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Income Tax Appellate Tribunal, DELHI BENCHES: ‘D’, NEW DELHI
Before: SMT. BEENA A PILLAI & SHRI PRASHANT MAHARISHI
PER BEENA A PILLAI, JUDICIAL MEMBER
Present penalty appeal has been filed by revenue against order dated 02/03/2015 passed by Ld.CIT(A)-14, New Delhi for Assessment Year 2009-10 on following grounds of appeal:
“ 1. Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) has erred in deleting the penalty u/s 271(1)(c) of Rs.25,83,572/- imposed by the AO? 2. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing.”
2. Brief facts of case are as under: Assessee filed its return of income for relevant year on 30/09/09 declaring total income of Rs.23,97,18,510/-. Ld. AO completed assessment under section 143(3) of I.T.Act, 1961 (the Act) on 17/12/11 at taxable income of Rs. 24,73,90,490/-. Ld. AO made following additions: i) excess claim of depreciation disallowed -Rs. 40, 79, 973/- ii) foreign exchange fluctuation capitalised- Rs.34, 56, 005/- iii) foreign exchange loss disallowed- Rs. 65,000/- 2.1. Assessee accepted additions made by Ld.AO and did not prefer any appeal before Ld.CIT(A). Following which Ld. AO initiated penalty proceedings against assessee for furnishing inaccurate particulars of income under section 271(1) (c) of the Act. Ld. AO has issued notices under section 274 of the Act calling upon assessee to submit details regarding reason for depreciation being claimed at 120% on air pollution control of equipments on items over 120 days and 60% for items below 120 days. 2.2. In response, assessee submitted that it was under bona fide belief that depreciation worked out by software while filing online returns was calculated correctly. In response to foreign exchange fluctuation assessee submitted that company had to pay additional amount of Rs. 33,31,408/-and 4,04,813/-due to fluctuation of US Dollar rate, and as per Accounting Standards 11 exchange difference was to be booked in profit and loss account. 2.3. Ld. AO after considering explanation offered by assessee rejected the same and imposed penalty of Rs.25,83,572/-for furnishing of inaccurate particulars.
3. Aggrieved by penalty order, assessee preferred appeal before Ld.CIT(A), who deleted penalty levied.
4. Aggrieved by order of Ld.CIT(A), revenue preferred appeal before this Tribunal.
At the outset it is recorded that, none has appeared on behalf of assessee and from records placed before us notice issued by this office has not been returned back. Considering smallness of case and that appeal has been filed in year 2015, we do not find it fit to keep it pending. Accordingly we are disposing of this appeal as under.
Ld.Sr.DR submitted that assessee has not furnished reason for claiming 100% on addition, for less than 180 days. She submitted that depreciation allowable on same is only 50%. She further submitted that foreign exchange fluctuation loss should have been capitalised, instead of treating same as revenue expenditure. She placed reliance upon order of Ld.AO.
We have perused submissions advanced by Ld.Sr.DR in light of records placed before us.
From submissions made by assessee before Ld.CIT(A), it is observed that, assessee was under bona fide belief that depreciation calculated by software was correct. Thus in our view assessee was in bona fide belief that it is eligible for depreciation at 120% and that foreign exchange fluctuation loss on account of purchase of sale was a revenue expenditure. It is observed that explanation offered by assessee has not been found to be false by Ld.AO. In our considered opinion, it is a case of wrong claim, which cannot be categorised within ambit of filing of inaccurate particulars. 8.1. Ld.CIT(A) deleted penalty by observing as under: “ 5.3 Now, adverting to the case of the appellant, It is observed that the AO has imposed penalty for furnishing “inaccurate particulars of income’’ by way of claim of additional depreciation of Rs. 40,79,973/- on Air pollution equipments @ 120% and foreign exchange fluctuation losses as revenue expenditure in the profit and loss account. It is noted that during the course of assessment proceedings, the appellant had accepted its mistake of claiming additional depreciation @120% on air pollution equipments and foreign exchange fluctuation loss on account of purchase of assets as revenue expenditure. The appellant company explained that due to the inadvertent mistake, the software used by the appellant company computed additional depreciation @ 120% instead of 100% depreciation on air pollution equipments. Similarly, the appellant company explained that the foreign exchange fluctuation loss on account of purchase of capital assets was inadvertently claimed as revenue expenditure in the profit and loss account due to bonafide mistake in the understanding of accounting standard 11 issued by the institute of Chartered Accountant. However, during the course of assessment, the appellant company agreed to the additions made on the aforesaid accounts and paid the due tax along with interest on the resultant income and did not prefer any appeal in order to avoid unnecessary litigation.
Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise. In this case, undisputedly, the appellant has offered explanation regarding the incorrect claim of additional depreciation and the foreign exchange fluctuation loss as revenue expenditure. However, the aforesaid explanation of the appellant company was not accepted by the Assessing Officer due to the following reasons:- i. That the foreign exchange fluctuation loss should have been capitalized instead of treating the same as revenue expenditure and; ii. The additional depreciation should not have been claimed on the anti pollution equipment @ 120%. It is noted that it is not a case of the Assessing Officer that either the bogus depreciation has been claimed or the assets in the form of air pollution equipments has not been purchased by the appellant company. Similarly, the genuineness of foreign exchange fluctuation loss on account of purchase of assets has not been disputed by the Assessing Officer. During the course of assessment proceedings, only the claim of deduction on account of additional depreciation and foreign exchange fluctuation loss has been disallowed as the same was not found to be allowable as per the Income Tax Act. Thus, it is a case of mere disallowance of claim of deduction on account of additional depreciation and foreign exchange fluctuation loss. As discussed above, in the case of Reliance Petro Product Ltd. (Supra) mere disallowance of claim of expenditure does not attract penalty u/s 271(1)(c). Relying upon the decision of Reliance Petro Products Ltd., the Assessing Officer is hereby directed to delete the impugned penalty.
We do not find any infirmity in view of Ld.CIT(A) and same is upheld. 9.1. Accordingly grounds raised
by revenue stands dismissed.
10. In the result appeal filed by revenue stands dismissed. Order pronounced in the open court on 08th February, 2019.