Alidhara Texpro Engineers Pvt.Ltd.,, ... vs Assessee

आयकर अपील सं./I.T.A. No.2006/Ahd/2011 ( Ǔनधा[रण वष[ / Assessment Year : 2005-06) Alidhara Texpro बनाम/ The Dy.CIT Engineers P.Ltd. Vs. Circle-1 Plot No.B-52 Surat Road No.3 Udhyognagar, Udhna èथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AACCA 0256 D (अपीलाथȸ /Appellant) .. (Ĥ×यथȸ / Respondent) अपीलाथȸ ओर से / Appellant by : Shri P.B.Shah, A.R. Ĥ×यथȸ कȧ ओर से/Respondent by : Shri M.K. Singh, Sr.DR

ु वाई कȧ तारȣख / सन Date of Hearing 07/01/2015 घोषणा कȧ तारȣख /Date of Pronounce ment 09/01/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-I, Surat ('CIT(A)' in short) dated 14/06/2011 pertaining to Assessment Year (AY) 2005-06. The Assessee has raised the following grounds of appeal:-

1. On the facts and in circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has ITA No.2006/Ahd/2011 Alidhara Texpro Engineers P.Ltd. vs. Dy.CIT Asst.Year - 2005-06 -2-

erred in confirming the action of the Assessing Officer in levying a penalty u/s.271(1)(c) of the Act of Rs.11,03,958/-.

2. It is therefore prayed that above penalty levied by Assessing Officer and confirmed by learned Commissioner of Income Tax (Appeals) may please be deleted.

3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) rws 142(2A) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 31/03/2008, thereby the Assessing Officer (AO in short) made addition on account of fall in Gross Profit, disallowance out of deduction claimed u/s.80IB of the Act, disallowance of depreciation and deduction claimed u/s.80IB of the Act and addition by invoking provisions of section 41(1) of the Act. The AO also initiated the penalty proceedings. The AO vide order dated 18/03/2010 levied penalty in respect of the addition made on account of fall in GP, disallowance of deduction claimed u/s.80IB of the Act and disallowance of depreciation and deduction claimed u/s.80IB of the Act aggregating to Rs.30,16,897/-. The AO imposed a penalty of Rs.11,03,958/-. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions of the assessee dismissed the appeal. Aggrieved by the order of the ld.CIT(A), now the assessee is further in appeal before us.

ITA No.2006/Ahd/2011 Alidhara Texpro Engineers P.Ltd. vs. Dy.CIT Asst.Year - 2005-06 -3-

3. It was noticed that the assessee vide letter dated 09/08/2011 had submitted that a challan of Rs.10,000/- is enclosed with the memorandum of appeal. It was found that the assessee had not enclosed the challan of Rs.10,000/- along with memo of appeal. Accordingly, a defect memo dated 11.08.2011 was issued to the assessee by the Registry. However, the assessee did not comply with the defect memo and subsequently a challan of Rs.500/- was submitted by the assessee dated 04/08/2011. The ld.counsel for the assessee was confronted in respect of in respect of the aforesaid laps. The ld.counsel for the assessee submitted that it was an inadvertent mistake, due to typographical error in respect of Rs.500/-, the assessee has written Rs.10,000/-. He submitted that this being appeal against levy of penalty. The filing fee is only Rs.500/- as per clause (d) of section 253(6) of the Act. He submitted that there was an inadvertent mistake and for that he offers unconditional apology to the Tribunal. The explanation of the assessee is found to be acceptable, however, the assessee is cautioned not to repeat this kind of mistake in future to avoid any confusion. The ld.counsel for the assessee in respect of the merit of the case submitted that, in quantum appeal, the assessee filed an appeal before the ld.CIT(A). The ld.CIT(A) vide order dated 08/09/2008 has confirmed the addition. He submitted that in respect of fall in GP of Rs.25,46,363/-, the addition was deleted by the Hon'ble Tribunal (ITAT Bench "D" Ahmedabad in ITA No.3496/Ahd/2008 for AY 2005-06 vide ITA No.2006/Ahd/2011 Alidhara Texpro Engineers P.Ltd. vs. Dy.CIT Asst.Year - 2005-06 -4-

order dated 12/08/2011. He drew our attention towards paras-7,8 & 9 of the said order of the Tribunal, wherein the Hon'ble Coordinate Bench has held that the addition made on account of fall in GP is not justified. He further submitted that in respect of addition made on account of disallowance of deduction u/s.80IB of the Act amounting to Rs.2,38,533/-, the AO disallowed deduction of Rs.2,38,533/- on interest income, in respect of vatav kasar of Rs.5,82,803/- and Rs.1,85,643/- respectively. He submitted that so far as the interest of Rs.5,82,803/-, it is submitted at the outset the assessee has suo-moto disallowed interest income of Rs.5,82,803/- while working out deduction u/s.80IB of the Act and assessing officer also passed order u/s.154 of the Act on 05/05/2008. He submitted that the AO has wrongly observed that the assessee did not exclude the interest income of RS.5,82,803/- while working out deduction u/s.80IB of the Act. The working of the deduction u/s.80IB and audit report u/s.80IB in Form No.10CCb is enclosed by the assessee for kind perusal. He also drew our attention towards rectification order passed u/s.154 of the Act by the AO placed at page No.4 of the paper- book. In respect of an amount of Rs.1,85,643/-, the ld.counsel for the assessee submitted that the disallowance u/s.80IB of the Act of vatav kasar was deleted by the Hon'ble Tribunal vide order dated 12/08/2011 in ITA No.34967/Ahd/2008(supra). He drew our attention towards para- 14 of the order of the Coordinate Bench. In respect of disallowance of depreciation and deduction claimed u/s.80IB of the Act amounting to ITA No.2006/Ahd/2011 Alidhara Texpro Engineers P.Ltd. vs. Dy.CIT Asst.Year - 2005-06 -5-

Rs.2,32,001/-, the ld.counsel for the assessee submitted that in earlier years, the assessee claimed deduction u/s.80IB of the Act without claiming depreciation. He submitted that the AO and the special auditor have worked out the amount of disallowance u/s.80IB of Rs.2,32,001/- being the deduction claimed at enhanced profit by not claiming the depreciation in the earlier years. He submitted that the Hon'ble Tribunal on the basis of the decision of Special Bench of ITAT in the case of Vahid Paper Converters & Others in ITA No.1686/Ahd/2004 confirmed the disallowance. He submitted that, in fact, the assessee claimed the deduction u/s.80IB after claiming of the depreciation during the year under consideration as can be perused from the working of deduction u/s.80IB of the Act. However, the AO recomputed the profit by allowing depreciation of earlier years although in fact it was not allowed in assessment records. He submitted that, under such circumstances, the decision of Vahid Paper Converters & Others cited supra is not applicable as held in the case of Khemani Distillers vs. ACIT in ITA No.2149/Ahd/2007 of ITAT, Ahmedabad. Even otherwise, the assessee's case is covered by the decision of Hon'ble Supreme Court in case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at 322 ITR 158(SC). He submitted that, in fact, in this case the assessee did not file any inaccurate particulars of income as assessee did claim the depreciation during the year and in the earlier years the AO himself ITA No.2006/Ahd/2011 Alidhara Texpro Engineers P.Ltd. vs. Dy.CIT Asst.Year - 2005-06 -6-

thrust upon depreciation on assessee. The ld.counsel for the assessee prayed that the Tribunal may please be deleted the penalty.

4. On the contrary, ld.Sr.DR supported the orders of the authorities below.

5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the decisions relied upon by the ld.counsel for the assessee. There is no dispute with regard to the deletion of addition in respect of the addition of Rs.25,46,363/- made on account of fall in GP and the addition made on account of disallowance of deduction amounting to Rs.2,38,533/-, the AO has disallowed the deduction on the basis that the assessee did not disallow the interst of Rs.5,82,803/-. The ld.counsel for the assessee submitted that the assessee had, in fact, disallowed the interest and rectification order u/s.154 of the Act was passed by the AO and rest of the disallowance was deleted by the Tribunal vide order dated 12/08/2011 in ITA No.3496/Ahd/2008 (supra). These facts are not controverted by the Revenue by placing any contrary material, therefore we hereby direct the AO to delete the penalty levied on an amount of Rs.2,38,533/-. In respect of disallowance of depreciation and deduction of Rs.2,32,001/-, the basis of disallowance was on that the assessee claimed deduction u/s.80IB of the Act in the earlier years was found to have been worked out without claiming depreciation. The AO found that this position was not in accordance with law and, therefore he disallowed ITA No.2006/Ahd/2011 Alidhara Texpro Engineers P.Ltd. vs. Dy.CIT Asst.Year - 2005-06 -7-

the deduction u/s.80IB of the Act and added back in the income of the assessee on account of excess/wrong claim of deduction u/s.80IB of the Act. The contention of the assessee is that the assessee claimed deduction u/s.80IB of the Act after claiming the depreciation during the year under consideration as can be perused from the working of deduction u/s.80IB of the Act. He drew our attention towards page No.6 of the paper-book. In which the working of deduction u/s.80IB is given. As per this working, we find that the assessee has claimed depreciation. The assessee has also placed reliance on the decision of Hon'ble Supreme Court rendered in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at 322 ITR 158(SC) to buttress the contention that the assessee had not filed any inaccurate particulars of income since the assessee had himself claimed depreciation during the year under consideration.

5.1. We have given our thoughtful consideration of the facts and circumstances of the case in view of the fact that the assessee, in fact, has claimed depreciation during the year under consideration. The Revenue has not controverted the same, therefore following the ratio laid down by the Hon'ble Supreme Court rendered in the case of CIT vs. Reliance Petroproducts Pvt.Ltd.(supra), we are of the considered view that the ld.CIT(A) was not justified in confirming the penalty on this issue, therefore the AO is hereby directed to delete the penalty levied on addition of Rs.2,32,001/-.

ITA No.2006/Ahd/2011 Alidhara Texpro Engineers P.Ltd. vs. Dy.CIT Asst.Year - 2005-06 -8-

6. In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on Friday, the 9th of January, 2015 at Ahmedabad.

Sd/- Sd/- (अǓनल चतुवȶदȣ) (कुल भारत) लेखा सदèय ÛयाǓयक सदèय ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 09/ 01 /2015 टȣ.सी.नायर, व.Ǔन.स./T.C. NAIR, Sr. PS

आदे श कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to :

1. अपीलाथȸ / The Appellant

2. Ĥ×यथȸ / The Respondent.

3. संबंͬधत आयकर आयुÈत / Concerned CIT

4. आयकर आयुÈत(अपील) / The CIT(A)-I, Surat

5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड[ फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स×याͪपत ĤǓत //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation ..7.1.15 (dictation-pad 17- pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ...8.1.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......9.1.15

7. Date on which the file goes to the Bench Clerk.....................9.1.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................