Drill Road Machinery Pvt.Ltd., Ahmedabad V. The ACIT.,(OSD)Range-1, Ahmedabad

ITA 801/AHD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0323 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 19-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Bad and doubtful debts; Revised return
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .. , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.801/AHD/2014 ( / ASSESSMENT YEAR : 2007-08) M/S.DRILL ROD MACHINERY PVT.LTD. 2111-B, PHASE-III, GIDC VATVA AHMEDABAD-382 445 / VS. THE ACIT (OSD) RANGE-1 AHMEDABAD $ ./ ./ PAN/GIR NO. : AAACD 5325 J ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : NONE ($'*) / RESPONDENT BY : MR. PRASOON KABRA, SR.DR + ,*-. / DATE OF HEARING 26/09/2016 /012*-. / DATE OF PRONOUNCEMENT 07/10/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, AHMEDABAD D ATED 02/01/2014 FOR THE ASSESSMENT YEAR (AY) 2007-08. THE ASSESS EE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- 1. THE ONLY GROUND OF APPEAL IS AGAINST LEVY OF PENAL TY U/S.271(1)(C) ON THE FOLLOWING ADDITIONS: LOSS ON SALE OF MACHINERY OF RS.12,70,158/- ITA NO.801/AHD/ 2014 M/S. DRILL ROD MACHINERY PVT.LTD. VS. ACIT ASST.YEAR 2007-08 - 2 - IN HIS ORDER DATED 30/03/2013, THE LD.AO HAS ERRED IN LAW BY LEVYING A PENALTY U/S.271(1)(C) ON THE ABOVE ADDITI ON WITHOUT CONSIDERING THE FACTS OF THE CASE AND REAL NATURE O F TRANSACTIONS INVOLVED. THE CIT(A) HAS ERRED IN LAW BY CONFIRMIN G THE ABOVE PENALTY. 2. ON THE DATE OF HEARING, NONE APPEARED ON BEHAL F OF APPELLANT-ASSESSEE NOR ANY APPLICATION FOR ADJOURNMENT OF HEARING HAS BEEN FILED. SINCE THERE IS NO APPEARANCE ON BEHALF OF ASSESSEE, WE PR OCEED TO DECIDE THE APPEAL EX - PARTE , QUA THE ASSESSEE, ON THE BASIS OF DETAILS AVAILAB LE ON RECORD. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- 3.1. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALING IN ENGINEERING/DRILLING A CCESSORIES. ASSESSEE FILED ITS RETURN OF INCOME ON 30/10/2007 D ECLARING TOTAL LOSS OF RS.(-)15,96,906/-. THE CASE WAS SELECTED FOR SCRU TINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S. 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') VIDE ORDER DATED 30/11/2009 AND THE TOTAL INCOME WAS DETERMINED AT RS.10,49,434/- AND AO MADE ADDITIONS OF DISALLOWANCE OF BAD DEBTS RS.13,28,585 /-, LOSS ON SALE OF MACHINERY RS.12,70,158/- AND DISALLOWANCE OF DEPREC IATION OF RS.47,597/-. SUBSEQUENTLY, AO LEVIED A PENALTY U/S .271(1)(C) OF THE ACT. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO ), ASSESSEE CARRIED ITA NO.801/AHD/ 2014 M/S. DRILL ROD MACHINERY PVT.LTD. VS. ACIT ASST.YEAR 2007-08 - 3 - THE MATTER BEFORE THE LD.CIT(A), WHO VIDE ORDER DAT ED 25/05/2012 (IN APPEAL NO.CIT(A) II/ACIT.(OSD)R-1/269/2013-14) PART LY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER O F LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 4. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. IN THIS CASE, ASSESSEE HAS AGREED ITSELF AND ACCEPTED ITS FAULT A ND SURRENDERED BEFORE THE AO. THE RELEVANT PORTION OF THE ASSESSMENT ORD ER IS REPRODUCED HEREUNDER:- 3. LOSS ON SALE OF MACHINERY :- ON PERUSAL OF SCHEDULE-Q OF THE P&L A/C., IT WAS NO TICED THAT THE ASSESSEE CLAIMED THE LOSS OF SELLING OF MACHINERY O F RS.12,70,158/-. IN THIS REGARD, THE ASSESSEE WAS V IDE ORDER SHEET ENTRY DTD. 06/11/2009 SHOW CAUSED THAT WHY THE CLAI M OF LOSS ON SALE OF MACHINERY SHOULD NOT BE ADDED BACK TO THE T OTAL INCOME OF THE ASSESSEE BECAUSE THE SALE CONSIDERATION ON THES E ASSETS HAVE ALREADY BEEN REDUCED IN THE DEPRECIATION CHART COMP UTED AS PER THE I.T. ACT. IN REPLY THE ABOVE SHOW CAUSE NOTICE, VIDE ORDER SH EET ENTRY DTD. 06/11/2009, THE ASSESSEE ACCEPTED THAT THIS WAS A M ISTAKE TO CLAIM THIS LOSS AND CONCEDED THAT IT SHOULD BE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS, THE LOSS ON SALE OF MAC HINERY OF RS.12,70,158/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.801/AHD/ 2014 M/S. DRILL ROD MACHINERY PVT.LTD. VS. ACIT ASST.YEAR 2007-08 - 4 - THE ASSESSEE HAS CLAIMED LOSS ON SALE OF MACHINERY WHICH IS NOT ALLOWABLE. BY DOING SO, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. HENCE, PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. (DISALLOWANCE OF RS.12,70,158) 4.1. THE HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT.LTD. VS. CIT (IN CIVIL APPEAL NO.6924 O F 2012 DATED 25 TH SEPTEMBER-2012) HAS HELD AS UNDER:- 9. THE ASSESSEE WAS COMMUNICATED THE REASONS FOR RE-OPENING THE ASSESSMENT, IT REALIZED THAT A MISTAKE HAD BEEN COM MITTED AND ACCORDINGLY BY A LETTER DATED 20.01.2005 THE ASSESS ING OFFICER WAS INFORMED THAT THERE WAS NO WILLFUL SUPPRESSION OF F ACTS BY THE ASSESSEE BUT THAT A GENUINE MISTAKE OR OMISSION HAD BEEN COM MITTED WHICH ALSO APPEARS TO HAVE BEEN OVERLOOKED BY THE ASSESSING OF FICER BEFORE WHOM THE TAX AUDIT REPORT WAS PLACED. ACCORDINGLY, THE ASSESSEE FILED A REVISED RETURN ON THE SAME DAY. A RE-ASSESSMENT WA S PASSED ON THE SAME DAY AND THE ASSESSEE THEN PAID THE TAX DUE AS WELL AS THE INTEREST THEREON. 4.2. FURTHER, THE APEX COURT HELD AS UNDER:- 17. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE FACTS OF THE CASE ARE RATHER PECULIAR AND SOMEWHAT UNIQUE. THE ASSESSEE IS UNDOUBTEDLY A REPUTED FIRM AND HAS GREA T EXPERTISE AVAILABLE WITH IT. NOTWITHSTANDING THIS, IT IS POSS IBLE THAT EVEN THE ASSESSEE COULD MAKE A 'SILLY' MISTAKE AND INDEED TH IS HAS BEEN ACKNOWLEDGED BOTH BY THE TRIBUNAL AS WELL AS BY THE HIGH COURT. 18. THE FACT THAT THE TAX AUDIT REPORT WAS FILED AL ONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ITA NO.801/AHD/ 2014 M/S. DRILL ROD MACHINERY PVT.LTD. VS. ACIT ASST.YEAR 2007-08 - 5 - ALLOWABLE UNDER SECTION 40A(7) OF THE ACT INDICATES THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. A PART FROM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR, IT WAS NOT EVEN NOTICED EVEN BY THE ASSESSING OFFICER WHO FRAMED THE ASSESSMENT ORDER. IN THAT SENSE, EVEN THE ASSESSING OFFICER SEEMS TO HAVE MAD E A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDIT REPORT. 19. THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST TH AT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THE RE IS ALSO NO QUESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. IT APPEARS TO US THAT ALL THAT HAS HAPPENED IN THE PRE SENT CASE IS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR, THE ASSE SSEE WHILE SUBMITTING ITS RETURN, FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXPERTISE OF THE ASS ESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSE E IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 20. WE ARE OF THE OPINION, GIVEN THE PECULIAR FACTS OF THIS CASE, THAT THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIF IED. WE ARE SATISFIED THAT THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS. 21. UNDER THESE CIRCUMSTANCES, THE APPEAL IS ALLOWE D AND THE ORDER PASSED BY THE CALCUTTA HIGH COURT IS SET ASIDE. 4.3. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LA ID DOWN BY THE HONBLE APEX COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT.LTD. VS. CIT (SUPRA), WE ARE OF THE OPINION THAT WHERE T HE ASSESSEE ACCEPTED/SURRENDERED ITS INCOME BEFORE THE AO, IN S UCH CASE, PENALTY CANNOT BE LEVIED. THEREFORE, GROUND RAISED BY THE ASSESSEE IS ALLOWED. ITA NO.801/AHD/ 2014 M/S. DRILL ROD MACHINERY PVT.LTD. VS. ACIT ASST.YEAR 2007-08 - 6 - 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 07 /10/2016 SD/- SD/- .. ( ) () ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 07/ 10 /2016 6...,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 78- + 9- / CONCERNED CIT 4. + 9- ( ) / THE CIT(A)-II, AHMEDABAD 5. :;<-78 , .782 , / DR, ITAT, AHMEDABAD 6. <=>, / GUARD FILE. / BY ORDER, (:-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 3.10.16 (DICTATION-PAD 2- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 4.10.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.10.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.10.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER