The ACIT, Circle-4, Baroda V. M/s Rinki Hydrocarbons Ltd, Baroda

ITA 995/AHD/2009

• Counselvise Citation: 99520514 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-10-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 02-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR K SHYAM PRASAD
• Assessee Lawyers: M J SHAH
• Keywords: Depreciation

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , . ! !,'# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A. NO.995/AHD/2009 ( ! & ! & ! & ! & / / / / ASSESSMENT YEAR : 2000-01) ASST.CIT CIRCLE-4 BARODA ! ! ! ! / VS. M/S.RINKI HYDROCARBONS LTD. MOTOROL HOUSE RACE COURSE, BARODA ' '# ./() ./ PAN/GIR NO. : AAACR 8989 G ( '* / // / APPELLANT ) .. ( +,'* / RESPONDENT ) '* - ' / APPELLANT BY : DR. K.SHYAM PRASAD, SR.D.R. +,'* . - ' / RESPONDENT BY : SHRI M.J. SHAH, A.R. !/ . 0# / / / / DATE OF HEARING : 12.10.2011 1 & . 0# / DATE OF PRONOUNCEMENT : 21.10.2011 '2 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-III, BARODA DATED 07/01/2009. REVENUE HAS RAISED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S.271(1)(C) OF RS.11,12,118/ - OVERLOOKING THE RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF DHARMEND RA TEXTILE PROCESSORS 306 ITR 277 (SC) WHEREIN IT WAS LAID ITA NO.995/AHD/ 2009 ACIT VS. M/S.RINKI HYDROCARBONS LTD. ASST.YEAR - 2000-2001 - 2 - DOWN THAT PENALTY U/S.271(1)(C) WAS CIVIL WRONG & M ENU REA IS NOT REQUIRED TO BE ESTABLISHED. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S.271(1)(C) OF THE I.T. ACT, 1961 DATED 2 8/03/2008 AND THE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 OF TH E I.T.ACT WERE THAT THE ASSESSEE-COMPANY IS IN TRADING BUSINESS. ON P ERUSAL OF RECORDS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT WHILE COM PUTING THE BOOK PROFIT FOR THE PURPOSE OF THE PROVISIONS OF SECTION 115JA, THE ASSESSEE HAD REDUCED THE FOLLOWING AMOUNTS FROM THE NET PROFIT . 1 DEPRECIATION (PER S.L.M.) ON RS.17241909 @ 10% 1724190 ON RS.27500000 @ 19% 2750000 2 DEF. REV.EXPENSES (NOT W.OFF) 1999039 3 INTEREST (NOT DEBITED) 2294895 8768124 2.1. ACCORDINGLY, BOOK PROFIT U/S.115JA WAS RECALC ULATED BY THE ASSESSING OFFICER. WHILE LEVYING THE PENALTY IT WA S COMMENTED THAT THE CORRECT BOOK PROFIT WAS NOT DISCLOSED AND THE A SSESSING OFFICER HAD TO REJECT THE WRONG CALCULATION OF 115JA, HENCE , THE ASSESSEES CASE WAS A CLEAR CONCEALMENT OF INCOME AS WELL AS F URNISHING OF INACCURATE PARTICULARS OF INCOME. BY INVOKING THE EXPLANATION-1 TO SECTION 271(1), A PENALTY OF RS.11,12,118/- WAS IMP OSED. WHEN THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(APPEALS) AFTER NARRATING ITA NO.995/AHD/ 2009 ACIT VS. M/S.RINKI HYDROCARBONS LTD. ASST.YEAR - 2000-2001 - 3 - THE FACTUAL BACKGROUND, PENALTY WAS DELETED BY ASSI GNING FOLLOWING REASONS:- 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUN SEL AND FACTS OF THE CASE. THE APPELLANT MADE CERTAIN ADJU STMENT WITH THE BOOK PROFIT WHICH WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THERE IS NO PROVISION U/S.115JA TO REDUCE SUCH ITEMS. IN APPEAL, THE CIT(A) HELD THAT THERE IS NO PROVISION U/S.115JA FOR SUCH ADJUSTMENT AND THEREFORE APPELLA NT CANNOT CLAIM SUCH DEDUCTION. THE APPELLANTS ARGUMENT IN PENALTY PROCEEDINGS IS BY REFERRING PROVISIONS OF SECTION 1 15JA(2) WHEREIN THE PROFIT AND LOSS ACCOUNT IS TO BE PREPAR ED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 AND 2 11(3A) OF THE COMPANIES ACT. THESE PROVISIONS REQUIRE CLAIM OF DEPRECIATION, INTEREST ACCRUED AND DEFERRED REVENUE EXPENSES RELEVANT FOR THE YEAR. ADMITTEDLY THE APPELLANT HA S NOT DEBITED THESE ITEMS IN PROFIT AND LOSS ACCOUNT. THE PROFIT AS PER AUDITED ACCOUNTS IS WITHOUT REDUCING THESE ITEMS. HOWEVER, THESE CLAIMS OTHERWISE REQUIRED TO BE MADE IN PROFI T AND LOSS ACCOUNT AS PER THE PROVISIONS OF COMPANIES ACT, WER E NOT MADE. THEREFORE THE APPELLANTS ARGUMENT IS THAT P ENALTY CANNOT BE LEVIED EVEN IF SUCH ADJUSTMENT WAS NOT PE RMITTED BY CIT(A). PARTICULARLY WHEN IT ACTED UNDER BONA FIDE BELIEF THAT SUCH ADJUSTMENTS ARE PERMISSIBLE AS PER COMPANIES A CT. THE APPELLANT RELIED UPON THE DECISION OF HON.SUPREME C OURT AND DELHI HIGH COURT BOTH DELIVERED IN 2008 ITSELF (AFT ER THE APPEAL ORDER WAS PASSED). IN THE DECISION OF DELHI HIGH COURT IN THE CASE OF SAIN PROCESSING AND WEAVING MI LLS P.LTD, THE HON.HIGH COURT HELD THAT THE USE OF THE EXPRESSION NET PROFIT MAKES IT CLEAR THAT DEPRECI ATION NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT WILL HAVE TO BE TAKEN INTO ACCOUNT WHILE DETERMINING BOOK PROFIT U/S.115J A OF THE ACT. THIS MEANS EVEN IF THE DEPRECIATION IS NOT DE BITED TO PROFIT AND LOSS ACCOUNT, THE SAME CAN BE REDUCED WH ILE DETERMINING BOOK PROFIT. THIS DECISION IS DIRECTLY APPLICABLE ITA NO.995/AHD/ 2009 ACIT VS. M/S.RINKI HYDROCARBONS LTD. ASST.YEAR - 2000-2001 - 4 - AS FAR AS DEPRECIATION IS CONCERNED. AS REGARDS OT HER ADJUSTMENTS MADE BY THE APPELLANT, ANALOGY CAN BE D RAWN FROM THE ARGUMENTS GIVEN THAT PROFIT IS TO BE WORKE D OUT AS PER SECTION 211 OF THE COMPANIES ACT WHICH REQUIRES CLA IM OF ALL EXPENSES, DEPRECIATION ETC. THEREFORE THE APPELLANT CANNOT BE HELD TO HAVE ACTED MALAFIDE WHILE MAKING THE ADJ USTMENT PERMISSIBLE UNDER COMPANIES ACT. THE PENALTY FOR SUCH ADJUSTMENT CANNOT BE LEVIED. THE DECISION OF DELHI HIGH COURT EVEN ALLOW THE CLAIM OF DEPRECITION EVEN IF N OT DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR THE PURPOSE OF S ECTION 115J. PENALTY ON SUCH ADJUSTMENT CANNOT BE LEVIED SINCE T HERE IS A JUDICIAL VIEW FAVOURING THE APPELLANTS ACTION. I THEREFORE DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER. 3. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE FIND NO FORCE IN THIS GROUND OF THE REVENUE. THE ADJUSTMEN TS WHICH WERE MADE BY THE ASSESSING OFFICER HAVE IN FACT WAS BORN E OUT OF THE ACCOUNTS OF THE ASSESSEE WHICH WERE VERY MUCH PART OF THE ASSESSMENT PROCEEDINGS. IT IS NOT THE CASE OF THE REVENUE THAT CERTAIN NEW FACTS WERE DETECTED AND THOSE WERE THE BASIS FOR THE ADDITION. RATHER, THE FACTS HAVE REVEALED THAT ON THE BASIS OF THE INFORMATION AVAILABLE ON RECORD, THE SAID ADJUSTMEN TS WERE MADE. EVEN IT IS NOT THE CASE OF THE REVENUE THAT CERTAIN INACCURATE PARTICULARS WERE PLACED BEFORE THE ASSESSING OFFICE R. BUT THE ONLY REASON OF DISPUTE WAS THAT WHILE CALCULATING THE BO OK PROFIT, THE ASSESSEE HAD MADE THE ADJUSTMENTS AS ADVISED BY THE CHARTERED ACCOUNTANT. THEREFORE, IT WAS MERELY AT THE MOST A ND INTERPRETATION OF THE STATUTE BUT NOT A CASE OF DETECTION OF CONCE ALED INCOME. THE CASE LAWS CITED BEFORE US IS CIT VS. SAIN PROCESSI NG & WEAVING ITA NO.995/AHD/ 2009 ACIT VS. M/S.RINKI HYDROCARBONS LTD. ASST.YEAR - 2000-2001 - 5 - MILLS REPORTED AT 221 CTR 493 SUPPORTS THE VIEW TA KEN HEREINABOVE, RESULTANTLY, WE HEREBY AFFIRM THE FIND INGS OF THE LEARNED CIT(APPEALS) AND DISMISS THIS GROUND OF THE REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (A. MOHAN ALANKAMONY) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 21 / 10 /2011 30..!, .!../ T.C. NAIR, SR. PS '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4&/ COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-III, BARODA 5. 49: +! , , / DR, ITAT, AHMEDABAD 6. :;