Income Tax Appellate Tribunal - Madras
Deputy Commissioner vs Texmo Industries on 24 February, 1995
Equivalent citations: [1995]53ITD370(MAD)
ORDER
G. Chowdhury, Judicial Member
1. The Revenue has files the instant appeal against the order of the Commissioner (Appeals) by which penalty under Section 271(1)(c) was cancelled.
2. In the return for the assessment year 1983-84 the assessee claimed depreciation and investment allowance on two machines, namely turret lathe and a multi-spindle boring machine showing that the machines were installed on 31-3-1983, that is the last day of the previous year and the machines were used for one day only in the said previous year. The Assessing Officer on enquiry found that one machine was despatched from Bangalore on 30-3-1983 and the other machine from Harihar on 29-3-1983. However, he was not satisfied about the claim that the machines were installed on 31-3-1983 by the assessee. On appeal the Commissioner (Appeals) by his order dated 30-1-1987 confirmed the order of the Assessing Officer. Against the said order the assessee did not move before the Tribunal.
3. At the time of assessment the Assessing Officer initiated penalty proceedings under Section 271(1)(c) for claiming the depreciation and investment allowance in respect of the two machines. By order dated 30-3-1988 the minimum penalty of Rs. 10,91,574 was imposed. Being aggrieved by the said order the assessee moved before the Commissioner (Appeals) and by order dated 26-10-1988 the appeal was allowed by the Commissioner (Appeals) cancelling the penalty imposed by the Assessing Officer. Against the said order the Revenue is in appeal before us.
4. On behalf of the Revenue it was submitted that the penalty order was rightly passed by the Assessing Officer as the assessee had furnished inaccurate particulars of its income and claimed depreciation and development allowance for the two machines which was turned down by the Assessing Officer as well as the first appellate authority. Regarding quantum the assessee did not challenge the order of the first appellate authority. Hence the said order is final. It was further contended on behalf of the Revenue that the assessee did not produce any evidence to show that the machines were installed and Commissioned even for a single day. However, the Revenue did not dispute the fact that the machines were purchased by the assessee on two different dates and those were sent by the different parties to the assessee. The main argument on behalf of the Revenue was that the fact of installation and commissioning was not proved by the assessee. The further argument on behalf of the Revenue was that the Commissioner (Appeals) while cancelling the penalty has held that the Revenue had failed to prove that the explanation offered by the assessee was not genuine. Reliance was placed upon the decision of the Madras High Court in the case. CIT v. E.V. Rqjan [1985] 151 ITR 189; in the case of K.P. Kandasami Mudaliar & Sons v. CIT [1985] 156 ITR 638 (Mad.) and also in the case of CIT v. Krishna & Co. [1979] 120 ITR 144 (Mad.). On behalf of the assessee it was submitted that the order passed by the first appellate authority requires no interference because the same order was passed after taking into consideration all the circumstances of the case. On behalf of the assessee documents were filed along with the paper-book to show that in fact the machines were despatched on 29th March and 30th March, 1983. At page 14 of the paper-book a bill dated 30th March, 1983 issued by the HMT Ltd., Bangalore was furnished to show that the machine was sent on 30th March, 1983. To substantiate the said fact the receipt of the transport company has also been filed which shows that the machine reached Coimbatore on 31-3-1983 and it was delivered on the same day to the assessee-company. The signature of the person taking delivery on behalf of the assessee is also there. The gate pass issued by the check post during the transit also finds place in the paper-book which is also dated 31-3-1983. Similarly for the other machine the delivery note issued by M/s. Mysore Kirloskar Ltd. was dated 29-3-1983, which was also filed with the paper-book. In the said delivery note the destination was mentioned as Coimbatore (door delivery). The said machine was transported by the Transport Corporation of India, which was received at the Coimbatore branch of the transport company and was delivered to the assessee-company on 30-3-1983, which is supported by the receipt dated 30-3-1983, a copy of which has been filed along with the paper-book. Apart from those documents a certificate issued by the Works Manager of the assessee-company is also on record which goes to show that the two machines were put to use before 31-3-1983 and it was possible only because those machines were fully tooled up and did not require any foundation for installation. Taking into consideration the aforesaid evidence the Commissioner (Appeals) has rightly cancelled the penalty. It was argued on behalf of the assessee that the genuineness of the claim has been shown. Reliance was placed upon the order of the Madras Bench 'D' of the Tribunal in the case of Ramalakshmi Spinners (P.) Ltd. v. ITO [1990] 33 ITD 327. It was further argued that since the penalty proceeding is altogether a distinct proceeding, it has nothing to do with the quantum appeal at least on the facts of the present case. It was further argued that even in a case where the machine was ready for operation but actually it was not operated, still the assessee is entitled to claim depreciation and investment allowance. Reliance was placed upon the decision of the Delhi High Court in the case of Capital Bus Service (P.) Ltd. v. CIT [1980] 123 ITR 404.
5. We have heard the parties. In the present case it appears from the arguments of both the sides that since the claim for depreciation and investment allowance was made by the assessee in respect of the two machines, the penalty proceeding was initiated. It is true that the penalty proceeding is altogether a separate proceeding than the assessment proceeding. In the case of CIT v. Anwar Ali [1970] 76 ITR 696 (SC) it was held that penalty could be imposed only on a reasonable conclusion that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. An argument was advanced on behalf of the Revenue that after the amendment by which the word 'deliberately' was taken out from the statute, the decision in Anwar Ali's case is not applicable. It is true that the word 'deliberately' has been taken out from the statute, still all cases where the assessee fails in quantum appeals cannot attract penalty proceedings. If the action of the assessee is bona fide, no penalty can be imposed because the penalty proceedings are quasi-criminal in nature. In a similar type of case in CIT v. Indian Metals & Ferro Alloys Ltd. [1995] 211 ITR 35 the Orissa High Court has observed as under :
The word 'installed' used in the statute means to induct or introduce or place an apparatus for service or use. The assessee felt that its claim was supportable by various decisions, for example, CIT v. Vayithri Plantations Ltd. [1981] 128 ITR 675 (Mad.), Capital Bus Service (P.) Ltd. v. CIT [1980] 123 ITR 404 (Delhi) at pages 413 and 414, Whittle Anderson Ltd. v. CIT [1971] 79 ITR 613 (Bom.) and CIT v. Vishwanath Bhaskar Sathe [1937] 5 ITR 621 (Bom.). Reliance was also placed on a decision of the Tribunal in the case of Hindustan Aluminium Corporation Ltd. v. ITO in ITA No. 1752 (Cal.) of 1976-77. It was held in that case that when power was not available though the plant was ready for commencement of business, the claim for depreciation and development rebate was allowable. The Revenue's reference applications under Section 256(1) and 256(2) were rejected by the Tribunal and the Calcutta High Court, respectively. When a claim is made with reference to several decisions and a view of the Tribunal, it cannot be said that the claim was not bona fide. The assessee claimed the expenses as revenue expenditure because according to it the second unit went into production during the previous year. The income-tax authorities, however, did not accept the plea and directed these expenses to be capitalised. Whether the assessee is entitled to claim the expenses as revenue expenditure or capital expenditure is a legal claim and simply because the legal claim has not been accepted, it cannot be said that the assessee concealed any income without furnishing any proof.
In that case also the assessee claimed the investment allowance and depreciation although the machines could not be commissioned for want of power. The Tribunal as well as the Hon'ble High Court held that simply because the claim has not been accepted it cannot be said that the assessee concealed any income without furnishing any proof. In the present case also as we find from the order of the Commissioner (Appeals) as well as the documents furnished before us (which were before the authorities below) that in fact the machines were sent by the parties in the name of the assessee and the delivery was also taken by the assessee on 30-3-1983 and 31-3-1983. Accordingly, the Commissioner (Appeals) held that it cannot be said that it was impossible to commission the machines on 31 -3-1983. In this regard the observation made by the Commissioner (Appeals) in the quantum appeal is also important to note, in which it was observed that the evidence available regarding the installation and commissioning of these two machines is therefore very weak and does not support the assessee's case. From the tenor of the said order, also it cannot be said that there was no evidence at all for coming to the conclusion with regard to the installation and commissioning of the machines. The word 'installed' as held in the decision in Indian Metal & Ferro Alloys Ltd.'s case (supra), means to induct or introduce or place an apparatus for service or use. In the present case the assessee felt that even for a single operation after installation, is entitled to depreciation and investment allowance and hence the same was made by it. Ultimately it was refused and that refusal alone cannot be the basis of penalty proceedings. In CIT v. Offshore India Ltd. [1994] 209 ITR 473 the Calcutta High Court has held that there must be deliberateness in not abiding by a legal requirement and a bona flde belief as to non-applicability of a provision precludes initiation of penalty proceedings.
6. Taking into consideration the circumstances mentioned above we are not inclined to interfere with the order passed by the Commissioner (Appeals). In the result the departmental appeal is dismissed.