Income Tax Appellate Tribunal - Chennai
M M Forings Limited, Chennai vs Department Of Income Tax on 4 February, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH "B" CHENNAI
(Before Shri Abraham P. George, Accountant Member
and Shri George Mathan, Judicial Member)
.....
I.T.A. No. 1554/Mds/2010
Assessment Year : 2005-06
The Assistant Commissioner M/s M.M. Forgings,
of Income Tax, Guindy House,
Company Circle IV(3), v. 95, Anna Salai,
Chennai - 600 034. Chennai - 600 032.
PAN : AAACM2164L
(Appellant) (Respondent)
Appellant by : Shri P.B. Sekaran
Respondent by : Shri Philip George
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
This appeal filed by the Revenue assails the order of the CIT(Appeals) deleting a penalty of ` 75,99,942/- levied on the assessee under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter called as "the Act"). According to Revenue, assessee had made a claim which was wholly untenable in law and which had absolutely no foundation and therefore, in view of the decision of 2 I.T.A. No. 1554/Mds/10 Hon'ble Delhi High Court in the case of CIT v. Zoom Communication (P.) Ltd. (191 Taxmann 179) the penalty was rightly levied.
2. Short facts apropos are that assessee had claimed additional depreciation at the rate of 15% under section 32(1)(iia) of the Act on assets acquired after 30.09.2004 during the relevant previous year. Such additional depreciation was claimed by the assessee based on a detailed statement of machinery addition made by it during the relevant previous year and certificate given by its Auditors in Form 3AA as prescribed in Rule 5A of the Income-tax Rules, 1962. Assessing Officer was of the view that the claim of the assessee for additional depreciation at full rate of 15% on assets installed after 30.09.2004 was not in order since second proviso to section 32(1)(i) clearly specified that depreciation had to be restricted to 50% of the prescribed percentage where an asset was used for a period of less than 180 days in a previous year. Result was that the claim of additional depreciation at 15% was not allowed but restricted to 7.5%.
3. Though the assessee moved in appeal against the above order of CIT(Appeals) and later before this Tribunal, it was unsuccessful in this regard. It was held by this Tribunal that second proviso to section 32(1)(i) of the Act was clear in that additional depreciation could be 3 I.T.A. No. 1554/Mds/10 claimed in full as per section 32(1)(iia) only if the asset was used for not less than 180 days. The Tribunal did not favour the argument of the assessee that second proviso was not applicable to claim of additional depreciation under clause (iia).
4. Penalty proceedings under section 271(1)(c) of the Act was initiated by the A.O. on the above disallowance. When put on notice, assessee responded by contending that it had not failed to offer proper explanation regarding the claim made nor was its explanation found to be false. Further, as per the assessee, the claim was bonafide and all the facts relating to claim was disclosed by the assessee in its return itself. However, the A.O. was not impressed. According to him, explanation offered by the assessee was false. In his opinion, even a cursory look at section 32(1)(iia) would show that it was subject to the proviso of section 32(1)(ii) and the assessee having been assisted by a battery of Chartered Accountant and legal advisers could not say that claim was legitimately made by it. Thereafter relying on the decision of Hon'ble Apex Court in the case of Union of India And Others v. Dharamendra Textile Processors And Others (2008) 306 ITR 277 (SC), the A.O. held that assessee was 4 I.T.A. No. 1554/Mds/10 liable for penalty. Penalty was levied at 300% of the tax sought to be evaded and this worked out to ` 75,99,942/-.
5. In its appeal before Ld. CIT(Appeals), assessee reiterated the contentions taken by it before the A.O. According to assessee, all the details regarding machinery acquired prior to 30.09.2004 and after 30.09.2004 were given by it and therefore, there was no concealment whatsoever. Further as per the assessee, just because its claim was rejected and such rejection by the Assessing Officer was confirmed by the appellate authority, levy of penalty would not be justified. Ld. CIT(Appeals) appreciated this contention. According to him, there was no claim which was not bonafide nor was there any furnishing of inaccurate particulars. Relying on the decision of Hon'ble Apex Court in the case of CIT v. Reliance Petro Products P. Ltd. (2010) 322 ITR 158 (SC), ld. CIT(Appeals) deleted the levy of penalty.
6. Now before us, learned D.R. strongly assailing the order of CIT(Appeals) submitted that relevant section 32(1)(ii) as well as section 32(1)(iia) were very clear and lucid. Assessee had ignored the second proviso to section 32(1)(ii) and was trying to make out a case law that its claim was bonafide. He, therefore, submitted that decision of Hon'ble Delhi High Court in the case of Zoom 5 I.T.A. No. 1554/Mds/10 Communication (P.) Ltd. (supra) clearly applied and levy of penalty was justified.
7. Per contra, the learned A.R. supported the order of the CIT(Appeals).
8. We have perused the orders and heard the rival contentions. What we note at the first instance is that assessee had filed Form No.3AA which is a certificate that has to be given by a Chartered Accountant for any claim of additional depreciation. Rule 5A of Income-tax Rules, 1962 has prescribed this Form No.3AA.
9. Third proviso to clause (iia) of section 32(1) is reproduced hereunder:-
Provided also that no deduction shall be allowed under clause (A) or, as the case may be, clause (B), of the first proviso unless the assessee furnishes the details of machinery or plant and increase in the installed capacity of production in such form, as may be prescribed along with the return of income, and the report of an accountant, as defined in Explanation below sub-section (2) of section 288 certifying that the deduction has been correctly claimed in accordance with the provisions of this clause.6 I.T.A. No. 1554/Mds/10
Rule 5A of Income-tax Rules, 1962 has prescribed Form No.3AA as the form in which the report has to be furnished by an assessee. If we have a look at Form No.3AA, it ran as follows:-
FORM NO. 3AA [See rule 5A] Report under section 32(1)(iia) of the Income-tax Act, 1961
1. I/We have examined the accounts and records of ........................................................................[name and address of the assessee with permanent account number] relating to the business of manufacture or production of...................................................during the year ended on 31st day of March, ....................
2. I/We have obtained all the information and explanations which, to the best of my/our knowledge and belief, were necessary for the purpose of ascertaining the amount of expenditure incurred by the assessee for acquiring and installing new plant and machinery in the new industrial undertaking/existing industrial undertaking.
3. (a) I/We certify that the deduction to be claimed by assessee under the provisions of clause (A) of the first proviso to clause (iia) of sub-section (1) of section 32 of the Income-tax Act, 1961, in respect of the assessment year...............................is Rs.............................which has been determined on the basis of new plant and machinery acquired and installed after the 31st day of March, 2002 by the assessee in the new industrial undertaking. The said amount has been worked out on the basis of the details given in Annexure A to this Form.
(b) I/We certify that the deduction to be claimed by the assessee under the provisions of clause (B) of the first proviso to clause (iia) of sub-section (1) of section 32 of the Income-tax Act, 1961, in respect of the assessment year........................................is Rs...........................which has been determined on the basis of new machinery and plant acquired and installed by the assessee during the course of substantial expansion by way of increase in installed capacity of the industrial undertaking existing before the 1st day of April, 2002. The said amount has been worked out on the basis of the details in the Annexure B to this Form.
7 I.T.A. No. 1554/Mds/10
4. I/We, therefore, certify that the total deduction to be claimed by the assessee under clause (iia) of sub-section (1) of section 32 in respect of the assessment year..............................is Rs..................... In my/our opinion and to the best of my/our information and according to the information given to me/us, the particulars given above are true and correct.
...........................................
Signed Accountant If we look at third proviso to clause (iia) as it stood at the relevant point of time, it clearly stipulated that further depreciation of 15% was to be allowed to an assessee only if there was report of a Chartered Accountant in the prescribed form furnished by it along with return of income. The prescribed form as mentioned by us above was Form No.3AA and the relevant portion reproduced above. Assessee here had filed such Form No.3AA and the claim of additional depreciation under section 32(1)(iia) of the Act was based on certificate in Form No.3AA given by a Chartered Accountant and this has not been rebutted by the Revenue. No doubt, assessee might have made a wrong interpretation of second proviso to section 32(1)(ii) of the Act and claimed additional depreciation to full 15% under clause (iia) of the Act. But, nevertheless, it remains a fact that claim of additional depreciation was made by it based on a certificate issued by a Chartered Accountant in prescribed format. That being so, we cannot 8 I.T.A. No. 1554/Mds/10 say that the claim made by the assessee was not bonafide. No doubt, appellate authority would have found that the claim made by the assessee for full additional depreciation for assets used for less than 180 days, could not be allowed and had upheld allowance at 7.5%. But, the facts and circumstances of the case, as mentioned above by us, clearly show that the claim was worked out by the assessee based on certificate given by a Chartered Accountant under Form No.3AA of the Act. We are of the opinion that in these circumstances, concealment could not have been fastened to assessee. Making a claim for allowance under bonafide belief, which was later found not sustainable in law, would not amount to furnishing inaccurate particulars regarding the income of the assessee. No information provided by the assessee in return was found to be inaccurate. In taking this view, we are fortified by the decision of Hon'ble Apex Court in the case of Reliance Petro Products P. Ltd. (supra). Assessee could not have been held guilty for furnishing inaccurate particulars or for concealment of income. Ld. CIT(Appeals) has rightly deleted the levy of penalty.
10. Before parting it will be inappropriate if we do not mention the case of Zoom Communication (P.) Ltd. (supra) relied on by the 9 I.T.A. No. 1554/Mds/10 learned D.R. There the claim of the assessee itself had no foundation. Here, on the other hand, the claim of the assessee could not be considered as one made without any foundation since assessee had attached Form No.3AA as prescribed under Rule 5A of Income-tax Rules, 1962 and based on such certificate claimed the allowance. Thus, we find no reason to interfere in the order of the CIT(Appeals).
11. In the result, the appeal filed by the Revenue stands dismissed. The order was pronounced in the Court on 4th February, 2011.
sd/- sd/-
(George Mathan) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 4th February, 2011.
Kri.
Copy to: Appellant/Respondent/CIT(A)-V, Chennai/CIT-III, Chennai
D.R./Guard file