ACIT, Chandigarh V. M/s Punjab State Container & Warehousing, Chandigarh

ITA 888/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95446 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Depreciation; Wrong claim; Difference of opinion; Condonation of delay
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 888/CHD/2013 ASSESSMENT YEAR: 2007-08 THE ACIT, VS M/S PUNJAB STATE CO NTAINERS CIRCLE 2(1), & WAREHOUSING, PATIALA. SCO 119-120, SECTOR 17-B, CHANDIGARH. PAN: AAECP0606J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAVI SARANGA L, CIT-DR RESPONDENT BY : SHRI AJAY JAIN DATE OF HEARING : 05.08.2015 DATE OF PRONOUNCEMENT : 07.08.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS), CHANDIGARH DATED 20.05.2013 FOR ASSESSMENT YEAR 2007-08, CHALLENGING THE CANCELLATI ON OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL ON RECORD. THE DEPARTMENTAL A PPEAL IS TIME BARRED BY 24 DAYS. THE ASSESSING OFFICER FILE D APPLICATION FOR CONDONATION OF DELAY STATING THAT AT THE TIME O F FILING APPEAL AGAINST THE PENALTY ORDER, INADVERTENTLY IT WAS MEN TIONED AS ORDER UNDER SECTION 143(3) WHICH WAS RECTIFIED. TH ERE IS NO CHALLENGE TO THE CONDONATION OF DELAY. CONSIDERING EXPLANATION 2 OF THE REVENUE, WE ARE SATISFIED THAT REVENUE DEPAR TMENT WAS PREVENTED BY SUFFICIENT CAUSE FROM FILING THE DEPAR TMENTAL APPEAL WITHIN THE TIME OF LIMITATION. THE DELAY IN FILING THE APPEAL IS, THEREFORE, CONDONED. 3. THE REVENUE IN THE PRESENT APPEAL CHALLENGED THE CANCELLATION OF PENALTY IN RESPECT OF DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION AND DISALLOWANCE UNDER SECTIO N 40(A)(IA) OF THE INCOME TAX ACT. 4. THE BRIEF FACTS WITH REGARD TO CLAIM OF DEPRECIA TION ARE THAT ASSESSEE HAD CLAIMED DEPRECIATION ON ELECTRIC FITTINGS @ 15% AS AGAINST 10%. THE EXCESS CLAIM OF DEPRECIATI ON OF RS. 91,866/- WAS DISALLOWED AND PENALTY PROCEEDINGS WER E INITIATED. THE ASSESSING OFFICER VIDE SEPARATE ORD ER, LEVIED THE PENALTY WHICH WAS CHALLENGED BEFORE LD. CIT(APPEALS ). THE ASSESSEE IN THE WRITTEN SUBMISSIONS SUBMITTED THAT ASSESSING OFFICER HAS WRONGLY LEVIED PENALTY ON DISALLOWANCE OF DEPRECIATION ON ELECTRIC FITTINGS AND EQUIPMENTS @ 15% INSTEAD OF 10%. IT IS THUS, DIFFERENCE OF OPINION THAT WHE THER 15% DEPRECIATION SHOULD BE CHARGED OR 10% BUT NOTHING H AS BEEN HIDDEN FROM THE RECORDS AND IF 10% IS TO BE ALLOWED IN THE ORDER THEN REMAINING 5% WOULD HAVE TO BE ALLOWED IN THE F OLLOWING YEARS AS THIS WILL HAVE TELESCOPIC EFFECT AND FURTH ER, THESE ARE ELECTRIC ITEMS NOT ELECTRICAL FITTINGS. SO DEPRECIA TION OF 15% IS ALLOWABLE ON THE SAME. 5. THE LD. CIT(APPEALS), CONSIDERING THE SUBMISSION OF THE ASSESSEE NOTED THAT IT IS A CASE OF DIFFERENCE OF O PINION BETWEEN 3 THE ASSESSEE AND THE ASSESSING OFFICER. THE ASSESS EE HAD NOT CONCEALED ANY FACTS REGARDING THE CLAIM OF DEPRECIA TION SO MADE. THEREFORE, NO PENALTY FOR CONCEALMENT COULD HAVE BEEN LEVIED AND ACCORDINGLY, CANCELLED THE PENALTY. 6. AFTER CONSIDERING RIVAL CONTENTIONS, WE ARE OF T HE VIEW LD. CIT(APPEALS) WAS JUSTIFIED IN CANCELING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICE R INITIATED THE PENALTY FOR EXCESS CLAIM OF DEPRECIATION ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE A SSESSEE HAS, HOWEVER, FURNISHED COMPLETE PARTICULARS OF CLAIM OF DEPRECIATION BEFORE ASSESSING OFFICER AS WELL AS IN THE RETURN OF INCOME. THERE WAS DIFFERENCE OF OPINION AS REGARDS CLAIM OF DEPRECIATION @ 15% OR 10% ONLY. THEREFORE, IT MAY NOT BE A FIT CASE FOR LEVY OF PENALTY. THE ASSESSEE FURTHER CLA IMED THAT EVEN IF 10% DEPRECIATION IS ALLOWED, IT WOULD BE CARRIED FORWARD IN THE SUBSEQUENT YEAR. THESE FACTS, THEREFORE, CLEARL Y DISCLOSE THAT ASSESSEE EXPLAINED THE ISSUE AND EXPLANATION O F THE ASSESSEE APPEARS TO BE BONAFIDE. THEREFORE, CANCEL LATION OF PENALTY WAS JUSTIFIED IN THE MATTER. WE, THEREFORE , DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF TH E LD. CIT(APPEALS) IN CANCELING THE PENALTY WITH REGARD T O CLAIM OF DEPRECIATION. 7. THE OTHER ISSUE IS DISALLOWANCE OF EXPENSES UNDE R SECTION 40(A)(IA) OF THE ACT DUE TO NON DEDUCTION OF TAX AT SOURCE ON INTEREST FOR WHICH ASSESSING OFFICER LEVIED THE PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT. THE BRIEF FACTS ARE T HAT ASSESSEE HAD MADE PAYMENT OF INTEREST OF RS. 2,84,64,390/- T O M/S 4 PUNJAB STATE WAREHOUSING CORPORATION, BUT HAD NOT D EDUCTED TAX AT SOURCE ON THIS PAYMENT. THE ASSESSING OFFIC ER DISALLOWED THE ENTIRE AMOUNT UNDER SECTION 40(A)(IA ) OF THE ACT AND LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF T HE ACT VIDE SEPARATE ORDER FOR FURNISHING INACCURATE PARTICULAR S OF INCOME ON THIS ISSUE. 8. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) T HAT THE ISSUE REGARDING DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT WAS DECIDED BY ITAT SPECIAL BENCH, VISHAKHAPATNAM I N FAVOUR OF THE ASSESSEE IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORTS AND SO THE ISSUE HAS BECOME DEBATABLE. 9. THE LD. CIT(APPEALS), CONSIDERING THE MATERIAL O N RECORD, CANCELLED THE PENALTY ON THIS ISSUE AS WELL. HIS F INDINGS IN APPELLATE ORDER IN PARA 4.3 TO 4.3.1 ARE REPRODUCED AS UNDER : 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL FOR THE APPELLANT. AS PER THE PROVISIONS OF SECTION 271(L)(C), PENALTY CAN BE LEVIED IF THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. FOR THE SAKE OF READY REFERENCE, EX PLANATION 1 BELOW SECTION 271(1) IS REPRODUCED BELOW: 'EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, 5 THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 4.3.1 THUS, WHEN THE ASSESSEE HAS CONCEALED PART ICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS, APPLICABILITY OF CONDITIONS LAID DOWN IN EXPLANATIO N 1 (SUPRA) HAVE TO BE EXAMINED. IN THIS CASE, THE APPE LLANT HAD NOT DEDUCTED TAX ON THE INTEREST PAYMENT AND SO THE ENTIRE AMOUNT OF WAS ADDED BACK TO THE TOTAL INCOME U/S 40 (A)(IA) OF THE ACT. ON THE FACTS OF THE CASE, THE APPELLANT CANNOT BE SAID TO HAVE DELIBERATELY FURNISHED INACCURATE PART ICULARS OF INCOME. HONBLE ITAT DELHI IN THE CASE OF AT & T COMMUNICATIONS SERVICES INDIA PVT. LTD. (42 DTK 22) HAS HELD THAT THE DISALLOWANCE MADE BY INVOKING PROVISI ONS OF SECTION 40(A)(I) CANNOT BE A GROUND TO LEVY PENALTY U/S 271(L)(C) SINCE IN SUCH SITUATIONS, IT CANNOT BE SAID THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO THE DEDUCTION CLAIMED BY THE ASSE SSEE. SECTION 40(A)(I) PERTAINS TO PAYMENTS MADE TO NON-R ESIDENTS AND THE CORRESPONDING PROVISION FOR RESIDENTS IS SE CTION 40(A)(IA) AND SO THE RATIO OF THIS DECISION IS APPL ICABLE IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) ALSO. FURTHER , THE ENTIRE AMOUNT HAS BEEN ADDED U/S 40(A)(IA) FOR NON-DEDUCTI ON OF TAX AND THE APPELLANT HAS ALREADY BEEN PENALIZED BY TAXING WHOLE OF THE AMOUNT, ON WHICH TAX WAS TO BE DEDUCTE D. IN VIEW OF THIS DISCUSSION AND BY RESPECTFULLY FOLLOWI NG THE DECISION OF HON'BLE ITAT DELHI (SUPRA), THE CONCEALM ENT PENALTY LEVIED U/S 271(L)(C) ON THIS ISSUE IS ALSO CANCELLED. GROUND OF APPEAL NO. 3 IS ALLOWED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) IN CANCELING THE PENALTY. IN THIS CAS E, THE ASSESSING OFFICER HAS INITIATED PENALTY ON THIS ISS UE IN 6 FURNISHING INACCURATE PARTICULARS OF INCOME. THE A SSESSING OFFICER IN THE PENALTY ORDER ALSO LEVIED THE PENALT Y FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND REL IED UPON DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION PVT. LTD. 327 ITR 510 IN WHICH THE HI GH COURT UPHELD THE PENALTY LEVIED FOR WRONG CLAIM OF DEDUCT ION ON ACCOUNT OF INCOME TAX PAYMENT UNDER SECTION 40(A)(I A) OF THE ACT. THIS JUDGEMENT HAS ALSO BEEN RELIED UPON BY L D. DR DURING THE COURSE OF ARGUMENTS. ON GOING THROUGH T HE ASSESSMENT ORDER, WE FIND THAT ASSESSEE WHILE EXPLA INING THE ABOVE ISSUE, SUBMITTED BEFORE THE ASSESSING OFFICER THAT ASSESSEE CORPORATION HAS TAKEN LOAN FROM PUNJAB STA TE WAREHOUSING CORPORATION ON WHICH A SUM OF RS.2.84 C RORE HAS BEEN CREDITED AS INTEREST DURING THE YEAR. BOTH TH E CORPORATIONS BEING UNDER THE SAME MANAGEMENT, IT WA S EVIDENT THAT THE PUNJAB STATE WAREHOUSING CORPORATION WAS I NCURRING HEAVY LOSS AND NO INCOME TAX WAS PAYABLE BY THE COR PORATION DURING THE ASSESSMENT YEAR UNDER APPEAL I.E. 2007-0 8. THE PUNJAB STATE WAREHOUSING CORPORATION HAS FILED ITS INCOME TAX RETURN FOR THE YEAR UNDER CONSIDERATION DECLARING A LOSS OF RS. 126.40 CRORE AND HAS CLAIMED A REFUND OF RS. 84.33 LACS. COPY OF THE INCOME TAX RETURN WITH COMPUTATION WAS FILED BEFORE ASSESSING OFFICER. IT WAS, THEREFORE, SUBMITTED TH AT IN VIEW OF THE ABOVE, NO TDS WAS MADE FROM INTEREST DURING THE YEAR UNDER CONSIDERATION AND ASSESSEE RELIED UPON DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VS CIT. THESE FACTS, THEREFORE , CLEARLY DISCLOSE THAT ASSESSEE DISCLOSED ALL THE PARTICULAR S OF INCOME IN 7 THE RETURN OF INCOME AS WELL AS AT THE ASSESSMENT S TAGE AND THE REASONS FOR NON DEDUCTION OF TDS ON THE INTEREST PA YMENT MADE TO PUNJAB STATE WAREHOUSING CORPORATION. MAY BE, T HE ADDITION IS MADE AT THE ASSESSMENT STAGE, WOULD NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT ASSESSEE IS LIABLE FOR LEVY OF THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE FACTS NOTED ABOVE CLEARLY SHOWS THAT ALL THE FACTS MATERI AL TO THE COMPUTATION OF INCOME UNDER THE INCOME TAX ACT WERE DECLARED TO THE REVENUE AUTHORITY AND ASSESSEE OFFERED EXPLA NATION TO THE SAME AND THE EXPLANATION OF THE ASSESSEE WAS NO T FOUND TO BE FALSE. THE EXPLANATION OF THE ASSESSEE, THEREFO RE, APPEARS TO BE BONAFIDE BECAUSE THE ASSESSEE CLAIMED THAT WHEN PUNJAB STATE WAREHOUSING CORPORATION WAS RUNNING IN LOSS A ND THEY WERE NOT LIABLE TO PAY TAX, NO TDS ON INTEREST WAS DEDUCTED. THIS WOULD LEAD TO THE CONCLUSION THAT IT IS NOT A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME OR MAKI NG FALSE CLAIM BEFORE THE AUTHORITIES BELOW. THE EXPLANATIO N-I TO SECTION 271(1)(C) OF THE ACT, THUS, WOULD NOT BE AT TRACTED IN THE CASE OF THE ASSESSEE. THE LD. CIT(APPEALS) WAS THE REFORE, JUSTIFIED IN FOLLOWING THE ORDER OF ITAT DELHI BENC H IN THE CASE OF AT & T COMMUNICATION SERVICES PVT. LTD. (SUPRA) ON THE MATTER IN ISSUE. THE LD. DR RELIED UPON DECISION I N THE CASE OF ZOOM COMMUNICATIONS PVT. LTD. (SUPRA) WHICH IS ON D IFFERENT FACTS AS IS ALSO NOTED BY THE ASSESSING OFFICER IN THE PENALTY ORDER. 11. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF THE FINDINGS OF THE LD. CIT(APPEALS), WE A RE OF THE VIEW 8 THAT THERE IS NO ERROR IN THE ORDER OF THE LD. CIT( APPEALS) IN CANCELING THE PENALTY ON ACCOUNT OF DISALLOWANCE MA DE UNDER SECTION 40(A)(IA) OF THE ACT. THUS, THE DEPARTMENT AL APPEAL ON THIS ISSUE HAS ALSO NO MERIT. THE SAME IS ACCORDIN GLY, DISMISSED. 12. IN THE RESULT, DEPARTMENTAL APPEAL FAILS AND IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH AUGUST,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH