Asstt. Comm. Of Income Tax Circle 1, Margao v. M/s. Borkar Packaging P. Ltd., Margao

ITA 39/PAN/2013 | 2002-2003
Pronouncement Date: 25-07-2013 | Result: Dismissed

Appeal Details

RSA Number 3924114 RSA 2013
Assessee PAN AAACB7618N
Bench Panaji
Appeal Number ITA 39/PAN/2013
Duration Of Justice 5 month(s)
Appellant Asstt. Comm. Of Income Tax Circle 1, Margao
Respondent M/s. Borkar Packaging P. Ltd., Margao
Appeal Type Income Tax Appeal
Pronouncement Date 25-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-07-2013
Assessment Year 2002-2003
Appeal Filed On 25-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI P.K. BANSAL HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER ITA NO S . 38 TO 41 /PNJ/2013 : (ASST. YEAR S : 2001 - 02 TO 2004 - 05 ) ASST. COMMISSIONER OF INCOME TAX CIRCLE - 1 MARGAO (APPELLANT) VS. M/S. BORKAR PACKAGING PVT. LTD. LAKE PLAZA OPP. NEHRU STADIUM FATORDA MARGAO GOA PAN : AAACB7618N (RESPONDENT) CO NOS. 9 TO 12/PNJ/2013 (IN ITA NO. 38 TO 41/PNJ/2013) : (ASST. YEARS : 2001 - 02 TO 2004 - 05) M/S. BORKAR PACKAGING PVT. LTD. LAKE PLAZA OPP. NEHRU STADIUM FATORDA MARGAO GOA PAN : AAACB7618N (CROSS OBJECTOR) VS. ASST. COMMISSIONER OF INCOME TAX CIRCLE - 1 MARGAO (RESPONDENT) REVENUE BY : SMT. ASHA DESAI DR ASSESSEE BY : NONE DATE OF HEARING : 04/07/2013 DATE OF PRONOUNCEMENT : 25 /07/2013 O R D E R PER P.K. BANSAL : 1. THE ONLY ISSUE INVOLVED IN ALL THESE APPEALS FILED BY THE REVENUE AS WELL AS THE CROSS OBJECTIONS FILED BY THE ASSESSEE IN ALL THE YEARS IS THE LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT EXCEPT THE CHANGE IN QUANTUM. BOTH THE PARTIES AGREED BEFOR E US THAT ALL THESE APPEALS SINCE INVOLVE COMMON FACTS AND PENALTY HAS BEEN IMPOSED ON THE COMMON ISSUE THEREFORE ALL THESE APPEALS CAN BE DISPOSED OFF BY TAKING THE FACTS FOR A.Y. 2001 - 02. WE THEREFORE DECIDED TO TAKE THE FACTS FOR A.Y. 2001 - 02. 2 ITA NOS. 38 TO 41/PNJ/2013 & CO NOS. 9 TO 12/PNJ/2013 (ASST. YEAR : 2001 - 02 TO 2004 - 05) 2 . THE BRIEF FACTS OF THE CASE FOR A.Y. 2001 - 02 ARE THAT THE ASSESSEE SUBMITTED THE RETURN FOR A.Y 2001 - 02 ON 29.10.2001 DECLARING A LOSS OF RS.55 65 452/ - AS PER REGULAR COMPUTATION WHEREAS BOOK PROFIT U/S 115JA WAS COMPUTED AT RS.2 26 07 464/ - . THE ASSES SMENT WAS COMPLETED U/S 143(3) ON 11.12.2002 ACCEPTING RETURNED LOSS AND THE BOOK PROFIT. SUBSEQUENTLY IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.76 47 750/ - ON GOODWILL WHICH IN THE OPINION OF THE AO WAS NOT A DEPRECIABLE ASSET AND THEREFORE THE AO AFTER RECORDING REASONS ON THIS COUNT RE - OPENED THE ASSESSMENT U/S 147 BY ISSUING NOTICE U/S 148. THE ASSESSMENT U/S 143(3) R/W SEC. 147 WAS COMPLETED ON 31.1.2006 DETERMINING THE TOTAL INCOME AT RS.84 93 017/ - AS PER REGULAR COMPUTATION WHILE THE BOOK PROFIT U/S 115JA WERE DETERMINED AT RS.2 26 07 464/ - . PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED IN RESPECT OF DISALLOWANCE OF THE DEPRECIATION ON THE GOODWILL AS WELL AS REDUCTION IN THE CLAIM OF DEDUCTION U/S 80IA. THE FACTS RELAT ING TO THESE ADDITIONS/DISALLOWANCE WERE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING ACTIVITY IN ITS 4 UNITS HOUSED SEPARATED IN MARGAO AND DAMAN. ON 7.9.2000 M/S. BORKAR INDUSTRIES PVT. LTD. M/S. SUPREME GRAPHICS CREATION PVT. LTD. AND M/S. SEA ROCK PRINTERS PVT. LTD. MERGED INTO M/S. BORKAR PACKAGING PVT. LTD. IN A SCHEME OF AMALGAMATION AND ACCORDINGLY THE ASSETS AND LIABILITIES OF EACH COMPANY AT BOOK VALUE WERE TRANSFERRED INTO THE AMALGAMATED COMPANY AND THE GOODWILL WAS ACCOUNTED AS THE BALANCE FACTOR. THE ASSESSEE ACCOUNTED FOR GOODWILL AT RS.3 05 91 000/ - AS DEPRECIABLE ASSET AND CLAIMED DEPRECIATION ON IT @ 25%. THE ASSESSEE HAD 4 UNITS. OUT OF THE 4 UNITS THE ASSESSEE HAS SHOWN PROFIT IN TWO UNITS I.E. UNIT NOS. 3 AND 4. THE ASSESSEE CLAIMED DEDUCTION U/S 80IA IN RESPECT OF PROFIT OF UNIT NOS. 1 2 & 3. THE DEDUCTION U/S 80IA FROM UNIT NO. 3 WAS CLAIMED @ 100% WHILE FOR UNIT NO. 4 @ 30% AMOUNTING TO RS.64 04 107/ - AND RS.6 612/ - RESPECTIVELY . THE AO ALSO FOUND THAT THE ASSESSEE HAD N OT COMPUTED ITS INCOME AS PER PROVISIONS OF SEC. 28 TO 43D AND 3 ITA NOS. 38 TO 41/PNJ/2013 & CO NOS. 9 TO 12/PNJ/2013 (ASST. YEAR : 2001 - 02 TO 2004 - 05) SEC. 70 TO 79 OF THE INCOME TAX ACT AND THE DEDUCTION U/S 80IA ON THE INCOME OF UNIT NOS. 3 & 4 WAS CLAIMED WITHOUT SETTING OFF THE UNABSORBED DEPRECIATION/LOSS OF EARLIER YEARS OF THESE ELIGIB LE UNITS. ULTIMATELY THE AO LEVIED PENALTY ON THE ASSESSEE AMOUNTING TO RS.55 60 124/ - IN RESPECT OF DEPRECIATION ALLOWED ON GOODWILL BY HOLDING THAT THE ASSESSEE HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS AND SIMILARLY IN RESPECT OF DEDUCTION U/S 80IA PENALTY WAS LEVIED FOR FURNISHING OF INACCURATE PARTICULARS BY WAY OF INCORRECT COMPUTATION OF THE INCOME AND INCORRECT CLAIM OF DEDUCTION U/S 80IA VIDE ORDER DT. 24.3.2010. AGAINST THE ORDER OF THE AO THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO CONFIRMED DISALLOWANCE . T HE DISALLOWANCE OF THE GOODWILL AS WELL AS DEDUCTION U/S 80IA WAS CONFIRMED BY THE ITAT. 2.1 BEFORE THE CIT(A) THE ASSESSEE POINTED OUT THAT THE INCOME HAS BEEN ASSESSED AS PER REGULAR PROVISIONS OF INCOME TAX ACT AT NIL WHILE AS PER THE DEEMING PROVISION OF SEC. 115JA THE SAME INCOME HAS BEEN RETURNED BY THE ASSESSEE. THEREFORE THERE CANNOT BE ANY EVASION OF TAX AND NO PENALTY CAN BE IMPOSED IN ADDITION TO THE OTHER GROUNDS. THE CIT(A) CANCELLED THE PENALTY ON THIS ISS UE ON THE BASIS OF THE DECISION OF THE CIT VS. NALWA SONS INVESTMENTS LTD. 327 ITR 543 (DEL.) (SLP AGAINST JUDGEMENT WAS DISMISSED BY THE HON'BLE SUPREME COURT ON 4.5.2012). ON OTHER GROUNDS WHICH CONSISTS ABOUT LEGALITY OF THE LEVY OF THE PENALTY AS WELL AS ON MERIT THE CIT(A) DELETED THE PENALTY. THERE WERE IN ALL 8 GROUNDS ON WHICH THE PENALTY HAS BEEN DELETED ON MERIT BY CIT(A). CIT(A) NOTED THAT THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. 252 CTR (SC) 233 TOOK THE VIEW THAT DEPRECIATION ON GOODWILL IS ALLOWABLE. THEREFORE ON THIS BASIS ALSO HE DELETED THE ADDITION. 2.2 THE LD. DR BEFORE US RELIED ON THE ORDER OF THE AO WHILE THE LD. AR RELIED ON THE ORDER OF CIT(A) AND ALSO CONTENDED BY REFERRING TO HIS CROSS OBJECTION THAT THE PENALTY HAS BEEN DELETED BY CIT(A) ON 5 COUNTS WHILE THE REVENUE HAS 4 ITA NOS. 38 TO 41/PNJ/2013 & CO NOS. 9 TO 12/PNJ/2013 (ASST. YEAR : 2001 - 02 TO 2004 - 05) COME IN APPEAL ONLY ON 3 ISSUES I.E. ASSESSEE HAS FILED INACCURATE PARTICULARS BY WAY OF CLAIMING DEPRECIATION ON GOODWILL AND THAT THE PENALTY WAS NOT BARRED BY TIME AND THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS FOR CLAIMING DEDUCTION U/S 80IA. IN VIEW OF THE ABOVE APPEAL OF THE REVENUE EVEN TECHNICALLY SINCE PENALTY HAS BEE N DELETED ON OTHER COUNTS THE DELETION OF PENALTY HAS TO BE SUSTAINED BY THIS TRIBUNAL. 2.3 IN RESPECT OF CLAIM OF DEPRECIATION ON GOODWILL IT WAS VEHEMENTLY CONTENDED THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DECISION IN CIT VS. SMIFS SECURI TIES LTD. 252 CTR (SC) 233 ( SUPRA ) AND IN THAT CASE THE HON'BLE SUPREME COURT HAS CATEGORICALLY HELD THAT THE ASSESSEE SHALL BE ENTITLED FOR DEPRECIATION ON GOODWILL. IN ANY WAY THE ISSUE WILL BE DEBATABLE AND THE CLAIM OF THE ASSESSEE WAS A BONA FIDE ON E. IT WAS ALSO POINTED OUT THAT THE ASSESSMENT HAS BEEN MADE ON THE BOOK PROFIT COMPUTED U/S 115JB AND IN CASE ASSESSMENT IS MADE U/S 115JB NO PENALTY CAN BE LEVIED ON THE ASSESSEE. THIS IS COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN CIT VS. NALWA SONS INVESTMENTS LTD. 327 ITR 543 (DEL.) ( SUPRA ). THE SLP AGAINST THE JUDGEMENT HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT AS REPORTED IN 21 TAXMANN.COM 184(SC). THERE WAS FAILURE TO OBTAIN MANDATORY PRIOR APPROVAL OF THE JT. COMMISSIONER OF I NCOME TAX BEFORE LEVYING PENALTY. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. VINOD KUMAR AIR 1996 2778 2779. LASTLY IT WAS CONTENDED THAT THE CLAIM MADE BY THE ASSESSEE WAS A BONA FIDE ONE. IT IS NOT THE CASE OF CONCEALING THE FACTS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. MERE MAKING A CLAIM WHICH IS NOT SUSTAINABLE BY ITSELF DOES NOT AMOUNT EITHER TO CONCEALING FACTS OR THE INCOME OR FURNISHING OF WRONG PARTICUL ARS OF INCOME. RELIANCE WAS PLACED IN THIS REGARD ON THE FOLLOWING CASES: 5 ITA NOS. 38 TO 41/PNJ/2013 & CO NOS. 9 TO 12/PNJ/2013 (ASST. YEAR : 2001 - 02 TO 2004 - 05) A. CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD; 322 ITR 158 (SC) B. SHARDA CO - OP. SUGAR MILLS LTD; 322 ITR 73 (P&H) C. T. ASHOK PAI VS. CIT; 292 ITR 11 (SC) D. CIT VS. P H I SEEDS INDIA LTD; 208 CTR (D) 308 E. CIT VS. MANIBHAI AND BROS. RELIANCE WAS ALSO PLACED ON THE SUBMISSIONS MADE BEFORE THE CIT(A) COPY OF WHICH WAS FILED AT PAPER BOOK PG. 1 - 31. 2.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THE SAME CAREFULLY ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED BEFORE US. IT IS A FACT THAT IN THIS CASE THE PENALTY HAS BEEN LEVIED BY THE AO IN RESPECT OF DISALLOWANCE MADE FOR THE DEPRECIATION CLAIMED BY THE ASSESSEE ON THE GOODWILL IN EACH OF THE A.YS AND THE REDUCTION OF THE CLAIM MADE BY THE ASSESSEE U/S 80IA/80IB IN A.Y 2001 - 02 2002 - 03 AND 2003 - 04. INCOME AS PER THE REGULAR ASSESSMENT HAS BEEN COMPUTED AT NIL IN A.Y 2001 - 02 AND 2002 - 03 AND ULTIMATELY TAX HAS BEEN COMPUTED AS PER THE BOOK P ROFIT U/S 115JA/JB WHILE FOR A.Y 2003 - 04 AND 2004 - 05 THE ASSESSMENT HAS BEEN COMPLETED AS PER THE NORMAL PROVISIONS OF THE INCOME TAX. WE NOTED THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NALWA SONS INVESTMENTS LTD. 327 ITR 543 (DEL.) ( SUPRA ) TOOK THE VIEW THAT WHEN THE ASSESSMENT AS PER NORMAL PROCEDURE WAS NOT ACTED UPON AND DEEMED INCOME IS ASSESSED U/S 115J A THE CONCEALMENT HAD NO ROLE TO PLAY AND IS TOTALLY IRRELEVANT AS IT DID NOT LEAD TO TAX EVASION AT ALL. THE SLP AGAINST THE DECISI ON OF THE HON'BLE DELHI HIGH COURT HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ITS ORDER DT. 4.5.2012 AS REPORTED IN 21 TAXMANN.COM 184. WE HAVE ALSO NOTICED THAT THE ISSUE REGARDING ALLOWABILITY OF DEPRECIATION ON INTANGIBLE ASSET I.E. GOODWILL IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. 24 TAXMANN.COM 222 . IN THIS CASE THE HON'BLE SUPREME COURT TOOK THE VIEW THAT THE DEPRECIATION WILL BE ALLOWABLE AS DEDUCTION WHERE THE GOODWILL REPRESENTS EXCESS OF THE CONSIDERATION PAID BY THE 6 ITA NOS. 38 TO 41/PNJ/2013 & CO NOS. 9 TO 12/PNJ/2013 (ASST. YEAR : 2001 - 02 TO 2004 - 05) ASSESSEE OVER THE VALUE OF THE NET ASSETS OF THE AMALGAMATING COMPANY TAKEN OVER AS AN INTANGIBLE ASSET. NO DOUBT IN THE CASE OF THE ASSESSEE THE CLAIM OF THE ASSESSEE IN RESPECT OF DEPRECIATION ON GOODWILL HAS BEEN DISALLOWED AND CONFIRMED BY THE TRIBUNAL AS WELL AS BY THE HON'BLE HIGH COURT BUT SINCE NOW THE DECISION OF THE HON'BLE SUPREME COURT IS BEFO RE US IT CANNOT BE SAID THAT THE CLAIM OF THE ASSESSEE WAS NOT BONA FIDE. THE DISALLOWANCE OF CLAIM OF DEPRECIATION IN CASE OF THE ASSESSEE WILL NOT MAKE THE CLAIM OF THE ASSESSEE NOT TO BE BONA FIDE ONE. THE BONA FIDE OF THE CLAIM OF THE ASSESSEE IS IT SELF PROVED BY THE DECISION OF THE HON'BLE SUPREME COURT. UNDER THESE FACTS IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME SO FAR IT RELATES TO THE CLAIM OF DEPRECIATION ON GOODWILL IN EACH OF THE A.YS. THE CLAIM U/S 8 0IA/80IB HAS BEEN MADE BY THE ASSESSEE AS PER COMPUTATION AND FOR MAKING THE CLAIM THE ASSESSEE HAS TO SUBMIT THE AUDITED REPORT WHICH IS DULY CERTIFIED BY THE C.A. ALL THE PARTICULARS IN RESPECT OF THE CLAIM ARE TO BE FURNISHED. IT IS NOT THE CASE OF T HE REVENUE THAT THE ASSESSEE HAS NOT FURNISHED ALL THE PARTICULARS OF THE CLAIM. IF THE ASSESSEE HAS MADE THE CLAIM ON THE BASIS OF THE OPINION AND CERTIFICATE OF AN EXPERT IN OUR OPINION IT CANNOT BE SAID THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) ALSO HELD AS UNDER : A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. THE LD. DR THOUGH RELIED ON THE ORDER OF THE AO COULD NOT BRING TO OUR KNOWLEDGE A NY CONTRARY DECISION WHICH MAY PROVE THAT THE CLAIM OF THE ASSESSEE WAS NOT BONA FIDE. ON ALL THESE COUNTS IN OUR OPINION IT IS A FIT CASE WHERE NO PENALTY CAN BE IMPOSED ON THE ASSESSEE. WE HAVE ALSO NOTED THAT THE 7 ITA NOS. 38 TO 41/PNJ/2013 & CO NOS. 9 TO 12/PNJ/2013 (ASST. YEAR : 2001 - 02 TO 2004 - 05) CIT(A) HAS DELETED THE PENALTY ON OT HER GROUNDS ALSO ON WHICH THE REVENUE HAS NOT COME IN APPEAL. IN VIEW OF THIS ALSO EVEN IF THE GROUNDS OF APPEAL OF THE REVENUE ARE ALLOWED THE PENALTY WILL REMAIN TO BE DELETED. IN VIEW OF THIS IN OUR OPINION NO INTERFERENCE IS CALLED FOR IN THE OR DER OF CIT(A) IN DELETING THE PENALTY IN EACH OF THE ASSESSMENT YEARS. WE ACCORDINGLY DISMISS ALL THE APPEALS FILED BY THE REVENUE. THE CROSS OBJECTION FILED BY THE ASSESSEE ARE MERELY SUPPORTIVE TO CIT(A) ORDER. 3. IN THE RESULT ALL THE APPEALS FILED BY THE REVENUE STAND DISMISSED WHILE THE CROSS OBJECTION S FILED BY THE ASSESSEE ARE ALLOWED. 4. ORDER PRONOUNCED IN THE OPEN COURT ON 25 /07/2013. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 25 /07/ 2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT PANAJI (4) CIT(A) PANAJI (5) D.R (6) GUARD FILE TRUE COPY BY ORDER SR. P RIVATE S ECRETARY ITAT PANAJI GOA