Indian Polyster Ltd., Surat vs Assessee

Indian Polyester Ltd., 504, V/S Income Tax Officer, Ward- Empire Estate Building, 1(2), Surat Ring Road, Surat

(Appellant) (Respondent) Income Tax Officer, Ward- V/S Indian Polyester Ltd., 504, 1(2), Surat Empire Estate Building, Ring Road, Surat

(Appellant) (Respondent)

PAN: AABCI2475N

Appellant by : Shri Mehul Shah, A.R. Respondent by : Shri Nimesh Yadav, Sr. D.R.

(आदे श)/ORDER

Date of hearing : 20-05-2015 Date of Pronouncement : 26 -05-2015

PER ANIL CHATURVEDI, ACCOUNTANT MEMBER.

1. These 2 appeals, of which 1 is filed by the Assessee and the other is filed by the Revenue are against the order of CIT(A)-I, Surat dated 21.06.2011 & 11.07.2013 for A.Y. 2005-06.

2. The relevant facts as culled out from the material on record are as under.

2 ITA Nos. 1934/A/11 & 2293/A/13 . A.Y. 2005-06

3. Assessee is a company stated to be engaged in the business of manufacturing of texturised yarn. Assessee filed its return of income for A.Y. 2005-06 on 30.10.2007 declaring total income at Rs. Nil. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 31.12.2007 and the total income was determined at Rs. 10,46,620/- interalia by making addition on account of unexplained cash credit of Rs. 6,50,000/- and disallowing depreciation of Rs. 13,05,971/-. On the aforesaid disallowances made, A.O levied penalty u/s. 271(1)(c) vide order dated 25.03.2010 of Rs. 7,12,750/- as he was of the view that Assessee had furnished inaccurate particulars of income. Aggrieved by the penalty order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 21.06.2011 granted partial relief to the Assessee by interalia deleting the penalty on depreciation but confirmed the penalty on unexplained cash credit of Rs. 6,50,000/-. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us and the grounds raised by Assessee reads as under:-

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 erred in partly confirming the penalty action of assessing officer in imposing penalty u/s 271(1)(c) of the Act by sustaining the penalty on addition of Rs. 6,50,000/- on account of unexplained cash credit.

2. It is therefore prayed that penalty imposed by Assessing Officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted.

4. Against the quantum addition made by A.O, Assessee preferred 2nd appeal before Hon'ble ITAT who vide order dated 23.07.2010 in ITA NO.

2695/Ahd/2008, on the issue of disallowance of depreciation of Rs. 13,05,971/- claimed by the Assessee restored the matter to A.O to re-decide the issue afresh. Pursuant to the directions of ITAT, A.O vide order dated 30.12.2011 passed u/s. 143(3) r.w.s. 254 and in the absence of details from 3 ITA Nos. 1934/A/11 & 2293/A/13 . A.Y. 2005-06 Assessee, once again confirmed the disallowance of depreciation of Rs. 13,05,971/- and on the aforesaid addition, A.O vide order dated 22.06.2012, levied penalty of Rs. 4,57,098/- u/s. 271(1)(c) on account of concealment of income. Aggrieved by the penalty levied by A.O, Assessee preferred appeal before CIT(A) who vide order dated 11.07.2013 deleted the penalty. Aggrieved by the order of ld. CIT(A), Revenue is now in appeal before us and has raised the following grounds:-

1. On the facts of the circumstances of the case, whether the Ld. CIT(A) is justified in deleting the penalty on disallowances of higher depreciation claimed by the assessee in his return of income, when the has accepted addition made by the AO in respect to disallowances of excess .depreciation during the course of re-assessment proceedings completed in the light of original assessment being set-aside by the Hon'ble ITAT.

2. On the facts of the circumstances of the case, whether the Ld. CIT(A) is justified in deleting the penalty, while the assessee has never responded to the penalty notices issued by the AO, during the course of penalty proceedings.

3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.

4. It is therefore, prayed that the order of the CIT(A) may be set-side and that of Assessing Officer may be restored to the above extent.

5. Before us, on the appeal of Revenue, on the issue of deletion of penalty on the issue of depreciation ld. A.R. reiterated the submissions made before ld.

CIT(A). He further submitted that Assessee had claimed depreciation at 50% of the WDV on the new plant and machinery purchased under TUF scheme. A.O was of the view that the provisions of Rule 5 in Appendix-1, Serial No.

(iii)(6) of the I.T. Rules were not applicable to the machinery utilized in Yarn Crimping or Texturising Industry and therefore Assessee was eligible for only normal depreciation and not higher depreciation he accordingly disallowed the excess claim of depreciation. On the aforesaid disallowance made by the A.O, the matter was carried in 2nd appeal. Ld. A.R. submitted that while deciding the Assessee's appeal, the Hon'ble Tribunal in ITA No. 2695/AHD/2008 order dated 23.07.2010 had principally agreed that 4 ITA Nos. 1934/A/11 & 2293/A/13 . A.Y. 2005-06 Assessee was eligible for higher depreciation but in the absence of the information as to whether the assets were put to use for less than 180 days or more than 180 days, the matter was restored to the A.O to re-decide the issue afresh. He therefore submitted that there was no concealment of particulars of income and in these facts ld. CIT(A) has rightly deleted the penalty. He therefore supported the order of ld. CIT(A).

6. On the issue of penalty on addition on account of unexplained cash credit. The ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further submitted that at the time of assessment proceedings, Assessee had filed all the relevant evidences relating to the receipt of application money like PAN number, contra confirmation, acknowledgement of return of income etc. However, A.O insisted the Assessee to file evidences in the form of bank statement of share applicants, source of fund etc. The Assessee to put an end to litigation, voluntarily offered Rs. 6,50,000/- for tax. The ld. A.R submitted that A.O has not brought on record any evidence which would indicate that the amount represents concealed income of the Assessee. He further submitted that in order to justify levy of penalty there must be some material or circumstances to show that there was conscious concealment or act of furnishing of inaccurate particulars. He further submitted that the A. O did not issue summons to the depositors u/s. 131 or did not obtain relevant information u/s. 133(6) to illicit the true position of the deposits. The Assessee further placed reliance on the decision in the case of National Textile vs. CIT 249 ITR 125 (Guj). The ld. D.R. on the other hand on the issue of levy of penalty on addition u/s. 68 supported the order of A.O. On the issue of levy of penalty on the claim of depreciation, he 5 ITA Nos. 1934/A/11 & 2293/A/13 . A.Y. 2005-06 supported the order of A.O and ld. CIT(A) and further placed reliance on the decision in the case of Anand Liquor 232 ITR 35.

7. We have heard the rival submissions and perused the material on record. The issue in the present case is about levy of penalty u/s. 271(1)(c) on two additions namely addition u/s. 68 on account of unexplained cash credit and on excess depreciation of machinery. On the addition made u/s. 68, we find that Assessee had filed the details about the name, PAN number, contra confirmation etc of the depositors which have not been found to be untrue by the A.O. It is also a fact that the A.O has also not brought any evidence on record to demonstrate that the amount of unexplained credit represents concealed income of Assessee. The act of Assessee of not preferring appeal against quantum addition cannot be considered to be a factor against the Assessee more so when it is a settled law that assessment proceedings and quantum proceedings are distinct and separate and that addition can be made on the basis of preponderance of probability but for the purpose of levy of penalty, heavy burden is cast on the Revenue to prove concealment. We further find that the Hon'ble Gujarat High Court in the case of National Textiles vs. CIT 249 ITR 125 has held in order to justify levy of penalty for addition of cash credits, there must be some material or circumstances leading to reasonable conclusion that the amount does represent assessee's income and the circumstances must show that there was conscious concealment or act of furnishing of inaccurate particulars; Expln.

1 does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the Assessee. As far as levy of penalty on disallowance of depreciation is concerned, we find that ld. CIT(A) after relying on the decision of Hon'ble Ahmedabad Tribunal in the case of 6 ITA Nos. 1934/A/11 & 2293/A/13 . A.Y. 2005-06 Deshraj Texturisers (ITA No. 660/A/2010 order dated 07.09.2010) has deleted the penalty. Before us, Revenue has not brought any contrary binding decision in its support nor could point out any legal infirmity in the order of ld. CIT(A). We further find that the facts in the case of Anand Liquor, (supra) which has been relied upon by Revenue are distinguishable on facts and therefore cannot be applied to the facts of the present case. In view of the aforesaid facts, we are of the view that in the present case no penalty u/s. 271(1)(c) is leviable on both the additions and therefore we delete the penalty levied on addition u/s. 68 and uphold the order of ld. CIT(A) whereby he had deleted the penalty on the claim of depreciation.

8. In the result, the appeal of Revenue is dismissed and that of Assessee is allowed.

Order pronounced in Open Court on 26 - 05 - 2015.

Sd/- Sd/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEBER ACCOUNTANT MEMBER Ahmedabad. TRUE COPY Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad