Cera Sanitaryware Ltd., Ahmedabad V. The Dy.CIT.,(OSD)Range-1, Ahmedabad

ITA 811/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94636 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 12-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SEVAK
• Assessee Lawyers: URVASHI SODHAN
• Keywords: Depreciation; Wrong claim

Judgement Text

ITA NO.811/AHD/2012 ASSESSMENT YEAR: 2005-06 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND KUL BHARAT JM] ITA NO.811/AHD/2012 ASSESSMENT YEAR: 2005-06 M/S. CERA SANITARYWARE LTD. ............... APPELLANT MADHUSUDAN HOUSE, OPP. NAVRANGPURA TEL. EXCHANGE, NAVRANGPURA, AHMEDABAD. [PAN AABCM 9244 N] VS. DY. COMMISSIONER OF INCOME-TAX (OSD) ............. ...............RESPONDENT RANGE-1, AHMEDABAD. APPEARANCES BY: URVASHI SODHAN FOR THE APPELLANT SHIVA SEVAK FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : AUGUST 10 TH , 2015 DATE OF PRONOUNCING THE ORDER : NOVEMBER 6 TH , 2015 O R D E R PER PRAMOD KUMAR AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 3 RD FEBRUARY 2010, UPHOLDING PENALTY OF RS.15,22,969/- IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2005-06. GRIEVANCE OF THE ASSESSEE, IN SUBSTANCE, IS THAT LEARNED CIT(A), ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, ERRED IN CONFIRMING THE IMPUGNED PENALTY. 2. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE, INTER ALIA , THE FOLLOWING ADDITIONS:- (I) DIFFERENCE IN STOCK AS PER BANK STATEMENT 8 ,85,620/- VIS-A-VIS BOOKS OF THE ASSESSEE ITA NO.811/AHD/2012 ASSESSMENT YEAR: 2005-06 PAGE 2 OF 6 (II) DEPRECIATION ON BANGALORE DISPLAY UNIT 53,348/- (III) WRITE OFF OF ADVANCES 32,23,000/- 3. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFIC ER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY UNDER SECTION 271(1)(C) NOT BE IMPOSED BY TREATING THE ABOVE INCOME AS CONCEALED INCOME AND THE INCOME FOR WHICH INACCURATE PARTICULARS ARE FILED IN RESPECT OF WHICH NO EXPLANATION HAS BEEN GIVEN BY T HE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE PENALTY PROCEEDINGS BE KEPT IN AB EYANCE TILL THE DISPOSAL OF RELATED APPEAL BY THE TRIBUNAL. THIS PLEA WAS REJECTED BY THE ASS ESSING OFFICER. HE THUS PROCEEDED TO IMPOSE THE PENALTY, AND, WHILE DOING SO, HE ALSO OB SERVED AS FOLLOWS:- THE SUBMISSION OF THE ASSESSEE IN RESPECT OF THE MER ITS OF THE UNDISCLOSED INVESTMENT IN STOCK, DEPRECIATION ON DISPLAY CENTRE AND WRITE OFF OF ADVANCES HAS ALREADY BEEN EXAMINED AND ADJUDICATED UPON IN THE ASSESSMENT AND THE ORDER OF THE CIT(A). IN VIEW OF THE SAME, THERE IS NO NEED OF FRESH COMMENTS ON THE CONTENTIONS FORWARDED BY THE ASSESSEE IN THIS RESPECT OF THESE ISSUES. 4. THE ASSESSING OFFICER THEN PROCEEDED TO SET OUT THE REASONS AS TO WHY PENALTY SHOULD BE IMPOSED ON FACTS OF THIS CASE. HE NOTED THAT TH E ASSESSEE HAS SHOWN LESS VALUE OF STOCKS THAN THE VALUE STATED IN THE ACCOUNTS, AND SINCE TH E CORRECT FACTS WERE IN HIS KNOWLEDGE, HE OUGHT TO HAVE SET OUT THE SAME IN THE INCOME TAX RE TURN. HE FURTHER NOTED THAT THE ASSESSEE HAD CLAIMED WRITE OFF OF CAPITAL ADVANCES WHICH WER E PATENTLY INADMISSIBLE. THIS CLAIM OF DEDUCTION WAS THUS TREATED AS FURNISHING OF INACCUR ATE PARTICULARS. AS FOR THE DEPRECIATION CLAIM ON DISPLAY UNIT IN BANGALORE, SINCE RELATED P ENALTY STANDS DELETED, IT IS NOT REALLY NECESSARY TO DEAL WITH THE OBSERVATIONS IN DETAIL. AGGRIEVED BY THE PENALTY SO IMPOSED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A) BUT WITHOUT COMPLETE SUCCESS. CONFIRMING THE PENALTY IN RESPECT OF ADDITION FOR D IFFERENCE IN BANK STATEMENT VIS-A-VIS BOOKS OF ACCOUNTS AND IN RESPECT OF WRITE OFF OF DE BTS, LEARNED CIT(A) OBSERVED AS FOLLOWS:- ITA NO.811/AHD/2012 ASSESSMENT YEAR: 2005-06 PAGE 3 OF 6 AS REGARD PENALTY ON DIFFERENCE BETWEEN BOOK STOCK AND BANK STOCK, IT WAS SPECIFICALLY ASKED TO THE COUNSEL OF THE APPELLANT WHETHER THE DIFFE RENCE IS ON ACCOUNT OF VALUE OR QUANTITY. APPELLANTS COUNSEL COULD NOT EXPLAIN THE DIFFERENCE ON ACCOUNT OF HIGHER VALUATION OF STOCK GIVEN TO THE BANK. THERE ARE SEVE RAL DECISIONS IN WHICH IT IS HELD THAT IF THE QUANTITY DISCLOSED TO THE BANK IS MORE, IT AM OUNTS TO UNEXPLAINED STOCK AND ADDITION ON ACCOUNT OF THE SAME IS JUSTIFIED. SINCE APPELLANT WAS NOT ABLE TO EXPLAIN THE DIFFERENCE IN STOCK WITH PROPER EXPLANATION, THE AD DITION IS DEEMED TO BE CONCEALED INCOME AS PER EXPLANATION 1 TO SECTION 271(1)(C) OF IT ACT. AGAIN IT IS NOT THE CASE OF TWO OPINIONS. PENALTY LEVIED BY THE ASSESSING OFFICER ON THIS ADDITION IS ACCORDINGLY CONFIRMED. PENALTY LEVIED BY THE AO ON APPELLANT'S CLAIM OF BUS INESS LOSS ON WRITING OFF OF CAPITAL ADVANCES IS ELABORATELY DISCUSSED IN THE PENALTY ORD ER. APPELLANT ADVANCED TO A COMPANY FOR POSSIBLE TIE-UP, THIS ADVANCE WAS NOT MA DE FOR THE PURPOSE OF APPELLANT'S EXISTING BUSINESS. EVEN THIS ADVANCE WAS NOT GIVEN I N THE COURSE OF CARRYING ON OF APPELLANT'S EXISTING BUSINESS. IN VIEW OF THIS, SUCH LOSS CAN NEVER BE CONSIDERED AS BUSINESS LOSS. DESPITE THE FACT THAT SUCH LOSS HAD NO THING TO DO WITH APPELLANT'S BUSINESS, APPELLANT STILL CLAIMED THIS LOSS. THIS IS NOTHING BUT FURNISHING OF INACCURATE PARTICULARS OF INCOME. APPELLANT IS NOT ABLE TO JUSTIFY ITS CLA IM OF BUSINESS LOSS BY ANY EXPLANATION AND THEREFORE THIS IS ALSO DEEMED CONCEALMENT. THE DEC ISIONS RELIED UPON BY THE APPELLANT ARE NOT APPLICABLE TO THE FACTS OF THIS CA SE. APPELLANT CLAIMED PATENTLY NOT ALLOWABLE CLAIM FOR WHICH IT DOES NOT HAVE ANY EXPLAN ATION. HOW ANY ADVANCE GIVEN FOR NEW BUSINESS TO BE SET UP BY ANOTHER COMPANY CAN BE BUSINESS LOSS OF THE APPELLANT DURING THE YEAR? IF THE ASSESSMENT WOULD NOT HAVE BEEN IN THE SCRUTINY, APPELLANT WOULD HAVE EVADED TAXES BY MAKING SUCH A WRONG CLAIM. THEREF ORE THE DECISIONS DO NOT HELP THE APPELLANT IN GETTING AWAY FROM MAKING SUCH A WRON G CLAIM. ACCORDINGLY, I CONFIRM THE PENALTY LEVIED BY THE ASSESSING OFFICER OF THIS AD DITION ALSO. IN THE FINAL RESULT APPEAL IS DISMISSED. 5. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER APPE AL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. WE FIND THAT SO FAR AS ADDITION IN RESPECT OF DI FFERENCE IN VALUE OF STOCK IN STOCK STATEMENT VIS-A-VIS ACCOUNTS OF THE ASSESSEE IS CON CERNED, IT PROCEEDS ON THE BASIS THAT DIFFERENCE BETWEEN THESE TWO FIGURES REPRESENTS CON CEALED INCOME. THAT VIEW IS NOT ENTIRELY FREE FROM DOUBT AS IT IS A GROUND REALITY THAT BANK STATEMENTS AT TIMES REFLECT INFLATED VALUE OF STOCKS SO AS TO AVAIL HIGHER CRED IT LIMITS. THERE IS NOTHING MORE THAN BANK STATEMENT FIGURE WHICH IS PUT AGAINST THE ASSESSEE. WHATEVER BE THE MERITS OF UPHOLDING ITA NO.811/AHD/2012 ASSESSMENT YEAR: 2005-06 PAGE 4 OF 6 ADDITION ON SUCH FACTS, IN OUR CONSIDERED VIEW, AN ADDITION OF THIS NATURE CANNOT BE VISITED WITH PENALTY PROCEEDINGS. HONBLE JURISDICTIONAL H IGH COURTS JUDGMENT, IN THE CASE OF CIT VS SACHIDANAND PULSE MILLS [(2013) 39 TAXMAN.COM 15 9 (GUJ.)] HOLDS SO. AS FOR THE PENALTY IN RESPECT OF DECLINING DEDUCTION FOR WRITE OFF OF RS.32,23,000/- DUE TO JOINT VENTURE HAVING BEEN ABORTED, WE FIND THAT THE TRIBUNAL HAS CONFIRM ED THE QUANTUM ADDITION. WHILE DOING SO, THE TRIBUNAL, VIDE ORDER DATED 22.02.2013, HAD OBSERVED THAT THE RESOLUTION ALSO PASSED AFTER THE FINANCIAL YEAR BY THE APPELLANT AND NO CO PY OF MOU DATED 15.11.2003 HAS BEEN FURNISHED BEFORE ANY OF THE AUTHORITIES BELOW. TH E ASPECT REGARDING JOINT VENTURE HAVING BEEN ABORTED WAS REJECTED ON TECHNICAL GROUNDS. SU CH A LOSS, IF IT IS INDEED FOUND TO BE ON ABORTED JOINT VENTURE, IS GENERALLY ALLOWABLE. IT I S ALSO IMPORTANT TO BEAR IN MIND THAT THE AO DID NOT EVEN BOTHER TO GIVEN AN OPPORTUNITY OF HEAR ING BECAUSE, AS IT APPEARS FROM HIS OBSERVATIONS EXTRACTED EARLIER IN THE ORDER, HE WAS OF THE VIEW THAT FINDINGS IN THE ASSESSMENT PROCEEDINGS WERE GOOD ENOUGH FOR IMPOSIN G PENALTY AS WELL. THAT IS CLEARLY AN ERRONEOUS APPROACH. IN VIEW OF THESE DISCUSSIONS, THE PENALTY IN RESPECT OF WRITE OFF OF RS.32,23,000/- WAS NOT JUSTIFIED EITHER. THE PENAL TY IN RESPECT OF DEPRECIATION ALREADY STANDS DELETED AND THE AO IS NOT IN APPEAL. FOR AL L THESE REASONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO DELETE THE IMPUGNED PENALTY. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 8. IN THE RESULT, THE APPEAL IS ALLOWED. P RONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF NOVEMBER, 2015. SD/- SD/- KUL BHARAT PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 06 TH DAY OF NOVEMBER, 2015 BT* ITA NO.811/AHD/2012 ASSESSMENT YEAR: 2005-06 PAGE 5 OF 6 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD