ITO 5(1)(3), V. DEVI ELECTRONICS P. LTD,

MA 258/MUM/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7021 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 1998-1999
• Appeal Filed On: 02-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Wrong claim; Unabsorbed depreciation

Judgement Text

1 MANO.258/MUM/2011 A/O ITA NO. 6481/MUM/2009 (ASST YEAR 1998-99 ) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL, AM & SHRI VIJAY PAL RAO, JM MISCELLANEOUS APPLICATION NO.258/MUM/2011 ARISING OUT OF ITA NO. 6481/MUM/2009 (ASST YEAR 1998-99 ) THE INCOME TAX OFFICER WARD 5(1)(3), MUMBAI VS M/S DEVI ELECTRONICS P LTD PLOT NO.E-8 GIDC ELECTRONIC ESTATE GANDHI NAGAR GUJARAT 382 044 (APPLICANT) (RESPONDENT) PAN NO. AAA CD 00720F ASSESSEE BY MS VASANTI PATEL REVENUE BY SH V V SHASHTRI DT.OF HEARING 26THE AUG.2011 DT OF PRONOUNCEMENT 23 SEPT 2011 PER VIJAY PAL RAO, JM THIS MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23.12.2010 OF THE TRIBUNAL WHEREBY THE PENALTY LEVIED U/S 271(1)( C) WAS DELETED. 2 THE REVENUE HAS MADE THE AVERMENTS IN THE APPLIC ATION THAT THE ASSESSING OFFICER LEVIED PENALTY AGAINST THE DISALLOWANCE OF UNABSORBED BUSINESS LOSS AS WELL AS UNABSORBED DEPRECIATION TO THE EXTENT OF RS. 24, 58,072/-. THE SAID DISALLOWANCE WAS CONFIRMED BY THE CIT(A) AND THEREAFTER, THE TRI BUNAL UPHELD THE DISALLOWANCE OF SETTING OF EARLIER YEAR BUSINESS LOSS; HOWEVER, TH E ISSUE OF UNABSORBED DEPRECIATION WAS REMANDED TO THE ASSESSING OFFICER. IN THE SECO ND ROUND, THE TRIBUNAL, VIDE ORDER DATED 6.8.2009 ALLOWED THE CLAIM OF UNABSORBE D DEPRECIATION. IT WAS POINTED 2 MANO.258/MUM/2011 A/O ITA NO. 6481/MUM/2009 (ASST YEAR 1998-99 ) OUT BY THE LD DR THAT WHILE DECIDING THE APPEAL OF THE ASSESSEE AGAINST THE PENALTY ORDER, THE TRIBUNAL TOOK A NOTE OF QUANTUM ORDER DATED 6.8.2009 WHEREBY THE CLAIM REGARDING THE UNABSORBED DEPRECIATION WAS ALL OWED; WHEREAS THE ASSESEES CLAIM OF SETTING OF EARLIER YEAR BUSINESS LOSS WAS ALREADY DISALLOWED BY THE TRIBUNAL VIDE ORDER DATED 11.6.2007. THEREFORE, THE TRIBUNAL HAS NOT ADJUDICATED THE ISSUE OF LEVY OF PENALTY ON ACCOUNT OF DISALLOWANCE OF CARR Y FORWARD LOSS. 2.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT AS FAR AS THE FACTUAL POSITION POINTED BY THE LD DR IS CONCERNED , THERE IS NO DISPUTE THAT THE CLAIM OF CARRY FORWARD LOSS DISALLOWED BY THE LOWER AUTH ORITIES HAS BEEN CONFIRMED BY THE TRIBUNAL IN THE EARLIER ROUND OF LITIGATION. HOWEV ER, THE PENALTY IS NOT WARRANTED EVEN ON THE DISALLOWANCE OF CARRY FORWARD LOSS BECAUSE O F THE FACTS THAT THE ASSESSEE HAD DISCLOSED ALL THE NECESSARY DETAILS AND FACTS AND T HERE IS NO CONCEALMENT OF PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. THE LD AR HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS ADMITTED THE BUSINESS CONDUCT ING RECEIPT FROM LEASING OUT THE FACTORY PREMISES, AS BUSINESS INCOME AND CLAIMED SE TTING OF EARLIER YEAR LOSS. THE ASSESSING OFFICER DISALLOWED THE CARRY FORWARD LOSS MAINLY ON THE GROUND THAT THE ASSESSEE DISCONTINUED THE BUSINESS. THEREFORE, TH E CLAIM OF THE ASSESSEE WAS NOT FOUND AS BOGUS OR FALSE; BUT THE DISALLOWANCE WAS M ADE BY INVOKING THE CLAUSE (I) TO PROVISO TO SEC. 72. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P LTD REPORTED IN 322 ITR 158(SC). 3 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RELE VANT MATERIAL ON RECORD. AT THE OUTSET, WE FIND THAT WHILE DECIDING THE APPE AL OF THE ASSESSEE AGAINST THE PENALTY ORDER, THE TRIBUNAL HAS TAKEN INTO ACCOUNT ONLY THE ORDER DATED 6.8.2009 WHEREBY THE CLAIM OF UNABSORBED DEPRECIATION WAS AL LOWED BY THE TRIBUNAL. SO FAR 3 MANO.258/MUM/2011 A/O ITA NO. 6481/MUM/2009 (ASST YEAR 1998-99 ) AS THE CLAIM OF CARRY FORWARD LOSS IS CONCERNED AND LEVY OF PENALTY AGAINST THE SAID DISALLOWANCE, THE SAME HAS ESCAPED THE ATTENTION AN D THEREFORE, REMAINED UN-ADJUDICATED. HENCE, WE DISPOSE OF THE ASPECT OF LEVY OF PENALTY AGAINST THE DISALLOWANCE OF CARRY FORWARD LOSS AS UNDER: 4 UNDISPUTED FACTS AS EMERGED FROM THE RECORD THAT THE ASSESSEE LEASED OUT ITS FACTORY TO M/S VIDEOCON INTERNATIONAL LTD., AND HAD AGREED TO RECEIVE BUSINESS CONDUCTING RECEIPT PER MONTH ON THE BASIS OF TURNOV ER. THE ASSESSING OFFICER HELD THAT THE LOSS INCURRED BY THE ASSESSEE IN THE EARLI ER YEAR CANNOT BE SET OFF AGAINST THE INCOME OF THE ASSESSEE RECEIVED FROM THE BUSINESS CONDUCTING RECEIPT BECAUSE THE ASSESSEE IS NO LONGER IN THE MANUFACTURING OF TELEV ISIONS. THE MATTER WAS CARRIED TO THE TRIBUNAL AND THE TRIBUNAL. WHILE UPHOLDING THE ORDER OF THE LOWER AUTHORITIES IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO ADJUST THE BUSINESS LOSS OF THE EARLIER YEAR THIS TRIBUNAL HAS GIVEN FINDINGS IN PARA 11 OF IT S ORDER IN ITA NO.1882/MUM/2002 DATED 19.19.6.2006 AS UNDER: 11 WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE SIDES, THE MATERIAL ON RECORD AND ORDERS OF THE AUTHORITIES BELOW AND THE JUD ICIAL PRECEDENTS CITED BY BOTH THE SIDES. THE ASSESSEES CASE IS THAT IT I S A COMMERCIAL EXPLOITATION OF THE BUSINESS ASSETS, THEREFORE, THE SAME HAS TO BE T REED AS INCOME FROM BUSINESS. HOWEVER, ON PERUSAL OF THE MATERIAL ON REC ORD AND TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE REVENUE, WE ARE OF THE VIEW THAT THE ASSESSES CASE REGARDING SET OFF OF CARRY FORWARD OF BUSINESS LOSS, DESERVES TO BE REJECTED BECAUSE THE ASSESSEE HAS NOT RESTARTE D THE BUSINESS AFTER EXPIRY OF THE LEASE PERIOD, THEREFORE, THE TRANSACTIO N OF LEASE IS NOTHING BUT EXPLOITATION OF THE PROPERTY BY THE ASSESSEE AS OWNE R THEREOF. WE ALSO FIND THAT THERE WAS A STATUTORY REQUIREMENT OF CONTINUAT ION OF THE SAME BUSINESS OR PROFESSION FOR WHICH THE LOSS WAS ORIGINALLY COMPU TED AS PER THE PROVISO TO CLAUSE (I) TO SUB. SEC. (1) OF SEC. 72 OF THE A T, WHICH WAS, OMITTED W.E.F 1.4.2000. THUS, ON THIS COUNT THE ASSESSEE HAS GOT NO CASE BECAUSE THE BUSINESS OF MANUFACTURING WAS NOT CARRIED OUT BY THE ASSESSEE IN THE PREVIOUS YEAR. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEE IS REJ ECTED. 4 MANO.258/MUM/2011 A/O ITA NO. 6481/MUM/2009 (ASST YEAR 1998-99 ) 5 IT IS CLEAR FROM THE ORDER OF THE TRIBUNAL IN THE QUANTUM PROCEEDINGS, WITH REGARD TO THE DISALLOWANCE OF EARLIER YEAR LOSS THA T THE CLAIM WAS NOT ALLOWABLE BECAUSE OF THE FACT THAT THE ASSESSEE HAS DISCONTIN UED THE BUSINESS OF PRODUCTIONS AND IN VIEW OF CLAUSE (I) OF PROVISO TO SEC. 72(1), WHICH HAS BEEN OMITTED W.E.F 1.4.2000. THE LOSS CANNOT BE SET OFF, IF THE ASSES SEE HAS DISCONTINUED THE BUSINESS. THEREFORE, THE CLAIM OF THE ASSESSEE WAS DISALLOWE D BECAUSE OF CLAUSE (I) OF PROVISO, TO SEC. 72(1), WHICH HAS BEEN OMITTED W.E.F 1.4.200 0 AND NOT BECAUSE OF ANY BOGUS OR FALSE CLAIM MADE BY THE ASSESSEE. AS A MATTER OF FACT, THE ASSESSEE HAS DISCLOSED AND PRODUCED ALL THE RELEVANT MATERIAL FACTS AND DE TAILS REGARDING THE SOURCE OF THE INCOME, LET-OUT OF THE FACTORY PREMISES, YEARS OF T HE LOSS INCURRED AND SETTING OFF AGAINST THE INCOME FROM LEASING OUT THE FACTORY PRE MISES. THUS, WE ARE OF THE OPINION THAT EVEN IF THE CLAIM OF SETTING OFF OF EA RLIER YEAR LOSS WAS NOT ALLOWABLE AS PER THE PROVISO TO SEC. 72(1), THE SAME WOULD AMOUN TS TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WARR ANTING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, IN VIEW OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P LTD (SUPRA) WE DELETE THE PENALTY WITH REGARD TO LEVY OF PENALTY OF SETTING OFF OF EA RLIER YEAR LOSS. 6 IN THE RESULT, THE MISCELLANEOUS APPLICATION FILE D BY THE REVENUE STANDS DISPOSED OFF IN THE TERMS INDICATED IN THE ORDER. ORDER PRONOUNCED ON THE 23 RD DAY OF SEPT 2011. SD/- SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 23 RD , SEPT 2011 RAJ* 5 MANO.258/MUM/2011 A/O ITA NO. 6481/MUM/2009 (ASST YEAR 1998-99 ) COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI