The Commissioner Of Income Tax – 20, Mumbai v. Hindustan Rubber (Silvasa

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (L) NO.765 OF 2011 ANDAND INCOME TAX APPEAL (L) NO.766 OF 2011 INCOME TAX APPEAL (L) NO.767 OF 2011 The Commissioner of Income Tax – 20, Mumbai Versus Hindustan Rubber (Silvasa) ..Appellant. ..Respondent. Mr.D.K. Kamwal for the appellant.None for the respondent. CORAM : J.P. Devadhar & K.K. Tated, JJ. DATE : 30[th] August, 2011. P.C. : 1.Office objections waived. Office to register the appeals. 2.In all these appeals, the Revenue is aggrieved by the order passed by the Income Tax Appellate Tribunal (‘Tribunal’ for short) in deleting the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (‘Act’ for short). 3.The assessment years involved herein are AYs 2003-2004, 2004-2005 and 2005-2006. 4.The assessee is a partnership firm engaged in the business of manufacturing rubber belts, v-belts etc. The returns of income filed for the assessment years in question were initially processed under Section 143(1) of the Act. Thereafter, a survey under Section 133A of the Act was carried out at the business premises of the assessee on 17[th] February 2006. During the course of survey, it was found that the assessee firm had not claimed depreciation on fixed assets for the Assessment Years 2000-01 to 2002-03, in which years the assessee was entitled to claim deduction under Section 80IB of the Act. It was also noticed that as a result of not claiming depreciation on the fixed assets for the said years, the Written Down Value (WDV) of the fixed assets of the assessee firm was over-stated and depreciation claimed by it on such written down value of fixed assets for the years under question was higher. 5.Immediately after the survey, the assessee filed revised return of income withdrawing such higher claim of depreciation for the assessment years in question. The said returns were accepted and assessment orders were passed under Section 143(3) read with Section 148 of the Act. 6.Thereafter, penalty proceedings were initiated under Section 271(1)(c) of the Act. The Assessing Officer held that the assessee had furnished inaccurate particulars of its income by claiming excessive depreciation on fixed assets in the returns of income originally filed for the assessment years in question. Accordingly, the assessing officer imposed penalty under Section 271(1)(c) of the Act. 7.On appeal filed by the assessee, the Commissioner of Income Tax (Appeals) deleted the penalty on the ground that the conditions for imposing penalty under Section 271(1)(c) of the Act were not fulfilled. The Income Tax Appellate Tribunal has upheld the order of the Commissioner of Income Tax (Appeals). Challenging the aforesaid order, the Revenue has filed these appeals. 8.According to the Revenue in the assessment years 2000-01 to 2002-03, the assessee had failed to claim depreciation on fixed assets while computing its income eligible for deduction under Section 80IB in spite of the decision of this Court in the case of Indian Rayon Corporation Limited. V/s. Commissioner of Income Tax reported in 261 ITR 98. It is contended that since the assessee has filed revised returns only after the survey action was carried out, it must be held that the assessee had furnished inaccurate particulars and, therefore, the penalty was leviable under Section 271(1)(c) of the Act. 9.In the present case, it is not in dispute that the returns of income for the assessment years 2000-01 to 2002-03 were filed prior to the decision 8.According to the Revenue in the assessment years 2000-01 to 2002-03, the assessee had failed to claim depreciation on fixed assets while computing its income eligible for deduction under Section 80IB in spite of the decision of this Court in the case of Indian Rayon Corporation Limited. V/s. Commissioner of Income Tax reported in 261 ITR 98. It is contended that since the assessee has filed revised returns only after the survey action was carried out, it must be held that the assessee had furnished inaccurate particulars and, therefore, the penalty was leviable under Section 271(1)(c) of the Act. 9.In the present case, it is not in dispute that the returns of income for the assessment years 2000-01 to 2002-03 were filed prior to the decision of this Court in the case of Indian Rayon (supra) delivered on 22[nd] January 2003. Prior to the said decision, the assessee had an option to claim depreciation on fixed assets as held by the Apex Court in the case of Commissioner of Income Tax V/s. Mahendra Mills Limited reported in 243 ITR 56. The amendment to the provisions of Section 32(1) of the Act making it mandatory for the assessee to claim depreciation on fixed assets has come into force with effect from 1[st] April 2002. Thus, on the date of filing return of income for AY 2000-01 to 2002-03 the assessee had the option of not claiming depreciation. 10.In these circumstances, the decision of the Tribunal in holding that the action of the assessee in not claiming the depreciation on fixed assets for assessment years 2000-01 to 2002-03 was bona fide, which was based on legal position prevailing at the relevant time cannot be faulted. The Tribunal has observed that the fact that no depreciation has been claimed on its fixed assets was clearly disclosed by the assessee in its return of income for assessment years 2000-01 to 2002-03, which was duly accepted by the assessing officer under Section 143(1) of the Act. The Tribunal has recorded a finding that even in the returns of income filed for the assessment years in question, all the material facts relevant to its claim for depreciation on fixed assets were duly furnished by the assessee by filing schedule of assets and depreciation claimed thereon. Although the said claim of the assessee for depreciation turned out to be excessive as a result of depreciation having not been claimed in the earlier years as found during the course of survey, the action of the assessee in not claiming the depreciation in the earlier years was bona fide. Moreover, immediately after the discrepancy was brought to the notice of the assessee during the course of survey action, the assessee accepted the said mistake and filed revised returns withdrawing the claim for excessive depreciation. 11.In these circumstances, deletion of the penalty levied under Section 271(1)(c) of the Act by the Tribunal cannot be faulted. Accordingly, all these appeals are dismissed with no order as to costs. (K.K. Tated, J.) (J.P. Devadhar, J.)