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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
Date of Hearing – 15.02.2018 Date of Order – 21.02.2018
O R D E R PER SAKTIJIT DEY, J.M.
Instant appeal by the assessee is against order dated 3rd October 2017, passed by the learned Commissioner (Appeals)–3, Thane, for the assessment year 2014–15.
Brief facts are, the assessee a partnership firm is engaged in the manufacturing and printing of cartons and labels. For the assessment year under dispute, the assessee filed its return of income on 23rd
2 M/s. Unipak September 2014, declaring nil income. During the assessment proceeding, on verifying the audit report and Profit & Loss account, the Assessing Officer found that the assessee had claimed additional depreciation of ` 65,77,362, on account of addition made to the fixed assets during the relevant previous year. However, on verifying the bills submitted by the assessee, the Assessing Officer found that the assessee had purchased second hand machineries from a party in France and sister concern during the financial year 2013–14. Being of the opinion that the assessee is not eligible to claim additional depreciation, the Assessing Officer issued a notice to the assessee on 9th September 2016, requiring it to show cause why the claim of additional depreciation should not be disallowed. As stated by the learned Authorised Representative, the assessee agreed for disallowance of additional depreciation of ` 65,77,362 before the Assessing Officer. Thus, ultimately, the Assessing Officer disallowed assessee’s claim of additional depreciation and added the amount of ` 65,77,362, to the income of the assessee. While doing so, the Assessing Officer also initiated proceedings for initiation of penalty under section 271(1)(c) alleging furnishing of inaccurate particulars of income. In response to the show cause notice issued under section 274 r/w section 271(1)(c), though, the assessee filed its explanation and requested to drop the penalty proceedings, however, the Assessing Officer passed an order imposing penalty of ` 20,32,405
3 M/s. Unipak under section 271(1)(c). Being aggrieved of the penalty order passed by the Assessing Officer, assessee preferred appeal before the first appellate authority.
The learned Commissioner (Appeals) after considering the submissions of the assessee, however, upheld the order passed by the Assessing Officer imposing penalty under section 271(1)(c) of the Act.
Learned Authorised Representative submitted, though in the assessment order, the Assessing Officer recorded his satisfaction for initiating penalty proceedings under section 271(1)(c) alleging furnishing of inaccurate particulars of income, however, in the show cause notice issued under section 274 r/w 271(1)(c) the Assessing Officer has not specified whether he intends needs to impose penalty for concealment of income or furnishing of inaccurate particulars of income as he has not struck–off the inappropriate words. He further submitted, while imposing the penalty in the penalty order also the Assessing Officer has mentioned both the limbs of section 271(1)(c). Therefore, he was not sure which limb of section 271(1)(c) was violated by the assessee. Learned Authorised Representative submitted, for the aforesaid reason, the imposition of penalty under section 271(1)(c) cannot be sustained. As regards the merits of the issue, the learned Authorised Representative submitted, disallowance of a claim made by the assessee would not result in imposition of 4 M/s. Unipak penalty even if the assessee accepts the addition. In this context, he relied upon the decision of the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC).
Learned Departmental Representative on the other hand submitted that during the assessment proceedings the wrong claim made by the assessee with regard to additional depreciation was discovered by the Assessing Officer and when this fact was pointed out to the assessee he immediately accepted the disallowance. Thus, the learned Departmental Representative submitted, the assessee has knowingly made a wrong claim to reduce its income. Further, she submitted, merely because the specific limb of section 271(1)(c) was not marked out in the show cause notice under section 274 of the Act, it will not invalidate the penalty order.
We have heard rival submissions and perused material available on record. We have also applied our mind to the decisions relied upon. At the outset, we propose to deal with learned Authorised Representative’s argument on the validity of the penalty order on the ground of non–striking–off of inappropriate words in the show cause notice under section 274 r/w section 271(1)(c). As far as the factual aspect of the issue is concerned, there is no dispute that the assessee had claimed additional depreciation of ` 65,77,362, which was disallowed by the Assessing Officer while completing the assessment
5 M/s. Unipak and the assessee has accepted such disallowance without contesting it any further. It is observed, while making disallowance of additional depreciation in the assessment order,, the Assessing Officer has also recorded his satisfaction for initiation of proceedings for imposition of penalty under section 271(1)(c) alleging furnishing of inaccurate particulars of income. Though, in the show cause notice dated 6th October 2016, issued under section 274 r/w section 271(1)(c) of the Act, the Assessing Officer has not specified the exact limb of section 271(1)(c) for which he intends to impose penalty by striking–off inappropriate words, however, while imposing penalty under section 271(1)(c) in the order the Assessing Officer has concluded that the assessee has furnished inaccurate particulars of income. Merely because in the table for quantification of penalty the Assessing Officer has mentioned the words “the total income as reduced by the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished”, for that reason alone, the penalty proceedings cannot be vitiated. A perusal of Para–9 of the impugned penalty order would make it clear that the Assessing Officer has imposed penalty alleging furnishing of inaccurate particulars of income which is the exact charge for which the Assessing Officer initiated penalty proceedings while completing the assessment. Therefore, the assessee’s contention that penalty order passed is invalid cannot be accepted. The reliance by the learned Authorised
6 M/s. Unipak Representative on the decisions placed before us including the decision of the Hon'ble Jurisdictional High Court in Samson Perinchery is equally misplaced, since, in that case, the Hon'ble Jurisdictional High Court has held that if penalty proceedings while completing the assessment proceedings is initiated for one limb penalty cannot be imposed for violation of another limb. Facts in assessee’s case are different as the Assessing Officer has not only initiated proceedings for imposition of penalty in the assessment order alleging furnishing of inaccurate particulars of income but while imposing penalty also, he has brought the very same charge. That being the case, we do not find merit in the submissions of the learned Authorised Representative regarding the validity of the penalty order. Having held so, we are now to examine the issue on merit. As could be seen from the facts on record, the assessee had claimed additional depreciation of ` 65,77,362, on account of addition to the fixed asset during the year. The Assessing Officer himself has stated in the assessment order that this fact was noticed by him from the audit report as well as Profit & Loss account. Further, he has stated that on verification of bills submitted by the assessee, he found that the assessee is not eligible to claim additional depreciation as they are second hand machineries. It further appears, when the Assessing Officer issued a show cause notice to the assessee proposing to disallow additional depreciation on the aforesaid reasoning, the assessee vide letter dated 10th September
7 M/s. Unipak 2016, has agreed for addition of the additional depreciation without making any admission that the claim was wrongly made. Undisputedly, the Assessing Officer has initiated proceedings for imposition of penalty alleging furnishing inaccurate particulars of income and has ultimately imposed the penalty on the said charge. Further, materials on record clearly suggest that the assessee had furnished full particulars of its claim relating to additional depreciation. That being the case, disallowance of deduction claimed by the assessee by itself would not result in furnishing of inaccurate particulars of income so as to invite levy of penalty under section 271(1)(c). In this context, we refer to the decision of the Hon'ble Supreme Court in Reliance Petroproducts Pvt. Ltd. (supra). In view of the above, we are of the considered opinion that the assessee having made a claim of additional depreciation which was disallowed by the Assessing Officer, it does not result in furnishing of inaccurate particulars of income. Therefore, penalty imposed under section 271(1)(c) of the Act is unsustainable. Accordingly, we delete the same.
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 21.02.2018