DCIT, New Delhi V. M/s Ambiance Hospitality Pvt. Ltd., New Delhi

ITA 2439/DEL/2011

• Counselvise Citation: 243920114 RSA 2011
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 12-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: H MITTER
• Keywords: Depreciation; Wrong claim
• Section: 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A. NO.2439/DEL/2011 ASSESSMENT YEAR : 2007-08 DY. C.I.T., VS. M/S AMBIANCE HOSPITALITY (P) CIRCLE 1(1), LTD., 1202, ANTRIKSH BHAWAN, NEW DELHI 2, KG MARG, NEW DELHI PAN NO.AAECA 3910 G (APPELLANT) (RESPONDENT) APPELLANT BY : DR. B.R.R. KUMAR, SR. DR RESPONDENT BY : SHRI H. MITTER, CA ORDER PER B.K. HALDAR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-IV, NEW DELHI, DATED 10.03.2011 FOR A SSESSMENT YEAR 2007-08 ON AN ORDER PASSED BY THE ASSESSING OF FICER U/S 271(1)(C) OF THE ACT. 1.1 THE REVENUE HAS TAKEN THE SOLITARY GROUND OF A PPEAL:- THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING PENALTY OF `10,70,388/- U/S 271(1)(C) OF THE I.T. ACT IGNORING THAT /THE ASSESSEE COMPANY MADE WRONG CLAIM OF DEPRECIATION AND IT WAS ONLY DURING THE SCRUTINY PROCEEDINGS THAT SUCH WRONG CLAIM WAS DETECTED. THE FACTS IN THE CASE LAWS RELIED UPON BY THE LEARNED CIT(A) ARE 2 DISTINGUISHABLE FROM THOSE OF THE PRESENT CASE. 2. THE RETURN OF INCOME FOR THE RELEVANT ASSESSMEN T YEAR WAS FILED ON 27.10.2007. THE ASSESSEE CLAIMED ADDITION TO FIX ASSET AND DEPRECIATION ON THE SAID ASSET. THE ASSESSEE WAS, THEREFORE, ASKED BY THE ASSESSING OFF ICER TO FILE DETAILS FOR ADDITION MADE TO THE FIXED ASSET A ND JUSTIFY THE CLAIM OF DEPRECIATION ON THESE ASSETS VIDE ORDE R-SHEET ENTRY DATED 04.09.2009 AND 23.11.2009. THE ASSESSE E VIDE ITS LETTER DATED 03.12.2009 CONTENDED AS UNDER:- AS REGARDS DEPRECIATION ON BUILDING, DEPRECIATION HAS BEEN CLAIMED CORRECTLY @10% IN AS MUCH AS THIS BUILDING IS USED AS CLUB PREMISES. RATE OF 5% IS APPLICABLE ONLY TO BUILDING USED MAINLY FOR RESIDENTIAL PURPOSES. HOWEVER, WE FIND THAT AMOUNT CAPITALIZED UNDER THE HEAD BUILDING IN THE BALANCE SHEET ALSO INCLUDES COST OF LAND AND SINCE THE COST OF LAND HAD NOT BEEN CAPITALIZED IN THE BALANCE SHEET SEPARATELY UNDER THE HEAD LAND. DEPRECIATION WAS INADVERTENTLY ALSO INCLUDED BY THE TAX AUDITORS ON THE AGGREGATE WDV APPEARING UNDER THE HEAD LAND AND BUILDING IN THE BALANCE SHEET. THIS MISTAKE CAME TO NOTICE OF THE AUDITORS NEXT YEAR WHILE PREPARING AND VERIFYING THE BALANCE SHEET AND THE TAX AUDIT REPORT RELATING TO ASSESSMENT YEAR 2008-09. IN THE BALANCE SHEET FOR THAT YEAR LAND HAS BEEN SEGREGATED AND APPEARS AS THE DISTINCT ITEM IN SCHEDULE OF THE FIXED ASSETS. IN THE TAX AUDIT REPORT AND IN THE INCOME TAX RETURN ALSO DEPRECIATION HAS BEEN CLAIMED ONLY ON THE BUILDING. IT IS, THEREFORE, PRAYED THAT DEPRECIATION ON BUILDING MAY KINDLY BE 3 ALLOWED AFTER EXCLUDING /THE COST OF LAND NAMELY `3,18,00,000/-. THE ASSESSING OFFICER, THEREFORE, DISALLOWE D DEPRECIATION CLAIME OF `31,80,000/- MADE BY THE ASS ESSEE ON COST OF LAND AND INITIATED PENALTY PROCEEDINGS U /S 271(1)(C) OF THE ACT. 2.1 DURING THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED ITS EXPLANATION VIDE LETTER DATED 25.05. 2010. THE CONTENTION RAISED THEREIN WAS NOT ACCEPTED BY THE A SSESSING OFFICER. ACCORDING TO THE ASSESSING OFFICER, THE A SSESSEE HAS NOT VOLUNTARILY AND IN GOOD FAITH BROUGHT THE FACT OF CHARGING DEPRECIATION ON LAND TO HIS NOTICE AND THE SAME WAS DISCOVERED ONLY WHEN THE ASSESSEE WAS ASKED TO FURN ISH DETAILS AS PER ORDER-SHEET ENTRY DATED 04.09.2009 A ND 23.11.2009. THE ASSESSING OFFICER WAS, THEREFORE, OF THE OPINION THAT THE ASSESSEE COMPANY HAD DELIBERATELY FILED WRONG AND INACCURATE PARTICULARS OF ITS INCOME AND HAD TRIED TO UNDERSTATE ITS INCOME. INVOKING EXPLANATION 1 T O SECTION 271(1)(C) OF THE ACT, HE IMPOSED A MINIMUM PENALTY OF `10,70,388/- BEING 100% OF TAX SOUGHT TO BE EVADED. 2.2 ON APPEAL BEFORE THE LEARNED CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT INADVERTENTLY DEPREC IATION WAS CLAIMED ON LAND, WHICH WAS DULY CORRECTED SUBSEQUENTLY. SUCH MISTAKE WAS WITHOUT ANY MALAFID E. IT WAS FURTHER CONTENDED THAT THE ASSESSEE, BEING A LI MITED COMPANY, WAS REQUIRED TO GET ITS ACCOUNT AUDITED BY 4 STATUTORY AUDITORS AND TAX AUDITORS. THE MISTAKE W AS NOT NOTICED BY SUCH AUDITORS. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS ONLY A GENERAL QUARRY WAS RAISED BY THE ASSESSING OFFICER. THERE WAS NO MATERIAL ON RECORD TO SUGGEST THAT THE COST OF LAND WAS INCLUDED IN THE B UILDING AND DEPRECATION WAS CLAIMED ON THE SAME. SUCH GENE RAL QUARRY WOULD NOT AMOUNT TO DETECTION. AS THE SURRE NDER WAS MADE BEFORE DETECTION OR WITHOUT ANY MATERIAL ON RE CORD, IT SHOULD BE CONSTRUED AS VOLUNTARY SURRENDER AND IN S UCH CASES PENALTY U/S 271(1)(C) WOULD NOT LIE. RELIANC E WAS PLACED IN THE CASE OF NAMASTE VOYAGES (P) LTD. VS. INCOME TAX OFFICER OF DELHI F BENCH OF THE TRIBUNAL AND DCIT VS. SHAHABAD CO-OPERATIVE SUGAR MILLS OF CHANDIGARH BEN CH OF THE TRIBUNAL. 2.3 THE LEARNED CIT(A) WAS OF THE OPINION THAT THE ASSESSEE FURNISHED ALL NECESSARY DETAILS BEFORE DET ECTION OF ANY UNDISCLOSED INCOME BY THE ASSESSING OFFICER. I N SUCH CIRCUMSTANCES, ACCORDING TO THE LEARNED CIT(A), NO PENALTY U/S 271(1)(C) COULD BE LEVIED. FOR THE ABOVE PROPO SITION, RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- ( I ) CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 230 CTR (SUPREME COURT) 320; (II) CIT VS. MAXOPP INVESTMENT LTD., IN I.T.A. NO.379/2010, DELHI HIGH COURT; (III) CIT VS. ESCORTS FINANCE LIMITED (2009) 28 DTR (DELHI) 293; AND, 5 (IV) NAMASTE VOYAGES (P) LTD. VS. INCOME TAX OFFICER (2010) 5 ITR (TRIB.) 90 (DELHI). HE, THEREFORE, DELETED THE IMPUGNED PENALTY. 2.4 AGGRIEVED, THE REVENUE HAS FILED APPEAL BEFORE THE TRIBUNAL. 2.5 BEFORE US, THE LEARNED DR REITERATED THE FINDI NG OF THE ASSESSING OFFICER. IT WAS CONTENDED BY HIM THA T THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME AND DID NOT CORRECT THE SAME VOLUNTARILY BEFORE DETECTION. IT WAS, THEREFORE, SUBMITTED THAT THE PENALTY LEVIED MAY PL EASE BE CONFIRMED. 2.6 THE LEARNED AR FOR THE ASSESSEE IN ADDITION TO RELYING ON THE ORDER OF THE LEARNED CIT(A), REFERRE D TO THE DEPRECIATION SCHEDULE FOR THE RELEVANT ASSESSMENT Y EAR WHERE DEPRECIATION WAS CLAIMED @10% ON BUILDING. L AND WAS NOT SEPARATELY SHOWN IN THE SCHEDULE. IT WAS C ONTENDED BY HIM THAT IN ASSESSMENT YEAR 2006-07 ALSO DEPRECI ATION WAS CLAIMED ON BUILDING WHICH INCLUDED THE COST OF LAND. IT WAS POINTED OUT BY HIM THAT THE AUDIT FOR ASSESSMEN T YEAR 2008-09 WAS COMPLETED BY THE TAX AUDITORS ON 20.09. 2008 WHERE THE VALUE OF LAND WAS SHOWN SEPARATELY AND ON THAT BASIS SUBSEQUENTLY, THE DEPRECIATION CLAIMED ON LAN D WAS SURRENDERED BEFORE THE ASSESSING OFFICER. ACCORDING TO THE LEARNED AR FOR THE ASSESSEE, THIS WOULD SHOW THAT T HE INACCURATE PARTICULARS FURNISHED BY THE APPELLANT W ITH 6 REFERENCE TO CLAIM OF DEPRECIATION WAS CORRECTED VO LUNTARILY AND THUS, NO PENALTY U/S 271(1)(C) WAS LEVIABLE. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS RE LIED ON BY THE PARTIES. THE LAW REGARDING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT HAS UNDERGONE SUBSTANTIAL CHAN GE OVER THE YEARS. THE LAW THAT HAS BEEN LAID DOWN BY THE HONBLE APEX COURT IN THEIR JUDGMENT IN THE CASE OF RELIANC E PETROPRODUCTS (SUPRA) IS THAT THE PENALTY U/S 271(1 )(C) OF THE ACT IS A CIVIL LIABILITY AND A STRICT LIABILITY. T HUS, MENS REA OR GUILTY MIND IS NOT AN ESSENTIAL INGREDIENT FOR LE VY OF SUCH PENALTY. HOWEVER, THE LIABILITY BEING A STRICT LIA BILITY, ALL THE CONDITIONS MENTIONED IN THE SECTION ARE REQUIRED TO BE FULFILLED FOR BRINGING THE CASE WITHIN THE AMBIT OF THIS SECTION. IT HAS, THEREFORE, TO BE SHOWN BY THE REVENUE THAT THE ASSESSEE EITHER FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME. ONLY WHEN THE ABO VE CONDITION IS FULFILLED, SECTION 271(1)(C) WILL BE A TTRACTED. 3.1 IN THE PRESENT CASE, THE ABOVE BASIC CONDITION FOR LEVY OF PENALTY U/S 271(1)(C) IS FULFILLED. AS IS EVIDENT FROM ASSESSEES PAPER BOOK PAGE 34, WHICH IS THE DEPRECI ATION SCHEDULE ANNEXED TO FORM NO.3CD, NO AMOUNT HAS BEEN SHOWN SEPARATELY AGAINST LAND. AGAINST BUILDING, W DV AS ON 01.04.2006 HAS BEEN SHOWN AT `7,36,15,549/- AND TOT AL ADDITION MADE DURING THE YEAR ON THIS HEAD IS `2,06 ,94,066/-. ON THIS TOTAL AMOUNT OF `9,43,09,615/-, DEPRECIATIO N AT 10% 7 AMOUNTING TO `94,25,153/- HAS BEEN CLAIMED BY THE ASSESSEE. IT IS NOT DISPUTED THAT THE ABOVE AMOUNT INCLUDED LAND VALUED OF `3,18,00,000/-. THUS, IT IS ABUNDAN TLY CLEAR THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS WITH REFERENCE TO VALUE OF BUILDING ON WHICH IT WAS ENTI TLED TO DEPRECIATION. THUS, SECTION 271(1)(C) OF THE ACT I S CLEARLY ATTRACTED IN THE FACTS OF THE CASE. 3.2 ONCE SECTION 271(1)(C) IS ATTRACTED, THE ASSES SEE CAN SHOW THAT IT IS NOT LIABLE TO THE PENALTY IN TE RMS OF EXPLANATION 1 OF THE SECTION OR ON ACCOUNT OF VOLUN TARILY REVISING THE RETURN AS PER THE PROVISION OF SECTION 139(5) OF THE ACT. IN THE PRESENT CASE THE CLAIM OF THE ASSE SSEE IS THAT THOUGH IT HAS NOT VOLUNTARILY REVISED THE RETURN OF INCOME, BUT HAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING O FFICER THE FACT OF WRONGLY CHARGING DEPRECIATION ON LAND B EFORE THE SAME WAS DETECTED BY HIM. IT HAS ALSO CLAIMED THAT SUCH WRONG DEPRECIATION WAS CLAIMED INADVERTENTLY AND WH EN THE SAME CAME TO ITS KNOWLEDGE DURING THE TAX AUDIT FOR ASSESSMENT YEAR 2008-09, NECESSARY CORRECTIONS WERE MADE. IN THE FACTS OBTAINED IN THE PRESENT CASE, THE ASSE SSING OFFICER HAS NOT ACCEPTED THE ABOVE EXPLANATION OF T HE ASSESSEE AS THE SAME COULD NOT BE SUBSTANTIATED BY IT. THE ASSESSING OFFICER, THEREFORE, IN TERMS OF EXPLANATI ON 1 TO SECTION 271(1)(C) HAS LEVIED THE IMPUGNED PENALTY. 8 3.3 IT IS, THEREFORE, TO BE SEEN AS TO WHETHER THE ASSESSEE WAS ABLE TO SUBSTANTIATE THE EXPLANATION F URNISHED BY IT OR NOT. FOR THIS, FOLLOWING FACTS ON RECORD ARE RELEVANT:- I) ASSESSMENT YEAR INVOLVED - 2007-08 II) LAST DATE FOR REVISING THE RE- TURN U/S 139(5) OF THE ACT. - 31.03.2009 III) DATE OF SIGNING FORM NO. 3CD FOR A.YR.- 2008-09 - 2 0.09.2008 IV) DATE OF FIRST LETTER ISSUED BY BY THE ASSESSING OFFICER DURING ASSESSMENT PRO- CEDING FOR ASSESSMENT YEAR 2007-08 AS PER THE ASSESSMENT ORDER - 20.08.200 9 V) DATE OF ASSESSEES LETTER BY WHICH THE ACT OF CHARGING DEPRECIATION ON LAND WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER - 03.12.2009 3.4 FROM THE ABOVE, IT COULD BE SEEN THAT THOUGH T HE FACT OF WRONGLY CHARGING DEPRECIATION ON LAND CAME TO THE KNOWLEDGE OF THE ASSESSEE ON OR PRIOR TO 20.09.2008 , AND EVEN THOUGH THE ASSESSEE HAD TIME TO REVISE ITS RET URN OF INCOME FOR ASSESSMENT YEAR 2007-08 TILL 31.03.2009, IT TOOK NO STEP TO DO SO. EVEN WHEN THE CASE FOR ASSESSMEN T YEAR 2007-08 WAS TAKEN UP FOR SCRUTINY, IT DID NOT OF IT S OWN BRING TO THE KNOWLEDGE OF THE ASSESSING OFFICER THIS FACT . IT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER O NLY ON 03.12.2009. CAN THIS ACTION OF THE ASSESSEE BE SAI D TO BE A 9 BONAFIDE ACTION? THE FACT OF WRONGLY CHARGING DEPR ECIATION ON LAND WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSI NG OFFICER ONLY AFTER A LONG PERIOD OF MORE THAN 14 MO NTHS FROM THE DATE WHEN IT CAME TO THE NOTICE OF THE ASSESSEE . 3.5 THE FACTS OBTAINED IN THE PRESENT CASE COULD B E SEEN FROM A DIFFERENT ANGLE ALSO. IN THE DEPRECIAT ION SCHEDULE FOR ASSESSMENT YEAR 2008-09, WHICH IS AVAI LABLE IN ASSESSEES PAPER BOOK ON PAGE 53, THE ASSESSEE HAS ONLY TAKEN OUT THE VALUE OF LAND I.E. `3,18,00,000/- FRO M THE WDV OF BUILDING ON 31.03.2007, WHICH WAS OF `8,48,84,46 2/- ,AFTER CHARGING DEPRECIATION ON WDV OF BUILDING AS ON 01.0 4.2006 AND ADDITION MADE THEREAFTER, WHICH INCLUDED THE VA LUE OF THE LAND. THUS, THE ASSESSEE HAS NOT UNDERTAKEN AN EXERCISE TO RECTIFY THE SAID MISTAKE FROM ASSESSMENT YEAR 20 06-07 ONWARDS. IT HAS ONLY TAKEN OUT THE VALUE OF LAND F ROM THE WDV OF LAND AND BUILDING AS ON 01.04.2007. THIS AC TION OF THE ASSESSEE ALSO CANNOT BE SAID TO BE BONAFIDE. 3.6 IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, WE ARE OF THE CONSIDERED OPINION THAT THE EXPLANATI ON FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER WAS NOT SUBSTANTIATED BY IT BY BRINGING ANY EVIDENCE. THE EVIDENCE ON RECORD, ON THE OTHER HAND, WOULD SUPPOR T THE ASSESSING OFFICERS VIEW THAT THE EXPLANATION OF TH E ASSESSEE COULD NOT BE SUBSTANTIATED BY IT . THE ASSESSING O FFICER, THEREFORE, WAS JUSTIFIED IN LEVYING THE IMPUGNED PE NALTY. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LE ARNED 10 CIT(A) DELETING THE IMPUGNED PENALTY AND RESTORE TH E ORDER OF THE ASSESSING OFFICER. 3.7 BEFORE PARTING, WE OBSERVE THAT IN THE FACTS O F THE CASE, WHICH HAVE BEEN NARRATED BY US HEREINABOVE, T HE CASE LAWS RELIED ON BY THE ASSESSEE AND THE LEARNED CIT( A) ARE NOT APPLICABLE. THE JUDGMENT OF THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LIMITED (SUPRA) SUPP ORTS THE CASE OF THE REVENUE. NEEDLESS TO SAY THAT EVEN THO UGH THE APEX COURT HAVE HELD THAT EXPLANATION 1 TO SECTION 271(1)(C) IS AUTOMATICALLY ATTRACTED, IN THE PRESENT CASE TH E ASSESSING OFFICER HAS INVOKED THE SAME IN THE PENALTY ORDER. 4. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . 5. ORDER PRONOUNCED IN OPEN COURT ON .08.2011. ( R.P. TOLANI ) ( B.K. HALDAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. .08.2011 NS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).