Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “E”, BENCH MUMBAI
Before: SHRI PAWAN SINGH, JM & SHRI G. MANJUNATHA, AM
आदेश / O R D E R आदेश आदेश आदेश
PER G.MANJUNATHA (A.M):
This is an appeal filed by the assessee is directed against order of the Commissioner of Income Tax Appeals – 20, Mumbai dated 09/02/2016 and it pertains to the Assessment Year 2010-11. The assessee has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and law, the Commissioner of Income-tax (Appeals) was not justified in confirming the levy of penalty of under section 271(1)(c) of Income Tax, 1961 for in respect of the wrong claim of depreciation and holding the same furnishing inaccurate particulars of income. 2. The appellant submits that the appellant has not furnished inaccurate particulars of income and as such the levy of penalty u/s 271(1)© is unwarranted on the facts on the circumstances of the case.
The appellant craves lave to, add to, alter or vary the grounds of appeal at or before the hearing of the appeal.
2 ITA No.3397/Mum/2016 M/s. Cana Glass Ltd.,
The brief facts of the case are that the assessee company is
engaged in the business of manufacture of glass bottles. As per the
Directors Report, the assessee company has discontinued its business
operations since 20/02/2003. However, the assessee company had
debited depreciation of Rs. 9,07,153/- and other expenses of
Rs.8,55,459/- into profit and loss account. The AO disallowed expenses
and depreciation claimed on plant machinery on the ground that when
business operations were discontinued the question of allowances of
expenses and depreciation does not arises. Thereafter the AO initiated
penalty proceedings u/s. 271(1)(c) and after considering relevant
submissions of the assessee and also relied upon the decision of Hon’ble
Delhi High Court in the case of CIT vs. Zoom Communication (P) Ltd.
[2010] (327 ITR 510) levied penalty of Rs. 5,50,000/- which works out to
100% of tax sought to be evaded. The assessee carried the matter in
appeal before the CIT(A), but could not succeed. The CIT(A), for the
detailed reasons recorded in this appellate order confirmed penalty levied
by the AO in respect of wrong claim of depreciation amounting to Rs.
9,07,153/- however, deleted the penalty levied in respect of claim by
expenses of Rs. 8,55,459/-. Aggrieved by the CIT(A) order, the assessee
is in appeal before us.
Ld. AR for the assessee, at the time of hearing, submitted that this
is covered in favour of the assessee by the decision of ITAT ‘D’ Bench
3 ITA No.3397/Mum/2016 M/s. Cana Glass Ltd.,
Mumbai, in assessee’s own case for AY 2009-10 where under identical
set of facts on similar additions, the Tribunal deleted penalty levied by the
AO. The Ld DR, on the other hand, fairly accepted that a similar issue has
been decided in favour of the assessee for earlier year, however, he
strongly supported order of the AO as well as the CIT(A).
We have heard both the parties and perused the material available
on record. We find that the Tribunal has considered an identical issue of
penalty levied u/s 271(1)(c) of the Act, in respect of wrong claim of
deprecation on plant machinery and after considering relevant
submissions held that when the basis for disallowance of expenses as
well as depreciation was similar, that is non carrying out of business
activity in the instant year and also fact that penalty levied in respect of
disallowance expenses has been deleted by the CIT(A), there is no
reason for the Ld. CIT(A) to sustained penalty in respect of wrong claim of
depreciation on plant machinery. The relevant findings of the Tribunal are
as under:
We have carefully perused the material on record in the light of the contentions of the parties. The Ld. CIT(A) has confirmed the penalty on disallowance of claim of depreciation holding that since the assets were not used and there were no business activities during the previous year the assessee is not entitled for the said claim, therefore the assessee is liable to be penalized u/s 271(1)(c) of the Act for claiming wrong and inadmissible claim. We further notice that the coordinate Bench of the Tribunal has deleted the penalty levied in the similar set of facts and circumstances of the case in assessee’s own case for the assessment year 2007-08 aforesaid. The operative part of the said order reads as under:- “6.We have considered the rival submissions. The learned representative for the assessee has explained the circumstances in which the return of income was filed by the assessee, including the facts that proper professional advice was not available. It has also been explained that the business of the assessee was lying discontinued on
4 ITA No.3397/Mum/2016 M/s. Cana Glass Ltd.,
account of labour trouble and it was facing financial hardships also. It is also emerging from the record that assessee had significant past losses. Considering the entirety of circumstances, in our view, a mere mistake in making of claim in the return of income would not ipso facto lead to the conclusion of concealment of income or furnishing of inaccurate particulars of income for the purpose of Sec.271(1)(c) of the Act. Quite clearly, in the present case the wrong claim of depreciation made by the assessee cannot be construed to have been made with an intention to evade taxes inasmuch as even before the allowance of deposition, the resultant income of the assessee is a loss and it had significant past losses, which have also remained unabsorbed. It has been pointed out by the assessee that such losses have lapsed on account of not being set off against income within the stipulated period. Considering the entirety of circumstances, in our view, the disallowance of depreciation in the instant year is a mistake and does not invite the provisions of Sce271(1)(c) of the Act. Notably, the Assessing Officer had also disallowed certain expenses debited in the Profit and Loss Account for the reason that the business of the assessee was discontinued, and on such disallowance also the Assessing Officer had levied penalty. The penalty in relation to disallowance of expenses has been deleted by the CIT(A). Clearly, the basis for disallowance of depreciation as well as expenses was similar, i.e. non-carrying out of any business activity in the instant year. Thus, if the basis of disallowance of the two claims was similar, and if one has been found not eligible to penalty u/s 271(1)(c) of the Act by the CIT(A), we find no justifiable reason for the CIT(A) not to delete the penalty with respect to the other claim. Therefore, for all aforesaid reasons, we deem it fit and proper to direct the Assessing Officer to delete the penalty imposed in relation to the denial of claim of depreciation also.” 7. Since, the coordinate Bench has deleted the penalty confirmed by the CIT(A) in a similar set of facts and circumstances in assessee’s own case for the assessment year 2008-09, we do not find any reason to deviate from the view taken by the coordinate Bench. Hence respectfully following the decision of the coordinate Bench we set aside the findings of the Ld. CIT(A) and direct the AO to delete the penalty imposed in relation to the denial of claim of depreciation in this case.
In this view of the matter and consistent with view taken by the Co-
ordinate Bench, we are of the considerd view that the AO as well as Ld.
CIT(A) were incorrect in levying penalty u/s 271(1)(C) of the I.T.Act, 1961
in respect of disallowance of the depreciation. Hence, we direct the AO to
delete the penalty levied u/s.271(1)(c) of the Income Tax Act, 1961.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on this 31/07/2019
5 ITA No.3397/Mum/2016 M/s. Cana Glass Ltd.,
Sd/- Sd/-
(PAWAN SINGH) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 31/07/2019 Thirumalesh Sr.PS
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, स�यािपत �ित //True Copy// (Asstt. Registrar) ITAT, Mumbai