ASHOK RAMNIKLAL PUROHIT, MUMBAI V. ITO WD 19(2)(1), MUMBAI

ITA 3479/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6358 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B B NEGANDHI
• Keywords: Business income; Depreciation; Wrong claim

Judgement Text

1 ITA NO3479/M/2010 I II IN THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH MUMBAI BENCH SMC SMC SMC SMC MUMBAI MUMBAI MUMBAI MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI R R R R K PANDA, A K PANDA, A K PANDA, A K PANDA, ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER IT ITIT ITA NO A NO A NO A NO. . . . 3479/MUM/2010 3479/MUM/2010 3479/MUM/2010 3479/MUM/2010 (ASSESSMENT YEAR 2006-07 ) ASHOK RAMNIKLAL PUROHIT A/202 JAL DARSHAN 18G RUIA PARK SANTACRUZ (WEST), MUMBAI VS THE INCOME TAX OFFICER WARD 19(2)(1), MUMBAI (APPELLANT) (RESPONDENT) PAN PAN PAN PAN AGMPP4807G AGMPP4807G AGMPP4807G AGMPP4807G ASSESSEE BY: SHRI B B NEGANDHI REVENUE BY: SHRI MAHUVA SARKAR/DR O OO O R RR R D DD D E EE E R RR R PER PER PER PER R RR R K PANDA K PANDA K PANDA K PANDA: :: : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 2.3.2010 OF THE CIT(A)-30 MUMBAI RELATING TO ASSESS MENT YEAR 2006-07. 2 THE ASSESSEE, IN ITS APPEAL HAS CHALLENGED THE OR DER OF THE CIT(A) IN CONFIRMING THE PENALTY OF ` . 33,064/- LEVIED BY THE ASSESSING OFFICER U/S 271(1)( C) OF THE I T ACT. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE HAS CLAIMED DEPRECIATION ON MOTOR CAR AT ` 1,37,080/- ALTHOUGH IT HAS NOT DECLARED ANY BUSIN ESS INCOME AND THE DEPRECIATION WAS DEDUCTED FROM INCOME FROM OTHER SOURCES DECLARED AT ` 1,52,350/-. ON BEING QUESTIONED BY THE ASSESSING OFFICER, IT WAS SUBMITTED THAT THE ASSESSEE IS A DIRECTOR OF METABOND INDUSTR IES LTD AND HE IS HOLDING SHARES. HE HAS ALSO INVESTED FUNDS IN SHARES OF VAR IOUS OTHER COMPANIES, POST 2 ITA NO3479/M/2010 OFFICES, UTI MUTUAL FUND AND HAS ALSO GIVEN LOANS T O VARIOUS PARTIES. HE HAS TO VISIT FACTORIES AT METABOND LTD AT VAPI & DHARAMPUR IN GUJARAT FOR WHICH HE NEEDS TO HAVE A CAR TO TRAVEL. HE ALSO NEEDS VEHIC LE TO LOOK AFTER HIS INVESTMENT ACTIVITIES AND HENCE, DEPRECIATION IS CLAIMED AS EX PENSES. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLAN ATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, SINCE THERE IS NO BUSINESS INCOME EARNED DURING THE YEAR, THE DEPRECIATION ON MOTOR CAR CANNOT BE ALLOWED. 2.2 THE ASSESSING OFFICER SIMILARLY NOTED THAT THE ASSESSEE HAS NOT SHOWN INCOME FROM HOUSE PROPERTY ALTHOUGH HE HAS GOT TWO HOUSE PROPERTIES. ON BEING QUESTIONED BY THE ASSESSING OFFICER, IT WAS S TATED THAT ONE HOUSE IS VACANT. IN ABSENCE OF DETAILS, THE ASSESSING OFFICE R ASSESSED THE VALUE OF THE HOUSE PROPERTY AT ` 25,000/-. SUBSEQUENTLY, THE ASSESSING OFFICER INIT IATED PENALTY PROCEEDINGS AND LEVIED PENALTY OF ` 33,064/- BEING MINIMUM PENALTY @ 100% ON TAX SOUGHT TO BE EVADED. 3 IN APPEAL, THE CIT(A) UPHELD THE ACTION OF THE A SSESSING OFFICER BY HOLDING AS UNDER: I HAVE CAREFULLY GONE THROUGH THE IMPUGNED PENALTY ORDER, SUBMISSIONS OF THE AR OF THE APPELLANT AND THE FACTS OF THE CASE. ADMITTEDLY, IN THIS CASE NO BUSINESS INCOME WAS EARNED DURING THE ASSESSMENT YEAR UNDER APPEAL BUT STILL THE APPELLANT HAD CLAIMED DEPRECIATION ON MOTOR CAR. SINCE THIS WAS A WRONG CLAIM WHICH WAS MADE DELIBERATELY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)( C) OF THE I T ACT. APART FROM THE ABOVE, IT WAS ALSO FOUND BY THE ASSESSING OFFICER T HAT THE APPELLANT WAS OWNING TWO HOUSE PROPERTIES, YET NO INCOME FROM HOU SE PROPERTY WAS SHOWN BY THE APPELLANT. IN THE ABSENCE OF DETAILS, INCOME FROM HOUSE PROPERTY WAS ASSESSED AT ` 25,000/-. PENALTY PROCEEDINGS U/S 271(1)( C) OF I T ACT WERE INITIATED SEPARATELY. IN MY CAREFUL CO NSIDERATION, I FIND THAT ON 3 ITA NO3479/M/2010 BOTH THE ISSUES I.E. WRONG CLAIM OF DEPRECIATION ON MOTOR CAR AND NON DISCLOSURE OF INCOME FROM HOUSE PROPERTY WHICH HAS BEEN ESTIMATED AT ` 25,00/- PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT ARE ATTRACTED. AS REGARDS TO THE CASE LAWS CITED BY THE APPELLANT, TH E ASSESSING OFFICER HAD FOUND THEM DISTINGUISHABLE ON FACTS IN THE PENALTY ORDER. I AGREE WITH THE ASSESSING OFFICER. THEREFORE, THE PENALTY LEVIED BY THE ASSESSING OFFICER OF ` 33,064/- U/S 271(1)( C) ON BOTH THE AFORESAID ISSU ES IS ACCORDINGLY CONFIRMED. THE GROUNDS OF APPEAL ARE DISMISSED. 4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 5 THE LD COUNSEL FOR THE ASSESSEE REFERRING TO THE COPY OF THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSING OFFICER IN COLUM N 10 OF THE ASSESSMENT ORDER HAS MENTIONED THE NATURE OF BUSINESS AS FINANCE & INVESTMENTS. REFERRING TO THE DECISION OF THE HONBLE PUNJAB HIGH COURT IN TH E CASE OF CIT VS ANAND WATER METER MFG CO REPORTED IN 117 ITR 866, HE SUBMITTED THAT PENALTY U/S 271(1)( C) IS NOT LEVYABLE FOR CLAIMING FOR ANY IN-ADMISSIBLE EXPENDITURE. REFERRING TO THE DECISION OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF MAHENDRA KUMAR VS UNION OF INDIA REPORTED IN 226 ITR 718, HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT ERRON EOUS DEDUCTION /S 80L DID NOT AMOUNT TO CONCEALMENT OF INCOME AND THEREFORE, PENA LTY U/S 271(1)( C) IS NOT WARRANTED. REFERRING TO THE DECISION OF HONBLE KA RNATAKA HIGH COURT IN THE CASE OF KHANCHAND THAKURDAS VS CIT REPORTED IN 140 ITR 5 81, HE SUBMITTED THAT AN INADVERTENT MISTAKE IS NOT EQUIVALENT TO GROSS NEGL IGENCE OR WILFUL NEGLECT. HE SUBMITTED THAT THE ASSESSEE IN THE INSTANT CASE REQ UIRED THE VEHICLE FOR LOOKING AFTER ITS INVESTMENT BUSINESS. THEREFORE, ALTHOUGH DEPRECIATION WAS DISALLOWED BY THE ASSESSING OFFICER, THE SAME DOES NOT WARRAN T LEVY OF PENALTY U/S 271(1)( C) OF THE I T ACT AS THERE IS NO CONCEALMENT OF INC OME. 4 ITA NO3479/M/2010 5.1 AS REGARDS TO THE ADDITION OF NOTIONAL INCOME F ROM HOUSE PROPERTY, HE SUBMITTED THAT THE ASSESSEE WAS NOT CONVERSANT WITH THE I T RULES FOR WHICH HE DID NOT INCLUDE THE NOTIONAL HOUSE RENT. THERE IS NO DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE FOR CONCEALING THE PARTICULARS OF INCOME; THEREFORE, PENALTY SHOULD NOT BE LEVIED. 5.2 THE LD DR, ON THE OTHER HAND SUPPORTED THE ORDE R OF THE CIT(A) AND RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE C ASE OF K P MADHUSUDHANAN REPORTED IN 251 ITR 99 AND THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES LTD. 6 I HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY B OTH THE PARTIES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISI ONS CITED BEFORE ME. ADMITTEDLY, THE ASSESSEE, IN THE INSTANT CASE HAS C LAIMED DEPRECIATION OF ` . 1,37,080/- ON MOTOR CAR AND DEDUCTED THE SAME FR OM THE INCOME FROM OTHER SOURCES AND HAS NOT DECLARED ANY BUSINESS INCOME DURING THE YEAR. SIMILARLY, THE ASSESSEE ADMITTEDLY HAS NOT DECLARED ANY INCOME FROM HOUSE PROPERTY THOUGH HE HAS TWO PROPERTIES. IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT ALTHOUGH THE DEDUCTION ON ACCOUNT OF DEPRECIATION IS INADMISSIBLE, THE SAME DOES NOT CALL FOR LEVY OF ANY PENALTY U/S 271(1)( C). SIMILARLY, SINCE THE ASSESSEE IS NOT WELL CONVERSANT WITH THE PROVISIONS OF THE LAW, HE HAS NOT DECLARED ANY INCOME FROM THE SECOND HOUSE PROPERTY ON NOTIONAL BASIS WHICH ACCORDING TO HIM IS VACANT. 5 ITA NO3479/M/2010 6.1 I FIND FROM THE COPY OF THE ASSESSMENT ORDER TH AT THE ASSESSING OFFICER HAS MENTIONED THE NATURE OF BUSINESS OF THE ASSESSEE AS FINANCE & INVESTMENT AS PER COLUMN 10 OF PAGE 1 OF THE ASSESSMENT ORDER. F URTHER, CLAIMING OF DEPRECIATION FROM INCOME FROM OTHER SOURCES IN THE YEAR WHEN THERE IS NO BUSINESS INCOME IS ALSO A DEBATABLE ISSUE. IT HAS B EEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PROTOPRODUCTS (P) LTD REPORTED IN 322 ITR 158 THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAI NABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGA RDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AND ACCORDINGLY PR OVISIONS OF SEC. 271(1)(C ) ARE NOT APPLICABLE. 7 CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND RELYING ON THE DECISION OF THE HONBLE APEX COURT CITED ABOVE, I AM OF THE VIEW THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A IS NOT JUSTIFIED. ACCORDINGLY, I SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY. THE APPEAL FILED BY THE ASSESSEE IS ACCORD INGLY ALLOWED. 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THE 26 TH , DAY OF NOV 2010. SD/- ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 26 TH , NOV 2010 RAJ* 6 ITA NO3479/M/2010 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI