DCIT, New Delhi v. M/s. Ajanta Offset & Packaging Ltd, New Delhi

ITA 3933/DEL/2009 | 2001-2002
Pronouncement Date: 26-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 393320114 RSA 2009
Assessee PAN AAACA0245Q
Bench Delhi
Appeal Number ITA 3933/DEL/2009
Duration Of Justice 6 month(s) 7 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Ajanta Offset & Packaging Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 26-03-2010
Date Of Final Hearing 15-03-2010
Next Hearing Date 15-03-2010
Assessment Year 2001-2002
Appeal Filed On 18-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 3933(DEL)/2009 ASSESSMENT YEAR: 2001-02 DEPUTY COMMISSIONER OF INCOME M/S AJANTA OFFSET & PACKAGING TAX CIRCLE 1(1) NEW DELHI. VS. LTD. B-95 WAZIRPUR INDL. AREA DELHI. PAN-AAACA0245Q C.O. NO. 372(DEL)/2009 (ARISING OUT OF ITA NO. 3933(DEL)/2009 ASSESSMENT YEAR: 2001-02 M/S AJANTA OFFSET & PACKAGING DEPUTY COMMISSIONER OF LTD. B-95 WAZIRPUR INDL. AREA VS. I NCOME-TAX CIRCLE 1(1) DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : MS. PRATIMA KAUSHIK SR. DR ASSESSEE BY : SHRI V.P. GUPTA & SHRI BASANT KUMAR ADVOCATES ORDER PER K.G. BANSAL : AM THE AFORESAID APPEAL OF THE REVENUE AND THE C ROSS OBJECTION OF THE ASSESSEE EMANATE FROM THE ORDER OF CIT(APPEALS)- IV NEW DELHI PASSED IN I.T.APPEAL NO.04/08-09 ON 3.7.2009 PERTAININ G TO ASSESSMENT YEAR 2001-02. THE REVENUE HAS CHALLENGED THE ORDER I N REGARD TO DELETION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 IN RESPECT OF ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 2 (I) NON-ADJUSTMENT OF UNABSORBED DEPRECIATION WH ILE COMPUTING PROFITS OF BUSINESS U/S 80-HHC; AND (II) NON-INCLUSION O F MISCELLANEOUS INCOME IN THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTA TION OF DEDUCTION UNDER THE AFORESAID SECTION. ON THE OTHER HAND THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF PENALTY IN RESPECT OF DIFFERENCE IN STOCK OF STORES MISCELLANEOUS ITEMS AND PAPER. 2. THE FACTS AS NARRATED IN THE ASSESSMENT ORDER ARE THAT THE RETURN OF INCOME WAS FILED ON 25.10.2001 DECLARING TO TAL INCOME OF RS. 1 08 64 746/-. THE ASSESSMENT WAS COMPLETED U /S 143(3) ON 31.3.2004 AT TOTAL INCOME OF RS. 2 15 73 400/-. IN THIS AS SESSMENT CERTAIN ADDITIONS WERE MADE IN RESPECT OF DISCREPANCY IN STOCK AND THE CLAIM OF THE ASSESSEE U/S 80-HHC WAS ALSO REDUCED IN RESPECT OF FOU R ITEMS. THE ORDER WAS SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT(A) . ON THE BASIS OF HIS ORDER ADDITION OF RS. 1 80 000/- WAS SUSTAINED IN RESPECT OF STOCK AND THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80- HHC WAS DENIED IN RESPECT OF FOUR ITEMS NAMELY- (I) INTEREST ON F IXED DEPOSITS (II) CLAIM OF EXPORT INCENTIVE BEING THE DEPB BENEFITS (III) ADJUSTMENT MADE IN RESPECT OF UNABSORBED DEPRECIATION OF EARLIER YE ARS AND(IV) ADJUSTMENT MADE IN THE EXPORT TURNOVER. THE AO HAD ALSO INITIATED PENALTY ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 3 PROCEEDINGS WHICH WERE DISPOSED OFF ON 28.03 .2008 BY LEVYING PENALTY OF RS. 12.00 LAKH. IN THIS ORDER PENALTY WAS LEVIED IN RESPECT OF ADDITION SUSTAINED ON DISCREPANCY IN STOCK. PEN ALTY WAS ALSO LEVIED IN RESPECT OF TWO ITEMS ON WHICH DEDUCTION WAS NO T ALLOWED U/S 80HHC NAMELY - (I) INTEREST EARNED ON FIXED DEPOSITS PLACED WITH THE BANK (II) ADJUSTMENT IN THE TOTAL TURNOVER AND (III) ADJUS TMENT ON ACCOUNT OF DEDUCTION OF UNABSORBED DEPRECIATION OF EARLIER YEARS. AGGRIEVED BY THIS ORDER THE ASSESSEE MOVED AN APPEAL BEFORE THE LD. CIT(APPEALS). THE FINDINGS OF THE LD. CIT(APPEALS) ON VARIOUS ISSUE S ARE SUMMARIZED HERE. IN REGARD TO DEDUCTION OF UNABSORBED DEPRECIAT ION FROM THE PROFITS OF BUSINESS IT WAS HELD THAT THE ISSUE WAS HIGHLY DEBATABLE AS CAN BE SEEN FROM THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHIRKEE CONSTRUCTION EQUIPMENT LTD. (2000) 246 I TR 429 AND THE MATTER WAS NOT SETTLED TILL THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF IPCA LABORATORIES LTD. VS. DCIT (2004) 266 ITR 5 21. IN REGARD TO NON-INCLUSION OF 90% OF INTEREST ON THE FIXED D EPOSITS IT WAS HELD THAT THE ISSUE WHETHER IT WAS TAXABLE UNDER THE BUSINES S HEAD OR THE RESIDUARY HEAD CONTINUES TO BE A DEBATABLE ISSUE EVEN N OW. IN REGARD TO NON- INCLUSION OF MISCELLANEOUS INCOME SALE OF BOOKS AND FRANCHISE FEES IN THE TOTAL TURNOVER IT WAS HELD THAT THE AGGR EGATE AMOUNT OF ABOUT RS. ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 4 11.62 LAKH OUGHT TO HAVE BEEN REDUCED FROM THE EXPORT TURNOVER AS WELL AS THE TOTAL TURNOVER. IN VIEW OF THE AFORESAID FINDING IT WAS HELD THAT THERE WAS REASONABLE CAUSE FOR THE ASSESSEE TO COMPUTE DEDUCTION U/S 80-HHC IN THE MANNER IT WAS CLAIMED. ALL THE FACTS HAD BEEN DISCLOSED AND THUS THERE IS NO CASE FOR SUSTAINING PENAL TY IN RESPECT OF COMPUTATION OF DEDUCTION U/S 80HHC. COMING TO THE ISSUE OF DISCREPANCY IN STOCK IT WAS MENTIONED THAT SUCH A GROUND WAS NOT TAKEN UP AND THEREFORE WRITTEN SUBMISSIONS IN THIS BEHALF WERE NOT CONSI DERED. HOWEVER THE AO WAS DIRECTED TO VERIFY WHETHER THE ADDITION SUST AINED BY THE CIT(APPEALS) IN THIS MATTER AMOUNTED TO RS. 1.30 LAKH OR RS. 1.80 LAKH. 3. BEFORE US THE CASE OF THE LD. DR WAS THAT THE COMPUTATION OF DEDUCTION U/S 80-HHC MADE BY THE AO WAS SUSTAI NED EVEN BY THE TRIBUNAL. THEREFORE THE EXCESS CLAIM MADE B Y THE ASSESSEE UNDER THIS PROVISION WAS A FALSE CLAIM ON WHICH PENALTY WAS RIGHTLY LEVIED BY THE AO. ON THE OTHER HAND THE LD. COUNSEL RELIED ON THE ORDER OF THE LD. CIT(APPEALS) AND MENTIONED THAT VARIOUS ADJUSTM ENTS MADE WHILE ALLOWING THE DEDUCTION WERE HIGHLY DISPUTABL E IN VIEW OF THE CASE LAW DISCUSSED BY THE CIT(APPEALS). THEREFORE H E RIGHTLY DELETED THE LEVY OF THE PENALTY. IN REGARD TO THE CROSS OBJEC TION IT WAS SUBMITTED THAT ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 5 IN THE COURSE OF SURVEY IT WAS FOUND THAT PHYS ICAL STOCK WAS LESS THAN THE BOOK-STOCK. THE DISCREPANCY WAS COMPUTED AT RS. 1.8 LAKH BY THE AO RS. 1.35 LAKH BY THE LD. CIT(APPEALS) AND RS. 50 000/- BY THE ITAT IN QUANTUM TERMS. THIS DISCREPANCY WAS NOMIN AL COMPARED TO THE VOLUME OF BUSINESS. THUS WHILE THE ADDITION M IGHT HAVE BEEN PARTLY SUSTAINED THERE WAS NO CASE FOR CONFIRMATION OF PENALTY BY THE LD. CIT(APPEALS). 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIVAL SUBMISSIONS. WE MAY TAKE UP VARIOUS ISSUES INVOLVED IN COMPU TATION OF DEDUCTION U/S 80HHC. COMING TO NON-DEDUCTION OF UNABSORBED DEP RECIATION OF EARLIER YEARS WHILE COMPUTING PROFITS OF BUSINESS THE FI NDINGS OF THE LD. CIT(A) ARE BASED HEAVILY ON THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF SHIRKEE CONSTRUCTION EQUIPMENT LTD. (SUPR A). THIS CASE DID NOT DEAL WITH UNABSORBED DEPRECIATION BUT WITH BROU GHT FORWARD LOSSES. THE ARGUMENT OF THE ASSESSEE IN THE CASE WAS THAT TH E PROFITS OF BUSINESS ARE TO BE COMPUTED IN ACCORDANCE WITH PROVISION CO NTAINED IN SECTIONS 28 TO 44D WHICH DID NOT INCLUDE SECTION 72 AND TH EREFORE SECTION 80AB DID NOT GOVERN THE DEDUCTION U/S 80HHC. THIS PLE A WAS ACCEPTED AND THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE O N 24.7.2000 PRIOR TO THE ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 6 FILING OF THE RETURN BY THE ASSESSEE. HOWEVER IT MAY BE STRESSED THAT THE CASE DID NOT DEAL WITH SECTION 32 BUT WITH SE CTION 72 REGARDING CARRY FORWARD AND SET-OFF OF BUSINESS LOSSES. THE HO NBLE SUPREME COURT RENDERED DECISION TO THE CONTRARY ON 11.3.2004 I N THE CASE OF IPCA LABORATORIES LTD. (SUPRA). FOLLOWING THIS DECI SION THE HONBLE COURT REVERSED THE DECISION OF HONBLE BOMBAY HIGH CO URT IN THE CASE OF SHIRKEE CONSTRUCTION EQUIPMENT LTD. ON 17.5.2007. ON THE BASIS OF THE DECISION OF HONBLE BOMBAY HIGH COURT IT CAN BE SAID THAT SOME CONTROVERSY EXISTED REGARDING SET OFF OF BRO UGHT FORWARD BUSINESS LOSS WHILE COMPUTING PROFITS OF BUSINESS U/S 80HHC W HICH ARE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISION CONTA INED IN SECTIONS 28 TO 44D. HOWEVER NO SUCH CONTROVERSY EXISTED IN REGARD TO ABSORPTION OF UNABSORBED DEPRECIATION BROUGHT FORWARD FROM EAR LIER YEARS. SUCH A CONTROVERSY COULD NOT HAVE EXISTED ALSO FOR THE SIMPLE REASON THAT SECTION 32 ITSELF PROVIDES A MECHANISM FOR SUCH ABSORPTION AS UNABSORBED DEPRECIATION OF EARLIER YEARS IS T AKEN AS THE DEPRECIATION OF THE CURRENT YEAR. THEREFORE WE DO NOT AGREE WITH THE LD. CIT(APPEALS) THAT THERE WAS ANY SUBSISTING CONTROVERSY IN REGARD TO DEDUCTION OF UNABSORBED DEPRECIATION WHILE COMPUTING PROFITS OF BUSINESS UNDER CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC WHICH DEFINES THE ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 7 TERM TO MEAN PROFITS OF THE BUSINESS AS COMPU TED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AS REDUCED BY CERTAIN SUMS MENTIONED THEREIN. THE LD. COUNSEL HAS NOT BEEN A BLE TO SHOW ANY BASIS ON WHICH UNABSORBED DEPRECIATION WAS NOT DEDUCTED U/S 32 WHILE COMPUTING PROFITS OF THE BUSINESS. IT ALSO CAN NOT BE SAID THAT THE ASSESSEE WAS NOT AWARE OF THE AFORESAID CLAUSE DEFINING THE TERM PROFITS OF BUSINESS AS A REFERENCE HAS BEEN MADE TO TH E DECISION IN THE CASE OF SHIRKEE CONSTRUCTION EQUIPMENT LTD. (SUPRA) WHICH DEALS WITH THE AFORESAID DEFINITION UNDER WHICH CONTROVERSY ARO SE AS TO WHETHER BROUGHT FORWARD LOSSES OUGHT TO BE SET OFF TO ARRIVE AT THE PROFITS. THUS THERE IS NO EXPLANATION FORTH COMING FROM THE ASSESSEE I N REGARD TO NON- DEDUCTION OF UNABSORBED DEPRECIATION. IN VIEW THEREOF IT IS HELD THAT THE RELIANCE PLACED ON THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF SHIRKEE CONSTRUCTION EQUIPMENT LTD. IS NOT ONLY MISPLACED BUT ALSO LEADS TO THE CONCLUSION THAT THE CLAIM WAS NOT BONA-FIDELY MADE ON THE BASIS OF THAT DECISION. ACCORDINGLY WE REVERSE THE DECISION OF HONBLE CIT(APPEALS) IN THIS MATTER AND HOLD THAT THE AO WAS JUSTIFIED IN LEVYING PENALTY IN RESPECT OF TAX SOUGHT TO BE EVADED ON SUCH FALSE CLAIM. IT MAY HOWEVER BE MENTIONED THAT WE UPHOLD THE FINDING OF ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 8 THE CIT(APPEALS) THAT ONLY MINIMUM PENALTY SHO ULD BE LEVIED IN RESPECT OF THIS AMOUNT. 4.1 IN REGARD TO THE ISSUE OF INCLUSION OF MISC ELLANEOUS INCOME ETC. IN THE TOTAL TURNOVER THE FINDING OF THE AO ARE NOT CLEAR AS MENTIONED BY THE LD. CIT(APPEALS). APART FROM THAT WHETHER THE AMOUNT SHOULD BE INCLUDED IN TOTAL TURNOVER OR IT SHOULD BE TRE ATED UNDER CLAUSE (BAA) OF THE EXPLANATION TO SECTION 80HHC IS A DISPUTAB LE ISSUE. IN VIEW THEREOF IT IS HELD THAT PENALTY U/S 271(1)(C) COULD NOT H AVE BEEN LEVIED IN RESPECT OF THIS MATTER. 5. COMING TO THE ISSUE OF QUANTIFICATION OF STOCK THE FINDING OF THE LD. CIT(A) IS THAT NO SPECIFIC GROUND WAS TAKEN I N THIS REGARD. THUS THE WRITTEN SUBMISSIONS OF THE ASSESSEE WERE IGNORED IN THIS MATTER. THE FACTS ARE THAT ADDITION OF RS. 1.50 LAKH WAS MADE BY THE AO OUT OF WHICH ADDITION OF RS. 50 000/- WAS SUSTAINED BY THE TRI BUNAL ON AN AD-HOC BASIS. THE LEARNED CIT(APPEALS) OUGHT TO HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE ON THIS GROUND ALSO BY TAKING IT TO BE AN ADDITIONAL GROUND. NONETHELESS THE FACTS SHOW THAT UL TIMATELY THE DISCREPANCY WAS FOUND TO BE NOMINAL WHICH COULD OCCUR ON A CCOUNT OF A NUMBER OF ITA NO. 3933(DEL)/2009& C.O. NO. 372(DEL)/2009 9 FACTORS INCLUDING VALUATION. THE AO HAS LEVIE D THE PENALTY MERELY BECAUSE A PART OF THE ADDITION HAS BEEN SUSTA INED IN QUANTUM APPEAL. HOWEVER HE HAS NOT CONSIDERED OBJECTIVELY THE EXPLANATION FURNISHED BY THE ASSESSEE THAT THE DISCREPANCY WAS NOM INAL COMPARED TO THE VOLUME OF BUSINESS OF THE ASSESSEE. IN SUCH A CIRCUMSTANCE WE DO NOT FIND ANY REASON TO HOLD THAT THE EXPLANATIO N OF THE ASSESSEE WAS NOT BONA FIDE. ACCORDINGLY THE LEVY OF PENALTY ON THIS GROUND IS DELETED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS P ARTLY ALLOWED AND THE OBJECTION OF THE ASSESSEE IS ALLOWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26. 03.2010. SD/- SD/- (R.P. TOLANI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 26 .03.2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- 1. AJANTA OFFSET & PACKAGING LTD. DELHI. 2. DY. CIT CIRCLE-1(1) NEW DELHI. 3. CIT(A) 4. CIT NEW DELHI. 5. DR ITAT NEW DELHI. ASSISTANT REGISTRA R.