M/s Capital Drycleaners Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1750/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52532 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-08-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK SENIOR
• Assessee Lawyers: RAKESH KUMAR
• Keywords: Wrong claim; Difference of opinion; Revised return; Revenue expenditure
• Section: 32; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1750/DEL./2010 (ASSESSMENT YEAR : 2003-04) M/S. CAPITAL DRYCLEANERS PVT. LTD., VS. ITO, WARD 3 (2), S-20, GREEN PARK, NEW DELHI. NEW DELHI 110 016. (PAN : AAACC6418M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAKESH KUMAR, CA REVENUE BY : MS. PRATIMA KAUSHIK, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT (APPEALS)-VI, NEW DELHI DATED 01.01.2010 FOR THE AS SESSMENT YEAR 2003-04. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READ AS UNDER :- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER IMPOSING THE PENALTY OF RS.1,40,760/- U/S 2 71(1)(C) OF THE INCOME-TAX ACT, 1961. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY GROUNDS OF APPEAL. 2. THE ONLY ISSUE INVOLVED IS SUSTAINING THE PENALT Y U/S 271(1)(C) OF RS.1,40,760/- UNDER INCOME-TAX ACT, 1961. ITA NO.1750/DEL./2010 2 3. ASSESSEE IS A PRIVATE LIMITED COMPANY AND DERIVI NG INCOME FROM BUSINESS OF COLOUR PHOTO LAB AND INCOME FROM HOUSE PROPERTY. THE ORIGINAL RETURN OF INCOME WAS FILED ON 2.12.2003 DECLARING I NCOME AT RS.3,81,900/-. THE RETURN WAS REVISED ON 31.3.2004 AND INCOME DECL ARED WAS NIL. THE ASSESSEE HAS LET OUT A PROPERTY SITUATED AT D-190, OKHLA INDUSTRIAL AREA PHASE-I, NEW DELHI. THIS PROPERTY WAS A LEASED PRO PERTY FROM DDA. DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE HA S PAID SUB-LETTING CHARGES OF RS.15,04,200/- TO THE DDA. THESE SUB-LETTING CHARG ES WERE FOR THE PERIOD 26.10.1999 TO 26.02.2004 (PAGE 26 OF SECOND PAPER B OOK). THE ASSESSEE HAS CLAIMED THESE CHARGES IN THE REVISED RETURN ADDING THE SAME WITH HOUSE TAX PAID (PAGE 16 OF FIRST PAPER BOOK). IN THE ORIGINA L RETURN, THE CLAIM OF HOUSE TAX WAS OF RS.34,46,170/- (PAGE 19 OF FIRST PAPER B OOK) WHILE IT WAS ENHANCED IN REVISED RETURN TO RS.49,50,370/-. THE CASE WAS REOPENED U/S 148 BY RECORDING THE REASONS ON 04.05.2005. THE REASON RE CORDED STATES THAT SUB- LETTING CHARGES OF RS.13,08,000/- WERE NOT ALLOWABL E AS PER INCOME-TAX ACT (PAGE 22 OF FIRST PAPER BOOK). THE ASSESSMENT WAS COMPLETED ON 13.12.2006 IN WHICH THE SUB-LETTING CHARGES OF RS.15,04,000/- PAID TO DDA WERE DISALLOWED AND PENALTY PROCEEDINGS U/S 271(1)(C) FO R FURNISHING INACCURATE PARTICULARS IN THE RETURN OF INCOME. THE ASSESSING OFFICER LEVIED THE PENALTY U/S 271(1)(C) AMOUNTING TO RS.1,40,760/-. THE CIT (A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY HOLDING AS UNDER :- ITA NO.1750/DEL./2010 3 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY LD.AR, AND HAVE GONE THROUGH THE PENALTY ORDER. THE PENALTY HAS BEEN LEVIED ON ACCOUNT OF CLAIM OF SUB-LETTING CHAR GES OF RS.15,04,200/-. WHILE COMPUTING THE INCOME FROM HOU SE PROPERTY, THE ASSESSEE HAS CLAIMED RS.49,50,370/- A S HOUSE TAX PAID. ON PAGE 2 OF THE ASSESSMENT ORDER, IT HAS BEE N DISCUSSED THAT THE ASSESSEE WAS REQUIRED TO FILE THE DETAILS OF HOUSE TAX PAID AND VIDE LETTER DT.27.11.2006, THE ASSESSEE ADMITTE D TO PAY TAX ON RS.15,04,200/- CLAIMED AS SUBLETTING CHARGES. AS PER THE SCHEME OF THE INCOME TAX ACT, INCOME FRO M HOUSE PROPERTY IS TO BE COMPUTED UNDER SECTION 23 A ND 24 OF THE ACT. PROVISO TO SECTION 23 PROVIDES FOR DEDUCTION O F 'TAXES' LEVIED BY THE LOCAL AUTHORITY. THE PROVISION OF THE ACT ARE CLEAR IN THIS REGARD AND 'SUBLETTING CHARGES' ARE NOT AN ADMISSIBLE DEDUCTION BY ANY STRETCH OF IMAGINATION. HENCE, IT IS NOT A CASE OF WRONG CLAIM, BUT IS A CASE WHERE A FALSE CLAIM H AS BEEN MADE BY THE APPELLANT. HENCE, THE PENALTY PROVISIONS OF SECTION 271 (1)(C) ARE CLEARLY ATTRACTED IN THIS CASE. LD. AR HAS RELIED ON VARIOUS CASE LAWS. HOWEVER, TH E FACTS OF THE PRESENT CASE ARE DIFFERENT. IT IS NOT A CASE WHERE ANY DIFFERENCE OF OPINION IS INVOLVED OR ANY CONTROVERS IAL OR DEBATABLE ISSUE HAS ARISEN. IT IS A CASE WHERE THE LEGAL PROVISIONS ARE VERY CLEAR AND THERE IS NO SCOPE OF GETTING THE DEDUCTION OF 'SUBLETTING CHARGES' AS 'TAXES LEVIED BY LOCAL AUTH ORITY'. IN THE CASE OF CIT V ESCORTS FINANCE LTD. 183 TAXMA N 453 IT HAS BEEN HELD BY HON'BLE DELHI HIGH COURT TH AT SINCE THE RELIEF IS EX FACIE INADMISSIBLE TO THE ASSESSEE, TH E ASSESSEE'S CLAIM FOR DEDUCTION WAS NOT A WRONG CLAIM BUT A FAL SE CLAIM AND SAME WOULD ATTRACT PENALTY. IT WAS OBSERVED BY THE HON'BLE COURT AS UNDER: WE FIND THAT IT IS NOT A CASE WHERE TWO OPINIONS AB OUT THE APPLICABILITY OF SECTION 35D WERE POSSIBLE. THEREFO RE, IT CANNOT BE A CASE OF A BONA FIDE ERROR ON THE PART OF THE A SSESSEE. AS HAS BEEN POINTED OUT ABOVE, THE RELIEF AVAILABLE UNDER SECTION 35D OF THE ACT TO A FINANCE COMPANY IS EX FACIE INADMISSIB LE AS THAT IS CONFINED ONLY TO THE EXISTING INDUSTRIAL UNDERTAKIN G FOR THEIR EXTENSION OR FOR SETTING UP A NEW INDUSTRIAL UNIT. IT WAS, THUS, NOT A 'WRONG CLAIM' PREFERRED BY THE ASSESSEE, BUT IS A CLEAR CASE OF ITA NO.1750/DEL./2010 4 'FALSE CLAIM'. IN CIT V. VIDYAGAURI NATVERLAL [199 9] 238 ITR 91, GUJARAT HIGH COURT MADE A DISTINCTION BETWEEN WRONG CLAIM AS OPPOSED TO FALSE CLAIM AND HELD THAT IF THE CLAIM I S FOUND TO BE FALSE, THE SAME WOULD ATTRACT PENALTY. WE MAY ALSO TAKE NOTE OF THE FOLLOWING OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [2 008] 306 ITR 277. IN SUCH A CASE IT IS DIFFICULT TO ACCEPT T HE PLEA THAT ERROR WAS BONAFIDE. IN VIEW OF THE ABOVE DISCUSSION, I FIND THAT THE AS SESSING OFFICER WAS JUSTIFIED IN IMPOSING THE PENALTY U/S 2 71(1)(C) OF THE ACT. THE SAME, THEREFORE, UPHELD. 4. WE HAVE HEARD BOTH THE SIDES AT LENGTH AND AFTER HEARING BOTH THE SIDES, WE HOLD THAT THE ORIGINAL RETURN FILED BY THE ASSES SEE ON 2.12.2003 AND NO CLAIM OF SUB-LETTING CHARGE WAS MADE. THE RETURN W AS SUBSEQUENTLY REVISED ON 31.3.2004 BY CLAIMING THE SUB-LETTING CHARGES PA ID TO DDA. THESE SUB- LETTING CHARGES WERE PERTAINING TO PERIOD FROM 26.1 0.1999 TO 26.02.2004. THE FINANCIAL YEAR PERIOD RELEVANT TO ASSESSMENT YEAR U NDER CONSIDERATION IS 1.4.2002 TO 31.3.2003. THUS THESE CHARGES WERE ALS O PERTAINING TO PRIOR AND POST PERIOD OF RELEVANT FINANCIAL YEAR. THE COMPUT ATION OF TOTAL INCOME FILED ALONG WITH THE REVISED RETURN TOTAL AMOUNT OF SUB-L ETTING CHARGES HAS BEEN CLAIMED UNDER THE HEAD HOUSE-TAX PAID. IN THE ST ATEMENT OF COMPUTATION OF INCOME FIELD ALONG WITH THE ORIGINAL RETURN OF INCO ME, THE HOUSE-TAX PAID CLAIMED WAS ONLY OF RS.34,46,170/-. THESE EXPENSES WERE DEFINITELY NOT HOUSE TAX PAID BY ASSESSEE. THE FIRST PROVISO TO S ECTION 23(1) PROVIDES THAT THE TAXES LEVIED BY ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY SHALL BE DEDUCTED IN DETERMINING THE ANNUAL VALUE OF THE PRO PERTY OF THAT PREVIOUS YEAR ITA NO.1750/DEL./2010 5 IN WHICH SUCH TAXES ARE ACTUALLY PAID. THE DDA IS NOT A LOCAL AUTHORITY. THE LEARNED AR PLEADED THAT THE CLAIM WAS MADE UNDER AD VICE OF TAX EXPERT. BUT CLAIM OF ASSESSEE IS ALSO NOT SUPPORTED BY ANY DOCU MENTARY EVIDENCE. WHO PROVIDED SUCH ADVICE AND WHEN? ONCE THE RETURN WAS FILED BY NOT CLAIMING THESE EXPENSES THAN UNDER WHAT CIRCUMSTANCES THE AD VICE WAS SOUGHT FOR. NOTHING HAS BEEN FILED IN THIS REGARD. EVEN THE AS SESSEE HAS NOT FILED ANYTHING ABOUT TYPE OF ADVICE PROVIDED. WHO ASKED FOR SUCH ADVICE FROM WHOM, HOW MUCH FEE WAS PAID FOR SUCH ADVICE, ALL TH ESE THINGS HAVE NOT BEEN ESTABLISHED BY THE ASSESSEE EXCEPT THE CLAIM THAT R ETURN WAS REVISED UNDER SUCH ADVICE OF THE TAX EXPERT. FURTHER, THE ASSESS EES CLAIM THAT IT WAS A BONAFIDE CLAIM AND IT WAS NOT A FALSE CLAIM IS ALSO NOT TRUE. THE FACTS OF CASE SHOW THAT THE ASSESSEE AT THE TIME OF FILING THE OR IGINAL RETURN OF INCOME ASSESSEE HIMSELF HAS NOT MADE SUCH CLAIM WHICH SHOW S THAT ASSESSEE WAS UNDER THE FIRM BELIEF THAT SUCH CLAIM IS NOT ALLOWA BLE IN THE LAW. THE PROVISO TO SECTION 23(1) CLEARLY PROVIDES THAT ONLY THE TAX ES LEVIED BY AND PAID TO ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY COULD BE DEDUCTED IN DETERMINING THE ANNUAL VALUE OF THE PROPERTY. ASSESSEE ACTED AS PE R LAW AT THE TIME OF FILING ORIGINAL RETURN. FACTS SHOW THAT TAXES WERE ALSO P AID ACCORDINGLY. IN THE REVISED RETURN, ASSESSEE MADE A CLAIM WHICH IS AN E X-FACIE BOGUS CLAIM. SINCE ASSESSEE FAILS TO ESTABLISH THAT IT WAS MADE UNDER THE LEGAL ADVICE, WE HAVE NO HESITATION TO SAY THAT ASSESSEE DELIBERATELY BY FIL ING THE REVISED RETURN MADE A ITA NO.1750/DEL./2010 6 CLAIM WHICH IS EX-FACIE BOGUS. FACTS OF CASE SHOW THAT ASSESSEE CLAIMED REFUND IN REVISED RETURN. 5. FOR HOLDING SO, WE ALSO FIND SUPPORT FROM THE OR DERS OF THE HON'BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASES OF ESC ORTS FINANCE LIMITED, 328 ITR 44 AND ZOOM COMMUNICATION PVT. LTD., 327 ITR 51 0. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ESCORTS F INANCE LIMITED HELD AS UNDER :- HELD, (I) THAT WHILE THE CLAIM WAS MADE BY THE ASS ESSEE AT 50 PER CENT. FOR ENTERTAINMENT EXPENSES THE ASSESSING OFFICER REDUCED IT TO 35 PER CENT. THE COMMISSIONER (APPEAL S) AS WELL AS THE TRIBUNAL RIGHTLY OBSERVED THAT THERE WAS NO CON CEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE ADDITION WAS ONLY ON ACCOUNT OF DIFFERENCE IN ESTIMATE MADE BY T HE ASSESSEE AND THE OTHER ESTIMATE MADE BY THE ASSESSING OFFICE R. THEREFORE, IN SO FAR AS THIS CLAIM WAS CONCERNED, IF THE ASSES SING OFFICER REDUCED IT FROM 50 PER CENT. TO 35 PER CENT. THAT C OULD NOT ATTRACT PENALTY. (II) THAT THE ASSESSEE HAD NOWHERE PLEADED THAT THE RETURN WAS FILED CLAIMING BENEFIT OF SECTION 35D OF THE ACT ON THE BASIS OF THE OPINION OF THE CHARTERED ACCOUNTANTS. MERELY BE CAUSE INFORMATION WAS AVAILABLE IN THE TAX AUDIT REPORT T HAT WOULD NOT ABSOLVE THE ASSESSEE. EVEN IF THERE WAS NO CONCEALM ENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, BUT ON THE BASIS THEREOF THE CLAIM WHICH WAS MADE WAS EX FACIE BOGUS , IT COULD ATTRACT PENALTY PROVISION. IT WAS NOT A CASE WHERE TWO OPINIONS ABOUT THE APPLICABILITY OF SECTION 35D WERE POSSIBL E. THEREFORE, IT COULD NOT BE A CASE OF A BONA FIDE ERROR ON THE PART OF THE ASSESSEE. THE RELIEF UNDER SECTION 35D OF THE ACT W AS CONFINED ONLY TO AN EXISTING INDUSTRIAL UNDERTAKING FOR EXTE NSION OR FOR SETTING UP A NEW INDUSTRIAL UNIT. IT WAS, THUS, NOT A 'WRONG CLAIM'' PREFERRED BY THE ASSESSEE, BUT WAS A CLEAR CASE OF 'FALSE CLAIM'. THE MATTER WAS REMITTED BACK TO THE ASSESSING OFFIC ER FOR DETERMINING THE PENALTY AFRESH ATTRIBUTING THE COND UCT RELATING TO ITA NO.1750/DEL./2010 7 CLAIM UNDER SECTION 35D OF THE ACT ONLY AS ATTRACTI NG PENALTY PROCEEDINGS. (III) THAT AS FAR AS THE CLAIM OF CAPITAL LOSS WAS CONCERNED, THE ASSESSEE WAS ABSOLVED BY THE AUTHORITIES BELOW ON T HE GROUND THAT IT WAS AN INADVERTENT ERROR WHICH WAS CORRECTE D BY THE ASSESSEE ITSELF BY FILING A REVISED RETURN AND OFFE RING THE SAME DURING THE ASSESSMENT PROCEEDINGS. SINCE A FINDING F FACT REGARDING INADVERTENT ERROR WAS RECEIVED BY THE T WO AUTHORITIES BELOW, AND WHILE IMPOSING THE PENALTY THE ASSESSING OFFICER HAD NOWHERE CONTRADICTED THAT THE ERROR WAS NOT INADVER TENT, THE MATTER NEED NOT BE INTERFERED WITH. IN THE CASE OF ZOOM COMMUNICATION PVT. LTD., THE HO N'BLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER :- HELD, THAT ADMITTEDLY, IN VIEW OF THE PROVISIONS C ONTAINED IN SECTION 40(A)(II) OF THE ACT, THE AMOUNT OF INCOME- TAX COULD NOT HAVE BEEN CLAIMED AS A DEDUCTION WHILE COMPUTING IN COME OF THE ASSESSEE. AS REGARDS THE AMOUNT CLAIMED ON ACCO UNT OF UNUSABLE AND DISCARDED ASSETS, THE TRIBUNAL, WAS EN TIRELY INCORRECT IN TAKING THE VIEW THAT THE DEDUCTION CLA IMED BY THE ASSESSEE WAS ADMISSIBLE TO IT UNDER SECTION 32(1)(I II). CLAUSE (I) OF SUB-SECTION (1) OF SECTION 32 RELATES TO ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION AND/OR DISTRIBUTI ON OF POWER. ADMITTEDLY, THE ASSESSEE-COMPANY WAS NOT ENGAGED IN GENERATION AND FOR DISTRIBUTION OF POWER, DURING TH E RELEVANT YEAR. THUS, THE PROVISIONS, OF CLAUSE (I) OF SUB-SE CTION (1) OF SECTION 32 WOULD NOT APPLY IN RESPECT OF THE ASSETS CLAIMED TO HAVE BECOME UNUSABLE AND WRITTEN OFF. THEREFORE, TH E ASSESSEE HAD NO JUSTIFICATION TO CLAIM THIS AMOUNT OF RS.13, 24,539 AS A REVENUE EXPENDITURE. IN FACT, THE ASSESSEE DID NOT CLAIM, EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE COMMISSI ONER (APPEALS) THAT SUCH A DEDUCTION WAS PERMISSIBLE UND ER SECTION 32(L)(III). IT WAS ALSO NOT THE CASE OF THE ASSESSE E THAT IT WAS UNDER A BONA FIDE BELIEF THAT THESE TWO AMOUNTS COU LD BE CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE WAS A COMPANY WHICH MUST BE HAVING PROFESSIONAL ASSISTANCE IN COMPUTATI ON OF ITS INCOME, AND ITS ACCOUNTS WERE COMPULSORILY SUBJECTE D TO AUDIT. THE TRIBUNAL ERRED IN LAW IN DELETING THE PENALTY I N RESPECT OF ITA NO.1750/DEL./2010 8 THE AMOUNT OF RS. 1 LAKH CLAIMED AS DEDUCTION ON AC COUNT OF PAYMENT OF INCOME-TAX AND THE AMOUNT OF RS.13,24,53 9 DEBITED UNDER THE HEAD' EQUIPMENT WRITTEN OFF', IN THE PROF IT AND LOSS ACCOUNT OF THE ASSESSEE. THIS IS A CLEAR CASE WHERE THE ASSESSEE HAS FAILED TO ESTABLISH THE BONAFIDE OF THE CLAIM MADE IN THE REVISED RETURN. THIS WAS AN EX-FACIE BOGUS CLAIM, THEREFORE, WE FIND NO FAULT IN THE ORDER OF THE CIT (A) AND WE SUSTAIN THE SAME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 5 TH DAY OF AUGUST, 2011. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 5 TH DAY OF AUGUST, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.