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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER PRADIP KUMAR KEDIA - AM: The captioned appeal is directed at the instance of the assessee against the order of the appellate Commissioner of Income Tax(Appeals)-XI, Ahmedabad [CIT(A) in short] dated 24/02/2014 arising in respect of the penalty order passed by Assessing Officer (AO)
ITA No.1575/Ahd/2014 N.K. Pharma Industries (now known as NKP Pharma P.Ltd.) vs. ACIT Asst.Year – 2001-02 - 2 - under s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 17/09/2012 relevant to Assessment Year (AY) 2001-02.
The solitary grievance of the assessee is towards confirmation of penalty under s.271(1)(c) of the Act on excess claim of depreciation of Rs.11,26,823/- in the Asst.Year 2001-02.
The Ld.AR for the assessee at the outset submitted that assessee is engaged in the business of manufacturing of pharmaceutical plant and machineries. It has undertaken forward integration project for manufacturing of pharmaceutical drugs and has set up another unit during the year. As corollary, the said unit for manufacturing of pharma drugs was claimed as an extension of same business. The assessee thus inter alia claimed depreciation allowance of Rs.22.53 lakhs for the full year on the machineries installed. It was thereafter submitted that in the course of quantum proceedings before the ITAT, the assessee itself voluntarily conceded that the depreciation claim on such assets should be restricted to 50% of the amount calculated as the asset were put to use in the second half of the financial year on 15/03/2001which is less than stipulated period of 180 days. The Ld.AR accordingly contended that the mistake committed towards excess claim of depreciation was offered without there being any finding or enquiry by the lower authorities in this regard. The Ld.AR exhorted that the AO or the CIT(A) at no stage had pin-pointed that asset was put to use for less than 180 days. The
ITA No.1575/Ahd/2014 N.K. Pharma Industries (now known as NKP Pharma P.Ltd.) vs. ACIT Asst.Year – 2001-02 - 3 - disallowance of depreciation claimed together with other incidental expenses towards business were made by revenue on an altogether different footing i.e. another unit is distinct undertaking and not an extension of the existing undertaking. The Ld.AR thus submitted that notwithstanding the fact that depreciation claim was wrongly made for the entire year, the mistake committed is bonafide and calls for benign view.
The Ld.DR, on the other hand, relied upon the order of the CIT(A).
We have perused the orders of the authorities below. The maintainability of levy of penalty under s.271(1)(c) on wrong and excess claim of depreciation allowances is in question. It is the case of the assessee that a bonafide error committed by the assessee was voluntarily corrected without being noticed by the Revenue. The depreciation ought to have been claimed at half of the full years depreciation eligible to the assessee since the asset was put to use in the second half of the financial year. The Revenue, on the other hand, contends that such wrongful claim of the depreciation in contravention of the statutory provisions is susceptible to penalty proceedings. We find ourselves in agreement with the plea raised on behalf of the assessee that the mistake committed was in the realm of a bonafide mistake. The depreciation on the assets have been claimed for the full year without taking cognizance of the date on
ITA No.1575/Ahd/2014 N.K. Pharma Industries (now known as NKP Pharma P.Ltd.) vs. ACIT Asst.Year – 2001-02 - 4 - which asset was put to use. The mistake was ratified eventually without any exertion of the Revenue. Coupled with this, we also find that the assessee had filed return of income declaring loss of Rs.12.30 lakhs. Therefore absence of any apparent motive towards tax saving by claim of excessive depreciation appears absent. Noticeably, any excessive claim of depreciation in one year finally gets neutralized and nullified over a period of time. Thus, we do not see any attributes of falsity in the claim per se. In view of aforesaid mitigating circumstances, the penalty under s.271(1)(c) of the Act on excess claim of depreciation deserves to be cancelled.
In the result, appeal of the assessee is allowed. This Order pronounced in Open Court on 09/ 10 /2017
Sd/- Sd/- (महावीर �साद) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 09/ 10 /2017
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
ITA No.1575/Ahd/2014 N.K. Pharma Industries (now known as NKP Pharma P.Ltd.) vs. ACIT Asst.Year – 2001-02 - 5 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XI, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 28.9.17 (dictation-pad 10-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …28.9.17 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….9.10.17 7. Date on which the file goes to the Bench Clerk…………………9.10.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………