Super Oil Seals (I) Ltd.,, New Delhi v. ACIT, New Delhi

ITA 4256/DEL/2009 | 2003-2004
Pronouncement Date: 08-01-2010 | Result: Allowed

Appeal Details

RSA Number 425620114 RSA 2009
Bench Delhi
Appeal Number ITA 4256/DEL/2009
Duration Of Justice 2 month(s) 3 day(s)
Appellant Super Oil Seals (I) Ltd.,, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 08-01-2010
Assessment Year 2003-2004
Appeal Filed On 04-11-2009
Judgment Text
ITA NO. 4256/DEL/09 A.Y. 2003-04 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 4256/DEL/2009 A.Y. : 2003-04 M/S SUPER OIL SEALS (I) LTD. VS. ASSTT. COMMIS SIONER OF INCOME TAX F-130 MALCHA MARG CIRCLE-9(1) NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. AGGARWAL AR DEPARTMENT BY : SHRI S.K. BHARATI SR. DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDERS OF THE LD. CIT(A) DATED 07.05.2009 PERTAINING TO ASSES SMENT YEAR 2003-04 CONFIRMING THE PENALTY UNDER SECTION 271(1) (C) AMOUNTING TO RS. 4 69 365/-. 2. IN THIS CASE THE ASSESSEE COMPANY IS IN THE BUSI NESS OF MANUFACTURING OF OIL SEALS. THE COMPANY WAS A SICK INDUSTRIAL COMPANY AND FOR THE YEAR UNDER CONSIDERATION THE AC TUAL PRODUCTION WAS NIL. UNDER SUCH SITUATION AO WAS O F THE OPINION THAT IN ORDER TO AVAIL DEPRECATION ASSET MUST BE US ED FOR THE PURPOSE OF BUSINESS DURING THE RELEVANT ASSESSMENT YEAR. ASSESSEES EXPLANATION IS THAT THOUGH THERE WAS NO PRODUCTION IN ITA NO. 4256/DEL/09 A.Y. 2003-04 2 THE PARTICULAR YEAR BUT ASSETS WERE KEPT READY FOR USE AND ASSESSEE UNDERTOOK TRADING ACTIVITY OF THE SAME ITEM. ASSESS EES ARGUMENT WAS NOT FOUND CONVINCING BY THE AO. HE HELD THAT A SSESSEE WAS NOT ENTITLED FOR DEPRECIATION. ON THIS ADDITION PENAL TY U/S. 271(1)(C) WAS ALSO IMPOSED. 3. UPON ASSESSEES APPEAL LD. CIT(A) HELD THAT ASSE SSEE HAD MADE WRONG CLAIM AGAINST THE LAID LEGAL POSITION. HE HEL D THAT ASSESSEE WAS WELL AWARE AND KNOWINGLY AND CONSCIOUSLY MADE A WRONG CLAIM. HE HELD THAT THERE IS NO PROVISION IN THE A CT WHICH ALLOWS DEPRECIATION FOR ASSETS AND MACHINERY KEPT READY. HE FOUND THAT SECTION 32 CLEARLY STATES THAT THE ASSETS HAS TO BE PUT TO USE FOR CLAIM OF DEPRECIATION. HENCE HE CONFIRMED THE LEVY OF PENALTY. 3.1 AGAINST THIS ORDER ASSESSEE IS IN APPEAL BEFORE US. 4. LD. COUNSEL OF THE ASSESSEE IN THIS REGARD SUBMI TTED THAT LD. CIT(A)S CONTENTION THAT THE DEPRECIATION CANNOT BE CLAIMED FOR ASSETS KEPT READY FOR USE IS INCORRECT. HE REF ERRED THE HONBLE JURISDICATIONLA HIGH COURT DECISION IN THE CASE OF CIT VS. VIBROS ORGNICS LTD. [2006] 206 CTR (DEL) 582 WHEREIN IT W AS HELD THAT ASSESSEES CLAIM FOR DEPRECIATION HAVING BEEN DISA LLOWED FOR WANT OF MANUFACTURING ACTIVITY DURING THE RELEVANT YEAR DESPITE THE FACT THAT THE PLANT AND MACHINERY WERE READY FOR USE TH ERE COULD BE TWO OPINIONS IN THE MATTER AND THEREFORE TRIBUNAL WAS RIGHT IN CANCELLING PENALTY PROCEEDINGS UNDER S. 271(1)(C). ITA NO. 4256/DEL/09 A.Y. 2003-04 3 4.1 LD. COUNSEL FURTHER REFERRED TO HONBLE JURISDI CTIONAL HIGH COURT DECISION IN ITA NO. 422/2007 IN THE CASE OF C IT VS. M/S PANACEA BIOTECH LTD. VIDE ORDER DATED 27.7.2009 WH EREIN IT WAS HELD THAT THE EXPRESSION USED FOR THE PURPOSE OF B USINESS IN THE CONTEXT OF SECTION 32 INCLUDES PASSIVE USER OF THE ASSETS IN THE BUSINESS. IN THAT CASE CLAIM OF DEPRECIATION WAS O N OFFICE WHICH WAS FURNISHED AND KEPT READY FOR USE. AO HAD DISA LLOWED THE CLAIM OF DEPRECIATION ON THE GROUND OF PASSIVE USE OF THE ASSET. 4.2 LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND SECTION 271(1)(C) OF THE ACT POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALME NT OF INCOME. IN THIS CASE WE FIND THAT ASSESSEE HAS CLAIMED DEPRECI ATION AND THE ASSESSEE PLEA IS THAT THOUGH NO PRODUCTION HAS TAKEN PL ACE ASSETS WERE KEPT READY FOR USE. THIS PLEA WAS NOT ACCEPTED BY TH E REVENUE AUTHORITIES ON THE GROUND THAT THERE IS NO PROVISION IN THE ACT FOR CLAIMING DEPRECIATION FOR ASSETS KEPT READY FOR US E. ADMITTEDLY AS EVIDENT FROM THE HONBLE JURISDICTIONAL HIGH COURTS DECISION AS ABOVE IT CANNOT BE CATEGORICALLY SAID THAT DEPRECIATION CANN OT BE ALLOWED IN THE CASE WHEN ASSETS ARE KEPT READY FOR USE. UNDER THE CIRCUMSTANCES IN OUR OPINION THE ASSESSEES CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS SO AS TO ENTAIL LEVY OF PENALTY UNDER SECTI ON 271(1)(C). ITA NO. 4256/DEL/09 A.Y. 2003-04 4 5.1 IN THIS REGARD WE ALSO DRAW SUPPORT FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF TH EIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 8 3 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMIN AL PROCEEDINGS AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FA ILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF TH E AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBE D THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED I N REFUSING TO IMPOSE PENALTY WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONAFIDE B ELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 6. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELET E THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE IT ACT. ITA NO. 4256/DEL/09 A.Y. 2003-04 5 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/2010. SD/- SD/- [RAJPAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 08/01/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES