ACIT, New Delhi V. M/s. Tepro System Ltd., New Delhi

ITA 686/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4227 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 15-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Depreciation; Additional depreciation; Bonafide belief; Wrong claim; Revenue expenditure
• Section: 271(1)(c)

Judgement Text

ITA NO. 686/DEL/2010 A.Y. 2006-07 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH H: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NOS. 686/DEL/2010 A.Y. : 2006-07 DY. COMMISSIONER OF INCOME TAX, VS. M/S TECPRO SYSTEM LTD., CIRCLE 16(1), NEW DELHI (FORMERLY TECPRO SYSTEM PV T. LTD.), 106, VISHWADEEP TOWER, PLOT NO. 4, DISTT. CENTRE, JANAKPURI, NEW DELHI (PAN : AABCT 4355K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAGAN KUMAR, CA DEPARTMENT BY : SHRI N.K. CHAND, DR O R D E R PER SHAMIM YAHYA, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 20.11.20 09 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE PENALTY OF RS. 232582/- IMPOS ED PENALTY U/S 271(1)(C) OF THE IT ACT. 3. IN THIS CASE DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED ADDITIONAL D EPRECIATION ON PLANT AND ITA NO. 686/DEL/2010 A.Y. 2006-07 2 MACHINERY AT RS. 21,73,127/-. ASSESSEE WAS ASKED T O FILE DETAILS ON WHICH THE ADDITIONAL DEPRECIATION HAS BEEN CLAIMED. IN RESPON SE TO THE SAME A REPLY WAS SUBMITTED BY THE ASSESSEE AS UNDER:- AS PER COMPUTATION OF INCOME TAX, WE HAVE CLAIMED TOTAL DEPRECIATION OF RS. 1,58,66,928/- WHICH INCLUDES:- DEPRECIATION FOR PLANT AND MACHINERY 2031035 ADDITIONAL DEPRECIATION OF PLANT AND MACHINERY 2173127 DEPRECIATION FIXED ASSETS OTHER THAN PLANT AND MACHINERY 11662465 15866927 HOWEVER, WE FIND THAT ADDITIONAL DEPRECIATION ON PL ANT AND MACHINERY WAS ONLY RS. 1897851/- AND OTHER ADDITIONAL DEPRECIATIO N CLAIMED WHICH WAS AMOUNTING RS. 275276/- WAS NOT PERTAINING TO PLANT AND MACHINERY BUT WAS WRONGLY CLAIMED. SO, WE HEREBY REQUEST YOU TO CONSI DER THE SAME AND CONDONE THE WRONG CLAIM WHICH WAS CLAIMED DUE TO LA CK OF CLARIFICATIONS AND THE CLARIFICATION FOR THE SAME CAME ONLY LATER. ON EXAMINING OF THE BOOKS OF ACCOUNTS AND THE CONT ENTION PUT FORTH BY THE ASSESSEE, IT WAS SEEN BY THE ASSESSING OFFICER THA T A SUM OF RS. 2,75,276/- WAS NOT AT ALL PERTAINING TO THE PLANT AND MACHINERY AN D THE ADDITIONAL DEPRECIATION WAS WRONGLY CLAIMED BY THE ASSESSEE. THEREFORE, AN ADDITION OF RS. 2,75,276/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 3.1 FURTHER THE ASSESSEE HAD CLAIMED PROFESSIONAL C HARGES OF RS. 9074652/-. ON SCRUTINY OF THE DETAILS IT WAS FOUND THAT A SUM OF RS. 5,00,000/- HAD BEEN GIVEN TO CHITALE AND ASSOCIATES FOR DESIGNING, DR AFTING AND FINALIZING THE SHARE SUBSCRIPTION AGREEMENT. A.O. OPINED THAT AS THE E XPENDITURE WAS BEING MADESPENT ON INCREASING THE CAPITAL, IT WAS NOT ALL OWABLE AS REVENUE EXPENDITURE. ITA NO. 686/DEL/2010 A.Y. 2006-07 3 THEREFORE, A SUM OF RS. 5,00,000/- WAS ADDED BACK T O THE TOTAL INCOME OF THE ASSESSEE ON THIS ACCOUNT. 3.2 ON THE ABOVE ADDITIONS PENALTY PROCEEDINGS WER E INITIATED AND PENALTY U/S 271(1)(C) WAS LEVIED ON THE GROUND THAT THE ASSESSE E HAD CLAIMED INADMISSIBLE EXPENSES AND HENCE HAD FURNISHED INACCURATE PARTIC ULARS OF INCOME. 3.3 UPON ASSESSEES APPEAL LD. LD. COMMISSIONER OF INCOME TAX (APPEALS)(A) DELETED THE ADDITION. 3.4 AGAINST THIS ORDER THE REVENUE IS IN APPEAL BE FORE US. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. 3.5 WE FIND THAT THE FIRST ASPECT OF THE PENALTY IN THIS REGARD IS WITH REFERENCE TO CLAIM OF ADDITION DEPRECIATION AMOUNTING TO RS. 275276/-. WE FIND THAT IN THE DETAILS OF DEPRECIATION CALLED FOR BY THE ASSESSIN G OFFICER, ASSESSEE HAS HIMSELF FOUND THAT ADDITIONAL DEPRECIATION CLAIMED OF RS. 275276/- WAS NOT PERTAINING TO PLANT AND MACHINERY AND HENCE THE SAME WAS WRONGLY CLAIMED. HOWEVER THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY TH E ASSESSING OFFICER. IN OUR CONSIDERED OPINION THE ASSESSEES CLAIM IN THIS REG ARD HAS CONSIDERABLE COGENCY. IT IS NOT THE CASE THAT ASSESSING OFFICER HAD FOU ND ANY MISTAKE, BUT THE CASE IS THAT THE ASSESSEE HAD HIMSELF WHILE PREPARING THE D ETAILS FOUND THE MISTAKE AND POINTED OUT THE SAME TO THE ASSESSING OFFICER. HENC E THIS CAN NOT BE SAID TO BE A CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PAR TICULARS. 3.6 ON THE ISSUE OF DISALLOWANCE OF RS. 5,00,000/- AGAINST THE TOTAL PROFESSIONAL CHARGES CLAIM OF RS. 9074652/-. WE FIND THAT ASS ESSING OFFICER HAD MADE THE SAID DISALLOWANCE ON THE GROUND THAT THE SAID AM OUNT WAS PAID TO M/S CHITALE AND ASSOCIATES FOR DESIGNING AND DRAFTING AND FINAL IZING THE ASSESSEES SUBSCRIPTION AGREEMENT. ASSESSING OFFICER WAS OF THE OPINION THAT THE AMOUNT ITA NO. 686/DEL/2010 A.Y. 2006-07 4 WAS SPENT ON INCREASING THE CAPITAL. HENCE, IT WAS NOT THE REVENUE EXPENDITURE. HERE WE FIND THAT THERE IS NO CONCEALMENT AND FURNI SHING OF INACCURATE PARTICULARS. THE ASSESSEE HAD MADE A CLAIM OF EXPE NDITURE WHICH IN THE OPINION OF ASSESSING OFFICER IS IN THE CAPITAL FIELD. HEN CE, THE ISSUE IS ONLY A MATTER OF DIFFERENT OPINION. 3.7 IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPI NION THERE IS NO VIOLATION OF SECTION 271(1)(C) WHICH MANDATES OF LEVY OF PENALTY FOR CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. IN THIS REGARD, WE FIND THAT HONBLE APEX COURT HAS RECENTLY IN THE CASE OF CIT VS. RELIANCE PETRO PR ODUCTS LTD. HAS HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC ) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A G OOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQU IREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED TH AT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN W HERE THE CLAIM IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 3.8 IN THIS REGARD, WE FURTHER PLACE RELIANCE OF TH E HONBLE APEX COURT DECISION IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 BY A BENCH COMPRISING 3 OF THEIR LORDSHIPS, WHEREIN IT WAS HEL D THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGA TION IS THE RESULT OF A QUASI- CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARI LY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LA W OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. ITA NO. 686/DEL/2010 A.Y. 2006-07 5 PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDIC IALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENA LTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OF FENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A). 3.9 IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DELETE THE LEVY OF PENALTY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/04/2010 UPON CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15/04/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A)5. DR, ITAT TRUE COPY DEPUTY REGISTRAR, ITAT, DELHI BENCHES