Income Tax Appellate Tribunal - Delhi
Richa Industries Ltd., Faizabad vs Dcit, Faridabad on 4 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A' NEW DLEHI
BEFORE SHRI G.D. AGRAWAL, PRESIDENT
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
I.T.A. Nos. 5914 & 5915/Del/2015
Assessment Years: 2008-09 & 2009-10
Dy. Commissioner of Income-tax vs M/s Richa Industries Ltd,
Circle-II, Faridabad. Plot No.29, DLF Industrial Area,
Phase-II, Faridabad.
(PAN: AAACR7943J)
I.T.A. No. 5910/Del/2015
Assessment Year: 2008-09
M/s Richa Industries Ltd, vs Dy. Commissioner of Income-tax
Plot No.29, DLF Industrial Area, Circle-II, Faridabad.
Phase-II, Faridabad.
(PAN: AAACR7943J
(Appellant) (Respondent
Assessee by: Shri Vijay Kumar, CA
Department by: Shri Ravikant Gupta, Sr. DR
Date of hearing: 2.05.2018
Date of Pronouncement: 4.05.2018
ORDER
PER K. NARASIMHA CHARY, JM
Income-tax Appeal No.5914/Del/2015 relates to the Asstt. Year 2008-09 and is preferred by the Revenue challenging order dated 18.8.2015 passed in appeal by learned Commissioner of Income-tax (Appeals), Faridabad (hereinafter referred to as the "ld. CIT(A)} sustaining the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961 ("the Act") whereas ITA Nos.5910 and 5915/Del/2015 relate to the Asstt. Year 2009-10 and are preferred by the assessee and revenue respectively challenging the impugned order dated 18.8.2015 in appeal.
ITA Nos.5914/Del/20152. Brief facts of the case are that the assessee is engaged in the knitting and processing of fabric. For the Asstt. Year 2008-09, they have filed their return of income on 28.9.2008 declaring an income of Rs.1,41,03,110/- under the normal provisions of the Act and Rs.9,64,61,545/- book profits u/s 115JB of the Act. During assessment, learned AO made certain additions. Simultaneously, learned AO initiated proceedings u/s 271(1)(c) and levied a penalty of Rs.20,04,382/- by order dated 28.3.2014.
3. In the appeal preferred against the levy of penalty, learned CIT(A) deleted the same stating that where the total income under the normal provisions of the Act is lower than 30% of the book profits computed u/s 115JB of the Act, then book profits computed u/s 115JB of the Act becomes the basis of making assessment and in those circumstances, there cannot be any concealment of income in respect of disallowance made under the normal provisions of the Act. For this proposition, learned CIT(A) relied upon the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Nalwa Sons Investment Ltd., 327 ITR
543. Challenging this, Revenue preferred this appeal.
4. It is the argument of the learned DR that the disputed addition was confirmed by the learned CIT(A) in appeal, as such, it proves that the assessee acted in total disregard of the provisions of law and furnished incorrect particulars of income. On this premise, he submits that the learned CIT(A) is not justified in deleting the penalty. Per contra, Ld. AR submitted that since the Ld. CIT(A) followed the binding precedent of the Hon'ble jurisdictional High Court, his findings cannot be disturbed.
5. We have gone through the orders of the authorities below in the light of the submissions on either side. In CIT Vs. Nalwa Sons Investments Ltd. (supra) the Hon'ble jurisdictional High Court considered the Explanation 4 to section 271(1)(c) of the Act and also noted judgment of the Hon'ble Apex Court in the case of Gold Coin Health Food Pvt. Ltd. (2008) 304 ITR 308 and held that when the computation was made under section 115JB of the Act, the aforesaid concealment had no role to play and was totally irrelevant. Therefore, non- disallowance did not lead to tax evasion at all. It is further noted by the learned CIT (Appeals) that this judgment of the Hon'ble jurisdictional High Court was carried to the Hon'ble Apex Court by the Department and SLP was dismissed by order dated 4.05.2012 in SLP (Civil) No(s) 18564/2011.
6. We, therefore, respectfully following the ratio of the decision in the case of CIT Vs. Nalwa Sons Investments Ltd. (supra) find that the deletion of the penalty in respect of the additions made to the book profit under section 115JB of the Act is proper and does not involve any interference. Hence, we hold that the grounds of appeal are devoid of merits and are liable to be dismissed and accordingly dismissed.
7. In the result appeal of the revenue (ITA NO.5914/Del/2015) is dismissed.
ITA Nos.5910 & 5915/Del/2015:
8. Brief facts of the case relevant to these two appeals for the Asstt. Year 2009-10, assessee has filed their return of income on 25.9.2008 declaring an income of Rs.4,46,54,190/-. During scrutiny, the AO made additions on account of disallowance on account of depreciation, depreciation on plant and machinery for which subsidy received in the earlier year, disallowance of proportionate interest on the amount of investment u/s 14A of the Act and the expenses incurred in respect of proposed GDR issues.
9. In appeal, learned CIT(A) confirmed the addition made on account of deprecation of plant and machinery for which subsidy received in the earlier years but reduced the excessive claim of depreciation referable to the amount of capital subsidy, whereas the assessee did not contest the addition on account of the expenses in respect of proposed GDR issue. Therefore, learned AO initiated penalty proceedings in respect of these two additions, namely, Rs.59,35,864/- on account of the depreciation on plant and machinery and Rs.18,77,542/- on account of the disallowance of expenses in respect of proposed GDR issue and concluded the proceedings with levy of penalty of Rs.26,56,796/- by way of order dated 28.3.2014.
10. In the appeal preferred by the assessee, learned CIT(A) confirmed the penalty on account of the depreciation issue but deleted the same on account of the GDR issue u/s 35D of the Act. Therefore, challenging the confirmation of the penalty on account of deletion of the penalty in respect of GDR issue u/s 35D of the Act, Revenue preferred the appeal. We deem it just and convenient to dispose them off by a common order.
11. It is the argument of the learned AR that there is no concealment of income or furnishing of inaccurate particulars thereof and the authorities below made the additions on these counts only basing on the information furnished by the assessee. It is further submitted that allowing the expenses or disallowance is a matter of interpretation of the provisions of statute and allowance or disallowance is also a matter of difference of opinion, as such, in the absence of any active concealment of income or furnishing of inaccurate particulars, no penalty could be levied. On this premise, he supported the order of the learned CIT(A) in deleting the penalty on account of the GDR issue u/s 35D of the Act but challenged the sustaining of the penalty on account of the depreciation issue.
12. Per contra, it is the argument of the learned that inasmuch as the addition made on account of depreciation was confirmed by the learned CIT(A) in quantum appeal, it establishes that the assessee had shown the incorrect particulars in utter disregard of the statutory provisions, as such, the learned CIT(A) is justified in sustaining the penalty on that account. He further argued that in respect of the GDR issue, the expenses were incurred for the issue of GDR are covered u/s 35D of the Act and liable to be amortized. Further, assessee has not preferred appeal on this count and also, as such, it has to be inferred that the assessee had concealed the income and also furnished inaccurate particulars thereof.
13. We have gone through the record in the light of the submission on either side. The assessment order reveals that it was pleaded before the learned AO at the time of assessment that the legal and profession charges relating to the vetting of the documents for public issue and professional charges for the issue of GDR, BSE approval for investment for offer documents booked under expenses due to that time, advisory services were secured from related parties, as such, the assessee was under the impression that no legal and professional charges can be amortized u/s 35D of the Act. Further, record reveals that the assessee has also not challenged the addition on this count. There is nothing for us not to believe that under a bonafide belief, the assessee instead of amortizing this expense claimed deduction which was rightly disallowed by the AO.
14. Now coming to the depreciation, the contention of the assessee has been that there is neither concealment of income nor furnishing of inaccurate particulars inasmuch as the assessee had claimed the excess depreciation for subsidy received in earlier years. On this aspect, a coordinate bench of this Tribunal vide order dated 6.10.2015 in ITA No.1219/Del/2013 set aside the matter to the file of the learned AO for deciding the issue in conformity with the directions given by the Tribunal for the immediately preceding assessment year. It is, therefore, clear that the disallowance of the depreciation and its allowable extent are debatable issue inasmuch as both the authorities below sustained the disallowance on this count to the tune of Rs.59,35,864/-, the Tribunal though it fit to remand the matter to the file of the AO to decide the issue afresh in the light of the directions given by the Tribunal for the immediately preceding asstt. Year. Learned AR submitted that in that case, the addition cannot be to the tune of Rs.59,35,864/- but it would be somewhere around Rs.3 lacs.
15. Be that as it may, both the additions in respect of which the penalty is levied are not the result of any discovery made by the learned AO but it was plainly based on the material available before him on record. Learned CIT(A) while deleting the penalty on account of the GDR issue placed reliance on the decision of the jurisdictional High Court and the decision of the Hon'ble Apex Court and his finding on that aspect is impeccable and cannot be disturbed. So also we are of the considered opinion that mere sustaining the addition in appeal does not ipso facto lead to the inference that there is either concealment of income or furnishing of inaccurate particulars. With this view of the matter, we are of the considered opinion that in respect of deprecation also, there is no concealment of income or furnishing of inaccurate particulars thereof but the addition on that count was the result of the interpretation of the statute which differed between the authorities below and this Tribunal in the second appeal. When it is a debatable issue, it does not lead to the levy of penalty. With this view of the matter, we find it difficult to sustain the same. As such whereas the appeal (ITA 5910/Del/2015) of the assessee is allowed, appeal of the revenue (ITA 5915/Del/2015) is dismissed.
16. In the result, ITA Nos.5914 & 5915/Del/2015 are dismissed and ITA No.5910/Del/2015 is allowed.
Order pronounced in the open court on this day the 4th May, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (K. NARASIMHA CHARY)
PRESIDENT JUDICIAL MEMBER
Dated: 4th May, 2018
'VJ'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
By order
Asstt. Registrar