M/S NISHILAND PARK LTD., V. THE ITO -3(2)(3), MUMBAI

ITA 3352/MUM/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79128 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 11-03-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 13-05-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Capital asset; Depreciation; Business expenditure; Bonafide belief; Wrong claim; Bonafide mistake; Revenue expenditure

Judgement Text

, VKBZ VKBZ VKBZ VKBZ , ,, , INCOME TAX APPELLATE TRIBUNAL MUMBAI - I BENCH MUMBAI , , / ! ! ! ! , BEFORE S/SH. VIJAY PAL RAO, JUDICIAL MEMB ER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 3352/M/2008, ' ' ' ' # # # # / ASSESSMENT YEAR 2001-02 NISHILAND PARK LTD., B BLOCK, NORTH STAND, WANKHEDE STADIUM, D.ROAD, CHURCHGATE, MUMBAI- 400020 VS. ITO 3(2)(3), AAYKAR BHAVAN, R.NO. 673, M.K.MARG, CHURCHGATE, MUMBAI-400020 PAN: AAACD3974E ( $% / ASSESSEE ) ( &'$% / RESPONDENT) $% $% $% $% ( ( ( ( / ASSESSEE BY : SHRI M.SUBRAMANIAN &'$% ) ( / REVENUE BY : SHRI PITAMBER DAS ' ' ' ' ) )) ) *+ *+ *+ *+ / DATE OF HEARING : 29-04-2014 ,-# ) *+ / DATE OF PRONOUNCEMENT : 11- 06- 2014 ' ' ' ' , 1961 ) )) ) 254 )1( *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M ! ' ! ' ! ' ! ' : CHALLENGING THE ORDER DATED 12.03.2008 OF THE CIT(A )-III,MUMBAI,ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE PENALTY ORDER PASSED U/S.271(1)(C) IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW,THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED OF RS. 4,89,814/- U/S. 271(1)(C) OF THE I.T. ACT, 1961 AND THAT TOO WITHOUT APPRECIATI NG FULLY AND PROPERLY THE FACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMIN G THE PENALTY LEVIED OF RS. 4,89,814/- U/S. 271(1)(C) OF THE I.T.ACT, 1961 ALTHOUGH THERE HAS BEEN NEITHER A NY CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULAR S OF INCOME. 6.THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELET E ANY OR ALL OF THE GROUNDS OF APPEAL. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF RUNNING AMUSEMENT PARK AND RELATED ENTERTAIN - MENT SERVICES,FILED ITS RETURN OF INCOME ON 22.10.2 001 SHOWING LOSS OF RS. 9.11 LAKHS. ASSESSING OFFICER(AO)FINALISED THE ASSESSMENT ON 31.03.2003,U /S.143(3) OF THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS.8820/-AFTER SETTING OFF THE L OSSES OF EARLIER YEARS. 3. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASS ESSEE HAD DEBITED RS. 12,38,462/- TO PROFIT & LOSS ACCOUNT UNDER THE HEAD ADMINISTRATIVE AND O THER EXPENSES AS LOSS ON ACCOUNT OF SALE OF MOTOR CAR SALE.HE ASKED THE ASSESSEE TO FILE EXPLA NATION IN THIS REGARD.ASSESSEE INFORMED THE AO THAT COMPANY HAD SOLD MOTOR CAR WHICH WERE SHOWN AS FIXED ASSETS.AO FOUND,FROM THE SCHEDULE SHOWING BLOCK OF ASSETS,THAT ASSESSEE HAD REDUCED T HE VALUE OF MOTOR CARS TO THE TUNE OF RS.70.38 LAKHS FROM WDV OF RS.78.68 LAKHS, THAT THE BALANCE OF RS. 61.29 LAKHS HAD BEEN SHOWN AS WDV ON MOTOR CARS AS 31.03.2001.AFTER CONSIDERING THE S UBMISSION OF THE ASSESSEE,AO HELD THAT TRADING IN MOTOR CARS WAS NOT THE BUSINESS OF THE A SSESSEE, THAT THE MOTOR CARS APPEARED AS FIXED ASSETS IN THE ACCOUNTS AND NOT AS STOCK-IN-TRADE,TH AT THEY WERE THE CAPITAL ASSETS,THAT THE LOSS INCURRED BY THE ASSESSEE ON DISPOSAL OF THE MOTOR C AR COULD NOT BE TREATED AS TRADING LOSS,THE LOSS WAS NOT ALLOWABLE AS BUSINESS EXPENDITURE ALSO,THAT THE ASSESSEE HAD REDUCED THE VALUE OF CARS 2 ITA NO. 3352/MUM/2008 NISHILAND PARK LTD. SOLD FROM THE BLOCK OF ASSETS,THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON ALL THE ASSETS IN THE EARLIER YEARS,THAT ONLY FOR THE YEAR UNDER CONSIDER ATION IT HAD OPTED NOT TO AVAIL DEPRECIATION ALLOWANCE.HE FURTHER HELD THAT WHETHER THE ASSESSEE CLAIMED DEPRECIATION OR NOT,FIXED ASSETS WERE TO BE TREATED AS CAPITAL ASSET,THAT ANY LOSS ON ACC OUNT OF SALE OF SUCH ASSETS WAS TO BE CONSIDERED AS PER THE PROVISIONS OF THE ACT.REFERRING TO THE PROV ISIONS OF SECTION 50 OF THE ACT,HE HELD THAT PROFIT/LOSS ON SALE OF DEPRECIABLE ASSET WAS TO BE TREATED AS SHORT TERM CAPITAL GAIN/LOSS IN CASE ENTIRE BLOCK OF ASSET HAD BEEN SOLD,THAT LOSS ON AC COUNT OF SALE OF PART OF THE BLOCK COULD NOT BE ALLOWED AS REVENUE EXPENDITURE.FINALLY,THE CLAIM OF LOSS ON ACCOUNT OF SALE OF MOTOR CARS,AMOUNT -ING TO RS. 12.38 LAKHS,WAS DISALLOWED.AO ALSO INIT IATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS.MEANWHILE ,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA),WHO DECIDED THE ISS UE IN FAVOUR OF THE DEPARTMENT AND HELD THAT THERE WAS NO PROVISION IN THE ACT TO ALLOW ANY LOSS ON SALE OF CAPITAL ASSET AS REVENUE EXPENDI - TURE.HIS ORDER WAS CHALLENGED BY THE ASSESSEE BEFOR E THE TRIBUANL.BUT,THERE ALSO THE ASSESSEE COULD NOT SUCCEED.ASSESSEE FILED AN MA AGAINST THE ORDER PASSED BY THE TRIBUNAL AND SAME WAS DISMISSED BY THE TRIBUNAL HOLDING THAT NO MISTAKE W AS APPARENT FROM THE RECORDS THAT COULD BE RECTIFIED U/S.254(2)OF THE ACT. 4. IN RESPONSE TO THE PENALTY NOTICE ASSESSEE ARGUED B EFORE THE AO THAT IT HAD INCURRED THE LOSS ON SALE OF MOTOR CARS,THAT IT HAD NOT CLAIMED DEPRECIA TION ON THE CARS AND HENCE WAS ELIGIBLE FOR CLAIMING LOSS,THAT AS NO DEPRECIATION WAS CHARGED S O QUESTION OF INVOKING THE PROVISIONS OF SECTION 50 OF THE ACT DID NOT ARISE,THAT PENALTY U/ S 271(1)(C) OF THE ACT COULD NOT BE LEVIED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,AO HELD THAT EXPLANATION OFFERED BY THE ASSESSEE WAS NOT CONVINCING,THAT IT HAD SOLD MOTOR CARS-A CAPITA L ASSET,THAT NOT CLAIMING DEPRECIATION ON MOTOR CARS DID NOT MEAN THAT MOTOR CARS CEASED TO BE PART OF BLOCK OF ASSET ELIGIBLE FOR DEPRECIATION. FINALLY,HE LEVIED A PENALTY OF RS. 4,89,814/- U/S 2 71(1)(C) OF THE ACT. 5. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE PENALTY ORDER,FAA HELD THAT CLAIM OF LOSS A TTRACTED PENAL PROVISIONS, THAT THE CAR WERE CAPITAL ASSET AND WERE ELIGIBLE FOR DEPRECIATION,TH AT SALE OF THE ASSETS WERE TO BE TREATED AS PER THE PROVISIONS OF SECTION 50 OF THE ACT, THERE WAS NEIT HER ANY LOGIC NOR ANY ELEMENT OF RATIONAL FOR CLAIMING THE ENTIRE LOSS ON SALE OF MOTOR CARS,THAT THE CLAIM MADE BY THE ASSESSEE WAS NOT BONAFIDE, THAT INCORRECT PARTICULARS OF INCOME INCL UDED LATENTLY WRONG CLAIM MADE IN COMPUTATION OF INCOME, THAT CLAIM OF LOSS ON CAPITAL ASSET HAD BEEN CLAIMED AS REVENUE LOSS, THAT THE SAID ASSETS WERE DEPRECIABLE ASSETS, THAT THE LOSS ON SALE OF M OTOR CARS CLAIMED AS REVENUE LOSS WAS AN INDEPENDENT ITEM OF PROFIT AND LOSS ACCOUNT, THAT I T WAS CLUBBED WITH A VARIETIES OF EXPENSES UNDER THE HEAD ADMINISTRATIVE AND OTHER EXPENSES, THERE W AS NOTHING BONAFIDE ABOUT THE CLAIMED MADE BY THE ASSESSEE,THAT EXPLANATION 1 TO SECTION 271(1 )(C) OF THE ACT WERE APPLICABLE IN THE CASE UNDER CONSIDERATION.FINALLY,HE UPHOLD THE ORDER OF THE AO IMPOSING PENALTY. 6. BEFORE US, AUTHORISED REPRESENTATIVE (AR) STATED TH AT ASSESSEE HAD SOLD FOUR CARS, THAT THE LOSS SUFFERED ON SALE OF CAR WAS DEBITED TO PROFIT & LOS S ACCOUNT, THAT ASSESSEE DID NOT OFFERED LOSS IN THE RETURN OF INCOME, THAT ASSESSEE HAD NEVER CLAIM ED ANY DEPRECIATION ON THE SAID CARS, THAT THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT AS DEPR ECIATION WAS NOT CLAIMED, SO IT DID NOT ADD BACK THE AMOUNT, NO INCORRECT PARTICULARS WERE FILED BY THE ASSESSEE. HE RELIED UPON THE DECISIONS OF SOMANY EVERGREE KNITS LTD.(352 ITR 592),RELIANCE PE TROPRODUCTS PVT.LTD.(322 ITR 158)NALIN P. SHAH(HUF)(ITA/49 OF 2013 DT.04.03.2013),AND AMRUTA ORGANICS PVT. LTD.(ITA1121/PN/11, AY- 2007-08DT.22.03.2013).DEPARTMENTAL REPRESENTATIVE(D R)CONTENDED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION IN EARLIER YEARS,THAT IT HAD MADE A PA TENT IN ADMISSIBLE CLAIMED IN THE RETURN OF INCOME,THAT THE FAA HAD RIGHTLY INVOKED THE EXPLANA TION 1 TO SECTION 271(1)(C) OF THE ACT,THAT THERE WAS NO BONAFIDE IN THE CLAIM MADE BY THE ASSE SSEE.HE REFERRED TO THE JUDGMENTS OF ZOOM COMMUNICATION (327ITR510)ESCORTS FINANCE LTD.(328 I TR 44). 3 ITA NO. 3352/MUM/2008 NISHILAND PARK LTD. 7 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT ISSUE OF LOSS ON SALE OF MOTOR CAR HAD BEEN CONTESTED BY THE ASSESSEE UP TO THE LEVEL OF THE TRIBUNAL.NOT ONLY THIS IT HAD FILED AN MA AGAINST THE ORDER OF T HE TRIBUNAL.WE WOULD LIKE TO REPRODUCE THE DECISION OF THE TRIBUNAL WHEREIN ISSUE HAS BEEN DEL IBERATED UPON AS UNDER: HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CAREFU L PERUSAL OF THE RECORD,WE FIND THAT THE LOWER AUTHORITIES HAVE GIVE A CATEGORICAL FINDING THAT TH ERS CARS WERE SHOWN AS PART OF BLOCK ASST AND IN EARLIER YEARS, DEPRECIATION WAS CLAIMED THEREON.IN THEIS YEAR THE WDV WAS SHOWN AT RS.71,39, 050/-.UNDISPUTEDLY,THE ASSESSEE IS NOT A DEALER OR A TRADER IN CARS AND THERS CARS HAVE BEEN ACQUIRED AS AN ASSET FOR BEING USED FOR THE PURPOSL ELLS OF ASSESSEES BUSINESS OF AMUSEMENT PARK. SINCE THESE CARS WAS A BUSINESS ASSET,THE LOSS ON I TS SALE CANNOT BE CALLED TO BE A REVENUE LOSS.WE, HOWEVER,CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES AND WE FIND THAT THE ISSUE WAS RIGHTLY ADJUDICATED BY THEM IN THE GIVEN FACTS ANC CIRCUMSTANCES OF THE CASE AND WE FIND ON INFIRMITY IN THE ORDER OF THE CIT(A).WE THEREFORE,C ONFIRM THE SAME WHILE REJECTING THE MA,FILED BY THE ASSESSEE,TRIBUN AL HAS,ON 09.03.2011,HELD AS FOLLOWING: 5. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL WITH REGARD TO GROUND NO. 1 THAT:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF LOSS ON SALE OF MOTOR CAR OF RS . 12,38,469/- OR ALTERNATIVELY HE OUGHT TO HAVE ALLOWED THE CLAIM OF DEPRECIATION WHEN THE FACTS SH OWS THAT NO DEPRECIATION WAS ALLOWED. HAS HELD VIDE PARA NO. 10 OF ITS ORDER DATED 11.1.0 8 AS UNDER: HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CARE FUL PERUSAL OF THE RECORD, WE FIND THAT THE LOWER AUTHORITIES HAVE GIVEN A CATEGORICAL FINDING THAT T HESE CARS WERE SHOWN AS PART OF THE BLOCK OF ASSET AND IN EARLIER YEARS, DEPRECIATION WAS CLAIME D THEREON. IN THIS YEAR, THE WDV WAS SHOWN AT RS.71,39,050/-. UNDISPUTEDLY, THE ASSESSEE IS NOT A DEALER OR A TRADER IN CARS AND THESE CARS HAVE BEEN ACQUIRED AS AN ASSET FOR BEING USED FOR THE PU RPOSE OF ASSESSEES BUSINESS OF AMUSEMENT PARK. SINCE THESE CARS WAS A BUSINESS ASSET, THE LO SS ON ITS SALE CANNOT BE CALLED TO BE A REVENUE LOSS. WE, HOWEVER, CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES AND WE FIND THAT THE ISSUE WAS RIGHTLY ADJUDICATED BY THEM IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). WE, THEREFORE , CONFIRM THE SAME. WE FURTHER FIND THAT IN THE NOTES ON ACCOUNT DATED, 30.8.2001 IN POINT NO. 9 AT PAGE NO. 3 AND IN POINT NO. (E) AT PAGE NO.4 OF THE ASSESSEES PAPER BOOK IT HAS BEEN MENTIONED AS UNDER: NO DEPRECIATION IS CHARGED ON ASSETS PURCHASED FOR LAST 5 YEARS. DEPRECIATION ON ASSET ARE RS. 9606324 AS SUCH LOSS IS UNDERSTATED BY RS. 9606324 E) DEPRECIATION DEPRECIATION OF FIXED ASSET HAS BEEN PROVIDED ON WR ITTEN DOWN VALUE METHOD AT THE RATES PROVIDED IN SCHEDULE XIV OF THE COMPANIES ACT, 1956 (AS AMEN DED). NO DEPRECIATION IS CHARGED ON THE NEW ADDITION OF FIXED ASSETS FOR LAST FIVE YEARS. ON A COMBINED READING OF THE ABOVE, WE OBSERVE THAT NOWHERE IT HAS BEEN MENTIONED BY THE ASSESSEE THAT NO DEPRECIATION WAS CHARGED ON CARS F ROM LAST 5 YEARS. WE FURTHER FIND THAT IN THE CHART OF THE DEPRECIATION APPEARING AT PAGE NO. 4 O F THE ASSESSEES PAPER BOOK, THE ASSESSEE HAS CHARGED DEPRECIATION ON THE MOTOR CARS AS UNDER: THUS, IN THE DEPRECIATION CHART, THE ASSESSEE HAS D ULY CHARGED DEPRECIATION ON MOTOR CARS RS. 48007/-. AS REGARDS THE ASSESSEES PLEA THAT NO DEP RECIATION WAS CHARGED FOR LAST 5 YEARS AND IN SUPPORT, HE ALSO PLACED ON RECORD THE NEW PAPER BOO K CONTAINING PAGE 1 TO 24 OF THE ASSESSEES PAPER BOOK, WE FIND THAT SINCE IN THE YEAR UNDER CO NSIDERATION, THE ASSESSEE HAS DULY CHARGED DEPRECIATION ON MOTOR CARS AS ABOVE, THEREFORE, THE NEW PAPER BOOK FILED BY THE ASSESSEE 4 ITA NO. 3352/MUM/2008 NISHILAND PARK LTD. MENTIONING DEPRECIATION ON MOTOR CARS CHARGED AND N OT CHARGED IS OF NO HELP TO THE ASSESSEE SINCE THE APPEAL IS FOR THE AY 2001-02 WHEREIN THE ASSESS EE HAS CHARGED DEPRECIATION ON MOTOR CAR AS ABOVE. IN THIS VIEW OF THE MATTER, WE ARE OF THE VI EW THAT THERE IS NO MISTAKE IN THE ORDER OF THE TRIBUNAL. THE WANTS REVIEW, WHICH IS NOT PERMISSIBL E UNDER SCHEME OF SECTION THE 254(2) OF THE ACT AND ACCORDINGLY ISSUE NO. 1 RAISED BY THE ASSESSEE IS REJECTED. FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE ASSE SSEE IS NOT IN THE BUSINESS OF SALE AND PURCHASE OF CARS AND THEREFORE CARS OWNED BY IT COULD NOT BE PART OF ITS STOCK IN TRADE.CARS WERE PART OF BLOCK OF ASSETS.SO,ANY LOSS SUFFERED OR PROFIT EARN ED ON SALE OF SUCH CARS CANNOT BE TREATED AS PART OF BUSINESS ACTIVITIES.THE ASSESSEE IN NOT IN A POS ITION TO CONTROVERT THE CATEGORICAL FINDING OF FACT GIVEN BY THE TRIBUNAL THAT IT HAD CHARGED DEPRECIAT ION ON MOTOR CARS FOR THE AY.2001-02.EVEN IF DEPRECIATION WAS NOT CHARGED THE NATURE OF CARS WOU LD NOT CHANGE FROM THE PART OF BLOCK ASSETS TO THE PART OF STOCK IN TRADE.REVENUE LOSS CAN BE CLAI MED ONLY FOR BUSINESS-ACTIVITIES CARRIED OUT BY AN ASSESSEE.AS THE CARS WERE PART OF BLOCK ASSET,SO LOSS ARISING OUT OF THEIR SALE HAS TO BE COMPUTED UNDER APPROPRIATE HEAD AND NOT UNDER THE HEAD REVEN UE LOSS.THE ASSESSEE HAS STATED THAT IT WAS A BONAFIDE MISTAKE.WE ARE OF THE OPINION THAT THE CLA IM MADE BY THE ASSESSEE ABOUT THE LOSS WAS NOT A BONAFIDE.TWO VIEWS ARE NOT POSSIBLE ABOUT THE SAI D CLAIM-ONLY ONE VIEW IS POSSIBLE.BY CLAIMING REVENUE LOSS ON SALE OF FIXED ASSETS THE ASSESSEE HAD FILED INACCURATE PARTICULARS OF INCOME. THEREFORE,WE ARE OF THE OPINION THAT THE ORDER OF T HE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. NOW,WE WOULD LIKE TO DISCUSS THE CASES RELIED UPON BY THE ASSESSEE.IN THE MATTER OF RELIANCE PETRO-PRODUCTS PVT.LTD.(SUPRA) THE ASSESSEE HAS DUL Y DISCLOSED ABOUT THE CLAIM OF INTEREST UNDER SECTION 36(1)(III) AND IN EARLIER YEAR CLAIM WAS AL LOWED.NO STATEMENT OR DETAILS SUPPLIED BY THE ASSESSEE HAD BEEN FOUND TO BE FACTUALLY INCORRECT B Y THE AO.CONSIDERING THE FACTS OF THAT CASE HONBLE COURT HAD DELETED THE ADDITION.BUT,IN THE C ASE BEFORE US,A PATENTLY WRONG CLAIM WAS MADE AND THAT ALSO UNDER THE HEAD ADMINISTRATIVE AND OTH ER EXPENSES IN THE P & L ACCOUNT.NOT ONLY THIS DURING THE ASSESSMENT AND PENALTY PROCEEDINGS DEPARTMENT HAD TAKEN THE STAND THAT BY MAKING A FALXE CLAIM THAT ASSESSEE HAD CONCEALED ITS INCOM E.THUS, THE CASE CITED BY THE AR IS OF NO HELP.IN THE CASE OF SOMANY EVERGREE KNITS LTD.(SUPR A)A WRONG CLAIM OF DEPRECIATION WAS MADE. BUT, THE ASSESSEE REALIZED ITS MISTAKE DURING THE A SSESSMENT PROCEEDINGS AND POINTED OUT TO THE AO.IN THE BACKGROUND OF THOSE FACTS HONBLE HIGH CO URT HAD HELD THAT THE ASSESSEE SHOULD NOT BE VISITED BY CONCEALMENT PROCEEDINGS.IN THE MATTER UN DER APPEAL,THE ASSESSEE IS AGITATING THE ISSUE OF CLAIM OF DEPRECIATION AT VARIOUS FORUM-IT HAD AL SO FILED AN MA.SECONDLY,IT IS A CASE OF CLAIMING REVENUE LOSS ON SALE OF BLOCK ASSETS.IN THE CASE OF AMRUTA ORGANIC PVT.LTD.(SUPRA) TRIBUNAL HAD FOUND THAT NET RESULT OF ADDITION WAS NEGATIVE INCO ME,SO,CONSIDERING THE FACTS PENALTY SHOULD NOT BE LEVIED.IN NONE OF THE CASES LOSS ARISING OUT OF SALE OF ASSETS;THAT WERE NOT STOCK IN TRADE;WAS CLAIMED AS REVENUE LOSS.THEREFORE IN OUR OPINION TH E MATTERE UNDER APPEAL CANNOT BE COMPARED WITH ANY OTHER MATTER.HERE WE WOULD LIKE TO REFER TO THE JUDGMENT OF ZOOM COMMUNICATION (SUPRA),CITED BY THE DR.IN THAT MATTER HONBLE DELH I HIGH COURT HAS HELD AS UNDER : SECTION 271(1)(C) OF THE ACT, TO THE EXTENT IT IS RELEVANT, PROVIDES FOR IMPOSITION OF PENALTY IN CAS E THE ASSESSING OFFICER, IN THE COURSE OF ANY PROCEED INGS UNDER THE ACT, IS SATISFIED THAT ANY PERSON HAD CONCEALED PARTICULARS OF HIS INCOME OR HAD FURN ISHED INACCURATE PARTICULARS OF SUCH INCOME. EXPLANATION 1 TO CLAUSE (C) SUB-SECTION (1) OF SECT ION 271 PROVIDES THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME OF ANY PERSON, SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE OR HE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE T HAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME, HAVE BEEN DISCLOSED BY HIM, THEN THE AMOUNT ADDED OR DISALLOWED IN COMP UTING THE TOTAL INCOME OF SUCH PERSON, AS A RESULT THEREOF, SHALL FOR THE PURPOSE OF CLAUSE (C) BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.THUS, IN CASE OF FAILURE OF THE ASSESSEE TO OFFER ANY EXPLANATION OR THE EXPLANATION FURNISHED BY HIM BEI NG FOUND FALSE, PENALTY MAY BE IMPOSED ON HIM. HOWEVER, IF AN EXPLANATION IS OFFERED BY THE A SSESSEE, MERE FAILURE ON HIS PART TO SUBSTANTIATE 5 ITA NO. 3352/MUM/2008 NISHILAND PARK LTD. IT WILL NOT BE ENOUGH TO WARRANT PENALTY, IF THE EX PLANATION IS BONA FIDE AND ALL THE FACTS RELATING T O THE SAME WERE DISCLOSED BY HIM IN THE RETURN. EXPLA NATION 1 TO SECTION 271(1)(C) WOULD BE INAPPLICABLE IN RESPECT OF ANY AMOUNT ADDED OR DISA LLOWED AS A RESULT OF REJECTION OF THE EXPLANATION FURNISHED BY THE ASSESSEE, PROVIDED THA T HIS EXPLANATION IS SHOWN TO BE BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME WERE DISCLOSED BY HIM IF THE EXPLANATION IS NEITHER SU BSTANTIATED NOR SHOWN TO BE BONA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME IN TO PLAY AND THE ASSESSEE WILL BE LIABLE TO FOR THE PRESCRIBED PENALTY. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS IN CORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSE E, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND WORK TO THE DIS-ADVANTAGE OF THE ASSESSEE.THE COURT CANNOT OVERLOOK THE FACT THAT ON LY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION F URNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT 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 T HAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE M ADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BO NA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO M AKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THE M, IN THE HOPE THAT THEIR 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 SELECTE D FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. TH E CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETER-REN T EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS IN CORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSE E, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND WORK TO THE DIS-ADVANTAGE OF THE ASSESSEE.THE COURT CANNOT OVERLOOK THE FACT THAT ON LY A SMALL PERCENTAGE OF THE INCOME-TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION F URNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT 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 T HAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE M ADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BO NA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO M AKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THE M, IN THE HOPE THAT THEIR 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 SELECTE D FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. TH E CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY.THIS WOULD TAKE AWAY THE DETERRENT EFFECT,WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. 6 ITA NO. 3352/MUM/2008 NISHILAND PARK LTD. IN THE CASE UNDER CONSIDERATION,THE ASSESSEE HAD MA DE A CLAIM THAT WAS WHOLLY UNTENABLE AND UNSUSTAINABLE.AO AND THE FAA HAD FOUND THAT THE ASS ESSEE HAD FAILED TO FILE ANY BONAFIDE EXPLANATION.CONSIDERING THE PECULIAR FACTS AND CIRC UMSTANCES OF THE CASE,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT,APPEAL FILED BY TH E ASSESSEE STANDS DISMISSED. 1*2 '3* 4 5 ) . 6* ) * 78 . ORDER PRONOUNCED IN THE OPEN COURT ON 1 1 TH JUNE,2014. / ) ,-# 9 :' 11 TWU , 2014 - ) . ; SD/- SD/- ( / VIJAY PAL RAO ) ( ! / RAJENDRA ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, :' /DATE: 11.06.2014 SK / / / / ) )) ) &* &* &* &* < #* < #* < #* < #* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT (A) / = > , 4. THE CONCERNED CIT / = > 5. DR I BENCH, ITAT, MUMBAI / ?. &*' VKBZ VKBZ VKBZ VKBZ , . . . 6. GUARD FILE/ . 1 '* '* '* '* &* &*&* &* //TRUE COPY// /' / BY ORDER, @ / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI