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ASSISTANT COMMISSIONER OF INCOME-TAX Versus BEST AND CROMPTON ENGINEERING LTD.

2015 (12) TMI 1463 - ITAT CHENNAI

Penalty under section 271(1)(c) - disallowance/expenditure, namely, (i) claim of depreciation under block "buildings" ; (ii) loss on sale of current assets ; (iii) claim of bad debts ; (iv) investments written off ; (v) irrecoverable project expenses written off, on the ground that the assessee has furnished inaccurate particulars of income - Held that:- Other than the claim made by the assessee with regard to five items of deduction, namely, claim of depreciation under block buildings, loss on .....

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its income. This Tribunal is of the considered opinion that the assessee has not furnished any inaccurate particulars regarding its income. In view of the judgment of the apex court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] the assessee cannot be by any stretch of imagination construed as to have furnished any inaccurate particulars of income. - Decided in favour of assessee - I. T. A. No. 600 /Mds/ 2012 (assessment year 2007-08). - Dated:- 16-9-2015 - N. R .....

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ntative, submitted that the Assessing Officer levied penalty under section 271(1)(c) of the Income-tax Act, 1961 (in short "the Act"). Referring to the penalty order, the learned Departmental representative pointed out that addition was made on the following grounds : (i) Claim of ROC fees (ii) Loss on exchange variation (iii) Reversal of provisions of sales tax (iv) Miscellaneous additions (v) Disallowance under section 14A. 3. However, the Assessing Officer found that the assessee ex .....

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f depreciation under the block "buildings" (ii) Loss on sale of current assets (iii) Claim of bad debts (iv) Investments written off (v) Irrecoverable project expenses written off. 4. Referring to the first addition on which penalty was levied, regarding depreciation on the block of assets, the learned Departmental representative pointed out that the assessee converted the capital asset, namely, the land at Cenotaph Road, into stock-in-trade in the financial year 1994-95. However, the .....

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he land portion alone should be taken as business profit, since the land alone was converted into capital asset. The building standing on the said land continued to be treated as capital asset. Therefore, the sale consideration of the building cannot be considered to be a business profit. However, the assessee claimed the sum of ₹ 95 crores as business receipt. 5. The learned Departmental representative further pointed out that the written down value of the block of asset "buildings&q .....

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377; 84,20,996 treating the same as a wrong claim and added the same to the taxable income. In view of the above factual situation, according to the learned Departmental representative, the assessee has furnished inaccurate particulars with regard to claim of depreciation to the extent of ₹ 84,20,996. 6. Referring to the issue of loss on current assets, the learned Departmental representative pointed out that the assessee has made an entry in the profit and loss account towards loss on sal .....

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ith regard to debit in the profit and loss account towards loss on sale of current assets, the assessee would not have admitted the addition. 7. Referring to the claim of bad debts, the learned Departmental representative submitted that the assessee has written off bad debts to the extent of ₹ 5,26,59,000 and debited the same to profit and loss account. According to the learned Departmental representative, the total sundry debtors as on March 31, 2006 was ₹ 2.58 crores and, as on Mar .....

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₹ 4,09,09,000. The learned Departmental representative clarified that actually these are all the actual value of the shares held by the assessee-company in its wholly owned subsidiary company M/s. Beacon Pumps Ltd. as on March 31, 2006. The assessee brought out 100 per cent. diminution in the value of the investments and claimed the same as expenditure. According to the learned Departmental representative, the same cannot be allowed as capital loss since no transfer of shares took place. .....

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artmental representative pointed out that the accounting principle did not permit the assessee to claim the same as revenue loss. According to the learned Departmental representative, an investment was made in the capital domain, therefore, it has to be necessarily treated as capital loss and not as revenue loss. The learned Departmental representative further pointed out that the expenditure relates to subsidiary company of the assessee. Since the project was shelved, the assessee claims that t .....

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judgment of the apex court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) and submitted that section 271(1)(c) of the Act indicates claim of strict liability on the assessee for concealment or for giving inaccurate particulars of income while filing the return. According to the learned Departmental representative, penalty being a civil liability, wilful concealment is not an essential ingredient for attracting penalty under section 271(1)(c) of the Act. The learned D .....

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the learned Departmental representative, the Commissioner of Income-tax (Appeals) committed an error in deleting the penalty levied by the Assessing Officer, mainly placing reliance on the decision of the judgment of the apex court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC). 11. On the contrary, Shri S. Subramanian, the learned representative for the assessee, submitted that penalty under section 271(1)(c) of the Act can be levied either on concealing the particulars of i .....

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ome-tax (Appeals) has rightly deleted the penalty levied by the Assessing Officer placing reliance on the judgment of the apex court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC). 12. According to the learned representative for the assessee, all the particulars of income were disclosed in the return of income as well as in the audit report. The claim made by the assessee is also disclosed in the audit report by way of a separate item in the profit and loss account and it was .....

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5.27 crores, irrecoverable project expenses to the extent of ₹ 5.44 crores and loss on disposal of investments in subsidiaries to the extent of ₹ 9.21 crores were all disclosed in the notes on accounts. According to the learned representative, the audit reports were prepared and signed on August 13, 2007, which were much before the issue of notice under section 143(2) of the Act, i.e., on July 22, 2008. The learned representative further submitted that the Revenue authorities could .....

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all the items, including loss on sale of current assets to the extent of ₹ 2,08,14,610, on account of obsolete and irrecoverability thereof. The learned representative submitted that the apex court in the case of CIT v. Hindustan Zinc Ltd. [2007] 291 ITR 391 (SC), allowed the similar claim of the assessee. In the assessee's own case for the assessment year 2008-09, the claim of the assessee was allowed by this Tribunal in I.T.A. No. 803/ Mds/2012. Similarly, Pune Bench of this Tribuna .....

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he learned representative further submitted that making a claim of loss on sale of current assets, after furnishing of particulars of income, does not amount to furnishing of inaccurate particulars. In other words, a claim made by the assessee for deduction from the total income computed cannot be treated as furnishing of inaccurate particulars of income. The learned representative placed his reliance on the judgment of the apex court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 .....

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rom the said division was offered by the assessee, the bad debts which were written off were also claimed under section 36(2) of the Act. According to the learned representative, this claim of the assessee cannot be construed as furnishing of inaccurate particulars. When the erstwhile Project Division took the debts as its income, and because it could not collect the same, the same was transferred while the Project Division itself was transferred to the assessee and the assessee itself offered t .....

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the issue of irrecoverable project expenses written off to the extent of ₹ 5,43,83,000, the claim was made as project expenses incurred by the assessee. However, the same could not be billed on the customers on becoming irrecoverable. Therefore, the same was written off. According to the learned representative, the irrecoverable project expenses are cost overruns on fixed contract projects which cannot be billed. Therefore, it becomes irrecoverable. According to the learned representative, .....

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presentative further submitted that even this Tribunal in DCIT v. Rambal Properties in I.T.A. No.1271/Mds/2010 for the assessment year 2006-07 allowed the investments written off. Referring to the claim of depreciation under the block buildings to the extent of ₹ 84,20,996, the learned representative submitted that the Assessing Officer found that the assessee's claim of long-term capital loss of ₹ 14,11,73,333 cannot be a basis for levying penalty. The fact remains that the land .....

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hout the building. In other words, the purchaser would not be willing to purchase the land unless the building is transferred. Therefore, the assessee has rightly treated the entire ₹ 95 crores as business receipt. Admittedly, the total consideration of ₹ 95 crores was disclosed and there is no dispute about that. Making a claim of ₹ 84,20,996 as depreciation after disclosing the entire sale consideration will not amount to furnishing inaccurate particulars. The learned represe .....

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ated February 19, 2014 (Best and Crompton Engineering Ltd. v. Asst. CIT [2014] 30 ITR (Trib) 688 (Chennai)), found that the assessee is eligible for depreciation. The Tribunal found that unabsorbed depreciation from the assessment year 1997-98 up to the assessment year 2001-02 was carried forward to the assessment year 2002-03 and became part thereof and were available for carry forward and set off against the profits and gains of subsequent years without any limit whatsoever. In view of the abo .....

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v) investments written off ; (v) irrecoverable project expenses written off, on the ground that the assessee has furnished inaccurate particulars of income. However, on appeal by the assessee, the Commissioner of Income-tax (Appeals) mainly placing reliance on the judgment of the apex court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) and the judgments of the Punjab and Haryana High Court in CIT v. Sidhartha Enterprises [2010] 322 ITR 80 (P&H) and in CIT v. Shahabad Co- .....

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attract penalty. The question now arises for consideration is when the assessee has furnished entire details of income by disclosing the same in the return of income, audit statements, etc., whether a claim with regard to depreciation on block buildings, loss on sale of current assets, claim of bad debts, investments written off and irrecoverable project expenses written off, would amount to furnishing inaccurate particulars of income. It is pertinent to note that the Assessing Officer himself .....

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nsidered in the light of the observation made by the Assessing Officer at para 8.1 of the penalty order. 17. We have carefully gone through the provisions of section 271(1)(c) of the Act, which reads as follows : "271.(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- . . . (c) has concealed the particulars of his income or furnished inaccurate particulars of such income." 18. The .....

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ssee has furnished all the particulars/details of its income, and claimed deduction in respect of depreciation on block of buildings, loss on sale of current assets, claim of bad debts, investments written off and irrecoverable project expenses written off, as deduction/expenditure, whether this would amount to furnishing inaccurate particulars of its income ? The apex court in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) considered an identical question. In the case before th .....

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particulars of income. The apex court further found that in order to expose the assessee to the penalty, the case has to be covered strictly by the provisions of section 271(1)(c) of the Act. The apex court further found that by any stretch of imagination making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars of income. The apex court, after referring to its earlier judgments in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) and in Union of India v. Dharam .....

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e particulars submitted by the assessee in its return. In this case also, other than the claim made by the assessee with regard to five items of deduction, namely, claim of depreciation under block buildings, loss on sale of current assets, claim of bad debts, investments written off and irrecoverable project expenses written off, no fault has been found by the Assessing Officer in the particulars of income submitted by the assessee in its return. Therefore, this Tribunal is of the considered op .....

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