The DCIT, Circle-1(1)(2), Ahmedabad V. M/s. Atul Ltd., Ahmedabad

ITA 851/AHD/2015

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4118 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Difference of opinion
• Section: 27; 271(1)(c); 92C; 92; 80IA; 92CA

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH (Conducted Through Virtual Court) Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e DCIT, Circle-1 (1 )(2), Ah medabad (Appellant) Vs Atu l Ltd., Ah med abad, PAN: AABCA239 0M (Resp ondent) Asses see b y : Shri Pa rin Shah, A. R. Revenue by : Shri S ushilkuma r M adhuk, CIT- D.R. Date of hearing : 22-03 -2022 Date of pronouncement : 22-04 -2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-1, Ahmedabad in Appeal no. CIT(A)-1/DCIT(OSD)Cir.1/113/2013-14 vide order dated 09/01/2015 passed for the assessment year 2005-06. 2. The Department has taken the following grounds of appeal:- ITA No. 851/Ahd/2015 Assessment Year 2005-06 I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 2 " The CIT(A) has erred in law and on facts in deleting the penalty of Rs.4,99,15,099/- levied u/s 27 1(1) (c) of the Act This is despite the fact that the quantum additions have been confirmed by the CIT(A) which proves that the assessee had furnished inaccurate particulars in its return of income. Penalty u/s 27 1(1)(c) was, therefore correctly levied." On the fact and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above since the assessee has failed to disclose his true income/book profit. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored to the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary.” 3. The brief facts of the case are that during the course of assessment proceeding for the captioned year, the ld. Assessing Officer made the following additions during quantum assessment proceedings:- Transfer Pricing Addition 2,70,80,409 Depreciation disallowed 2,66,83,892 Disallowance of deduction u/s 80SA 8,26,43,706 During the course of penalty proceedings in relation to the above additions, the ld. Assessing Officer upheld the penalty in respect of the above additions made during quantum proceedings. In respect of claim of depreciation of 37,45,93,719/-, the ld. Assessing Officer noted that in the assessment for A.Y. 2001-02, the Assessing Officer thrust upon the assessee depreciation I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 3 which was not claimed by him (which order has been confirmed by Hon’ble ITAT) and accordingly claim of depreciation for current year i.e. A.Y. 2005- 06 would be reduced after allowing the enhanced depreciation in A.Y. 2001- 02 to A.Y. to A.Y. 2004-05. Accordingly, the ld. Assessing Officer confirmed penalty in respect of excess depreciation claimed of Rs. 2,66,83,892/- for the year under consideration. With respect to claim u/s. 80-IA of the Act , the assessee claimed deduction u/s. 80-IA of the Act of Rs. 4,90,84,017/- on income earned from “new power plant” and Rs. 9,62,10,765/- on income from “captive power plant”. The ld. Assessing Officer noted that the Department consistently held that the assessee is not eligible for deduction u/s. 80-IA of the Act in respect of “new power plant” and this has also been upheld by Hon’ble ITAT Ahmedabad. Accordingly, deduction u/s 80-IA of the Act in respect of ‘new power plant’ was disallowed to the tune of Rs. 4,90,84,017/- . As regards deduction u/s. 80-IA in respect of “captive power plant”, the ld. Assessing Officer in quantum proceedings has noted that the assessee has taken unacceptably high rate of profit @ 75% for supplying electricity to other undertaking. Accordingly, the Ld. Assessing Officer restricted the deduction and disallowed claim of Rs. 3,35,59,689/- u/s 80-IA of the Act in respect of the captive power plant. The Ld. Assessing Officer imposed penalty in respect of the aforesaid additions on the ground that the Ld. CIT(A) has upheld the disallowance u/s 80-IA of the Act in quantum appeal. The Ld. Assessing Officer also imposed penalty u/s 271(1)(c) of the Act in respect of Transfer Pricing additions by stating that after considering the order of TPO, there are ‘sufficient grounds’ for initiation of penalty u/s 271(1)(c) of the Act. I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 4 4. In appeal, Ld. CIT(A) deleted the penalty by holding that the Ld. Assessing Officer imposed penalty in a mechanical manner without appreciating the facts and issues and explanation provided by the assessee. While deleting the penalty Ld. CIT(A) observed as below: “(i) In reference to penalty imposed on Rs. 2,70,80,409/- being addition made by TPO. On being referred by A.O. u/s 92CA of the Act the TPO vide order u/s 92 CA (3) dt. 26/02/2008 made such adjustment which were upheld by Ld. CIT(A). The appellant contended that it disclosed all the material fact and adopted all appropriate method for working of Arm's length price (ALP). The TPO without rejection of such method, adopted another method for the adjustment. It is therefore, such additions cannot be termed as furnishing of inaccurate particulars of income or concealment since based on different opinion of TPO and in the nature of deeming provisions. The appellant relied on Hon'ble ITAT Ahmedabad order in the case of Mastek Ltd. (supra). Hon'ble ITAT in this case held that - "8. We have heard the rival submissions and perused the material on record. It is seen that the A.O. has levied penalty on the adjustments made by the TPO with respect to international transactions. It is an undisputed fact that the international transactions were reported by assessee in Form 3CEB.Transfer Pricing adjustments have been made only in relation to certain activities stated by Transfer Pricing Officer to be of international transactions. The penalty under sec. 271(l)(c) of the Act is leviable if the A.O. is satisfied in the course of any I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 5 proceedings under the Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. It is well settled that assessment proceedings and penalty proceedings are separate and distinct and the finding in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. 9. The necessary ingredients for attracting Explanation 1 to Sec.271(l)(c) are that (i) the person fails to offer the explanation, or (if) he offers the explanation which is found by the A.O. or the CIT (A) or the CIT to be false, or (Hi) the person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him. If the case of an assessee falls in any of these three categories, then according to the deeming provision provided in Explanation to Sec. 271(l)(c) the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of Cl. (c) of Sec. 271(1), and the penalty follows. On the other hand, if the assessee is able to offer an explanation, which is not found by the authorities to be false, and assessee has been able to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him, then in that case penalty shall not be imposed. 10. As per Explanation 7; no penalty is leviable if the assessee proves that the price charged or paid in such transaction was computed in accordance with the provisions contained in Sec. 92C and in the manner prescribed under section in good faith and with due diligence. I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 6 11. In the present case the assessee has furnished all the required details called for from time to time. Assessee had also disclosed material facts before the A.O. The A.O. has not given any finding indicating that the assessee had failed to offer any information or the information provided was false. The assessee has not concealed any material fact and the information given by the assessee has not been found to be incorrect. The claim of the assessee was reduced by CIT (A). In view of the totality of the aforesaid we are of the view that no penalty can be levied in the present case. We therefore, direct the deletion of penalty. Thus the ground of the assessee is allowed." The facts of appellant are similar to the fact of this case and I am inclined that as held by Hon'ble ITAT, in the case of appellant necessary ingredient of drawing satisfaction of furnishing of inaccurate particulars of income are absent. Further appellant followed proper procedure and submitted all the details in respect of international transaction with an approved method of valuation of ALP. It is therefore, the satisfaction so drawn by A.O. and penalty so imposed is neither justified nor sustainable^ (ii) In reference to penalty imposed on disallowance of depreciation of Rs. 2,66,83,893/-, the appellant claimed depreciation under the bonafide tax audit report on the fact that appellant didn't claimed-depreciation in A.Y. 01-02 thrusted by A.O. in the asstt. order for A.Y. 01-02, hence there is difference of WDV and claim. Apart from various explanation and facts against penalty imposition, appellant relied on the order of Hon'ble ITAT I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 7 Ahmedabad in its own case for A.Y. 02-03 & A.Y. 04-05 where penalty on this issue was deleted. I am inclined with appellant that on same issue and similar facts, Hon'ble ITAT Ahmedabad. In appellant's case for A.Y. 04-05 vide order dt. 19/01/2012 in ITA No. 3455/Ahd/2010 & C.O. No. 71 And/2011 & ITA No. 3188/Ahd/2010 following the ratio of its order in the appellant's case for A.Y. 02-03 in ITA No. 951/Ahd/2008 order dt. 24/07/09 deleted the penalty imposed on this issue. It is therefore following the same ratio, penalty so imposed by A.O. is neither justified nor sustainable. (iii) In reference to penalty imposed for disallowance u/s 80IA claim of Rs. 8,26,43,706/-, it has two part i.e. the A.O. disallowed claim of appellant u/s 80IA of Rs. 4,90,84,0171- in respect of New power plant, while claim u/s 80IA for captive power plant was disallowed to the extent of Rs. 3,35,59,689/-. The appellant contended that on the issue of disallowance of claim u/s 80IA for New power plant penalty imposed by A.O. in earlier year i.e. A.Y. 02-03 and A.Y. 04-05 was deleted. In respect of disallowance out of claim u/s 80IA in respect of captive power plant the appellant contended that all the material facts were disclosed before A.O. and the claim was made on the basis of tax audit report as well as a certificate in Form 10CCB. The disallowances so made by A.O. are on account of difference of opinion in reference to market price of electricity so consumed. I am inclined with appellant that in respect of New power plant, penalty imposed u/s 271(1)(c) of the I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 8 Act for disallowance of claim u/s 80IA in earlier year i.e. A.Y. 02- 03 & A.Y. 04-05 were deleted by Hon'ble ITAT Ahmedabad, while in respect of disallowance of claim in respect of claim u/s 80-IA for captive power plant, same ratio of Hon’ble ITAT as held in reference to New Power plant are applicable and penalty is not exigible. Further Hon'ble Supreme Court in the case of Reliance Petro product Ltd. as relied on by appellant also support that penalty under 271(1)(c) of the Act for disallowance of such claim u/s 80IA of the Act are not exigible. I am also inclined by appellant that all the material facts were disclosed and available before A.O. and appellant under bonafide certificate from a charted accountant, claimed such allowances. It is therefore the penalty so imposed by A.O. is neither justified nor sustainable. 5. Before us, the Revenue has relied on the observations of Ld. Assessing Officer in the penalty order u/s 271(1)(c) of the Act. In response, Ld. Counsel for the assessee submitted that so far as the penalty in relation Transfer Pricing additions are concerned, the Hon'ble Ahmedabad ITAT in quantum appeal in relation to Transfer Pricing additions for captioned year i.e. AY 2005-06 in assessee's own case in ITA No. 1681/Ahd/2011 has restored the matter back to the file of Ld. Assessing Officer for fresh adjudication. Accordingly, the penalty issue may also be restored to file of Ld. Assessing Officer. The Ld. Counsel for the assessee drew our attention to Para 7 of the aforesaid order. Now, so far as penalty on excess claim for depreciation is concerned, Ld. Counsel I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 9 for the assessee submitted that on same issue and similar facts, Hon'ble ITAT Ahmedabad in appellant's case for A.Y. 03-04 vide order dt. 26-02- 2015 in ITA No. 2970/Ahd/2010 &in ITA No. 3188/Ahd/2010 for AY 2004-05 vide order dt. 19/01/2012 deleted the penalty imposed on the issue of excess claim of depreciation. Accordingly, he submitted that penalty in respect of excess claim of depreciation may kindly be deleted. On the issue of imposition of penalty in respect of claim u/s 80-IA of the Act, Ld. Counsel for the assessee submitted that Hon'ble ITAT in assessee's own case in ITA No. 2970/A/2010 for AY 2003-04 and in ITA No. 3188/A/2010 for AY 2004-05 has deleted the penalty in respect of claim u/s 80-IA of the Act. Accordingly, respectfully following the decision of Hon'ble ITAT in assessee's own case, the penalty u/s 271(1)(c) of the Act may kindly be deleted. 6. We have heard the rival contentions and perusal the material on record. Now, so far as penalty in relation Transfer Pricing additions are concerned, we note that the Hon'ble Ahmedabad ITAT in quantum appeal in relation to Transfer Pricing additions for captioned year i.e. AY 2005- 06 in assessee's own case in ITA No. 1681/Ahd/2011 has restored the matter back to the file Ld. Assessing Officer for fresh adjudication. Accordingly, in our view, respectfully following the above decision, it would be fit to restore the penalty issue to file of Ld. Assessing Officer. The Hon'ble ITAT while restoring the file made the following observations:- I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 10 “7. In view of the above, since the Ld. CIT(A) adjudicated the issue following his order for Assessment Year 2004-05 which has been adjudicated by the ITAT vide its order for the said year dated 24-09- 2010 ,as afore-stated, restoring the issue to the A.O. for fresh adjudication, the issue stands covered by the decision of the ITAT in the case of the assessee for Assessment Year 2004-05 as above. Accordingly, the issue is restored back to the A.O. to be decided in accordance with the direction of the ITAT in Assessment Year 2004- 05. Needless to add, the assessee be granted full opportunity of hearing.” 6.1 On the issue of penalty in respect of excess claim for depreciation is concerned, we note that on same issue and similar facts, Hon'ble ITAT Ahmedabad in appellant's case for A.Y. 03-04 vide order dt. 26-02-2015 in ITA No. 2970/Ahd/2010 & in ITA No. 3188/Ahd/2010 for AY 2004- 05 vide order dt. 19/01/2012 deleted the penalty imposed on the issue of excess claim of depreciation. The Hon'ble ITAT vide order dt. 26-02- 2015 in ITA No. 2970/Ahd/2010 while deleting the penalty observed as under: “5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that in the AY 2002-03, the Hon’ble ITAT in respect of the penalty levied on excess depreciation, deleted the penalty in ITA No.846/Ahd/2007 & ITA No.253/Ahd/2008 in para-38 by observing as under:- “38. We find from the above that the CIT(A) has deleted the penalty on the premise that this disallowance of depreciation is basically for the reason that after allowing depreciation in assessment year 2001-02, the WDV has reduced and accordingly the claim of the assessee for this year was reduced. The finding of the CIT(A) are that the earlier years claim of the assessee was that no depreciation was allowed actually on the basis of a legal decision hence the issue in that year was debatable. In view of this finding of the CIT(A), we find no I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 11 infirmity in the same and accordingly we uphold the same. This issue of the Revenue’s appeal is dismissed.” 5.1. The similar issue was also before the Tribunal (ITAT “D” Bench Ahmedabad) in assessee’s own case in ITA No.3188/Ahd/2010 for AY 2004-05 & CO No.07/Ahd/2011, order dated 19/01/2012, and the Coordinate Bench following the earlier decision in ITA No.951/Ahd/2008 for AY 2002-03 deleted the penalty by observing as under:- (extracted from ITA No.3455/Ahd/2010 & CO No.07/Ahd/2011) “7. We have considered the rival submissions and have perused the order of the Tribunal for the earlier assessment year 2002- 03 in assessee’s own case. WE find that in identical facts, the penalty imposed u/s.271(1)(c) of the Act on excess depreciation was cancelled by the Ld.CIT(A) in the case of the assessee in earlier assessment year 2002-03. Against this order, the revenue has preferred an appeal before ITAT and the Tribunal in ITA No.951/Ahd/2008 for the assessment year 2002-03 has confirmed the order of the Ld. CIT(A) cancelling the penalty imposed u/s.271(1)(c) of the Act. We, being in agreement with the decision of the Tribunal on this issue, confirm the order of Ld.CIT(A) by following the order of the Tribunal for the earlier assessment year 2002-03 cancelling the penalty imposed u/s.271(1)(c) of the Act. Accordingly, the Ground No.1 of the revenue’s appeal is dismissed.” 6.2 Respectfully following the above decisions in assessee's own case for previous years, we are directing that penalty in respect of excess claim of depreciation may be deleted for this year. 6.3 On the issue of imposition of penalty in respect of claim u/s 80-IA of the Act is concerned, we note that Hon'ble ITAT in assessee's own case in ITA No. 2970/A/2010 for AY 2003-04 and in ITA No. 3188/A/2010 for AY 2004-05 has deleted the penalty in respect of claim u/s 80-IA of I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 12 the Act. The Hon'ble ITAT vide order dt. 26-02-2015 in ITA No. 2970/Ahd/2010 while deleting the penalty in respect of claim u/s 80-IA of the Act, observed as under: “5.2. In respect of penalty levied with regard to disallowance of claimed depreciation of deduction u/s.80IA of the Act, the Coordinate Bench in ITA No.951/Ahd/2008 for AY 2002-03 (ITAT Bench “D” Ahmedabad), the Tribunal dismissed the appeal of the Revenue, by observing as under:- “33. In view of the above facts, we find that the assessee has made a claim of depreciation u/s.80IA of the Act on the basis that it had set up a new industrial undertaking and accordingly is eligible for deduction. The Assessing Officer disallowed the claim made by the assessee by stating that the new power plant which was the new industrial undertaking for which the assessee was claiming deduction u/s.80IA of the Act was using the services of one old boiler and hence, the requirements of the section were not being fulfilled the assessee filed explanation and took the contentions which were two folds in nature i.e. (i) that the value of the boiler which is the so-called old machinery used by the assessee in this new industrial undertaking is less than 20% of the overall expenditure of the new machinery and on that the new machinery and (ii) that the new turbine is by itself a new industrial undertaking and the steam which was taken from the boiler would have been either purchased from outside agency as a fuel or like it has been done it would take the same from the in-house boiler and used it as fuel. There was no question of this being considered as a part of the turbine as a new Industrial Undertaking for the purposes of granting deduction under section 80IA. In view of the above explanation the assessee has stated in his explanation that very same Assessing Officer had scrutinized the return for assessment year 2001-02 and had made disallowance of the assessee’s claim and hence was aware about the legal stand of the assessee. The assessee is merely canvassing the same stand in the subsequent assessment year i.e. Assessment year 2002-03 and hence there is no question of any concealment or filing of I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 13 inaccurate particulars in the return of income. The assessee also put the certificate of the chartered Accountant as required u/s. 80IA(7) of the Act which also clearly demonstrate the bona fide of the assessee in making this claim. In view of the above explanation of the assessee, we find that that it is a difference of opinion on legal point of view and the assessee’s explanation has never been held to be false and without that the penalty u/s.271(1)(c) of the Act cannot be levied in the similar circumstances, (from unreported decision), the Hon’ble jurisdictional High Court in Tax Appeal No.430 to 432 of 2006 in the case of JCIT vs. Kiran Sytex Private Ltd. held that penalty levied for claim of deduction u/s.80HHC of the Act which was disallowed while the claim of the assessee was that it was under a bona fide legal belief that it was entitled to the deduction. The Hon’ble High Court affirmed the findings of Tribunal quashing the penalty u/s.271(1)(c) of the Act. Since the facts being similar, we respectfully following the Hon’ble jurisdictional High Court delete the penalty u/s.271(1)(c) of the Act on this issue. ” 5.3. On similar issue the Coordinate Bench (ITAT “D” Bench Ahmedabad) in ITA No.3455/Ahd/2010 & CO No.07/Ahd/2011 for AY 2004-05, following the earlier decision of Tribunal, dismissed the Revenue’s appeal by observing as under:- “11. We have considered the rival submissions. We find that in identical facts, the penalty imposed u/s. 271(1)(c) of the Act on claim of deduction u/s.80IA was cancelled in the assessee’s own case in the earlier assessment year 2002-03 by the Tribunal. We, being in agreement with the decision of the Tribunal on this issue and the facts of this case being identical with the facts of the case of the assessee in the earlier assessment year 2002-03, cancel the penalty imposed for the relevant assessment year by following the order of the Tribunal for the earlier assessment year 2002-03 and accordingly, ground No.2 of the revenue’s appeal is dismissed.” I.T.A No. 851/Ahd/2015 A.Y. 2005-06 Page No. DCIT vs. Atul Ltd. 14 6.4 Respectfully following the above decisions in assessee's own case for previous years, we are directing that penalty in respect of claim u/s 80- IA of the Act may be deleted. 7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 22-04-2022 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/04/2022 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद