Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs Power Grid Corporation Of India Ltd., ... on 9 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F', NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACOUNTANT MEMBER
ITA Nos. 189 & 191/Del/2013
Assessment Years: 2006-07 & 2005-06
DCIT, CIRCLE-14(1), VS. M/S POWER GRID CORPORATION
ROOM NO. 415, 4TH FLOOR, INDIA LIMITED,
C.R. BUILDING, B-9, QUTUB INTERNATIONAL AREA,
NEW DELHI KATWARIA SARAI, NEW DELHI-16
(PAN: AAACP02F]
(APPELLANT) (RESPONDENT)
Appellant by : Sh. R.S. Rawal, CIT(DR)
Respondent by : Sh. Ved Jain, Adv. &
Sh. Ashish Chadha, CA
ORDER
PER H.S. SIDHU, J.M.
01. These are the two appeals filed by the revenue for assessment years 2006-07 and 2005-06 respectively against the order of the Ld. CIT(A)-XVII, New Delhi dated 30.10.2012 and 31.10.2012 wherein penalty u/s. 271(1)(c) of the I.T. Act amounting to Rs. 71,32,55,400/- for AY 2006-07 and Rs. 8.06 crores /- for AY 2005-06 levied by the AO was deleted. Issues involved in both the appeal are similar and therefore both the appeals are disposed of by this common order. 2
02. The grounds of appeal for respective assessment years are as under:-
ASSESSMENT YEAR : 2006-07
1. "Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in deleting penalty of Rs. 84.06 crores u/s 271(1)(c) of the I T Act, 1961.
2. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that AO had no initiated penalty proceedings u/s 271(1)(c) in the assessment order while framing assessment. Initiation of penalty proceedings is clearly mentioned in the assessment order and a valid notice was served upon the assessee.
3 Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in appreciating the that the show cause notice was issued by the AO having jurisdiction over the case.
The assessee confirmed that order of penalty was time barred without examine the facts of the case and a misstated argument of the assessee before the AO, the assessee never argued on this issue.
4 Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in allowing relief on account of additions on Advance Against Depreciation which was later admitted by the assessee itself in the subsequent years and also assessee had 3 withdrawn the appeal from Hon'ble ITAT on this ground by accepting the stand on the Revenue on this ground. 5 The appellant craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal."
ASSESSMENT YEAR : 2005-06
1. "Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in deleting penalty of Rs. 8.06 crores u/s 271 (1)( c) of the I T Act, 1961.
2. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that AO had no initiated penalty proceedings u/s 271(1) (c) in the assessment order while framing assessment. Initiation of penalty proceedings is clearly mentioned in the assessment order and a valid notice was served upon the assessee.
3. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in appreciating the that the show cause notice was issued by the AO having jurisdiction over the case. The assessee confirmed that order of penalty was time barred without examine the facts of the case and a misstated argument of the assessee before the AO, the assessee never argued on this issue.
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4. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in not appreciating the fact that not credit of income in the P&L a/c tantamount to concealment of income. The appellant has taken the ground that the AO did not specify the nature of default for which penalty proceedings were initiated and itself has admitted that the same was initiated for furnishing inaccurate particulars as well as concealment of income.
5. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in allowing relief on account of additions on Advance Against Depreciation which was later admitted by the assessee itself in the subsequent years and also assessee had withdrawn the appeal from Hon'ble ITAT on this ground by accepting the stand on the Revenue on this ground.
6. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in allowing relief on amount of addition on account of SEB and NER Constituent when the assessee did not contested this addition even in quantum appeal on assessment completed under section 143(3).
7. The appellant craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal."
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03. Though the Revenue has raised 6 effective grounds of appeal in assessment year 2005-06 and 4 effective grounds of appeal in assessment year 2006-07. Issues involved in these appeals are i. whether on disallowance of advance against depreciation of Rs. 211.90 Crores and Rs. 216.10 crores in assessment year 2005-06 and 2006-07 respectively would invite penalty under section 271(1)© of the I.T. Act, 1961 under the charge of ' Furnishing inaccurate particulars of income".
ii. Whether the addition to income of Income Tax Recoverable from State Electricity Board of Rs. 1.53 Crores and Transmission charges of Rs. 12.09 crores would invite penalty u/s 271(1) (c) of the act under the charge of ' Furnishing inaccurate particulars of income'.
04. The brief facts of the case for assessment year 2005-06 is that assessee is a Public Sector Undertaking engaging in transmitting power to State Electricity Board from generating units. For the year under consideration, it filed its return of income at Rs. NIL, however, paid taxes on the Book Profit u/s. 115JB of the I.T. Act, 1961. The assessment under section 143(3) of the Act was made on 28.12.2007 wherein an addition of Rs. 216.10 crores was made on account of 6 disallowance of advance against depreciation. Similar addition was also made to the Book Profit under section 115JB of the I.T. Act. Both these additions were confirmed by the Ld. First Appellate Authority and before the Coordinate Bench, the assessee withdrew its Appeal. Therefore, the penalty proceedings originally initiated were adjudicated upon by the AO vide order dated 27.8.2012 levying the penalty of Rs. 7,77,18,59,200/-. The main reason for levy of penalty was that the assessee had not preferred the appeal and the amount has been added, hence, the penalty is leviable holding that assessee has furnished the inaccurate particulars of its income. The assessee being aggrieved with the order of the ld. AO preferred an appeal before the Ld. CIT(A) against the order of penalty. The Ld. CIT(A) after considering the decision of the Hon'ble Supreme Court of India in the case of NHPC Limited vs. CIT 320 ITR 374 (SC) deleted the penalty. With respect to the other addition of Rs. 1.53 crores and Rs. 12.09 crores as transmission charges, it was submitted by the assessee that these amounts were billed pursuant to the order of the CERC dated 6.9.2004 and because of the uncertainty involved in receipt of this money as Bills have been have been protested by those companies. It was further stated that as the accrual of the income is not certain income was not recognized and therefore, on this 7 sum the penalty is not leviable. However, AO levied the penalty on all these additions/disallowances. The Ld. CIT(A) has deleted the penalty on these two additions also for the reasons that the same has been explained in the assessee's Notes on Account No. 14(d) and 17 and further ordered that this income in assessment year 2007-08, there is no concealment of income on the part of the assessee with respect to these two income. Therefore, he deleted the penalty on this for the assessment year 2007-08 with respect to disallowance of Rs. 211.19 crores being advance the depreciation on which the penalty is levied and contested.
05. Before us, the Ld. CIT(DR) vehemently contested that when the additions have been confirmed and accepted by the assessee as the amount of advance against depreciation is not deductible, penalty is correctly levied. Further, with respect to the short income tax recovery and transmission charges recovery, the addition has been made in subsequent years as accepted by the assessee; the AO is correct in levying the penalty u/s. 271(1) ( c ) of the I.T. Act on account of adjustment to the Book Profit as well as to the normal computation of the total income. He further submitted that the assessee has not agitated this issue at the higher forum and has withdrawn the Appeal before the Tribunal itself 8 shows that assessee has claimed these deductions which has invited the penalty under section 271(1) ( c ) of the I.T. Act, 1961. He therefore, vehemently argued that Ld. CIT(A) has erroneously deleted the penalties without giving cogent reasons.
06. Ld. A.R. of the assessee submitted that penalty could not be levied on advance against depreciation, in view of the decision of Hon'ble Supreme Court in the case of NHPC vs. CIT 320 ITR 374 (SC) wherein it held that advance against depreciation is not an income. He, therefore, submitted that the Ld. CIT(A) has rightly deleted the penalty u/s. 271(1)(c) of the Act. He further submitted that on the income tax recoverable, the Ld. CIT(A) has held that as assessee has disclosed the full facts in the Notes on Account, hence, the penalty was deleted. He further submitted that merely withdrawal of the appeal by the assessee before the Coordinate Bench does not advance or hamper the case of the assessee as far as the issue of levy of penalty is concerned. He further submitted that after the withdrawal of the appeal by the assessee the Hon'ble Supreme Court of India has referred the decision in the case of NHPC vs. CIT (Supra) wherein, it is held that Advance against depreciation is income received in advance and it is timing difference, hence, AAD is not a 9 reserve. He further stated that Coordinate Bench has decided this issue in ITA No. 3013-3015 dated 309.2014 has also held that AAD is a liability and is to be discharged in future. He further stated that similar disallowances were made in earlier years and no penalty has been initiated on this account. With respect to other additions, he submitted that there is a complete disclosure of these two incomes in the Notes on Accounts of the assessee. He further advanced his arguments holding that the assessee is a Public Sector Undertaking and question of any malafide cannot be attributed. With respect to the Book adjustment, he referred to the decision of the Hon'ble High Court in the case of CIT vs. Nalwa Sons Investment Ltd. 327 ITR 543. In the end, he vehemently submitted that on both the additions, the penalty cannot be levied under section 271(1) ( c) of the I.T. Act, as complete and correct particulars of income were furnished by the asssesse and therefore, the Ld. CIT(A) has correctly deleted the penalty levied by the AO.
07. We have carefully considered the rival contentions. The main disallowance on which the penalty has been levied by the AO is advance against depreciation. It is necessary to understand what the advance against depreciation is in case of electricity company. The Hon'ble Supreme Court of India in the case of 10 NHPC vs. CIT 320 ITR 374 (SC) vide para no. 11 has held as under:-
"11. Since the amount of ADD is reduced from sales, there is no debit in the profit and loss account, the amount did not enter the stream of income for the purposes of determination of net profit at all, hence clause (b) of Explanation 1 was not applicable. Further, "reserve" as contemplated by clause (b) of Explanation 1 to section 115JB of the 1961 Act is required to be carried through the profit and loss account. At this stage, it may be stated that there are broadly two types of reserves, viz., those that are routed through the profit and loss account and those, which are not, carried via the profit and loss account, for example, a capital reserve such a share premium account. ADD is not a reserve. It is not an opportunity of profits. AAD is not meant for an uncertain purposes. AAD is an amount that is under obligation, right from the inception, to get adjusted in the future, hence, cannot be designated as a reserve. AAD is nothing but an adjustment by reducing the normal depreciation includible in the future years in such a manner that at the end of the useful life of the plant (which is normally 30 years) the same would be reduced to nil. Therefore, the assessee cannot use the AAD for any other purpose (which is possible in the case of a reserve) except to adjust the same against future deprecation so as to reduce the tariff in the future years. As stated above, at the end of the life of the plant AAD will be reduced to NIL. In fact, Schedule XII-A to the balance sheet of the financial years 2004-05 onwards indicates recouping. In our view, AAD is "income received in advance". It is 11 timing difference. It represents adjustment in future which is inbuilt in the mechanism notified on May 26, 1997. This adjustment may take place over a long period of time. Hence, we are of the view that AAD is not a reserve."
08. According to the above decision of the Hon'ble Supreme Court advance against depreciation is an income received in advance and therefore, is not hit by Clause (b) while working out the Book Profit of the assessee for the purpose of Income Tax Returns u/s 115JB of the act. Subsequently, the Coordinate Bench vide order dated 30.9.2014 decided the issue with respect to disallowance of the same in the normal computation of total income. The relevant facts were stated at par no. 2 to para no. 4 of that decision and subsequently in para no. 5 wherein it has been held by the Coordinate Bench that it cannot be added or disallowed under the computation of income under normal method under section 143(3) of the I.T. Act. Therefore, it is apparent that above two judicial precedents has clearly established that addition on account of advance against depreciation cannot be made either at the time of computation of book profit under section 115JB of the I.T. Act or under the normal computation of total income. Apparently, in the case of the assessee the addition in both the method of computation of total income 12 this amount has been made i.e. normal computation as well as computation under section 115JB of the Act. We are not on the issue of disallowance or addition while determining the income of the assessee, but on the levy of penalty u/s 271(1)
(c) of the act on these disallowances accepted by the assessee. The issue of disallowance has already reached finality in the hands of the assessee for both the assessment years against the assessee. It is a settled principle of law that where there are two opinions on allowability of expenditure , it makes it debatable and on such disallowance penalty u/s 271(1) (c) cannot be levied. The present disallowance of advance depreciation is ultimately settled by the Hon'ble Supreme Court of India and that too in favor of the assessee, therefore even if the assessee has accepted the addition in its hands, it cannot be said that assessee has furnished inaccurate particulars of income. Hence on this disallowance penalty u/s 271(1) ( c) cannot be levied. Hon Supreme court in case of CIT V Reliance Petro products Limited [322 ITR 158] (SUPREME COURT ) has held that "10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :
"not accurate, not exact or correct ; not according to truth ; erroneous ; as an inaccurate statement, copy or transcript."13
11. We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the * [2007] 291 ITR 519 (SC). ** [2008] 306 ITR 277 (SC). assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.
12. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect ; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms ; (i) an item of receipt may be suppressed fraudulently ; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature.
13. In this behalf the observations of this court made in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings under the Tamil Nadu General Sales tax Act, the court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This court, therefore, observed (page 251) : 14
"So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities includes these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.""
09. In the present case, the claim of the asssessee is not at all disallowable Therefore it stands on better footing than the case decided by honourable Supreme court in above case. Furthermore, we do not find any provisions under section 271(1) ( c) which depends upon the filing of the Appeal by the assessee before the Higher Forum contesting the addition. Therefore, whether the assessee files an appeal or did not contest the addition or disallowance at higher forums , it does not have any bearing on the statutory provisions of section 271(1) ( c) of the I.T. Act, 1961In view of this, we do not incline to uphold the order of the AO on levy of penalty under section 271(1) ( c) of the I.T. Act, on advance against depreciation disallowed while computing the Book Profit under section 115JB of the I.T. Act as well as under the normal computation of total income. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) in cancelling the penalty levied by the AO.
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10. With respect to other disallowances of Income Tax recovery and Transmission charges, we are of the opinion that both these issues were amply disclosed in Note No. 14(d) and 17 of the Audited Accounts of the assesee. These Notes also shows that the same have been based on the order of the CERC and the claim has been disputed by the payer. In view of this, the income have not been shown by the assessee for tax purposes. Subsequently, on the submission of the assessee, sum have been added to the income of the assessee for the assessment year 2007-08. On that basis, the addition was made in assessment year 2005-06. In the present case, the accrual of the income itself is in doubt when the payee has provided the same, but the payer has not admitted the liability. Further, the Assessee itself has brought on record before the AO that as the same amounts have been received in assessment year 2007-08, it can be added in the income of the current year and may be excluded from assessment year 2007-08. The full facts of particular dispute and uncertainty arising on account of receipt of the income were disclosed and reason why assessee did not offer it for taxation was also available before ld AO. Therefore, it cannot be said that assessee has furnished inaccurate particulars thereof. Therefore, We concur with the view of that Ld. CIT(A) in deleting the penalty under section 271(1)(c) on both these 16 disallowances. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the penalty on Income Tax Recoverable from State Electricity Board of Rs. 1.53 Crores and Transmission charges of Rs. 12.09 crores.
11. In the result, we confirm the order of the Ld. CIT(A) deleting the penalty under section 271(1)(c) of the I.T. Act for AY 2006- 07 and AY 2005-06.
12. In the result, both the Appeals of the Revenue are dismissed.
Order pronounced in the Open Court on 09/01/2017.
SD/- SD/-
(PRASHANT MAHARISHI) (H.S. SIDHU)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 09/01/2017
*SR BHATNAGAR*
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY By Order,
ASSISTANT REGISTRAR
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