE AUDITED BY A CHARTERED ACCOUNTANT AND DEPRECIATION WAS CLAIMED B Y THE ASSESSEE IN ACCORDANCE WITH THE REPORT OF THE CHARTERED ACCO UNTANT AND DEPRECIATION WAS CLAIMED BY THE ASSESSEE IN ACCORDA NCE WITH THE REPORT OF THE CHARTERED ACCOUNTANT. EXCESS DEPRECI ATION WAS CLAIMED DUE TO INADVERTENT OMISSION TO TAKE NOTE OF AMENDMENT MADE IN THE LAW AND THAT WAS A BONAFIDE ERROR ON TH E PART OF A PROFESSIONAL WHOSE SERVICES THE ASSESSEE RELIED UPO N FOR FILING THE RETURN OF INCOME. HE FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT, WHEN THE ASSESSING OFFICER POINTED OUT THE ERROR, THE ASSESSEE READILY ADMITTED THE SAME AND AGREED TO PA Y TAX THEREON. THE ASSESSEE ALSO SUBMITTED THAT EXCESS CLAIM MADE IN THIS YEAR HAS NO REVENUE EFFECT IN TOTALITY AS DUE TO CLAIMING EX CESS DEPRECIATION IN THIS YEAR, THE ASSESSEE CLAIMED LESSER DEPRECIAT ION IN THE SUBSEQUENT YEAR AND PAID HIGHER TAX IN THOSE YEARS. IN TOTALITY, THE DEPRECIATION IS ALLOWABLE UPTO THE COST OF ASSET ON LY AND THEREFORE, PAGE 4 OF 5 ITA. NO. 68 /MDS/2010 WHEN EFFECT OF SUBSEQUENT YEARS ARE ALSO TAKEN INTO CONSIDERATION, THERE IS NO EVASION OF TAX INVOLVED IN THIS CASE. 5. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE OR DERS OF THE LOWER AUTHORITIES 6. WE FIND THAT IT IS NOT IN DISPUTE THAT ALL PARTI CULARS OF FIXED ASSETS WERE TRULY AND COMPLETELY DISCLOSED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER, IT IS ALSO OBSERV ED THAT THE RATE OF DEPRECIATION IN CASE OF WIND MILL HAD UNDERGONE CHA NGE AND UPTO ASSESSMENT YEAR 2002-03, ASSESSEE WAS ENTITLED TO D EPRECIATION @ 100% AND SAME WAS REDUCED TO 80% FROM ASSESSMENT YE AR 2003-04. THUS THE CONTENTION OF THE ASSESSEE THAT EXCESS CLA IM OF DEPRECIATION @ 100% IN PLACE OF 80% WAS DUE TO A BO NAFIDE ERROR IN AS MUCH AS NOT TAKING NOTE OF AMENDMENT IN LAW CANN OT BE SAID TO BE MALAFIDE. FURTHER PLEA OF THE ASSESSEE THAT EXC ESS CLAIM OF DEPRECIATION IN THIS YEAR HAS, THOUGH IMPACT ON THE TAX PAYABLE IN THIS YEAR, BUT WHEN WE CONSIDER THE NUMBER OF YEARS IN TOTALITY, THEN IT HAS NO TAX EFFECT AS THE ASSESSEE WOULD BE ELIGIBLE FOR LESS DEPRECIATION IN SUBSEQUENT YEAR, COULD NOT BE CONTR OVERTED BY THE PAGE 5 OF 5 ITA. NO. 68 /MDS/2010 REVENUE. FURTHER SUBMISSION OF THE ASSESSEE THAT T HE ABOVE EXCESS CLAIM WAS BASED ON A REPORT OF A PROFESSIONAL EXPER T ALSO COULD NOT BE CONTROVERTED BY THE REVENUE. IN THE ABOVE CIRCU MSTANCES, WE ARE OF THE CONSIDERED VIEW THAT EXCESS CLAIM OF DEP RECIATION ON THE PART OF THE ASSESSEE WAS DUE TO BONAFIDE ERROR AND THEREFORE, LEVY OF PENALTY U/S 271(1)(C) OF THE ACT WAS NOT JUSTIFIED. WE, THEREFORE, DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AND ALLOW THE GROUND OF APPEAL RAISED BY THE ASSESSEE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 9 TH SEPTEMBER, 2011. SD/- SD/- (U.B.S BEDI ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 9 TH SEPTEMBER, 2011. VL/- COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE