Morgan Finvest Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 261/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8199 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO.261/DEL/2009 ASSESSMENT YEAR : 2005-06 MORGAN FINVEST PVT. LTD., INCOME-TAX OFFICER, A-38, 1 ST FLOOR, MOHAN CO-OPERATIVE VS. WARD 5(4), NEW DELHI. INDUSTRIAL ESTATE, MAIN MATHURA ROAD, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S. SINGHVI, CA RESPONDENT BY : SHRI G.S. SAHOTA, SR. DR. O R D E R PER B.P. JAIN, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, NEW DELH I, DATED 08.12.2008 PERTAINING TO THE ASSESSMENT YEAR 2005-06 IN AN APP EAL AGAINST PENALTY ORDER UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. GROUND NOS.1(I), (II), (III) & 2 RAISED BY THE ASSESSEE ARE BEING TAKEN UP TOGETHER BEING THE ISSUE IDENTICAL AS UNDER:- 1(I). THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING PENALTY OF 2 RS.14,46,239/- EVEN THOUGH THERE IS NO CASE OF ANY CONCEALMENT OR WRONG DISCLOSURE OF RELEVANT PARTICU LARS OF INCOME. (II) THAT THE RETURN WAS FILED ON THE BASIS OF AUDI TED ACCOUNTS AND MERELY BECAUSE A CLAIM OF DEDUCTION WA S NOT ACCEPTED, THERE CANNOT BE ANY PRESUMPTION ABOUT CONCEALMENT OF INCOME. (III) THAT THE ASSESSMENT WAS COMPLETED AT THE LOSS AND AS SUCH CLAIM OF DEDUCTION WAS MADE ON BONAFIDE BASIS AND IN ACCORDANCE WITH AUDITED BOOKS OF ACCOUNTS AND PROVISIONS OF LAW. THAT IMPOSITION OF PENALTY IS INCORRECT, ILLEGAL AN D ARBITRARY. 2. THAT THE ORDERS OF THE LOWER AUTHORITIES ARE NOT JUSTIFIED ON FACTS AND SAME ARE BAD IN LAW. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY PURCHASED A CONSTRUCTED PROPERTY BUILT ON PLOT NO.4, IN BLOCK-A OF MAHARANI BAGH CO- OPERATIVE HOUSING BUILDING SOCIETY LTD., KNOWN AS 3 , EASTERN AVENUE MAHARANI BAGH, NEW DELHI FOR RS.3.5 CRORES FROM SMT . HEMINDER KUAMR AND PAID STAMP DUTY AND CORPORATION TAX THEREON RS. 25 LAKHS. THE SALE DEED WAS EXECUTED ON 29.4.2004 AND THE PAPERS WERE REGIS TERED WITH THE REGISTRAR OF PROPERTIES. IN THIS REGARD COMPANY RAISED A LOA N OF RS.3.5 CRORES FROM ITS SISTER CONCERN M/S. MORGAN SECURITY & CREDITS PVT. LTD. BY TWO CHEQUES OF RS.2.90 CRORES AND RS.60 LAKHS. THE ASSESSEE COMPA NY SOLD THE SAID PROPERTY MENTIONED ABOVE TO OTHER COMPANY M/S. HIND USTAN UDYOG LTD. FOR 3 A SALE CONSIDERATION OF RS.4.50 CRORES AND AGREEMEN T TO SELL WAS EXECUTED ON 18.9.2004. THE AO FURTHER STATED THAT: THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION OF RS.39,52,300/- ON PROPERTY MENTIONED ABOVE AS PER DEPRECIATION CHART FILED ALONG WITH THE COMPUTATION OF INCOME. ON EXAMINATION, IT WAS FOUND THAT THE SAID RESIDENT IAL PROPERTY WAS NOT PUT TO USE FOR THE PURPOSE OF BUSINESS ACTI VITIES. THE INSPECTOR OF THIS OFFICE WAS DEPUTED TO MAKE LOCAL ENQUIRY ABOUT THE OWNERSHIP OF THE PROPERTY. THE CARETAKER OF TH E PROPERTY TOLD HIM THAT PROPERTY REMAINED VACANT SINCE IT HAS BEEN SOLD BY SMT. HEMINDER KUMARI. AS PER OWNERSHIP OF THE PROP ERTY, HE WAS TOLD THAT ONE SMT. RITU AGGARWAWL OF KOLKATA IS THE OWNER OF THE PROPERTY. SHE LIVES IN KOLKATA AND TWICE OR THRICE CAME FOR INSPECTION. THE ASSESSEE COMPANY KEPT THE PROP ERTY WITH THEM ONLY FOR FOUR MONTHS AND MADE AN AGREEMENT TO RESELL THE SAME. THEREFORE, THE MOTIVE WAS TO EARN A SHORT-TE RM CAPITAL GAIN FROM THE PROPERTY. THE AGREEMENT TO SELL WAS MADE JUST FOUR AND A HALF MONTH OF ITS PURCHASE. THE COST OF BUILDING INCLUDES THE COST OF LAND AND DEPRECIATION IS NOT ALLOWED ON COST OF LAND. THE L AND COST IN DELHI IS MUCH HIGHER THAN THE CONSTRUCTED PORTION O N THE SAID LAND. UNDER THE CIRCUMSTANCES THE ASSESSEE COMPANY WAS NOT ENTITLED FOR DEPRECIATION ON PROPERTY AS THE SAME W AS NOT USED FOR ANY COMMERCIAL ACTIVITIES OF THE COMPANY. IN VIEW OF THE ABOVE, AO WAS SATISFIED THAT THE AS SESSEE COMPANY HAS FURNISHED INACCURATE PARTICULAR OF ITS INCOME BY CLAIMING DEPRECIATION ON BUILDING WHEREAS, THE COMP ANY WAS NOT ENTITLED FOR DEPRECIATION THEREON, AS PER PROVI SIONS OF SECTION 32 OF THE INCOME TAX ACT. THE ASSESSEE DID NOT PREFER APPEAL AGAINST THE ASSE SSMENT ORDER. THE AO THEREAFTER LEVIED PENALTY UNDER SEC.271(1)(C ) OF T HE ACT HOLDING THAT: IT IS CLEAR THAT ASSESSEE COMPANY HAS CONCEALED T HE TRUE AND CORRECT PARTICULARS OF ITS INCOME AND CLAIMED W RONG 4 DEPRECIATION. HENCE IT IS A CASE OF NOT ONLY CONCE ALMENT OF INCOME BUT IT IS ALSO A CASE OF FURNISHING OF INACC URATE PARTICULARS OF INCOME. THE CASE LAWS CITED BY THE ASSESSEE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE AND HENC E ARE OF NO HELP TO THE ASSESSEE. THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ONLY DISPUTE RAISED BY THE AO IN THE ASSESSMENT FRAMED WAS THAT THE BUILDING WAS NOT USED FOR THE PURPOSE OF BUSINESS A ND SAME WAS ACQUIRED ON 29.4.2004 AND WAS SOLD ON 18.9.2004 THROUGH AN AGRE EMENT TO SELL. THEREFORE, THE CLAIM OF THE DEPRECIATION IS NOT ALL OWABLE SINCE THE ASSET HAS NOT BEEN PUT TO USE DURING THE YEAR. WHEREAS THE L EARNED COUNSEL FOR THE ASSESSEE SHRI R.S. SINGHVI, CA POINTED OUT AT PAGES 17 TO 21 OF THE PAPER BOOK IN SPECIFIC PAGE 19 PARA 3 OF THE AGREEMENT TO SELL WHERE IT IS SPECIFICALLY MENTIONED IN THE SAID AGREEMENT THAT T HE CONSIDERATION OF RS.1.50 CRORE WILL BE PAID BY THE INTENDING VENDEE TO THE INTENDING VENDOR ON OR BEFORE 31.3.2006 OR TILL SUCH FURTHER TIME AS DISCUSSED AND MUTUALLY AGREED BY BOTH THE PARTIES AND THE SALE DEED WILL B E EXECUTED AND REGISTERED BY THE PARTIES AND POSSESSION OF THE DEMISED PREMI SES HANDED OVER TO THE VENDEE IMMEDIATELY THEREAFTER. THEREFORE, THE OBSE RVATION OF THE AO THAT THROUGH AGREEMENT TO SALE PLACED AT PAGES 17 TO 21 OF THE PAPER BOOK, THE PROPERTY HAS BEEN SOLD DURING THE YEAR IS WITHOUT A NY BASIS. SHRI SINGHVI 5 ALSO POINTED OUT PB PAGE 7, COPY OF BALANCE-SHEET W HERE THE PROPERTY HAS BEEN REFLECTED UNDER THE HEAD FIXED ASSETS AND NO T AS INVESTMENT. THE ASSESSEE COMPANY DOES NOT OWN ANY OTHER PROPERTY AN D THE PROPERTY HAD BEEN PURCHASED FOR THE PURPOSE OF BUSINESS ACTIVITI ES BUT THE SAME WAS NOT FOUND SUITABLE FOR COMMERCIAL ACTIVITIES AND THEREF ORE, THE SAME WAS SOLD IN THE FOLLOWING YEARS. WE ARE CONVINCED WITH THE ARGU MENTS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE EXPLANATION SUBMITTED APPEARS TO BE BONA FIDE AND ALL THE FACTS WERE ON RECORD AND NOTH ING HAS BEEN CONCEALED THEREIN. PENALTY PROCEEDINGS AND THE ASSESSMENT PR OCEEDINGS ARE SEPARATE PROCEEDINGS. THOUGH THE DISALLOWANCE OF DEPRECIATI ON HAS BEEN MADE IN THE ASSESSMENT PROCEEDINGS BUT THE EXPLANATION SUBMITTE D IN THE PENALTY PROCEEDINGS APPEARS TO BE SATISFACTORY AND BONA FID E THAT THE ASSESSEE HAD ACQUIRED THE PREMISES FOR THE BUSINESS PURPOSES FOR CLAIM OF DEPRECIATION. MERE DISALLOWANCE IN THE ASSESSMENT PROCEEDINGS WIL L NOT LEAD TO THE PENALTY UNDER SECTION 271(1)(C ) OF THE ACT. RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS: (1) ADDL. CIT VS. DELHI CLOTH & GENERAL MILLS CO. (1986 ) 157 ITR 822 (DEL); & (2) CIT VS. AJAIB SINGH & CO. (2002) 253 ITR 630 (P&H). IN THE CIRCUMSTANCES AND FACTS OF THE CASE AND THE DECISIONS RELIED UPON THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE P ENALTY IMPOSED BY THE AO. 6 THE SAME IS DIRECTED TO BE CANCELLED. THUS GROUND NOS.1(I) TO 1(III) OF THE ASSESSEE ARE ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2010. SD/- SD/- (A.D. JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5 TH FEBRUARY, 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.