Income Tax Appellate Tribunal - Delhi
Ganpati Polymers Ltd., New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' : NEW DELHI)
Before Shri J. Sudhakar Reddy, Accountant Member
and
Shri C.M. Garg, Judicial Member
ITA No.449 /DEL/2012
(Assessment Year : 2005-06)
ACIT, Ganpati Polymers Ltd.
Circle-12(1), 1109-10, Chiranjeev Tower,
New Delhi. 43, Nehru Place,
New Delhi.
PAN:AAACG4671J
(APPELLANT) (RESPONDENT)
ASSESSEE BY :Smt.Anshu Khurana, CIT DR
REVENUE BY : Shri Pradeep Dubidia & R.K. Kapoor, F.C.A,
ORDER
PER J. Sudhakar Reddy, Accountant Member:
This is an appeal filed by the Revenue directed against the order of the CIT (A)- VII, New Delhi, dated 4.11.2011 for the assessment year 2005-06, wherein a penalty levied u/s 271 (1)(c) of the Income Tax Act, 1961 by the assessing officer vide order dated 24.6.2008, was confirmed.
2. Facts in brief: The assessee a company, filed its return of income declaring a loss of Rs.22.46 lacs and the assessment was completed u/s 143 on 28.12.2007.In the assessment order at para 4.1, the AO records that vide questionnaire dated 16.8.2007, he had asked for details to be furnished by the assessee justifying its claim for depreciation, by furnishing copy of bills and invoices. The assessee in response agreed to disallowance of depreciation of Rs.16,53,881/-. Thereafter, penalty proceedings were initiated u/s 271 2 ITA No.449/Del/2012 (1) (c). As assessee had not furnished any explanation, the AO levied penalty. Aggrieved the assessee carried the matter in appeal. The first appellate authority vide order dated 4th November, 2011 deleted the penalty on the ground that mere disallowance or not accepting the claim of the assessee, is not sufficient ground to levy penalty. He further held that the assessee has disclosed all material facts and that there was a possibility of two opinions and under those circumstances, there cannot be the case of concealment or furnishing of inaccurate particulars of income. Aggrieved the Revenue is before us in appeal on the following grounds:
"(a) Whether Ld. CIT (A) was correct on facts and circumstances of the case and in law in canceling the penalty of Rs. 6,05,196/-
imposed by the AO u/s 271 (1) (c).
(b) The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing."
3. Smt Anshu Khurana, learned DR submitted that the assessee had admittedly made a wrong claim and when it was cornered, it surrendered part of its claim for depreciation. She referred to page 2, para4.1 of the assessment order, wherein the letter of the assessee was extracted by the assessing officer. Referring to the order of the CIT (A), she submitted that "mens rea" was taken as one of the criteria for granting relief. She submitted that such criteria cannot be adopted for granting relief. She relied on the following case laws
(i) Union of India and others Vs. Dharmendra Textile Processors and others 306 ITR 277 (S.C),
(ii) Commissioner of Income Tax Vs. Zoom Communication P. Ltd. 327 ITR 510 (Delhi).
3 ITA No.449/Del/2012
4. The learned counsel for the assessee, Mr. Pradeep Dinodia, on the other hand, opposed the contentions of the DR and submitted that the AO has wrongly recorded the facts. He pointed out that there is no dispute of the fact that the assessee has made the said addition to its assets. He further submitted that the only issue was whether the assessee has put to use the assets during the year, so as to enable it to claim depreciation. He pointed out that the assessee gave the reply to the query of the assessing officer on 28.12.2007 and on the same date, the assessment was finalized. He pleaded that the assessee had declared a loss of Rs.22.46 lacs and disallowance of the claim of depreciation, was only a question of postponement of claim to the subsequent year and did not make any difference to the assessee and hence it agreed to the disallowance. He argued that the assessment was a loss and the assessee did not have any gain or saving of income tax by making a claim in the year. He further submitted that the depreciation was allowed in the subsequent year. He relied on the following case laws.
(i) CIT Vs. BRAHMAPUTRA CONSORTIUM LTD 2011-TIOL-470-HC-
DEL-II.
(ii) CIT Vs. HARNARAIN-2011-TIOL-470-HC-DEL-II.
He argued that the claim was correct and in the interest of avoiding litigation, the assessee has agreed to defer the claim to the next year.
5. In response, the learned Department Representative emphasized the point that the assessee agreed that the claim was wrong and argued that in such circumstances, penalty has to be levied. She emphasized the fact that only certain cases has selected for scrutiny and in those circumstances, if a return is not selected for scrutiny, then the wrong claim cannot be detected. She relied on the following cases, K.L.Swamy Vs. Commissioner of Income Tax and Another.239 ITR 386,Bhairav Lal Verma Vs. Union of India & Anr. 230 4 ITA No.449/Del/2012 ITR 855, for the preposition that voluntarily surrendered, does not give immunity to the assessee from penalty.
6. Rival contentions heard. On a careful consideration of the facts and circumstances of the case we hold as follows. The assessing officer was factually wrong in mentioning that the assessee has wrongly claimed additions to its assets. The fact is that the claim of additions to assets was rightly made. The only issue is whether the assessee has put these additional assets to use, for enabling it to claim depreciation. The issue as to whether the assets were put to use,2 has not been tested in this case as the assessee has surrendered the claim. The assessee has declared a loss and surrendering part of the depreciation would only result in reduction of loss. Either way the assessee is not saddled with any tax liability. Under these circumstances, the assessee had agreed to forego part of its claim for depreciation. The fact remains that in the subsequent assessment year, the Revenue has allowed the claim of the assessee for depreciation on these assets. Under these circumstances, we are of the considered opinion that the claim of the assessee was bonafide.
7. Coming to the submissions of the Ld. Department representative, we find that the decision in the case of Union of India and others Vs. Dharmendra Textiles Processors and others 306 ITR 277 (SC) has held that "mens rea" is not an essential ingredient for attracting civil liability of penalty. We do not uphold the CIT (A)'s order and the issue of "mens rea". We uphold it on the ground that the claim is not a false ground.
8. In the case of CIT Vs. Zoom Communication P.Ltd.327 ITR 510, the Hon'ble Delhi High Court was dealing with an issue where the claim made by assessee had no justification. This case does not apply to the facts of the impugned case as the claim cannot be held as not justified.
5 ITA No.449/Del/2012
9. Coming to the decision in the case of CIT Vs. Gurbachan Lal 250 ITR 157, the proposition laid down by the jurisdictional High Court is that the initial burden of discharging the onus is on the assessee in cases where penalty is levied u/s 271 (1) (c).
10. In the case of Bhairav Lal Verma Vs. Union of India 230 ITR 855, the full bench of the Allahabad High Court held that full and true disclosure of income made voluntarily and in good faith by the assessee is a condition precedent for waiver of penalty.
11. In our view, on the facts and circumstances of the case, we find that the claim by the assessee was bonafide and CIT (A) has rightly deleted the penalty u/s 271 (1) (c) and the case laws relied upon by the first appellate authority supports his conclusions on the facts.
12. In the result the appeal of the Revenue is dismissed.
Order pronounced in open court on this 03/07/2012.
Sd/- Sd/-
(C.M. Garg) (J. Sudhakar Reddy)
Judicial Member Accountant Member
Dated the 3rd day of July 2012
SS
Copy forwarded to
1. APPELLANT
2. RESPONDENT
3. CIT
4. CIT (A)
5. CIT(ITAT), New Delhi.
AR,ITAT
NEW DELHI.