Income Tax Appellate Tribunal - Delhi
Super Cassettes Industries Ltd., New ... vs Department Of Income Tax on 31 May, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'G': NEW DELHI)
BEFORE SHRI RAJ PAL YADAV, JUDICIAL MEMBER
And
SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
ITA No.4788/DEL/ 2011
(Assessment Year : 1999-00)
JCIT(OSD) Vs. Super Cassettes Industries Ltd.
Circle-9(1), Room No.163, Plot No.3 & 3A, Film City
C. R. Building, Sector-16A
New Delhi. NOida.
PAN:AABCS4712P
ASSESSEE BY : Shri Hiren Mehta, C.A,
REVENUE BY :Smt. Nidhi Srivastava, Sr.DR
ORDER
PER T.S. KAPOOR, AM:
This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-XII New Delhi dated 31.05.2011 for the assessment year 1999-2000. The grounds taken by the Revenue are as under:
"1. The Ld. CIT (A) erred in law and on the facts and circumstances of the case in canceling the penalty of Rs.29,99,293/- imposed by the Assessing Officer u/s 271(1)
(c)."
2. The appellant craves, to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
2 ITA No.4788/Del/2011
2. The brief facts of the case are that assessment in this case was completed vide order dated 28.03.2002. The assessment was completed after making the following additions/ disallowances (1) Disallowance of Brought forward losses of M/s Mandakini Aqua Minerals Pvt. Ltd.
(2) Addition due to Under valuation of closing WIP of Rs. 1,92,885/-. (3) Disallowance on account of excess claim of deduction u/s 80HHC. (4) Disallowance of Penalty paid in pursuance of order of the Commissioner of Central Excise.
(5) Disallowance of Depreciation in respect of film city and C-35.
3. The Assessing Officer also initiated penalty proceedings u/s 271(1)
(c) of the Income Tax Act and imposed a penalty of Rs.29,99,293/- vide order dated 29.04.2010.
4. Aggrieved with the order the assessee filed appeal before Ld. CIT (A) and LD CIT (A) deleted the penalty imposed by Assessing Officer by recording his findings qua each disallowance/addition. The operative part of findings of Ld. CIT (A) are reproduced below:
Brought forward losses of M/s Mandakini Aqua Minerals Pvt. Ltd.
"12. I have considered the submissions of the appellant and the penalty order. On the basis of facts brought on record it is evident that at the point of filing the return for A. Y. 1999-00, the appellant company i.e. Super Cassettes Industries Ltd. was 3 ITA No.4788/Del/2011 eligible to claim the losses of the amalgamating company i.e. Mandakini Acqua Mineral Pvt. Ltd. However, by the time the assessment of Super Cassettes Industries Ltd. was taken for scrutiny proceedings it had discontinued the business of bottling of mineral water due to economic reasons. As such it got disentitled for set off of the past losses of Mandakini Acqua Mineral Pvt. Ltd. due to restrictions imposed by Section 72A of the Income Tax Act. Hence, mere disallowance of this loss of Rs.68,85,252/- by itself would not lead t a conclusion of concealment. The attendant facts and circumstances would also have to be examined which are clearly in favour of the appellant. In the above cited case relied upon by the appellant vis. CIT vs. Reliance Petro Products Ltd. (supra) it has been held by the Apex Court that there is a difference between a wrong claim and a false claim. Based on this proposition, it is the submission of the appellant that the claim for losses made in the return was later on turned out to a wrong claim due to discontinuance of line of activity, which is true. Hence, the penalty for concealment levied on this account is hereby deleted. In the result this ground of appeal is allowed."
Under valuation of closing WIP of Rs. 1,92,885/-.
"16. I have considered the penalty order and the submissions of the appellant and also the above relied order of the ITAT. The findings of ITAT on this issue are that the addition enhancing the value of closing WIP has been made on estimate basis. Neither any quantity was found in excess nor was any rate difference on the basis of which addition has been made to work in progress. The WIP indicates the value added in the raw material by way of any process undertaken by the assessee. It is just estimation of further expenditure put by the assessee after procurement of raw material before converting the same into finished product. Any addition made by having a difference estimation being upheld in quantum proceedings would not attract levy of penalty. Consequent upon the same, the issue relating to imposing of penalty stands in favour of the assessee.
17. Respectfully, following the order of ITAT referred above, on this issue, it is held that levy of penalty with respect 4 ITA No.4788/Del/2011 to under valuation of closing WIP is covered by the decision of ITAT and hence penalty is required to be deleted. This ground of appeal is therefore allowed."
Disallowance on account of excess claim of deduction 80HHC.
26. Identical issue involving levy of penalty had cropped up in appellant's own case for A. Y. 2000-01, 2001-02 and 2004-
05. The relevant portion of my predecessor's order on this issue reads as under:
"5.5 The submission given by the appellant has been considered and it is observed that the disallowance made by the Assessing Officer was modified by the CIT (A) and the Hon'ble ITAT had also given the direction to re-compute the deduction u/s 80HHC. Thus, considering the fact of the case and the items which were to be excluded for the purposes of calculating deduction u/s 80HHC, the Hon'ble ITAT also relied on the decision of CIT vs. K Ravindernathan Nair 295 ITR 228. In the aforementioned judgment, the Hon'ble Supreme Court had reversed the finding of the High Court as well as the Hon'ble ITAT by deciding the issue in favour of the Revenue. Thus, till the stage of High Court the decision was in favour of the appellant, which goes to show that this was a debatable issue.
5.6 Similarly, coming to the issue of sale of scrap the Hon'ble Madras High Court in the case of CIT vs Shiva Distilleries (Mad) 293 ITR 108 has held that profit from sale of scrap and waste material is to be excluded from profits of the business under cl. (Baa) to sec.80HHC. This again goes to show that issue regarding sale of scrap was a dispute issue and since the Department had gone in appeal before the Hon'ble High Court, it is implied that the Tribunal had given the decision in favour of the appellant. In fact the amounts which go to constitute the numerator as well as the denominator have remained a matter of conflict between the Department and the assessee and the same has been resolved through different judicial pronouncements. Thus, a different stand taken by the appellant for computing the deduction u/s 80HHC cannot 5 ITA No.4788/Del/2011 amount to concealment of income or furnishing inaccurate particulars of income. Thus, this issue is also decided in favour of the appellant and the penalty of Rs.1,01,463/- imposed u/s271(1) (c) is hereby cancelled."
27. I am in agreement with the above reproduced findings and respectfully following the same penalty levied on part disallowance of deduction u/s 80HHC is hereby deleted. In the result this ground of appeal is allowed."
Penalty paid in pursuance of order of the Commissioner of Central Excise Rs.2,50,000/-.
"I have considered the penalty order and the submissions of the appellant on this issue. The question regarding allowability of expenditure towards excise duty demands deposited under the Kar Vivad Samadhan Scheme is a debatable issue. This is substantiated by the fact that the quantum of disallowance was reduced by the CIT (A) from Rs.3 lacs to Rs.2.50 lacs in appeal. This action has been further upheld by the ITAT. It is a well accepted proposition that mere sustenance of addition in quantum proceedings cannot ipso facto lead to levy of penalty for concealment. The Assessing Officer apart from relying upon the quantum proceedings has not brought on record any material to show that there was a willful attempt on the part of the appellant to reduce its tax liability. It is rather a case of debatable issue where more than one view is possible on the allowability of expenditure. The ratio laid down by the Apex Court in the case CIT vs. Reliance Petro Products Ltd. (supra) would therefore be applicable in this case. Hence the penalty levied on account of disallowance of expenditure of Rs.2.50 lacs is hereby deleted. In the result this ground of appeal stands allowed.
Depreciation in respect of film city
37. I have considered the penalty order and the submissions of the appellant on this issue. From the facts brought on record it emerges that the claim for higher rate of depreciation @ 25% on studio building as against the rate of 10% provided in the I. 6 ITA No.4788/Del/2011 T. Rules was based upon the judicial decisions of various High Courts which were in favour of the assessee. As it turned out the Supreme Court later on reversed these orders by holding that depreciation on theatre building and other such buildings had to be allowed only at the rate prescribed in the I. T. Rules i.e.10%. Thus the issue regarding eligible rate of depreciation on Studio building is a debatable issue a remained contentious till it was finally settled by the Supreme Court. The action of the appellant in claiming higher rate of depreciation based upon judicial decisions of various high courts cannot therefore be termed as concealment. Accordingly, penalty on this ground is deleted."
5. Aggrieved with the deletion of penalty the revenue is in appeal before us. At the outset the Ld. Departmental Representative submitted that there is a delay of 48 days in filing of the appeal and invited our attention to petition filed by Revenue for condonation of delay placed in file and it was prayed that since the delay has occurred due to inadvertent lack of communication and appeal involves significant tax implication, therefore, delay may be condoned.
6. The Ld. AR had no objection in condonation of delay. On merits the Ld. Departmental Representative submitted that 5 additions were made by Assessing Officer which were not contested by assessee and, therefore, they had become final and, therefore, penalty imposed by Assessing Officer was wrongly deleted by Ld. CIT (A).
7. The Ld. AR on the other hand submitted that penalty for similar additions in earlier years on account of addition at serial no.2 and 3 were 7 ITA No.4788/Del/2011 deleted by Hon'ble ITAT in the case of assessee itself and our attention was invited to ITAT order for assessment year 1997-98 and 1998-99 in ITA Nos. 4893 and 4894 pronounced on 23.03.2012 and our specific attention was invited to page no.3,6,9,11 and 15. It was argued that the Hon'ble ITAT had deleted the penalty u/s 271 (1) (C) in those years imposed under similar circumstances and since the facts and circumstances of the present case remain same, the penalty imposed on account of these two additions were covered in favour of the assessee.
8. Regarding penalty imposed on account of brought forward losses of Mandakini Acqua Mineral Pvt. Ltd., it was argued that the said company was merged with the assessee company w.e.f. 1st April, 1998 and as per provisions of Section 72A the brought forward losses to the extent of Rs.68,85,252/- were set off against the assessee's income for A. Y. 1999- 2000. It was further submitted that however the business of manufacture and sale of mineral water as done by amalgamating company was discontinued w.e.f. 30.06.2001 and, therefore, the conditions for carrying and setting off loss u/s 72A were violated however since the return was already filed and the date of filing revised return had also expired therefore, there was no option left with the assessee for revising the same but when Assessing Officer enquired about this carried forward loss the same was immediately 8 ITA No.4788/Del/2011 surrendered. However there was no filing of inaccurate particulars as complete particulars were filed at the time of filing of return. The assessee was under bonafide belief that it will continue to carry on the business of amalgamating company for a period of five years and, therefore, had claimed the loss of amalgamating company. At the time of filing of return it was not known that assessee will discontinue its business. Therefore, it was argued that it was not false claim and Ld. Commissioner of Income Tax (appeals) had rightly deleted the penalty alter relying upon the case law of CIT vs. Reliance Petro Products Ltd. (supra) decided by Hon'ble Supreme Court.
9. As regards penalty imposed by Commissioner of Central Excise, it was submitted that Ld. CIT (A) had reduced the addition from Rs.3 lacs to Rs.2.5 lacs and, therefore, it was a debatable issue and where more than one view was possible the penalty u/s 271(1) (c) cannot be imposed and, therefore, Ld. CIT (A) had rightly deleted the penalty on this account also. As regards penalty due to excessive claim of depreciation, it was argued that assessee had claimed depreciation @ 25% on studio buildings on the basis of decision of Madras High Court in the case of A. V. Mevyyappa Chettiar and the decision of full bench of Kerla High Court in the case of Anand 9 ITA No.4788/Del/2011 Theaters which remained in favour of assessee till 12.05.2000 when Hon'ble Supreme Court reversed the same. It was further argued that assessee had filed return of income on 31.12.1999 with a bonafide belief that it was eligible for depreciation @ 25%.
10. We have heard the rival contentions of both the parties and have gone through the material placed on record. First of all delay in filing the appeal is condoned. We find that penalty was imposed due to five additions out of which two additions on similar grounds were made by Assessing Officer in A. Y. 1997-98 and 1998-99. In respect of these two additions ITAT in ITA Nos. 4983 and 4984 had deleted the penalty imposed by Assessing Officer by relying upon the earlier decision of Tribunal under similar circumstances. The concluding findings are contained at para 5.1 and para 12.4 of the said order. Out of two one addition was exactly on similar grounds i.e addition on account of under valuation of work-in-progress whereas the other addition was somewhat different as in the A. Y. 1997-98 and 1998-99, the addition was on account of calculation of exemption u/s 80 (1) (A) whereas in the present case it is u/s 80HHC. However the principle in both years remains same i.e the penality for concealment of income cannot be made where there is difference in calculation of an exemption as claimed by assessee and as 10 ITA No.4788/Del/2011 allowed by Assessing Officer due to difference in opinion in respect of various heads of expenses and income relating to export or non export income. Therefore relying upon earlier years Tribunal's order in the case of assessee itself, in respect of these two additions, the penalty is not imposable.
11. As regards depreciation on film city, we find that assessee had claimed depreciation @ 25% on studio building on the basis of decision of M. P. High Court in the case of A. V. Mevyyappa Chettiar. Up to the date of filing of return that is on 31.12.1999 the decision of the case remained in favour of assessee. However, the Hon'ble Supreme Court reversed the decision vide it's order dated 12.05.2000 therefore, at the time of filing of return of income, the assessee was under bonafide belief that it was eligible for depreciation @ 25% and hence there was no furnishing of inaccurate particulars. Similarly penalty imposed on account of disallowance of carry forward loss of amalgamating company was not justified as at the time of filing of return, the assessee was under a bonafide belief that it will continue to carry on the business of amalgamating company. The penalty imposed on account of addition of penalty amount is also not justified as the addition was debatable as is apparent from the order of Ld. CIT (A) in respect of 11 ITA No.4788/Del/2011 quantum additions wherein he had reduced the disallowance from Rs. 3 lacs to Rs. 2.50 lacs. In view of the above facts and circumstances we find that Ld. CIT (A) has correctly deleted the penalty and we do not intend to interfere with it.
In view of the above, appeal filed by Revenue is dismissed.
Order pronounced in open court on 8th /11/ 2013
Sd/- Sd/-
(Raj Pal Yadav) (T. S. Kapoor)
Judicial Member Accountant Member
Dated the 8th day of November, 2013
S.Sinha
Copy forwarded to
1. APPELLANT
2. RESPONDENT
3. CIT
4. CIT (A)
5. CIT(ITAT), New Delhi. AR,ITAT
NEW DELHI.