ACIT, New Delhi V. M/s. Kaveri Co-operative Group Housing Society, New Delhi

ITA 5792/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4093 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 29-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Wrong claim; Revised return; Bonafide mistake
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO S . 5792 & 5793 /DEL/201 4 [ASSESSMENT YEAR S : 2007 - 08 & 20 0 8 - 0 9 ] THE A.C.I.T VS. KAVERI COOPERATIVE GROUP HOUSING SOCIETY CIRCLE 27(1) PLOT NO. 4, SECTOR 6, PHASE 1, DWARKA NEW DELHI NEW DELHI PAN : AABFK 0926 E [APPELLANT] [RESPONDENT] DATE OF HEARING : 2 2 . 01 .2017 DATE OF PRONOUNCEMENT : 23 . 01 .201 8 ASSESSEE BY : SHRI ARVIND KUMAR, ADV REVENUE BY : SHRI AMIT JAIN , SR. DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, TH ESE TWO APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDER S DATED 29 . 08 .201 4 O F COMMISSIONER OF INCOME TAX [APPEALS] XXIV NEW DELHI AND RELATES TO ASSESSMENT YEAR S 200 7 - 08 AND 2008 - 09 . 3. EXCEPT FOR THE QUANTUM OF AMOUNT OF PENALTY , ALMOST IDENTICAL GROUND HA S BEEN TAKEN BY THE ASSESSEE IN BOTH THE APPEALS. FIRST WE TAKE UP ITA NO. 5792/DEL/2014. OUR DECISION HEREINBELOW SHALL IDENTICALLY BE APPLICABLE IN ITA NO. 5793/DEL/2014. ITA NOS. 5792 & 5793/DEL/2014 - 2 - 4. THE SOLE GROUND RAISED BY THE REVENUE IN ITA NO. 5 792 /DEL/201 4 READ AS UNDER: O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN D ELETING THE PENALTY OF RS. 15,45,282/ - IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT ON ACCOUNT OF WILLFUL EVASION OF TAX BY CLAIMING DEPRECATION ON BUILDING. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO - OPERATIVE GROUP HOUSING SOCIETY. TH E ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2007 - 08 ON 13.02.2008 DECLARING LOSS OF RS. 53,76,403/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] ON 28.03.2009 A T THE RETURNED LOSS. SUBSEQUENTLY, THE ASSESSING OFFICER NOTICED THAT THE RETURNED LOSS WAS FILED ON 13.02.2008 I.E. AFTER THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139(1) OF THE ACT I.E. 31.10.2007. IT WAS ALSO NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 45,99,053/ - ON THE BUILDING. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE FLATS OF THE SOCIETY BELONGS TO THE MEMBERS IN THEIR OWN RIGHT AND THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEPRECIATION ON THE DWELLING UNITS OF THE MEMBERS. THEREFORE, AFTER RECORDING REASONS FOR REOPENING OF THE CASE, THE ITA NOS. 5792 & 5793/DEL/2014 - 3 - ASSESSING OFFICER ISSUED A NOTICE U/S 148 ON 26.03.2012 AND SERVED THE SAME ON THE APPELLANT. IN RESPONSE TO THE NOTICE, THE ASSESSEE SUBMITTED ITS RETURN OF INCOME ON 12.03.2013 .DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER CLAIM OF DEPRECIATION OF RS. 45,99,053/ - ON THE DWELLING UNITS OF AND ASSESSED THE INCOME OF THE ASSESSEE AT THE LOSS OF RS. 7,77,350/ - VIDE ORDER U/S 143(3)/147 OF THE ACT DATED 18.03.201 3. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) READ WITH SECTION 274 OF THE INCOME TAX ACT, F O R FURNISHING INACCURATE PARTICULARS OF INCOME TO THE TUNE OF RS. 45,99,053/ - . I N RESPONSE TO NOTICE U/S 271(1 )(C), THE ASSESSEE SUBMITT ED BEFORE THE ASSESSING OFFICER THAT THE SOCIETY MERELY ACTS AS AN AGENT AND COLLECT THE CHARGES ON BE HALF OF MEMBERS AND SPENT THE S AME TO MEET THE VARIOUS COMMON EXPENSES OF THE SOCIETY. IN CASE OF ANY SHORTFALL OR SURPLUS, THE SAME IS COLLECTED AND/OR U TILIZED FOR THE COMMON BENEFITS OF THE MEMBERS. SINCE THERE WAS NO TAINT OF COMMERCIALITY, THE QUESTION OF EARNING PROFITS WOULD NOT ARISE WHEN THE ASSESSEE USED THE FUNDS RECEIVED TOWARDS MAINTENANCE OF THE SOCIETY FOR PROVIDING THE MEMBERS WITH USUAL PRI VILEGES, ADVANTAGES AND CONVENIENCE. THUS THE RECEIPT OF FUNDS FOR AND ON BEHALF OF THE MEMBERS WAS NOT LIABLE TO TAX. THE AFORESAID SUBMISSION OF THE ASSESSEE WAS FOUND NOT TO BE TENABLE IN THE O PINION OF THE ASSESSING ITA NOS. 5792 & 5793/DEL/2014 - 4 - OFFICER . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE FLATS OF THE SOCIETY BELONG TO THE MEMBERS IN THEIR OWN RIGHT AND THE CO - OPERATIVE GROUP HOUSING SOCIETY CANNOT BE SAID TO BE ENTITLED FOR DEPRECIATION ON THE DWELLING UNITS OF THE MEMBERS. FURTHER, THE ASSESS EE HAS ADOPTED THE SAME PRACTICE FROM THE BEGINNING IN RESPECT OF SOCIETY FLATS ALLOTTED TO ITS MEMBERS. THE ASSESSEE GOT ITS ACCOUNTS AUDITED FROM A CA FIRM AND FILED ITS RETURN WITH THE HELP OF PROFESSIONAL PERSON. THE APPELLANT HAS ALSO CLAIMED DEPRECIA TION ON ALL 195 UNITS IN THE ASSESSMENT YEAR 2006 - 07 AND ADDITION WAS ALSO MADE ON DISALLOWANCE OF DEPRECIATION OF RS. 48,21,141/ - VIDE ORDER DATED 22.1.2.2008. EVEN AFTER THAT, THE APPELLANT HAS NOT FILED ITS REVISED RETURN FOR THE SUCCESSIVE YEARS. THUS, THE ASSESSEE WAS HABITUAL IN CLAIMING DEPRECIATION ON THE UNITS BELONGING TO ITS MEMBERS AND THEREFORE THE EXPLANATION OF THE APPELLANT WAS NOT SATISFACTORY. THEREAFTER, THE ASSESSING OFFICER IMPOSED PENALTY OF RS. 15,45,282/ - U/S 271(1)(C) OF THE INCOME TAX ACT, ON THE ASSESSEE F OR FURNISHING INACCURATE PARTICULARS OF INCOME VIDE ORDER DATED 20.09.2013. THE LD. CIT(A) DELETED THE PENALTY FOR THE REASONS MENTIONED IN HIS ORDER. AGGRIEVED BY THE ACTION OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE T HE TRIBUNAL. ITA NOS. 5792 & 5793/DEL/2014 - 5 - 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE A.O AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED UPON BY BOTH THE SIDE S. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEPRECATION MAINLY FOR THE REASON THAT THE ASSESSEE HAS FILED BELATED RETURN CLAIMING IN ITS COMPUTATION UNDER THE HEAD PROFITS AND GAINS OF BUSINESS/PROFESSION AS LOSS AND THIS LOSS INCLUDING DEPRECA TION COULD NOT HAVE BEEN WHOLLY SET OFF AGAINST INCOME UNDER ANY OTHER H E AD OF THE FOLLOWING ASSESSMENT YEAR /YEARS TO BE SET OFF AGAINST THE PROFIT AND GAINS OF BUSINESS OR PROFESSION. THEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSE E WAS NOT ENTITLED TO DEPRECATION ON THE DWELLING UNITS OF MEMBERS. FOR THE RELEVANT ASSESSMENT YEAR 2006 - 07, SIMILAR CLAIM WAS MADE, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER, BUT NO PENALTY WAS INITIATED DURING THE ASSESSMENT YEAR 2006 - 07. WHEREAS, PENALTY WAS IMPOSED DURING THE IMPUGNED ASSESSMENT YEAR FOR FURNISHING INACCURATE PARTICULARS OF INCOME NOT WRONG CLAIM OF DEPRECATION. 7. IT IS AN UNDISPUTED FACT THAT THE RELEVANT MATERIAL FACTS RELATING TO THE CLAIM OF DEPRECATION/COMPUTATION OF INCOME WERE DULY DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. IT IS ALSO AN UNDISPUTED FACT THAT THE MEMBERS OF ITA NOS. 5792 & 5793/DEL/2014 - 6 - THE GROUP HOUSING SOCIETY ARE NOT TECHNICAL PERSONS AND THEY ACTED ON THE ADVICE OF A QUALIFIED CHARTERED ACCO UNTANT WHO AUDITED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE, IT IS A CASE WHERE THE RELEVANT MATERIAL RELATING TO CLAIM OF DEPRECATION WERE FOUND TO BE DISCLOSED IN THE RETURN OF INCOME. THE CLAIM OF DEPRECATION MADE BY THE ASSESSEE WAS BASED ON THE REPORT OF THE AUDITOR. 8. WE FIND IT RELEVANT TO REPRODUCE THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE, WHICH IS REPRODUCED AS BELOW: T HE ASSESSING OFFICER ALSO NOTICED THAT IN THE RELEVANT ASSESSMENT YEAR 2007 - 08, THE APPELLANT HAS ALSO CLAIMED SIMILAR DEPRECIATION ON THE WHOLE BUILDING. THEREFORE, THE ASSESSING OFFICER INITIATED PROCEEDINGS U/S 147 OF THE INCOME TAX ACT AND DISALLOWED THE CLAIM OF DEPRECIATION IN THE ASSESSMENT YE AR 2007 - 08 ALSO. HOWEVER, IN THE RELEVANT ASSESSMENT YEAR 2007 - 08, THE ASSESSING OFFICER IMPOSED PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, FOR FURNISHING INACCURATE PARTICULARS OF INCOME TO THE TUNE OF RS. 45,99,053/ - BY WAY OF WRONG CLAIM OF DEPRECIATION. IT IS AN UNDISPUTED FACT THAT THE RELEVANT MATERIALS FACTS REG ARDING THE CLAIM OF DEPRECIATION/COMPUTATION OF INCOME WAS DULY DISCLOSED BY THE APPELLA NT IN ITS RETURN OF IN CO ME FOR THE RELEVANT ASSESS MENT YEA R AND DURING THE COURSE OF ASSESSMENT ONLY SUCH CLAIM OF DEPRECIATION OF THE APPELLANT HAS BEEN DISALLOWED. IT IS ALSO AN ITA NOS. 5792 & 5793/DEL/2014 - 7 - UNDISPUTED FACT THAT THE MEMBERS OF THE GROUP HOUSING SOCIETY ARE NOT TECHNICAL. PERSONS, AND, THEY ACTED ON THE ADVICE OF A QUALIFIED C HARTERED ACCOU NTANT WHO AUDITED THE BOOKS OF ACCOUNTS OF THE APPELLANT. THUS, IT IS A CASE WHERE THE RELEVANT MATERIAL FACTS RELATING TO THE CLAIM OF DEPRECIATION WAS FOUND TO BE DISCLOSED IN THE RETURN OF INCOME OF THE APPELLANT AND THE SAME WAS DISALLOWE D ONLY BY THE ASSESSING OFFICER. THIS CLAIM OF DEPRECIATION WAS FOUND TO BE BASED ON THE REPORT OF AUDITOR. THUS IT IS A CASE OF MERE DISALLOWANCE OF THE CLAIM OF DEPRECIATION BY THE APPELLANT AND IN SUCH A DISALLOWANCE, IN MY HUMBLE OPINION, PENALTY IS NO T LEVIABLE U/S 271(1)(C) OF THE INCOME TAX ACT. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD. 322 ITR 158WHEREIN IT HAS BEEN HELD THAT NO PENALTY U/S 271(1)(C) COULD BE LE VIED ONLY IN MERE MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF. IT IS ALSO STRANGE TO NOTE THAT SIMILAR DISALLOWANCE OF DEPRECIATION WAS MADE BY THE ASSESSING OFFICER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006 - 07, BUT NO PENALTY PROCEEDINGS WAS INITIATED OR LEVIED BY THE ASSESSING OFFICER. THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE RELEVANT ASSESSMENT YEAR 2007 - 08, DESPITE THE ASSESSING OFFICER PREFERRED TO LEVY PENALTY U/S 271(1)(C) ON THE CHARGE OF FURNISHING INACCURAT E PARTICULARS OF INCOME IN THE RELEVANT ASSESSMENT YEAR 2007 - 08. NO REASON HAS BEEN EXPLAINED BY THE ASSESSING OFFICER FOR THE CHANGE OF HIS STAND FOR THE RELEVANT ASSESSMENT YEAR 2007 - 08 FOR IMPOSING PENALTY. MOREOVER, IT IS A CASE WHERE NO INDIVIDUAL IS BEING BENEFITED BY CLAIMING WRONG DEPRECIATION. THUS, IN MY ITA NOS. 5792 & 5793/DEL/2014 - 8 - OPINION, THERE IS A BONAFIDE MISTAKE MADE BY THE APPELLANT WITHOUT ANY INTENTION TO EVADE THE TAX. IN THIS CASE, THE APPELLANT WAS ALREADY SHOWING LOSSES FOR THE PREVIOUS YEARS AND YEARS BEFORE TH E RELEVANT ASSESSMENT YEAR. THE APPELLANT HAS WRONGLY CLAIMED DEPRECIATION ON THE BASIS OF TECHNICAL ADVICE GIVEN BY THE CHARTERED ACCOUNTANT. MOREOVER, EVEN AFTER SUCH DISALLOWANCE OF THE CLAIM OF DEPRECIATION, THE INCOME OF THE APPELLANT IS A NEGATIVE FI GURE. IN MY OPINION, MERE MISTAKE IN MAKING A CLAIM IN THE RETURN OF INCOME WOULD NOT IPSO FACTO REFLECT CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN TERMS OF SECTION 271(1)(C) OF THE ACT. THE WRONG CLAIM OF DEPRECIATION IN THE PRESENT CASE CANNOT BE SAID TO BE MADE WITH AN INTENTION TO EVADE TAX IN AS MUCH AS EVEN AFTER THE DISALLOWANCE OF DEPRECIATION, THE RESULTANT INCOME OF THE APPELLANT REMAINS A LOSS. AN EXPLANATION WAS OFFERED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT THAT THE AFORESAID CLAIM WAS MADE ON THE BASIS OF THE REPORT OF A QUALIFIED CHARTERED ACCOUNTANT. IT IS ALSO NOTED THAT THE APPELLANT HAS FILED ITS RETURN OF INCOME BELATEDLY AND A BELATED RETURN COULD NOT HAVE BEEN REVISED. THE RETURN FOR THE RELEVANT ASSESSME NT YEAR WAS ALREADY FILED BELATEDLY ON 13.02.2008 I.E. MUCH BEFORE THE ASSESSMENT WAS COMPLETED FOR THE ASSESSMENT YEAR 2006 - 07 ON 22.12.2008. THEREFORE, THE SAID RETURN FOR THE RELEVANT ASSESSMENT YEAR 2007 - 08 COULD NOT HAVE BEEN REVISED BY THE APPELLANT. THE ASSESSING OFFICER HAS NOT FOUND THE AFORESAID EXPLANATION AS NOT BONAFIDE OR BOGUS. IT IS WORTHWHILE TO MENTION HERE THAT IN THE CASE OF AMRUTA ORGANICS PVT LTD. VS DCIT (ITA NO 1121/PN/2011) THE HON'BLE ITAT, PUNE IN A SIMILAR CASE HAS DELETED THE PE NALTY U/S ITA NOS. 5792 & 5793/DEL/2014 - 9 - 271(1)(C) OF THE INCOME TAX ACT. RELYING UPON THE AFORESAID DECISION OF THE HON'BLE ITAT, PUNE AND CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE IMPUGNED DISALLOWANCE ON ACCOUNT OF DEPRECIATION WAS ONLY A BONAFIDE MISTAKE AND THEREFORE DOE S NOT INVITE THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT. THEREFORE, THE ASSESSEE ASSESSING OFFICER IS DIRECTED TO DELETE THE IMPUGNED PENALTY OF RS. 15,45,282/ - . 9. IN SUCH CIRCUMSTANCES, PENALTY U/S 271( 1)(C) OF THE ACT CANNOT BE LEVIED AND RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS [P] LTD REPORTED IN 322 ITR 158 [SC] WHEREIN HAS BEEN HELD THAT NO PENALTY U/S 271(1)(C) OF THE ACT COULD BE LEVIED ON LY IN MERE MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF. NO PENALTY PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2006 - 07 AND FACTS OF THE PRESENT CASE ARE IDENTICAL IN THE IMPUGNED ASSESSMENT YEAR. MOREOVER, IT IS A CASE WHERE NO INDIVIDUAL IS BEING BENEFITTED BY THE CLAIMING WRONG DEPRECIATION. THIS IS A BONAFIDE MISTAKE MADE BY THE ASSESSEE WITHOUT ANY INTENTION TO EVADE TAX. MOREOVER, THE ASSESSEE HAS ALREADY SHOWN LOSSES FOR THE PREVIOUS YEARS. THE ASSESSEE HA S SUBMITTED REASONABLE EXPLANATION ON THE BASIS OF THE REPORT OF A QUALIFIED AUDITOR. IN SUCH FACTS AND CIRCUMSTANCES, WE FIND NO ITA NOS. 5792 & 5793/DEL/2014 - 10 - INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY DELETED THE IMPUGNED PENALTY SO MADE BY THE ASSESSING OFFICER . GROUND RAISED BY THE REVENUE IS DISMISSED. 10. SINCE THE ISSUE RAISED IN ITA NO. 5 793 /DEL/201 4 IS IDENTICAL TO TH AT DECIDED BY US ABOVE, THEREFORE, OUR DECISION HEREINABOVE IN ITA NO. 5 792 /DEL/201 4 WILL APPLY MUTATIS MUTANDIS TO THIS CASE AS WELL. ACCORD INGLY, THE ISSUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME DE NOVO AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 1 1 . IN THE RESULT, BOTH THE APPEALS OF THE REVENUE IN ITA NOS. 5792 & 5793/DEL/2014 STAND DI SMISSED. THE ORDER IS PR ONOUNCED IN THE OPEN COURT ON 2 3 . 01.2018 . SD/ - SD/ - [ SUDHANSHU SRIVASTAVA ] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 3 R D JANUARY, 2018 VL/ ITA NOS. 5792 & 5793/DEL/2014 - 11 - COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI