Income Tax Appellate Tribunal - Pune
Starlite Components Ltd.,, Nashik vs Assessee on 13 July, 2012
1
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav Judicial Member
and Shri R.K. Panda Accountant Member
ITA NO. 938/PN/2011
(Assessment Year 2004-05)
Starlite Components Ltd.
7, M.I.D.C, Satpur, Nashik. .. Appellant
PAN No.AAECS 5086K
Vs.
Addl. Commissioner of Income Tax,
Circle-1, Nashik. .. Respondent
Assessee by : Sri C.H. Naniwadekar
Department by : Ms. Ann Kapthuama
Date of Hearing : 13-07-2012
Date of Pronouncement : 23-07-2012
ORDER
PER R.K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 16-11- 2007 of the CIT(A)-I, Nashik relating to Assessment Year 2004-05.
2. The only effective ground raised by the assessee reads as under :
"The learned CIT (Appeals) erred on facts and in law in confirming the penalty of Rs. 73,71,366/- u/s. 271(1)(c) of the Act. He failed to take into account assessee's submissions and particularly the decision of Hon'ble Supreme Court in CIT Vs. Reliance Petro Products Pvt. Ltd., (322 ITR 158) which was binding upon him".
3. This is the second round of litigation before the Tribunal. Facts of the case, in brief, are that the company filed its return of income on 25-10-2004 declaring total loss of Rs. 3,28,23,553/-. The assessment was completed u/s. 143(3) wherein the AO made the following disallowances :
a. Excess claim of depreciation Rs. 2,00,06,968/-.
b. Non inclusion of Excise duty as per the provisions of section 145A
Rs. 2,68,423/-.
c. Disallowance of unpaid bonus Rs. 1,60,474/-.
2
So far as the claim of excess depreciation is concerned, it was noted by the AO that the assessee company in the depreciation chart attached with return has devalued the asset and has claimed depreciation of Rs. 2,00,06,968.50. The AO noted that the machineries are devalued by the company on its own accord even though the machineries are in operation. Some machineries have been devalued by 100% and some machinery by 75%. The devalued amount has been claimed in the form of depreciation and to that extent excess claim of depreciation has been made.
During the assessment proceedings, on being questioned by the AO to justify the claim, it was submitted by the assessee that the machineries are old, therefore, these were devalued to bring them to correct value. However, the AO was not satisfied with the explanation given by the assessee. According to him, under the Income Tax Act depreciation is granted on the basis of WDV and not on the cost of the asset. Such devaluation made have reduced the cost of the asset but not the WDV. Rejecting the various explanations given by the assessee the AO disallowed excess claim of depreciation amounting to Rs. 2,00,06,968/-.
4. So far as the valuation of closing stock is concerned the AO noted that the assessee has not applied the provisions of section 145A by including the value of excise duty of Rs. 2,68,423/- while valuing the closing stock. Therefore, in terms of provisions of section 145A the AO made addition of Rs. 2,68,423/- to the closing stock. The AO similarly made addition of Rs. 1,60,474 u/s.43B being unpaid bonus which has not been paid during the year. Subsequently the AO initiated penalty proceedings u/s. 271(1)(c) of the I.T. Act. Rejecting the various explanations given by the assessee and distinguishing the various decisions cited before him, the AO levied penalty of Rs. 73,31366/- being the minimum penalty @ 100% of the tax sought to be evaded.
35. In appeal the learned CIT(A) deleted the penalty levied by the AO. On appeal by the revenue, the Tribunal vide ITA No. 237/PN/2008 order dated 29-01- 2010 restored the issue to the file of the CIT(A) for fresh adjudication by holding as under :
"9. We have heard the parties and perused the orders of the revenue as well as the judgment or decisions relied on the parties. The facts of the case and the explanation of the assessee have been perused. Regarding the excess claim of depreciation, we find that the explanations of the assessee mainly revolve around the defense that when there is full disclosure of relevant information in the return, even if the assessee makes an inaccurate claim of excess depreciation in violation of the provisions of section 43(6) read with section 32, the assessee should not be penalised u/s.271(a)(c) for the year wrong claim. Same is the position with regard to the other two disallowances relating to unpaid bonus disallowance 43B and exclusion of excise duty for the purpose of arriving at the closing stock in violation of section 145A.
10. On the other hand, the case of the revenue is that the assessee made an inaccurate claim of excess depreciation and said claim is clearly in violation of the express provisions of section 43(6), which provide for definition of "written down value" in respect of the assets acquired at different time as well as the block of assets. As per the revenue, leaving a note in the Auditor's report, i.e. disclosure in the return, does not absolve the assessee from penalty u/s. 271(1)(c). Regarding the other disallowances, revenue holds that the said claims of the assessee are in violation of the relevant express provisions of the statute. Details of the provisions violated by the assessee are as under :
"A. We have perused the said para 4 on page 7 of the paper book ie Auditor's Report vide the letter dt 18th October 2004 and find item 1 relates to extra depreciation and the same read as under.
"1. The company has identified certain items of Plant and Machinery the value of which was not in consonance with its real value. Hence company has claimed extra depreciation on the same in the books of accounts. The said depreciation is accounted below the line...... This depreciation is not in conformity with the concept of block of assets. "
From the above the assessee is aware that the claim of depreciation on the wrong WDV figures of the 'block of assets' is not as per the provisions of section 43(6) of the Act. By claiming the depreciation wrongly, the assessee preferred real value demonstration at the cost the compliance to the provisions. We have also perused the provisions of section 43(6) relating to defining of 'written down value' and clause © deals with 'block of assets' and relevant portions of the same are as under. In this regard, we find that provisions of section 43(6)(c) are very specific and these provisions are applicable to the provisions of section 32 of the Act. Relevant provisions of sections 43(6)(c) relating to written down value are extracted and they read as follows.
"Section 43(6) "written down value" means-
(a)...
(b)...
(c) in the case of any block of assets,-
(i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted, -
(A) by the increase by the actual cost of any asset falling with that block, acquired during the previous year;4
(B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; "
Provisions of section 43(6)(c) provides for reduction of WDV only as per sub-clause (B) above only and it is only when any asset is sold or discarded or demolished or destroyed and these modes do not include the 'reduction of WDV by way of revaluation of block of assets' for the purpose of reflecting the 'real value' and there are no two views about it. At least, it is not the case of the assessee the issue is a debatable one. Further, it is an undisputed fact that the assessee has indeed relied on the wrong WDV figures and ultimately claimed wrong depreciation for obtaining the twin advantage of (i) projecting the real value and (ii) reducing the loses by making the false or wrong claim of depreciation.
B. We have also perused the relevant provisions of section 43B(c) read with clause
(ii) of 36(1) of the Act relating to bonus paid by the employer. Section 36(1)(ii) relating to other deductions and the bonus read that "(ii) any sum paid to an employee as bonus ...." and the said bonus is allowable as per the provisions of section 43B(c) only and it is an accepted fact that the assessee claim the same as deduction without actually paying the same with in the time permitted under the Act.
C. Finally, we have gone through the provisions of section 145A of the Act in connection with the claim of non inclusion of the Excise duty and relevant provisions are 145A(b) and the assessee is under obligation of the statute to include the same in valuing the closing stock and it is an admitted fact the same is not done.
11.Keeping the above rival positions of the parties in dispute and violation of law in mind, we have perused the decisions relied on by the parties.
So far as the decision of the Kanbay Software India P Ltd vs DCIT (122 TTJ 721) is concerned, we find it is the case where the assessee filed the revised return of income, filed the explanation for the revised claim and said explanation is not found to be false as the claim of deduction u/s 10A has support of some possible interpretation of CBDT circular in its favour. There is irrevocable act of filing of the revised return of income in this case, which is statutorily approved. Whereas in the assessee's case, the section 43(6) provides for the definition and it an exhaustive definition and the assessee clearly violated in decreasing the cost of asset by a sum of diminution in value and claim of the same sum as depreciation. Does the assessee has the mandate of the statute to compute the WDV in the fashion declared by the assessee and the answer is negative. In this case, there is event of filing of revised return of income and it is the case where the assessee on pointing out the violation, the assessee conceded and agreed for disallowance. The said disallowance reached the finality and there is no further appeal on the disallowance.
Further, we have also perused the decision of the Delhi Bench Tribunal in the case of Tel-Abridge International Limited, 126 TTJ 672. It is the case where the assessee made claim of deduction for expenditure towards filing fee and stamp duty being against the law laid down by the apex court, which is ex facie bogus. Tribunal came to conclusion that the penalty is attracted in such circumstances. The explanation relating the bona fide belief, not a deliberate claim have been rejected.
Further also, we have also perused the decision of the Mumbai bench in the case of Supreme Industries Ltd (supra), where one of is party to the order, for the proposition that the assessee, making a patently wrong claim and patently impermissible claims, is deemed to represent income in respect of which particulars have been concealed and discussion given in relevant paragraphs 7 to 10 are relevant and the same are reproduced as under.
7. On having held that the claim is legally wrong, we proceed to examine if the claim is made under the bona fide belief at least. From the impugned order, we find that CIT (A) deleted the penalty holding that there nothing to suggest gross or wilful negligence or fraud by the assessee and relied on Apex court judgment in the case of Musadilal Rambharose (165 ITR 14)(SC) in this regard. Ld counsel also relied on various 5 judgments to advance his please that the assessee is under the bona fide belief while making the said claim. In this regard, we have already examined whether there is any information in the order of the BIFR, the provision of and SICA and section 72A or section 32A of the Income-tax Act or any other provision under other statutes in favour of the assessee. There is no provision or order in favour of the assessee to suggest that the assessee is entitled to claim the said expired loss beyond eight years. Therefore, the answer is negative and against the assessee. Thus the claim is patently wrong. In such a situation, the finding of the CIT (A) that there is no wilful negligence by the assessee is totally misplaced.
8. In matters relating to the provisions of section 271(1)(c), the wilfulness of the assessee, in concealing the income or in furnishing of inaccurate particulars, is not essential in. Relevant provisions of said section and the Explanation 1 are important and they read as under.
" 271(1) If the assessing officer or the commissioner (Appeals) or the commissioner in the course of any proceedings under this Act, is satisfied that any person--
(a)...
(b)...
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,
(d)..
he may direct that such person shall pay by way of penalty,--
Explanation1.- where in respect of any facts material to the computation of the total income of any person under this Act,-
(A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that the such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub section, be deemed to represent the income in respect of which particulars have been concealed.
9. From the words 'assessing officer or the commissioner (Appeals) or the commissioner in the course of any proceedings under this Act, is satisfied', the satisfaction of the AO, as the case may be, should have the satisfaction in this regard. From the Explanation 1 above, it refers to a couple of independent groups of cases, which narrate the deemed cases of concealment. They are: (A) This group covers cases again there are two sub groups of persons and they are: (i) the persons, who fail to offer an explanation or (ii) the persons, who have offered an explanation which is found to be out right false by the revenue authorities; or (B) This group refers to cases where the explanation offered by the person is not found false out right, but those cases other than such-false-explanation cases. These are identified by the following symptoms. They are: (i) such person does not able to substantiate the explanation offered; and (ii) such person not only fails to prove that such explanation is bona fide but disclosed all the facts relating to such explanation and material to the computation of his total income
10. On comparison, the assessee's case is found covered by the cases of group (B) above and the onus is on the assessee substantiate the explanation or prove the bona fide and also the responsibility of full disclosure of all the facts relating to the explanation and materials as stated above. Per contra, the AO is not under obligation to prove the wilful attempt of the assessee in matter of concealment or the explanation of the assessee in this regard is not bona fide. Thus, it is the assessee's responsibility to meet the above requirements. Wilful concealment is not an essential ingredient for 6 attracting civil liability such a penalty u/s 271(1)(c). The above view is fortified by the apex court judgment in the case of Union of India vs Dharamendra Textiles Processors 306 ITR 277 (SC) or 174 Taxmann 571(SC). This judgment has disapproved the judgment in the case of Dilip N Shroff (161 Taxmann 218) (SC) too.The gists of the said judgment in the case of Dharamendra Textiles Processors (supra) and relevant paragraphs are as under.
"Absence of specific reference to mens rea in provisions of penalties is not a case of casus omisus. In fact, the provisions with expression 'liable to pay penalty', by no stretch of imagination, be said that the adjudicating authority has even a discretion to levy less than what is legally ad statutorily leviable (para 12).
It is a well-settled principles, in law, that the Court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous. A statute is a determinative factor of the legislative intent (para 13).
It is significance to note that the conceptual and contextual difference between section 271(1)© and section 276C was lost sight of in Dilip N Shroff's case (para 24) The explanations appended to section 271(1)(c) entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars of income while filing return. The judgment in Dilip N Shroff's case (supra) had not considered the effect ad relevance of section 276C. Object behind enactment of section 271(1)(c), read with the Explanations thereto, indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability, as is the case in the matter of prosecution under section 276C (para 25)."
Further, we have noticed that the aspects of civil liability, non requirement of mens rea / wilfull concealment, element of strict liability profounded by the Apex court in the case of Dharmendra Textile processors (supra) has not been rejected by the same Court in the case of Atul Mohan Bindal (supra) where the matter was remanded to the Delhi High court for adjudicating the issue in the light of apex court's judgments in the case of Dharmendra Textile processors (supra) and the Rajasthan Spinning & weaving Mills (224 CTR 1)(SC). It was also held that the judgment in the case of Dilip N Shroff is not a good law. Relevant conclusion of the apex courts judgment in the case of Atul Mohan Bindal (supra) read as follows.
"Penalty having been deleted by High Court following earlier decision which has been held to be not good law by the Supreme Court, matter remitted back to the High Court for fresh consideration in the light of decision in cases of Dharmendra Textile processors (supra) and the Rajasthan Spinning & weaving Mills (supre)."
This is the case where the penalty was deleted by the Tribunal and High Court of Delhi where the penalty was levied applying the concepts of civil liability albeit the strict liability, non essentiality of mens rea and the element of strict liability on the assessee.
12. The provisions of section 43(6)(c) provides for meaning of WDV or block assets, the assessee is expressly provided with the meaning and procedure as to how to block of assets should be adjusted for claim of the depreciation u/s 32 of the Act. So are the provisions of section 145A with regard to excise duty treatment and the provisions of section 43B with regard to claim of unpaid bonus. Thus, the claim of excess depreciation is made in violation of express provisions of section 43(6) read with section 32, manner of arriving at the closing stock without adjusting with regard to excise duty component is violation of the provisions of section 145A and so is claim unpaid bonus as a deductible expenses, which is not an allowable expenditure and liable to be disallowed u/s 43B of the Act. The claims are patently wrong and ex facie bogus in the language of the Delhi bench decision in the case of Tel-Abridge International Limited (supra). It is not the case of the assessee that the he is not aware of the provisions and the case of the assessee is that he wants to project the real value of the fixed assets, in our words, even it means violation of the enshrined legal provisions.
13.We have so far discussed the fact of blatant violation of the provisions of 43(6)(c) on the issue of extra depreciation, 43B on the claim of unpaid bonus and 145A(b) on non 7 inclusion of excise duty. We have also examined the scope of 271(1)(c) in the light of the apex court's judgments. As on date and as per the latest apex court's judgment in the case of Atul Mohan Bindal (supra), the law is that the penalties u/s 271()(c) have to be decided in the light of the apex court's judgments in the case of Dharmendra Textile processors (supra) and the Rajasthan Spinning & weaving Mills (supra). It was also held that the judgment in the case of Dilip N Shroff is not a good law.
Now, we shall analyse the explanations of the assessee for the above violations. This is the case of Explanation 1 of section 271(1)(c) ie case of deemed concealment. The said explanations are basically on the aspect of full disclosure of relevant information in the returns or books of accounts or auditor's report and such claim mere an error and not a deliberate act.
First, we have given our thought to whether such disclosure of information provide protection to the from the pangs of the penalty u/s 271(1)(c). In our view what protects the assessee from the penal provisions is the decision not to make patently wrong or bogus claims or making a correct or legitimate claims and not making such ex facie bogus and furnish the disclosure of information. Requirement of presenting real value of the fixed assets must not lead the assessee to violate the statutory provisions as done by the assessee in this case. Why did assessee make such wrong claims when he is aware that such claims are not entertainable legally and why must the assessee made such disclosure when he is aware that the claim is anyway dishonoured by the AO. Accordingly, the explanation that such claim of express depreciation was made in order to present the real value of the fixed assets of the company cannot be held bona fide. Therefore, such explanation referred to above, which is in contravention of the provisions of the statute, is not a bona fide one. Regarding the other claims, there is no justifiable reasons which are demonstrated with evidence by the assessee that the claims are made under bona fide belief. In any case, the real value - requirement - oriented explanations is not the explanation the said Explanation 1 of section 271()(c) refers. That explanation refers to the phrase 'where in respect of any facts material to the computation of the total income of' which should be read in the context of the present issues of disallowance of extra depreciation, unpaid bonus, non inclusion of excise duty in closing stock and the explanation of the assessee is that it is an error. Thus, in the instant case involving making patently wrong claims with disclosure of relevant information, such disclosures without bona fide explanation, shall not grant immunity to the assessee from the penal provisions.
Secondly, regarding the explanation of no deliberate intention to mislead the revenue, we do not agree with the above explanation as the assessee is well aware of the fact of violation as informed to the assessee by the Auditors vide the letter dt 18th October 2004 as per the extraction above. The word 'deliberate' as defined in the Oxford dictionary are that 'done consciously and intentionally or careful and unhurried'. In the instant case Auditors have informed the assessee the violations relating to claim of extra depreciation and assessee had sufficient time to discuss or deliberate on the consequences of such a wrong claim, which assessee describes as an error.
This being the position, we have perused the impugned order and find that the CIT(A) relied on the judgment of the Dilip N Shroff (supra) while deleting the penalties and he did not have the benefit of either Dharmendra Textile processors (supra) or Rajasthan Spinning & weaving Mills (224 CTR 1)(SC) or the latest judgment of Atul Mohan Bindal (supra). As such, the Apex court felt need of remanding the judgment of the Delhi High Court, which was decided based on the judgments in the case of Dilip N Shroff (supra).
Regarding the issue of levy of penalty in cases of assessment, which resulted in reducing of losses, the issue is now covered by the Apex Court's judgment in the case of Gold Coin Health Products Pvt.Ltd. 304 ITR 308 where it is held that the Explanation 4 is clarificatory in nature and applies to the said cases too. The CIT(A) has to address to this issue afresh as he and the assessee did not have benefit of the said Judgment.
In all fairness of the issue and the legal position, we are of the opinion that the matter should be remanded to the CIT(A) for fresh consideration of the issue in the light of the afore said judgments after giving opportunity of being heard to the assesssee. Accordingly, the grounds are set aside".
86. Subsequently, after the issue was restored to the file of the CIT(A) the learned CIT(A) upheld the penalty levied by the AO on the ground that it is a case of deliberate misleading of facts and furnishing of inaccurate particulars of income by making false claim of deduction. So far as the direction of the Tribunal regarding the issue relating levy of penalty in case of an assessment which had resulted in reducing of losses the learned CIT(A) held that the issue stands decided against the assessee by the decision of the Hon'ble Supreme Court in the case of Goldcoin Health Products Pvt.Ltd. reported in 304 ITR 308. He further observed that this issue was neither raised by the assessee before the CIT(A) in the first innings or before the Tribunal. Therefore, the observation of the Tribunal are obiter dicta and is an incidental remark and therefore not legally binding as a precedent. He noted that even in a case where assessee's income was reduced to NIL after setting off of carry forward loss of earlier years, penalty could be imposed u/s. 271(1)(c) of the I.T. Act in view of the decision of Hon'ble Supreme Court reported in 313 ITR 397. He accordingly confirmed the penalty levied by the AO. Aggrieved with such order of the CIT(A), the assessee is in appeal before us.
7. The learned counsel for the assessee submitted that the issue is decided in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. wherein it has been held that when there is no finding that any details supplied by the assessee in its return are incorrect or false, there would be no question of inviting penalty u/s.271(1)(c) of the I.T. Act.
He submitted that in the said decision it has further been held that a mere making of a claim which is not sustainable in law by itself will not amount to "furnishing of inaccurate particulars" regarding the income of the assessee. Such claims made in the return, therefore, cannot amount to furnishing of inaccurate particulars. He submitted that in the instant case the Tribunal has recorded that all particulars were 9 furnished. The only reservation of the Tribunal was that the assessee was making a legally unsustainable claim. This reservation is squarely answered by the Hon'ble Supreme Court in the decision cited (supra). He accordingly submitted that the penalty so levied by the AO and sustained by the CIT(A) should be deleted.
8. The learned DR on the other hand heavily relied on the order of the learned CIT(A). She submitted that the language used in the provisions of section 271(1)(c) are very clear and unambiguous. Referring to the finding given by the Tribunal she submitted that the Auditors in their report has mentioned that the extra depreciation claimed by the assessee on account of revaluation of certain plant and machinery is not in conformity with the subject of block of assets.
Further, the Tribunal has held that they do not agree with the explanation of the assessee that there was no deliberate intention to mislead the Revenue. Referring to the decision of the Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd (Supra) she submitted that the facts in that case are distinguishable and are not applicable to the facts in the present case. In the case decided by the Hon'ble Supreme Court, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. However, in the instant case Auditor himself has stated that such higher depreciation claimed is not in conformity with the concept of block of assets. Even though the Auditor has given this observation the company has not disallowed such higher depreciation and therefore it is a clear case of deliberately misleading of facts and furnishing of inaccurate particulars of income by making false claim of deduction. She accordingly submitted that the order of the learned CIT(A) should be upheld.
9. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the 10 assessee. We have also considered the decisions cited before us. There is no dispute to the fact that penalty has been levied by the AO on account of excess claim of depreciation of Rs. 2,00,00968/-, addition of Rs. 2,68,423/- on account of non-application of provisions of section 145A towards valuation of closing stock and addition of Rs. 1,60,474/- u/s.43B on account of unpaid bonus. We find in appeal the learned CIT(A) deleted the penalty on account of the above 3 additions and on further appeal by the Revenue the Tribunal restored the issue to the file of the CIT(A) for deciding the issue afresh with certain directions. We find the learned CIT(A) in such setting aside proceedings upheld the penalty levied by the AO on the ground that it is a case of deliberately misleading of facts and furnishing of inaccurate particulars of income by making false claim of deductions.
Therefore, the AO was justified in levying penalty u/s.271(1)(c) of the I.T. Act. It is the submission of the learned counsel for the assessee that in view of the decision of the Hon'ble Supreme Court in the case of Reliance Petro Products Pvt.
Ltd. (Supra) no penalty is leviable u/s.271(1)(c) of the I.T. Act since there is no finding that any details supplied by the assessee in its return are incorrect or false.
Further according to the learned counsel for the assessee a mere making of a claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. It is the submission of the learned DR that the above cited decision is distinguishable and not applicable to the facts of the present case.
10. We find the Tribunal in the order dated 29-01-2010 extracted the report of the Auditors which read as under :
"1. The company has identified certain items of Plant and Machinery the value of which was not in consonance with its real value. Hence company has claimed extra depreciation on the same in the books of accounts. The said depreciation is accounted below the line...... This depreciation is not in conformity with the concept of block of assets. "11
11. We find despite such observation by the Auditors as mentioned above the company has not reduced the excess claim of depreciation. We find the Tribunal at page 12 of the order has also observed as under :
"Secondly, regarding the explanation of no deliberate intention to mislead the revenue, we do not agree with the above explanation as the assessee is well aware of the fact of violation as informed to the assessee by the Auditors vide the letter dated 18th October 2004 as per the extraction above. The word "deliberate" as defined in the Oxford dictionary are that 'done consciously and intentionally or careful and unhurried. In the instant case Auditors have informed the assessee the violations relating to claim of extra depreciation and assessee had sufficient time to discuss or deliberate on the consequences of such a wrong claim, which assessee described as an error".
12. We find the Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. (supra) at Para 9 to 11 has observed as under :
"9. 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".
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 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 u/s.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.
10. It was tried to be suggested that s.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 AO 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; (1) 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 s.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 AO for any reason, the assessee will invite penalty under s.271(1)(c). That is clearly not the intendment of the legislature.
11. In this behalf the observations of this Court made in Sree Krishna Electricals Vs. State of Tamil Nadu & Anr. (2009) 23 VST 249 (SC) as regards the penalty are apposite.
12In the aforementioned decision which pertained to the penalty proceedings in 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 :
" 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 include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside".
The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its return.
13. From the above, it is clear that ratio of Reliance Petro Products Pvt. Ltd (supra) is not applicable to the facts of the present case. In that case the Hon'ble Supreme Court has observed that 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. However, in the instant case, the Auditor appointed by the assessee itself had pointed out that the excess depreciation claim on certain items of plant and machinery is not in conformity with the concept of block of assets. Inspite of such comments of the auditors the assessee did not reduce the excess depreciation claim while computing the total loss/income. Similarly while arriving at the closing stock no adjustment with regard to excise duty was made which is a deliberate violation of the provisions of section 145A. The assessee has deliberately violated the provisions by not disallowing the unpaid bonus u/s. 43B of the I.T. Act. Therefore, we are of the considered opinion, that this is a deliberate attempt on the part of the assessee in furnishing of inaccurate particulars of income and making false claim of deduction. Therefore, the provisions of section 271(1)(c) in our opinion are clearly attracted to the facts of the present case. In this view of the matter, we uphold the order of the CIT(A) in confirming the penalty levied by the AO u/s. 271(1)(c) of the I.T. Act. Ground raised by the assessee is accordingly dismissed.
1314. In the result, the appeal filed by the assessee is dismissed.
Pronounced in the open court on this the 23rd day of July 2012
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune Dated: the 23rd July 2012
satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. ACIT, Circle-1, Nashik
4. The D.R, "A" Pune Bench
5. Guard File
By order
// True Copy //
Senior Private Secretary
ITAT, Pune Benches, Pune