Gujarat High Court
Gujarat Machinery ... vs Assistant Commissioner Of Income ... on 9 August, 2016
Author: Ks Jhaveri
Bench: Ks Jhaveri, G.R.Udhwani
O/TAXAP/617/2009 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 617 of 2009
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE KS JHAVERI SD/-
and
HONOURABLE MR.JUSTICE G.R.UDHWANI SD/-
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1 Whether Reporters of Local Papers may be allowed YES
to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy of NO
the judgment ?
4 Whether this case involves a substantial question of NO
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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GUJARAT MACHINERY MANUFACTURESLIMITED....Appellant(s)
Versus
ASSISTANT COMMISSIONER OF INCOME TAX....Opponent(s)
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Appearance:
MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1
MRS MAUNA M BHATT, ADVOCATE for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE KS JHAVERI
and
HONOURABLE MR.JUSTICE G.R.UDHWANI
Date : 09/08/2016
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O/TAXAP/617/2009 JUDGMENT
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE KS JHAVERI) By way of this appeal, the assessee has challenged the order passed by the ITAT in ITA No.4232/Ahd/2007 for assessment year 199899 whereby the tribunal has reversed the findings of the CIT (A) and confirmed the order of AO.
2. The short facts of the case are that the assessee has filed its return of income on 30/11/1998 declaring the total income at Rs.2,70,35,810/ and the order under Section 143 (3) of the IT Act came to be passed determining the total income at Rs.3,03,37,294/ and made following disallowance of Rs.17,54,739/ in respect of depreciation on technical knowhow, Rs.10,95,515/ in respect of custom duty and Rs.8,33,185/ in respect of interest paid on APSEB and penalty proceedings under Section 271(1)(c) of the Act were also initiated and ultimately the penalty at 100% of the tax sought to be evaded which is worked at Rs.9,05,773/ was levied.
2.1 Against the said order, the assessee preferred an appeal before the CIT (A) which has allowed the appeal of the assessee and penalty levied was cancelled.
2.2 The matter was thereafter carried before the Tribunal against the order passed by the CIT (A) cancelling the penalty under Section 271 (1)(c) in Page 2 of 9 HC-NIC Page 2 of 9 Created On Fri Aug 12 01:35:26 IST 2016 O/TAXAP/617/2009 JUDGMENT respect of two items of disallowance upheld by the Tribunal (i) Rs.17,54,739/ in respect of depreciation on technical knowhow and Rs.8,33,185/ in respect of interest paid on APSEB where the Tribunal restored the penalty insofar as it relates to the disallowance of depreciation in respect of technical knowhow of Rs.17,54,739/ is concerned which has given rise to the present appeal.
3. While admitting this appeal, following substantial question of law arises for consideration:
"Whether in the facts and under the circumstances of the case, the Income Tax Appellate Tribunal was right in law in confirming the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961?"
4. Learned Senior Counsel Mr.Soparkar has contended that both the claims have been disclosed by the assessee by way of Notes No.4 and 7 to the Balance sheet and they were also attached with the return of income which reads as under:
"4. Claim of Depreciation:
(a) The computation of depreciation is claimed on the basis of return of income filed in earlier assessment years. The claim of depreciation on technical knowhow disallowed in Assessment Year 198990 and subsequent assessment year has not been considered as the same is being contested in appeal before Income Tax Appellate Tribunal.
5. The deduction available under section 35AB is Page 3 of 9 HC-NIC Page 3 of 9 Created On Fri Aug 12 01:35:26 IST 2016 O/TAXAP/617/2009 JUDGMENT calculated as under:
[a] In respect of technical 2,47,667 knownow acquired in 9394 (Rosernmudn A.G.) 1st Installment 1/5th Rs.1238333/ (Rs.1486000/ Rs.247667) [b] In respect of exchange 6206 rate difference paid to Edlon Products Inc. in A.Y. 9495 1/5th of Rs.31,033/ (Rs.37249 Rs.6206) [c] In respect of technical 5,76,620 know how acquired in A.Y. 9596 (Second & Third instalemnt to Rosenmund A.G.) 1/5TH of Rs.2883105/ (Rs.3459725 Rs.576620) [d] In respect of technical 8,82,250 know how acquired in A.Y. 9697 (paid to Reosenmund A.G.) 1/5th of Rs.52,93,500/ (Rs.52,93,500 -
Rs.8,82,250)
Total 17,12,743"
6. Clause7 in the Notes with regard to interest reads as under:
"7. AS per City Civil Court decree dated 16/12/94, the assessee has to pay 12% interest on damages payable Rs.69,43,209/. The Andhra Pradesh State Electricity Board. The interest payable Rs.8,33,185/ for the year has not been provided in the books of accounts. Since, the Page 4 of 9 HC-NIC Page 4 of 9 Created On Fri Aug 12 01:35:26 IST 2016 O/TAXAP/617/2009 JUDGMENT assessee is following mercantile system of accounts, the interest payable is allowable business expenditure on accrual thereof."
4.1 Learned Senior Counsel has also submitted that the CIT (A) has rightly observed in its order and reliance is placed upon following paragraphs:
"2.2 I have considered the submissions of the Ld. Counsel of the appellant. I find from the copy of Hon'ble ITAT Ahmedabad 'A' Bench's order dated 9112004 for A.Y. 198990 in the case of the appellant in ITA Nao.2194/Ahd/2001 that penalty levied u/s. 271(1)(c) for A.Y. 198990 was deleted by the Hon'ble Tribunal holding that the appellant had not concealed the particulars of its income or filed inaccurate particulars of income consciously and deliberately and has disclosed everything before the Assessing Officer in respect of the claim of technical knowho and as facts in this year are similar to A.Y. 198990 and as the penalty has been deleted by the Tribunal for A.Y. 198990, for the said reasons in respect of technical knowhow, I hold that it is not a fit case for levy of concealment penalty in respect of this addition.
2.3 In respect of interest paid on APSEB the Authorised Representative has filed copy of Assessment order for A.Y. 199596 dated 2731998 wherein issue was first raised by the Assessing Officer. The APSEB had claimed damages including interest payable thereon in City Civil Court at Hyderabad. On account of order of City Civil Court, the appellant had claimed this interest payable to APSEB.
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Then the appellant filed petition before Andhra Pradesh High Court which stayed the order of City Civil Court. In A.Ys. 199596 to 199798 the disallowance of claim of damage and interest was made by A.O. and the same was allowed by CIT (A) and the matter is pending before I.T.A.T. In respect of the disallowance, no penalty has been initiated in A.Y. 199596 and it was submitted by the Counsel that the matter has been finalized by the Supreme Court and the Hon'ble S.C. has confirmed the order of the City Civil Court in respect of the claim of damages made by the Andhra Pradesh Electricity Board in the F.Y. 2007 08, in the note No.7 to the Statement of total income these facts of dispute have been mentioned and no penalty has been initiated in respect of the addition in the initial year A.Y. 199596. In respect of the disallowance of interest which has been claimed by the appellant in all these year starting from A.Y. 199596 either penalty has not been initiated or not levied. Therefore, there is no concealment of facts on the part of the appellant and there is no concealment of income or furnishing of inaccurate particulars and the appellant had disclosed everything before the Assessing Officer. Hence, I do not find it to be fit case for levy of concealment penalty in respect of the disallowance of interest. Accordingly, the penalty levied is cancelled in respect of the claim of interest. Further I find that there was no proper satisfaction recored by the Assessing Officer for initiation of penalty. The penalty has been initiated only at the end of the assessment order which was not proper satisfaction for initiation of penalty. The Assessing Officer has not given any finding in the Page 6 of 9 HC-NIC Page 6 of 9 Created On Fri Aug 12 01:35:26 IST 2016 O/TAXAP/617/2009 JUDGMENT assessment order whether the penalty is initiated for concealment of income or filing inaccurate particulars of income. In view of the above facts, the penalty levied is cancelled."
4.2 Learned Senior Counsel Mr.Soparkar appearing for the appellant has contended that the claim which has been made was specifically mentioned that this will be subject to the riders which is pending before the Tribunal. He has contended that in view of decision in case of Commissioner of Incometax, Ahmedabad v. Reliance Petroproducts (P) Ltd., [2010] 189 Taxman 322 (SC) whereby the issue of penalty imposed under Section 271(1)(c) of the Act was considered for concealment of income and held in favour of the assessee.
4.3 Learned Senior Counsel has also drawn attention of this Court to a decision of this Court in case of Geeta Prints (P.) Ltd. v. Assistant Commissioner of Incometax [2013] 33 taxmann.com 393 (Gujarat) wherein this Court has held that the assessee had full disclosure about his claim which was certified by the CA and therefore it did not mean that the assessee had concealed any income. The Court has also held that when no information as given in return was found to be incorrect, penalty could not be imposed.
4.4 Learned Senior Counsel has also drawn attention to the decision of Bombay High Court in case Page 7 of 9 HC-NIC Page 7 of 9 Created On Fri Aug 12 01:35:26 IST 2016 O/TAXAP/617/2009 JUDGMENT of Commissioner of Incometax12 v S.M. Construction [2015] 60 taxmann.com 135 (Bombay) wherein also the issue of penalty was decided in favour of the assessee by holding that on appreciation of the facts, two authorities have concurrently come to finding of fact that there was complete disclosure of facts and the claim made though not found acceptable was bona fide to conclude that no penalty be visited on assessee.
4.5 By making aforesaid submissions, learned Senior Counsel has contended that the appeal may be allowed and the issue may be answered in favour of the assessee.
5. On the other hand, learned Senior Standing Counsel Mr.Bhatt has contended that in spite of the fact that the matter which is claiming depreciation for deduction was rejected upto the Apex Court and the tax was not paid deliberately and it will amount to concealment and therefore the penalty imposed by the authorities below is just and proper. He has contended that the order of the Tribunal is just and proper and this Court may not interfere with the same.
6. Having heard the learned Counsel for the respective parties and having gone through the order passed by the CIT (A), as well as, considering the fact that claims have been disclosed by the assessee by way of Notes No.4 and 7 to the Balance sheet and considering the authorities cited at the bar by the learned Counsel for the assessee, this Court is the opinion that this will not amount to concealment and Page 8 of 9 HC-NIC Page 8 of 9 Created On Fri Aug 12 01:35:26 IST 2016 O/TAXAP/617/2009 JUDGMENT therefore will not attract penalty. We are in complete agreement with the view taken by the CIT (A). Accordingly, Tax Appeal is allowed by answering the issue raised in this appeal in favour of the assessee and against the department.
(K.S.JHAVERI, J.) (G.R.UDHWANI, J.) sompura Page 9 of 9 HC-NIC Page 9 of 9 Created On Fri Aug 12 01:35:26 IST 2016