Adi Media Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6035/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7376 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 06-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Assessee Lawyers: PAWAN JAND
• Keywords: Depreciation; Revised return; Bonafide mistake
• Section: 271(1)(c); 32; 148

Judgement Text

1 ITA NO. 6035/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 6035/DEL/20 15 (A.Y 2008-09) ADI MEDIA PVT. LTD. N-49, GREATER KAILSAH-1 NEW DELHI AAECA1780C (APPELLANT) VS ITO WARD-1(2), RANGE-1 CENTRAL REVENUE BUILDING NEW DELHI (RESPONDENT) APPELLANT BY SH. PAWAN JAND, CA RESPONDENT BY SMT. NAINA SOIN KAPIL, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 17/08/2015 PASSED BY CIT(A)-1, NEW DELHI FOR ASSESSMENT YEAR 2008-09. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE LEARNED CIT (APPEALS] ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF PENALTY UNDER SECTION 271(L)(C) OF THE INC OME TAX ACT, 1961. 2. THAT THE LEARNED CIT (APPEALS] ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE FACT THAT THE APPELLANT IS SUBJECT TO TAX AUDIT AND DEPRECIATION WAS CLAIMED ACCORDINGLY. 3. THAT THE LEARNED CIT (APPEALS) ERRED IN LAW AND ON FACTS IN COMING TO THE CONCLUSION THAT APPELLANTS AGREEING TO DISALLOWANC E OF 60% INSTEAD OF 50% DATE OF HEARING 03.01.2019 DATE OF PRONOUNCEMENT 17.01.2019 2 ITA NO. 6035/DEL/2015 DONE PURELY TO BUY PEACE WITH THE DEPARTMENT, IMPLI ES CONCEALMENT. 4. THAT THE PENALTY OF RS.250,000 IS BAD IN LAW AN D BE DELETED. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PUBLICATION OF BUSINESS MAGAZINES. IT OWNS A PREMISE KNOWN AS C- 3 5, SECTOR -62, NOIDA, U.P. A PART OF THIS PREMISE WAS GIVEN ON LEASE VIDE LEAS E DT. 01.04.2006 AND BALANCE PART THE PREMISES WAS USED BY THE ASSESSEE COMPANY FOR BUSINESS PURPOSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE, HAS SHOWN INCOME FROM HO USE PROPERTY FOR REGARDING PREMISES AT C- 35, SECTOR -62, NOIDA, U.P. AND CLAI MED 30% DEDUCTION UNDER SECTION 24(1) OF THE I.T. ACT. IN ADDITION TO THIS, ASSESSEE ALSO CLAIMED DEPRECIATION OF RS.11,91,227/- ON THE VERY SAME PRO PERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DEPUT ED A INSPECTOR TO FIND OUT THE EXACT PORTION GIVEN ON LEASE BY THE ASSESSEE TO M/S GLYPH INTERNATIONAL (FORMERLY KNOWN AS AMERICAN DEVICE INDIA PVT. LTD.) . THE INSPECTOR SUBMITTED HIS REPORT VIDE HIS LETTER DT. 19.10.2010 AND STATE D THAT ONE THIRD OF THE SAID PREMISES IS BEING USED BY THE ASSESSEE FOR ITS BUSI NESS PURPOSES AND TWO THIRD OF THE SAID PREMISES WAS RENTED OUT TO M/S GLYPH IN TERNATIONAL. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED THE EXCESS DEPRECI ATION CLAIMED OF RS.7,94,151/- AND INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T ACT. THE ASSESSEE FILED APPEAL BEFORE CIT(A) AGAINST THE SAID DISALLOWANCE BY THE ASSESSING OFFICER . THE CIT(A) UPHELD THE DISALLOW ANCE. THEREAFTER, SHOW CAUSE NOTICE WAS ISSUED BY THE AO VIDE HIS LETTER DATED 1 8.03.2014 FIXING THE DATE OF HEARING ON 25.03.2014. THE ASSESSEE FILED ITS SUBMI SSIONS WHICH WAS CONSIDERED BY THE AO AND HELD THAT THE ASSESSEE TRI ED TO CLAIM DEDUCTION UNDER SECTION 24 AS WELL AS DEPRECIATION U/S 32 OF THE I. T. ACT, IN RESPECT OF THE PREMISES LET OUT BY IT. THUS, IT WAS ESTABLISHED TH AT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME TO THE EXTENT OF RS.7,94,151/- AND ACCORDINGLY LEVIED PENALTY U/S 271(1)(C) OF THE I.T . ACT OF RS. 2,50,000/-. 3 ITA NO. 6035/DEL/2015 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASS ESSEE. 5. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A COMP ANY IN THE BUSINESS OF PUBLISHING OF COMMERCIAL MAGAZINES FOR CERTAIN INDU STRIES. THE BUSINESS IS BEING CARRIED ON FROM PREMISES LOCATED AT C-35, SEC TOR-62 NOIDA. THESE PREMISES ARE PARTLY LET OUT AND ARE PARTLY BEING US ED FOR THE BUSINESS OF THE ASSESSEE. IN THE YEAR UNDER REFERENCE, THE ASSESSEE HAD EARNED RENTAL INCOME FROM THE LET OUT PART BUT HAD INADVERTENTLY CLAIMED DEPRECIATION ON THE FULL BUILDING. THE LD. AR SUBMITTED THAT AN INADVERTENT ERROR OCCURRED DUE TO THE TAX AUDIT REPORT WHERE THE CHARTERED ACCOUNTANT CON DUCTING THE TAX AUDIT HAD WORKED OUT THE DEPRECIATION ON THE COMPLETE BUILDIN G AND THE ASSESSEE RELIED ON THE TAX AUDIT REPORT AND CLAIMED THE DEPRECIATIO N ACCORDINGLY. FOR TAX AUDIT REPORT, THE LD. AR REFERRED CLAUSE 14 OF THE TAX AU DIT REPORT READ ALONG WITH SCHEDULE-1. THE LD. AR FURTHER SUBMITTED THAT THE A SSESSEE HAD NO CHARTERED ACCOUNTANT WORKING ON ITS PAYROLL AND AS SUCH IT CO MPLETELY RELIED ON THE TAX AUDIT REPORT WHILE CLAIMING THE DEPRECIATION. THE L D. AR FURTHER SUBMITTED THAT THE ERROR WHEN POINTED OUT DURING THE COURSE OF ASS ESSMENT WAS ACCEPTED BY THE ASSESSEE AND IT OFFERED 50% DISALLOWANCE ON THE PORTION LET OUT. THE ASSESSEE HAD WORKED OUT THE DISALLOWANCE BASED ON T HE COST OF CONSTRUCTION ALLOCABLE TO THE LET OUT PORTION AND THAT WHICH WAS BEING USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. THIS WAS BASED ON THE FACT THAT THE ASSESSEE HAD INCURRED A COST OF RS. 24,09,000 ON THE RENOVAT ION OF THE PORTION BEING USED FOR THE PURPOSE OF THE BUSINESS AFTER LETTING OUT THE PROPERTY. HOWEVER, THE ASSESSING OFFICER, DISALLOWED 2/3 RD OF THE DEPRECIATION BASED ON THE AREA IGNORING THE COST OF CONSTRUCTION. EVEN WHILE WORKI NG OUT THE AREA, THE ASSESSING OFFICER ALLOCATED PROPORTIONATELY THE COM MON AREA SUCH AS DRIVEWAY ETC. DESPITE THE FACT THAT THESE WERE EXCLUSIVELY B EING USED BY THE ASSESSEE AND WERE NOT LET-OUT. THE ASSESSEE HOWEVER IN ORDER TO AVOID LITIGATION AND BUY PEACE WITH THE DEPARTMENT ACCEPTED THE HIGHER DISAL LOWANCE, ESPECIALLY IN VIEW OF THE FACT THAT THE ASSESEE GOING FORWARD HAD GOT THE PREMISES VACATED AND 4 ITA NO. 6035/DEL/2015 HAD STARTED USING THE SAME FOR BUSINESS PURPOSES. T HE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE ON REALIZING ITS GENUIN E & INADVERTENT MISTAKE NOT ONLY SURRENDERED AND PAID TAX ON THE EXCESS DEPRECI ATION FOR A.Y 2008-09 BUT ALSO REVISED RETURN FOR EARLIER YEAR AND PAID TAXES THEREON. HOWEVER THE ASSESSING OFFICER IGNORED THE FACT THAT IT WAS A GE NUINE AND INADVERTENT MISTAKE AND IMPOSED A PENALTY OF RS. 2,50,000 ON TH E DISALLOWANCE OF DEPRECIATION OF LEASED PREMISES WHICH WAS CONFIRMED BY THE CIT(A) RELYING ON THE ORDER OF THE ASSESSING OFFICER. THE LD. AR POIN TED OUT THE COMPUTATION OF INCOME WHERE THE ASSESSEE CLAIMED DEPRECIATION UNDE R INCOME TAX OF RS. 41,51,001 AS CERTIFIED BY THE TAX AUDITOR IN HIS TA X AUDIT REPORT REFERRING POINT NO. 14 OF THE TAX AUDIT REPORT READ ALONG WITH SCHE DULE I ATTACHED TO THE TAX AUDIT REPORT. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE AS SOON AS REALIZED ITS MISTAKE TOOK STEPS TO RECTIFY THE SAME AND OFFERED FOR TAXATION THE EXCESS DEPRECATION CLAIMED. IT NOT ONLY DID SO FOR THE YEAR UNDER REFERENCE BUT REVISED RETURNS OF EARLIER YEAR WHICH HAD NOT COME TO SCRUTINY. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT CONCEAL ED ANY FACTS NOR DID IT PROVIDE ANY INACCURATE PARTICULARS AT THE TIME OF F ILING OF RETURN. THE ASSESSEE HAD DISCLOSED INCOME FROM HOUSE PROPERTY IN THE COM PUTATION OF INCOME AND HAD ALSO DISCLOSED THE DEPRECIATION WHICH WAS AS PE R THE TAX AUDIT REPORT ATTACHED TO THE RETURN. THUS THERE WAS NO CONCEALME NT OF ANY FACTS OR PROVIDING OF INACCURATE PARTICULARS BY THE ASSESSEE AT THE TIME OF FILING OF RETURN. THUS, THE LD. AR FURTHER SUBMITTED THAT THE ADDITION HAS NOT BEEN MADE DUE TO ANY CONCEALMENT OF FACTS OR FURNISHING OF INACCURATE PARTICULARS - A SINE QUA NON FOR IMPOSITION OF PENALTY UNDER SECT ION 271(L)(C). THE ADDITION HAS BEEN MADE DUE TO A GENUINE BONAFIDE MISTAKE OF THE ASSESSEE CAUSED BY THE RELIANCE ON THE TAX AUDIT REPORT FOR CLAIMING D EPRECIATION. THEREFORE, THE LD. AR SUBMITTED THAT NO PENALTY IS LEVIABLE AS THE MIS TAKE WAS BONAFIDE AND NOT INTENTIONAL. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS:- OXFORD SOFTECH PVT. LTD. VS. ITO-ITA NO. 5100/DEL/2 011-ITAT DELHI 5 ITA NO. 6035/DEL/2015 PRICE WATER HOUSE COOPERS (P) LTD. (PWC) VS. CIT(A) KOLKATA-1 (2012) SUPREME COURT 211 TAXMAN 40 CIT(A) VS. RELIANCE PETROPRODUCTS PVT. LTD. SUPREM E COURT-322 ITR 158 DCIT VS. M/S SOCIETEX ITAT DELHI ITA NO. 1397/DEL/2 012 B. L. INTERNATIONAL VS. ACIT NEW DELHI-ITA NO. 159 0/DEL/2014 CIT(A) VS. HARI MACHIENS LTD 311 ITR 285 (HONBLE D ELHI HIGH COURT) PRAFFUL INDUSTRIES PVT. LTRD. VS. DCIT- ITA NO. 402 3/DEL/2016-ITAT DELHI CIT(A) VS. BENNETT COLEMAN & CO. LTD. (BOMBAY) 2012 -259 CTR 383) 6. THE LD. DR RELIED UPON THE PENALTY ORDER AND OR DER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE CIT(A) HELD AS UNDER:- 5.1 DECISION I HAVE CONSIDERED THE FACTS DISCUSSED BY THE AO IN THE PENALTY ORDER AND SUBMISSION OF THE APPELLANT. IT IS SEEN THAT THE AP PELLANT HAS MADE A CLAIM OF DEPRECIATION ON A PART OF THE PREMISES WHICH WAS BE LONGING TO IT AND LET OUT TO M/S GLYPH INTERNATIONAL. THE APPELLANT CLAIMED THAT THIS WAS A INADVERTENT MISTAKE AND THERE WAS NO INTENTION OF FURNISHING IN ACCURATE PARTICULARS OF INCOME. IT HAS ALSO SUBMITTED THAT WHEN THIS MISTAK E WAS POINTED OUT BY THE ASSESSING OFFICER, IT NOT ONLY SURRENDERED THE EXCE SS DEPRECIATION FOR A.Y 2008- 09 BUT ALSO REVISED THE RETURN OF INCOME FOR A.Y. 2006-07 AND PAID TAXES. THE APPELLANT CLAIMS THAT IT WAS A BONAFIDE MISTAKE AND HAS RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE C ASE OF PRICE WATER HOUSE COOPERS PVT. LTD. VS. CIT (2012) 345 ITR 306 (SC). IT ALSO RELIED UPON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS SOCIETEX (2012). HOWEVER, THE COMPLETE DETAILS OF THE CASE AND CITAT ION OF THE JUDGMENT HAS NOT BEEN PROVIDED. THE APPELLANT CLAIMED THAT IT WA S A BONAFIDE ERROR AND PENALTY IS NOT LEVIABLE. HOWEVER, THE FACTS SPEAK O THERWISE. ON DETECTION OF 6 ITA NO. 6035/DEL/2015 THE CLAIM OF DEPRECIATION BY THE ASSESSING OFFICER, IT WAS FOUND THAT APPELLANT HAD OFFERED ONLY 50% CLAIM OF THE DEPRECIATION AS I TS INCOME. HOWEVER, ON ENQUIRY CONDUCTED BY THE ITI, IT WAS FOUND THAT THE APPELLANT HAD GIVEN TWO THIRD PART OF THE PREMISES ON RENT AND CLAIMED THE DEPRECIATION ON THE SAME FACTS HAS BEEN ADMITTED BY THE APPELLANT HIMSELF IN THE RETURN OF INCOME FILED FOR A.Y. 2007-08 IN RESPONSE TO NOTICE U/S 148 OF T HE I. T. ACT. IT IS ALSO SEEN THAT HAD IT BEEN A BONAFIDE MISTAKE IT WOULD NOT HA VE BEEN REPEATED YEAR AFTER YEAR. THE APPELLANT CLAIMED DEPRECIATION AS W ELL AS DEDUCTION U/S 24 IN A.Y. 2006-07 AND 2007-08 ALSO. THEREFORE, THERE IS NO TRUTH IN THE CLAIM OF THE APPELLANT THAT THIS MISTAKE HAS HAPPENED INADVE RTENTLY. THE CLAIM OF THE APPELLANT WAS PLANNED ONE AND WAS WITH THE INTENTIO N TO CLAIM BOTH THE BENEFITS AND TO EVADE TAXES. ACCORDINGLY, THE LEVY OF PENALTY BY THE ASSESSING OFFICER FOR CLAIMING DEPRECIATION ON THE 2/3 RD PART OF THE PREMISES IS UPHELD AS THE CLAIM OF THE APPELLANT WAS NOT BONAFIDE AND THE SAME WAS MADE WITH THE INTENTION TO EVADE TAXES. IN SUPPORT OF MY ABOVE DE CISION RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT(A) VS. MORGAN FINVEST PVT. LTD. 213 TAXMAN 23(DELHI). THE FACTS OF THE ABOVE CITED JUDGMENT ARE IDENTICAL WITH THE FACTS OF THE APPELLANTS CASE, THEREFORE, THE RATIO OF THE ABOVE JUDGMENT IS SQUARELY APPLICABLE IN THE CASE OF APPELLANTS CASE. THE JU DGMENTS CITED BY THE APPELLANT OF PRICE WATER HOUSE COOPERS AND CIT(A) V S. SOCIETEX ARE NOT IDENTICAL WITH THE FACTS OF THE APPELLANT CASE AS T HE MISTAKE IN THOSE CASE WAS BONAFIDE WHEREAS IN THE APPELLANTS CASE IT WA S MALAFIDE WHICH HAS BEEN REPEATED YEAR AFTER YEAR. THEREFORE, THE PENA LTY LEVIED BY THE ASSESSING OFFICER IS CONFIRMED. IN RESULT, THE APPEAL IS DISMISSED. 7 ITA NO. 6035/DEL/2015 THE CIT(A) HAS GIVEN CATEGORICAL FINDING THAT THE M ISTAKE IN PRESENT CASE WAS NOT BONAFIDE. FROM THE RECORDS ALSO, WE CAN SEE THA T THE ASSESSEE COMPANY ONLY OFFERED 50% CLAIM OF DEPRECIATION AS ITS INCOM E AND CONVENIENTLY/DELIBERATELY CONCEALED THE ACTUAL FACT THAT 2/3 PART OF THE PREMISES WAS ON RENT. IN FACT, THE ASSESSEE REPEATE D THE SAID CLAIMS OF DEPRECIATION AS WELL AS DEDUCTION U/S. 24 IN A.Y. 2 006-07 AND 2008-09. THUS, THE ASSESSING OFFICER RIGHTLY LEVIED THE PENALTY U/ S 271 (1)(C) OF THE ACT. THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT(A ) AS THE ASSESSEE HAS DELIBERATELY GIVEN INACCURATE PARTICULARS OF INCOME . THEREFORE, THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 17/01/2019 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 8 ITA NO. 6035/DEL/2015 DATE OF DICTATION 14.01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15 .01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 7 .01.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 7 .01.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 7 .01.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK