DCIT, CIRCLE- 11(1), NEW DELHI V. HOTLINE CPT LTD., NEW DELHI

ITA 4522/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8376 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 07-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Bad and doubtful debts; Unabsorbed depreciation
• Section: 271(1)(c); 48; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.4522/DEL./2017 ASSESSMENT YEAR: 2012-13 DCIT, CIRCLE-11(1), NEW DELHI VS. HOTLINE CPT LTD., 52A, OKHLA INDUSTRIAL ESTATE, PHASE-III, NEW DELHI PAN :AABCH0583M (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDE R DATED 05/04/2017 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-22, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2012-13, IN RELATION TO PENALTY LEVIED BY THE ASSESSING OFFICER IN TERMS OF SECTION 271(1)(C) OF THE INCOM E-TAX ACT, 1961 (IN SHORT THE ACT). THE GROUNDS RAISED IN THE APP EAL ARE REPRODUCED AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF CASE, THE LD. CIT(A) IS CORRECT IN DELETING THE PENALTY ON DISALLOWANCE OF DEPRECIATION ON APPELLANT BY SHRI GURMEET SINGH, SR.DR RESPONDENT BY NONE DATE OF HEARING 06.01.2021 DATE OF PRONOUNCEMENT 06.01.2021 2 ITA NO.4522/DEL./2017 COMPUTERS AND THE DISALLOWANCE OF EXPENSES OF RS.42 ,29,574/- IGNORING THE FACT THAT NO BUSINESS ACTIVITY WAS CAR RIED OUT DURING THE YEAR UNDER CONSIDERATION. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF CASE, THE LD. CIT(A) IS CORRECT IN DELETING THE PENALTY ON DISALLOWANCE OF DEPRECIATION ON COMPUTER WHICH IS NOT ALLOWABLE AS PER PROVISION OF SECTION 342 OF I.T. ACT, 1961, THAT TANTAMOUNT TO FILING OF INACCU RATE PARTICULARS OF INCOME. 3. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 29/09/2012 DECLARING LOSS OF 7,41,35,379/-. THE SCRUTINY ASSESSMENT IN THE CASE WAS COMPLETED ON 31/10/2014 AT ASSESSED INCOME OF 2,42,91,970/-. THE ASSESSING OFFICER ALSO ISSUED PE NALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF INCOME-TAX A CT, 1961 (IN SHORT THE ACT). THE ASSESSEE DID NOT PREFER ANY A PPEAL AGAINST THE ASSESSMENT ORDER AND, THEREFORE, THE ASSESSING OFFICER ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE ON 07/04/2015 THA T AS TO WHY THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT MIGH T NOT BE LEVIED. THERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE AND THUS THE ASSESSING OFFICER LEVIED THE PENALTY IN ORDER DATED 30/04/2015 @ 100% OF THE TAX SOUGHT TO BE EVADED, WHICH WAS WORK ED OUT TO 3,34,55,353/-. THE PENALTY LEVIED WAS IN REFERENCE TO TWO ITEMS OF ADDITIONS/DISALLOWANCES. THE FIRST, DISALLOWANCE IS IN RESPECT OF EXPENSES OF 3,11,17,710/- OUT OF THE EXPENSES OF 3,34,88,530/- CLAIMED IN VARIOUS HEADS BY THE ASSES SEE IN ITS BOOKS OF ACCOUNTS. THE SECOND DISALLOWANCE IS IN RE SPECT OF DEPRECIATION ON COMPUTERS. ACCORDING TO THE ASSESSI NG OFFICER, THE COMPANY HAS NOT CARRIED OUT ANY BUSINESS ACTIVI TIES; 3 ITA NO.4522/DEL./2017 THEREFORE, DEPRECIATION ON PROPORTIONATE BASIS ON T HE ASSETS WAS DISALLOWED. 2.1 ON FURTHER APPEAL, THE LD. CIT(A) DELETED THE PENA LTY HOLDING THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESS EE IN DISCLOSING FULLY AND TRULY ALL THE MATERIAL FACTS AND ISSUE IN VOLVED WAS A DEBATABLE ISSUE. 3. BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESSEE . WE HAVE HEARD SUBMISSION OF THE LEARNED DR, WHO APPEARED TH ROUGH VIDEO CONFERENCING FACILITY. THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE SUBMISSION OF THE LEARNED DR AND PERUSED THE RELEVANT MATERIAL ON RECORD, INCLUDING ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT LEARNED ASSESSING O FFICER HAS LEVIED THE PENALTY INVOKING EXPLANATION 1 BELOW SEC TION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER HAS HELD THAT CON TENTIONS OF THE ASSESSEE ARE NOT BONAFIDE. THE LD. CIT(A), HOWEVER, HAS DELETED THE PENALTY OBSERVING AS UNDER: 4. THE ONLY ISSUE INVOLVED IN THE APPEAL IS PENALT Y LEVIED U/S 271 (1) (C) IN RESPECT OF TWO ADDITIONS MADE IN THE ASSESSMENT ORDER INCLUDING THE DISALLOWANCE OF DEPRECIATION OF 6,73, 09,336/- ON THE GROUND THAT NO BUSINESS WAS DONE BY THE APPELLANT. THE ONLY INCOME OF THE APPELLANT WAS INTEREST INCOME FROM BA NK DEPOSITS/ INCOME TAX REFUND AND MISCELLANEOUS INCOME OF 7,37, 960/- AGAINST WHICH THE RETURN OF INCOME OF A LOSS OF 7,41,35,079 /- WAS FILED. THE AO DISALLOWED EXPENSES OF 3,11,17,710/- BESIDES DEP RECIATION AND ASSESSED THE TOTAL INCOME AT RS. 2,42,91,970/-. THE APPELLANT DID NOT FILE ANY APPEAL AGAINST THE SAID ORDER. DURING THE PRESENT APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED THAT THE APPEAL AGAINST THE ASSESSMENT ORDER WAS NOT FILED ONLY TO SAVE COST AS THE APPELLANT COMPANY WAS DECLARED SICK VIDE ORDER OF B IFR DT. 31ST OCTOBER, 2014. THE APPELLANT, HOWEVER, SUBMITTED TH AT ADDITION OF 3,11,17,710/- OUT OF EXPANSES AMOUNTED TO DOUBLE AD DITION AS PROVISION FOR BAD DEBTS OF RS. 2,63,88,136/- WAS AL READY DISALLOWED BY THE APPELLANT IN THE COMPUTATION INCO ME FOR WHICH AN APPLICATION U/S 154 WAS ALSO FILED BEFORE THE ASSES SING OFFICER. IN 4 ITA NO.4522/DEL./2017 FACT, THE LOSS AS PER, PROFIT AND LOSS OF THE APPEL LANT IS 48 CRORES. HOWEVER, MOST OF THE EXPENSES WERE DISALLOWED AND T HE MAJOR COMPONENT OF THE RETURNED LOSS OF 7.41 CRORES CONSI STED OF UNABSORBED DEPRECIATION OF 6.73 CRORES. OTHER MAJOR EXPANSES INCLUDED SALARIES, WAGES AND OTHER BENEFITS OUT OF WHICH AN AMOUNT OF RS. 29.86 LAKHS HAS BEEN DISALLOWED BY THE AO. O UT OF TRAVELLING AND CONVEYANCE EXPENSES AN AMOUNT OF RS. 4.26 LAKHS HAS BEEN DISALLOWED. OUT OF LEASE RENT EXPENSES, AN AMOUNT O F RS. 4.47 LAKHS HAS BEEN DISALLOWED. OUT OF RENT EXPENSES AN AMOUNT OF RS. 2.19 LAKHS HAS BEEN DISALLOWED. OTHER EXPENSES OF SMALLE R AMOUNTS HAVE ALSO BEEN DISALLOWED. AT THE ASSESSMENT STAGE, THE APPELLANT HAD ALSO RELIED ON TWO DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF BHARAT ALUMINUM COMPANY LIMITED AND INTEGRATED T ECHNOLOGIES LIMITED FOR CLAIMING DEPRECIATION. THE EXPENSES WER E CLAIMED FOR RUNNING DAY TO DAY AFFAIRS OF THE COMPANY. 5. DURING THE PRESENT APPELLATE PROCEEDINGS, THE AP PELLANT RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF RELIA NCE PETRO PRODUCTS LIMITED REPORTED IN 36 DTR 449 AND CLAIMED THAT THE MERE FACT THAT AN EXPENDITURE HAS BEEN DISALLOWED PER CAN NOT LEAD TO THE PRESUMPTION OF CONCEALMENT. 6. THE APPELLANTS CONTENTION HAS BEEN EXAMINED. IT IS NOT A CASE WHERE FULL MATERIAL FACTS WERE NOT DISCLOSED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO MADE OUF A CASE AS TO WHY, THE APPELLANT'S EXPLANATION WAS NOT BONAFIDE. SINCE , THE ISSUE INVOLVED WAS A DEBATABLE ISSUE AND FULL MATERIAL FA CTS WERE DISCLOSED BY THE APPELLANT, THE PENALTY LEVIED IS C ANCELLED AND THE APPEAL IS ALLOWED. 4.1 IN OUR OPINION, THE DISALLOWANCE OF EXPENSES CANNO T ATTRACT PENAL PROVISIONS DUE TO THE REASON THAT ASSESSEE HA S CLAIMED THE EXPENSES FOR MAINTAINING THE STATUS AND STRUCTURE O F THE ASSESSEE COMPANY DURING THE BIFR PROCEEDINGS AND PART OF WHI CH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON ONLY ES TIMATE BASIS. SIMILARLY, DEPRECIATION CLAIMED ON COMPUTERS, AND O THER ASSETS CANNOT BE DISALLOWED ON PROPORTIONATE BASIS, WHEN T HE ASSESSING OFFICER HAS ADMITTED PART OF THE DEPRECIATION AS AL LOWED. THE LD. CIT(A) HAS RELIED ON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT LTD. (SUPRA) , W HEREIN IT IS HELD 5 ITA NO.4522/DEL./2017 THAT MERELY REJECTION OF THE CLAIM OF THE ASSESSEE CANNOT INVITE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE LEA RNED ASSESSING OFFICER HAS FAILED TO SUBSTANTIATE ANY FAILURE ON T HE PART OF THE ASSESSEE IN DISCLOSING ALL MATERIAL FACTS FULLY AND TRULY. THE ASSESSING OFFICER HAS ALSO FAILED TO SUBSTANTIATE, AS HOW THE CONTENTION OF THE ASSESSEE WAS NOT BONA FIDE. WE AL SO NOTICED THAT IN THE GROUNDS RAISED, THE REVENUE HAS ONLY CONTEST ED PENALTY IN RESPECT OF DEPRECIATION ON COMPUTERS, WHEREAS THERE IS NO SEPARATE COMPUTATION OF THE DEPRECIATION ON COMPUTE RS, EITHER IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER. 4.2 IN OUR OPINION, THE FINDING OF THE LD. CIT(A) ON T HE ISSUE IN DISPUTE IS WELL REASONED AND WE DO NOT FIND ANY INF IRMITY IN THE SAME. ACCORDINGLY, WE UPHOLD THE SAME. THE GROUNDS OF THE APPEAL OF THE REVENUE ARE ACCORDINGLY DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6 TH JANUARY, 2021. RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI