Guruji Shree Sandipani Education Foundation, Baroda V. The ACIT.,Circle-5, Baroda

ITA 2887/AHD/2011

• Counselvise Citation: 288720514 RSA 2011
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 21-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWAL SRDR
• Keywords: Depreciation; Wrong claim; Bad and doubtful debts
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD BBENCH BEFORE SHRI D.K.TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.2887/AHD/2011 ASSESSMENT YEAR:2005-06 GURUJI SHREE SANDIPANI EDUCATION FOUNDATION, C/O AMERICAN SCHOOL OF BARODA, AT & P.O. SAYAJIPURA, AJWA, NIMETA ROAD, VADODARA PAN NO.AAJFM2724N / V/S . ACIT, CIRCLE-5, BARODA / APPELLANT .. / RESPONDENT /APPELLANT BY SHRI MANISH J SHAH, AR /RESPONDENT BY SHRI SAMIR TEKRIWAL, SR-DR / DATE OF HEARING 05-03-2012 / DATE OF PRONOUNCEMENT 30-03-2012 !' !' !' !' / // / ORDER PER T.R. MEENA, ACCOUNTANT MEMBER:- THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER O F LD. COMMISSIONER OF INC- TAX (APPEALS)-V, BARODA DATED 19-10-2011 FOR THE AS SESSMENT YEAR 2005-06. 2. THE SOLE GROUND RAISED BY THE ASSESSEE IS AGAINS T THE IMPOSING OF PENALTY U/S. 271(1)(C) ON DISALLOWANCES OF DEPRECIATION AT RS.6,71,643/-, LEGAL EXPENSE OF RS.1,33,875/-. THE FACTS IN BRIEF ARE THAT THE ASSE SSEE IS A PARTNERSHIP FIRM RUNNING EDUCATIONAL INSTITUTION IN THE NAME OF GURUJI SHREE SANDIPANI EDUCATION FOUNDATION. THE FIRM HAD CLAIMED DEPRECIATION U/S 32 AS WELL AS DEDUCTION U/S 24 ON SCHOOL BUILDING WHICH WAS LET OUT. THE RETURN OF INCOME WA S FILED ON 28-10-2005 DECLARING TOTAL LOSS AT RS.8,64,880/- AND THE ASSESSMENT WAS COMPLETED ON 26-04-2007 DETERMINING TOTAL INCOME AT RS.3,41,190/- BY MAKING DISALLOWANCES OF DEPRECIATION OF ITA NO.2887/AHD/2011 A.Y.2005-06 GURIKO SJREE SANDIPANI EDUCATION FOUNDATION V. ACIT, CIR-5, BRD PAGE 2 RS.10,41,438/- & DISALLOWANCE OF LEGAL EXPENSES OF RS.1,33,875/-. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE FILED APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) RESTRICTED THE DISALLOWANCES OF DEPRECIATION OF RS.10,41,438/- TO RS.6,71,643/-AND REMAINING ADDITION/DISALLOWANCE WAS CONFIRMED. THE ASSESSEE R ELIED UPON VARIOUS DECISIONS DURING THE COURSE OF HEARING FOR 271(1)(C) BEFORE L D. CIT(A) FOR THE SAKE OF CLARITY WHICH ARE REPRODUCED AS UNDER:- I) ITO V. RAM DAS DEOKINANDAN PRASAD (1985) 14 ITD1 55 (ALL) II) DCIT V. RAJAN H SHINDE (2005) 93 ITD 1/143 III) ACIT V. M.V. KENLUCKY (1997) 60 ITD 492 (PUNE) IV) NAVINBHAI M PATEL V. ITO (1988) 27 ITD 411 (AHD ) V) ACIT V. SUPREME INDUSTRIES LTD. (2009) 122 TTJ 5 6 (MUM) VI) MADAN GOPAL BANSAL &SONS V. IAC (1984) 19 TTJ 4 93 (DEL) VII) MAHENDRA KUMAR V. UNION INDIA (1997) 226 ITR 7 18 (MP) VIII) CIT V. INTERNATIONAL AUDIO VISUALA CO. (2007) 288 ITR 570 (DEL) IX) CIT V. NATH BROTHERS EXIM INTERNATIONAL LTD. (2 007) 288 ITR 670 (DEL) X) BALAJIA VEGETABLES PRODUCTS PVT. LTD. (2007) 290 ITR 172 (KAM) XI) DILIP N SHROFF V. JCIT & ANR. (2007) 210 CTR 22 8 (SC) XII) ENTERPRISE PRIVATE LTD. V. ACIT (2009) 309 ITR 79 (AT) (HYD) XIII) CIT V. BUDHEWAL COP SUGAR MILLS LTD. (2009) 3 12 ITR 336 (ST) XIV) IMPULSE INDIA (P) LTD. V. ITO 40 ITD 36 (DEL) XV) ITO V. HEMCHAND ASHOK KUMAR SHAH 8 ACAJ 209 (AH D) XVI) CIT V. ANAND WATER METER MFG. CO. (1979) 117 I TR 866 XVII) J.K. JAICO V. CIT (1990) 181 ITR 410 (MP) XVIII) CIT V. SMT. BIMLA DEVI SHARMA (1991) 192 ITR 482 (PAT) XIX) T ASHOK PAI V. CIT (2007) 292 ITR 340 (SC) XX) CIT V. SHRI SARADHA TEXTILE PROCESSORS (P) LTD. (2006) 286 ITR 499 (MAD) XXI) CIT V. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 IT 158 (SC) XXII) NATIONAL TEXTILE V. CIT 242 ITR 125 (GUJ) XXIII) HINDUSTAN STEEL LTD. V. STATE OF ORISSA (197 2) 83 ITR 26 (SC) THE CASE LAWS NARRATED BY THE ASSESSEE IS THAT THER E IS NO CONCEALMENT OF INCOME AND THAT PROVISIONS OF EXPLANATION-1 TO SECTION 271 (1)(C) ARE NOT ATTRACTED TO THE CASE OF THE ASSESSEE. ITA NO.2887/AHD/2011 A.Y.2005-06 GURIKO SJREE SANDIPANI EDUCATION FOUNDATION V. ACIT, CIR-5, BRD PAGE 3 3. THE LD. CIT(A) AFTER CONSIDERING THE VARIOUS CA SE LAWS CONFIRMED THE PENALTY LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INC OME BY RELYING UPON ITAT DELHI BENCH DECISION IN THE CASE OF CIT V. ZOOM COMMUNICATION (P) LTD. (2010) 191 TAXMAN 179 (DEL) AND ITAT AHMEDABAD BENCH DECISION IN ITA NO.2078/AHD/2006 IN THE CASE OF GUJARAT SATE FINANCIAL SERVICES LTD. V. ITO FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED AS UNDER:- 5.3 IT IS WELL ESTABLISHED THAT SO LONG AS THE ASS ESSEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY H IM HAS NOT BEEN FOUND TO BE INCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF P ENALTY UNDER SECTION 271(1)(C) OF THE ACT, EVEN IF THE CLAIM MADE BY HIM IS NOT SU STAINABLE IN LAW, PROVIDED THAT HE EITHER SUBSTANTIATES THE EXPLANATION OFFERE D BY HIM OR THE EXPLANATION, EVEN IF NOT SUSTAINED, IS FOUND TO BE BONA FIDE. IF THE EXPLANATION IS NEITHER SUBSTANTIATED NOR SHOWN TO BE BONA FIDE, EXPLANATIO N 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND THE ASSESSEE WILL BE LIABL E TO FOR THE PRESCRIBED PENALTY. IT IS TRUE THAT MERE SUBMITTING A CLAIM WH ICH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF INCO ME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSES SEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW I S MALA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) COMES INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. IN THE PRESENT CASE, DESPITE THE FACT THA T PROVISION FOR BAD AND DOUBTFUL DEBTS WAS EXPRESSLY MADE NOT DEDUCTIBLE IN TERMS OF THE RELEVANT PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, THE AS SESSEE CLAIMED THE DEDUCTION, EVEN WHEN THE AMOUNT HAD NOT BEEN WRITTEN OFF. WE C ANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME-TAX RETU RNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NO T ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATIO N FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, I T WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW, THAT A CLAIM WHICH IS WHOLLY UNTE NABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NO ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LI CENSE TO UNSCRUPULOUS ASSESSEE TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT T HEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED O N THE BASIS OF SELF ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING TH E TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY AN INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGAL LY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY. THIS WO ULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT H AVE. WE FIND THAT THE AS BEFORE US DID NOT EXPLAIN EITHER TO THE ASSESSING O FFICER/LD. CIT(A) AND EVEN TO US AS TO IN WHAT CIRCUMSTANCES AND ON ACCOUNT OF W HOSE MISTAKE, THE AMOUNTS CLAIMED AS DEDUCTIONS IN THIS CASE WERE NOT ADDED BACK, WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPANY. WE CA NNOT IGNORE THE FACT THAT THE ASSESSEE IS A COMPANY WHICH IS HAVING PROF ESSIONAL ASSISTANCE IN ITA NO.2887/AHD/2011 A.Y.2005-06 GURIKO SJREE SANDIPANI EDUCATION FOUNDATION V. ACIT, CIR-5, BRD PAGE 4 COMPUTATION OF ITS INCOME, AND ITS ACCOUNTS ARE COM PULSORILY SUBJECTED TO AUDIT. IN THE ABSENCE OF ANY DETAILS/EXPLANATION FR OM THE ASSESSEE, WE FAIL TO APPRECIATE HOW SUCH DEDUCTIONS COULD HAVE BEEN LEFT OUT WHILE COMPUTING THE INCOME OF THE ASSESSEE COMPANY AND HOW IT COULD ALS O HAVE ESCAPED THE ATTENTION OF THE AUDITORS OF, ESPECIALLY WHEN THE D EDUCTION FOR PROVISION FOR BAD AND DOUBTFUL DEBTS AND PROVISIONS FOR DIMINUTION IN VALUE IF INVESTMENTS WERE CLAIMED IN FLAGRANT VIOLATION OF PROVISIONS OF LAW. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN EXPLANATION GIVEN BY THE ASSESSEE D URING THE PENALTY PROCEEDINGS HAS NOT BEEN SUBSTANTIATED NOR FOUND TO BE BONA FIDE AND THERE IS NO MATERIAL BEFORE US TO TAKE A DIFFERENT VIEW I N THE MATTER WE ARE OF THE OPINION THAT THE LD. CIT(A) WAS JUSTIFIED IN UPHOLD ING THE LEVY OF PENALTY ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME IN RELATION TO PROVISION FOR BAD AND DOUBTFUL DEBTS AND PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 4. BEFORE US THE LD. AR OF THE ASSESSEE RELIED UPON THE CASE LAW OF ITAT CHANDIGARH BENCH IN THE CASE OF DCIT V. SHAHABAD CO-OP SUGAR MILLS (2010) 33 DTR 19 (CHD), WHERE ADDITION WAS WRONG CLAIM OF DEP RECIATION. HE FURTHER DRAW OUR ATTENTION AT PAGE-29 OF ASSESSEES PAPER BOOK, WHER E BIFURCATION OF SCHOOL BUILDING AND ADMINISTRATIVE BUILDING HAS BEEN SHOWN ON WHICH DEPRECIATION HAS BEEN WRONGLY CLAIMED WHICH WAS ACCEPTED BY THE ASSESSEE BEFORE T HE ASSESSING OFFICER. THE LD. AR FURTHER ARGUED THAT THIS WAS MISTAKE OF LEGAL FI RM WHOSE HAS AUDITED AS WELL AS FILED THE RETURN. THE MISTAKE COULD NOT BE VISUALIZ ED BY THE LEGAL ADVISER. IT IS TRUE THAT THE VERIFICATION PART OF THE INCOME WAS OBLIGA TORY ON POINT OF THE ASSESSEE BUT THE PARTNER OF THE ASSESSEE-FIRM SIGNED ON RETURN A S PER DIRECTION OF LEGAL ADVISER AND THE MISTAKE WAS BONA FIDE. THEREFORE HE PRAYED THAT BEING BONA FIDE MISTAKE PENALTY IMPOSED ON THE ASSESSEE MAY BE DELETED. ON THE CONTRARY, THE LD. DR RELIED UPON THE VARIOUS CASE LAWS INCLUDING THE GUJARAT ST ATE FINANCE CORPORATION IN ITA NO.2078/AHD/2006 ORDER DATED 31-05-2010, A.M. SHAH AND CO. V. CIT (1999) 238 ITR 415 (GUJ) AND PSP INDIA PVT. LTD. V. CIT (2011) 65 DTR 400 WHERE PENALTY WAS FOUND JUSTIFIABLE. HE FURTHER ARGUED THAT MERE OFFE RING AN EXPLANATION IS NOT SUFFICIENT TO SHOW THE CLAIM WAS BONA FIDE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS ON RECORD AS WELL AS SUBMISSIONS OF BOTH THE PARTIES AND ARGUMEN TS MADE BEFORE US. IN THIS CASE, ITA NO.2887/AHD/2011 A.Y.2005-06 GURIKO SJREE SANDIPANI EDUCATION FOUNDATION V. ACIT, CIR-5, BRD PAGE 5 THE ASSESSEE HAD CLAIMED DEPRECIATION ON RENTED PRE MISES I.E. SCHOOL BUILDING AND 30% DEDUCTION U/S.24 OF THE ACT FROM THE RENTAL INC OME. THE LEGAL EXPENSES WERE FOR LOAN FOR SCHOOL BUILDING WHICH WAS CAPITAL EXPENDIT URE. THE ASSESSEE MADE DOUBLE CLAIM ON SCHOOL BUILDING WHEREAS LEGAL EXPENSES ARE NOT ALLOWABLE AS PER LAW. THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME , IT IS ESTABLISHED POSITION OF LAW THAT PENALTY PROCEEDINGS ARE COMPENSATORY IN NATURE AND IRRESPECTIVE OF CIVIL LIABILITY. PRINCIPLE IS RESPONSIBLE FOR MISTAKE COMMITTED BY T HE EMPLOYEE BUT DOUBLE CLAIM ON SCHOOL BUILDING WAS NOT BONA FIDE AS THERE WAS NO A DMISSION BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. WE THEREFORE DO NOT FIN D ANY POINT TO INTERFERE IN THE ORDER OF LD. CIT(A). THIS GROUND OF ASSESSEES APPE AL IS DISMISSED. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISM ISSED. # !' $!%& 30/ 03 /201 2 + , - . THIS ORDER PRONOUNCED IN OPEN COURT ON 30 /03/ 201 2. SD/- SD/- ( D.K.TYAGI ) ( T.R. MEENA ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) $!%&- 30/03/2012 0!! . DKP* !' !' !' !' 112 112 112 112 32 32 32 32 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. %%15 6 / CONCERNED CIT 4. 6- / CIT (A) 5. 29- 1115, 15, 0!! / DR, ITAT, AHMEDABAD 6. -<= ># / GUARD FILE. BY ORDER/ !' , /TRUE COPY/ ?/0 %@ 15, 0!! .