M/s. Maa Sharda Garments Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6128/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8259 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 09-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJANA
• Assessee Lawyers: VP BANSAL
• Keywords: Depreciation; Bonafide mistake
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A .NO.6128/DEL/2013 ASSESSMENT YEAR-2008-09 MAA SHARDA GARMENTS P. LTD., E-24, BASEMENT, LAJPAT NAGAR-III, NEW DELHI. AAECM2357F VS ITO, WARD 6(1), NEW DELHI. APPELLANT BY SHRI V.P. BANSAL, FCA RESPONDENT BY SHRI P. DAM KANUNJANA, SR. DR ORDER PER BEENA A. PILLAI, JM THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINS T THE PENALTY ORDER DATED 19/09/2013 PASSED BY THE CIT(A) S-IX, NEW DELHI ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND THE LAW INVOLVED, THE CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 2,20,000/- LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961; 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR VARY ANY GROUND BEFORE OR AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: DATE OF HEARING 09.02.2016 DATE OF PRONOUNCEMENT 08.04.2016 I.T.A. NO. 6128/D/2013 2 2.1. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTS OF READYMADE GARMENTS. T HE RETURN OF INCOME FOR THE A.Y. 2008-09 WAS FILED ON 30.09.2008 DECLARING AN INCOME OF RS. 3,63,484/-. THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUE NTLY, THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSME NT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 30.11.2010 BY THE AO AT THE INCOME OF RS. 10,08,934/-. THE AO NOTED IN THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, DATE D 30.11.2010 THAT, DURING THE YEAR UNDER CONSIDERATIO N THE ASSESSEE IN ITS P&L ACCOUNT HAS SHOWN RECEIPTS ONLY ON ACCOUNT OF RENT RECEIVED AMOUNTING TO RS. 14,83,334 /-. 2.2. THE LD.AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE DID NOT PERFORM ANY BUSI NESS ACTIVITY. THE BALANCE SHEETS AND P&L ACCOUNT OF LA ST THREE YEARS WERE PERUSED AND IT WAS FOUND THAT THE ASSESS EE HAS NOT UNDERTAKEN ANY BUSINESS ACTIVITY DURING THIS PE RIOD TOO. THE ASSESSEE HAS BOOKED CERTAIN EXPENSE IN IT S P&L ACCOUNT, INCLUDING DEPRECIATION OF RS. 2,80,521/- O N THE BUILDING LET OUT FOR RENT, WHICH IN ANY WAY IS ALLO WABLE AS PER PROVISIONS OF THE I.T. ACT, 1961. THE LD.AO DI SALLOWED THE CLAIM OF BUSINESS LOSS WHEN NO BUSINESS ACTIVIT Y HAS BEEN PERFORMED DURING THE YEAR AND THE DEPRECIATION CLAIMED ON THE LET OUT BUILDING. 2.3. DURING THE ASSESSMENT PROCEEDINGS, THE AO INIT IATED PENALTY PROCEEDINGS U/S 271(1)(C) FOR FILING INACCU RATE PARTICULARS OF INCOME. SUBSEQUENTLY, THE AO LEVIED THE PENALTY I.T.A. NO. 6128/D/2013 3 OF RS. 2,20,000/- U/S 271(1)(C) ON 31.05.2011 GIVIN G ADEQUATE OPPORTUNITY TO THE APPELLANT. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A). 4. THE LD. CIT(A) CONFIRMED THE PENALTY ON THE GROU ND THAT THE ASSESSEE HAS WILFULLY FILED INACCURATE PARTICULARS OF INCOME. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR SUBMITTED THAT PENALTY U/S.271(1) (C ) HAS BEEN LEVIED ON TWO GROUNDS WHICH ARE; (I) THE ASSESSEE HAD CLAIMED EXPENSES UNDER THE HE AD BUSINESS SINCE THE COMPANY WAS FORMED WITH THE OBJECT OF SET TING UP OF UNIT OF MANUFACTURING AND EXPORT OF READYMADE GARME NTS. THE AO DISALLOWED THE EXPENSES SO CLAIMED ON THE BASIS THAT THE PROJECT COULD NOT BE IMPLEMENTED; (II) ASSESSEE HAD CLAIMED DEPRECIATION AGAINST A P ROPERTY FROM WHICH RENTAL INCOME WAS EARNED FOR THE YEAR UNDER C ONSIDERATION. 6.1. THE LD. AR SUBMITTED THAT THE CLAIM OF EXPENSE S AS WELL AS DEPRECIATION IS AN ERROR, WHICH IS BONAFIDE AND UNI NTENTIONAL. THE LD. AR SUBMITTED THAT THE ISSUE IS SQUARELY COV ERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F RELIANCE PETRO PRODUCTS PVT. LTD. VS. CIT REPORTED IN 322 IT R 158, WHEREIN THE HONBLE COURT HAD HELD THAT BY NO STRETCH OF IM AGINATION AND INCORRECT CLAIM WOULD TANTAMOUNT TO FURNISHING OF I NACCURATE PARTICULARS. 7. ON THE CONTRARY THE LD. DR SUBMITTED THAT THE AS SESSEE HAS CLAIMED THE RENTAL INCOME EARNED FROM THE IMMOVABLE PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HE TH US I.T.A. NO. 6128/D/2013 4 SUBMITTED THAT CLAIMING OF DEPRECIATION ON THE IMMO VABLE PROPERTY COULD NOT BE TREATED AS A BONAFIDE MISTAKE . THE LD. DR PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA (UOI) VS. DHARMENDRA TEXTILE PROCESSORS REPORTED IN 306 ITR 277. LD. DR SUBMITTED THAT THE EXPLANATION APPENDED TO SECTION 271(1)(C) OF THE ACT INDICATES A STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACC URATE PARTICULARS WHILE FILING THE RETURN. HE SUBMITTED THAT THE ASSESSEE IN THE PRESENT CASE HAS FURNISHED INACCURA TE PARTICULARS IN RESPECT OF THE DEPRECIATION BEING CLAIMED WHEN T HE INCOME EARNED FROM SUCH PROPERTY HAVE BEEN CONSIDERED UNDE R THE HEAD INCOME FROM HOUSE PROPERTY. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS PERUSED THE PAPER BOOK FILED BEF ORE US AND THE ORDERS PASSED BY THE AUTHORITIES BELOW. THE RELEVANT PROVISION U/S. 271(1)(C), IS REPRODUCE D HEREIN BELOW: FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME, ETC. 271. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE PRINCIPAL COMMISSIONER OR COMMISSI ONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF [SUCH INCOME, OR EXPLANATION 1.WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON U NDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE PRINCIPAL COMMISSIONER OR COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON I.T.A. NO. 6128/D/2013 5 IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. 8.1. FROM THE SAID PROVISION, IT IS APPARENT THAT, IF THE LD.AO IN THE COURSE OF ASSESSMENT PROCEEDINGS IS SATISFIED T HAT, ANY PERSON HAS CONCEALED THE PARTICULARS OF INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME, THEN HE MAY LEVY PENALTY ON THE ASSESSEE. THUS, THERE ARE TWO DIFFERENT CHA RGES I.E. CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY CAN BE IMPOSED ONLY FOR A SPECIFIC CHARGE. FURNISHING INACCURATE PARTICULARS OF INCOME MEANS, WHEN THE ASSESSEE HAS NOT DISCLOSED THE PART ICULARS CORRECTLY OR THE PARTICULARS DISCLOSED BY THE ASSES SEE ARE FOUND TO BE INCORRECT WHEREAS, CONCEALMENT OF PARTICULARS OF INCOME MEANS, WHEN THE ASSESSEE HAS CONCEALED THE INCOME A ND HAS NOT SHOWN THE INCOME IN ITS RETURN OR IN ITS BOOKS OF A CCOUNTS. 8.2. HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS . MANJUNATHA COTTON & GINNING FACTORY, REPORTED IN 359 ITR 565 H AS DISCUSSED THE CIRCUMSTANCES IN WHICH THE SECTION 271(1) (C ) COULD BE LEVIED. HONBLE COURT HELD THAT; AFTER INSERTION OF EXPLANATION 1 TO SECTION 271(1)( C ), THE LAW ON CONCEALMENT AND PENALTY HAS BECOME STIFFER. THE EX PLANATION AS IT STANDS NOW IS A COMPLETE CODE HAVING THE FOLLOWING FEATURES: I.T.A. NO. 6128/D/2013 6 (1) EVERY DIFFERENCE BETWEEN REPORTED AND ASSESSED INC OME NEEDS AN EXPLANATION; (2) IF NO EXPLANATION IS OFFERED, LEVY OF PENALTY MAY B E JUSTIFIED; (3) IF EXPLANATION IS OFFERED BUT IS FOUND TO BE FALSE, PENALTY WILL BE EXIGIBLE; (4) IF EXPLANATION IS OFFERED AND IT IS NOT FOUND TO BE FALSE, PENALTY MAY NOT BE LEVIABLE,- (A) SUCH EXPLANATION IS BONA FIDE. (B) THE ASSESSEE HAD MADE AVAILABLE TO THE ASSESSING OF FICER ALL THE FACTS AND MATERIALS NECESSARY IN COMPUTATIO N OF INCOME. THEREFORE, EXPLANATION 1 UNDERSTOOD IN THE PROPER C ONTEXT, IN PARTICULAR, CLAUSE (C ) OF SUB-SECTION (1) OF SECTI ON 271 MAKES THE INTENTION OF THE LEGISLATURE MANIFEST. IT CLEARLY SETS OUT WHEN PENALTY IS LEVIABLE AND WHEN PENALTY IS NOT LEVIABL E. THE CONDITION PRECEDENT FOR LEVYING THE PENALTY IS THE SATISFACTI ON OF THE AUTHORITY THAT THERE IS A CONCEALMENT OF THE PARTICULARS OF T HE INCOME OR INACCURATE PARTICULARS ARE FURNISHED TO AVOID PAYME NT OF TAX. 9. LET US ANALYSE THE DISALLOWANCE MADE BY THE LD.A O IN THE LIGHT OF THE RATIO LAID DOWN IN THE CASE OF CIT VS. MANJU NATHA COTTON & GINNING FACTORY(SUPRA). 9.1. THE LD.AO HAS DISALLOWED THE EXPENDITURE CLAIM ED BY THE ASSESSEE FOR SETTING UP OF THE BUSINESS OF MANUFACT URING AND EXPORT OF GARMENTS, ON THE BASIS THAT THE PROJECT C OULD NOT BE IMPLEMENTED IN THE YEAR UNDER CONSIDERATION. HE THU S LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME. BY APPLYING THE PARAMETERS LAID DOWN BY HONBLE KARNAT AKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GI NNING I.T.A. NO. 6128/D/2013 7 FACTORY(SUPRA), IT APPEARS THAT THERE WAS FULL DISC LOSURE BY THE ASSESSEE, HOWEVER THE EXPENDITURE CLAIMED WAS INADM ISSIBLE IN LAW. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN CIT VS. MANJUNATHA COTTON & GINNING FACTORY(SUPRA), WE ARE OF THE OPINION THAT THE DISALLOWANCE OF THE CLAIM OF EXPEN SES WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS BY T HE ASSESSEE. WE THEREFORE DELETE THE PENALTY LEVIED IN RESPECT O F THE DISALLOWANCE OF CLAIM OF EXPENDITURE. 9.2. IN RESPECT OF DEPRECIATION CLAIMED BY THE ASSE SSEE, IT IS OBSERVED THAT THE ASSESSEE HAS SHOWN THE INCOME EAR NED FROM RENTING OF THE PROPERTY UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE HAS WILFULLY SHOWN THE REN TAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND FUR THER CLAIMED DEPRECIATION. THE ASSESSEE IN SUCH A SITUA TION HAS FILED WRONG PARTICULARS OF INCOME, WHICH IS APPARENT FROM THE FACE OF THE RECORD. WE, THEREFORE, CONFIRM THE PENALTY LEVI ED BY THE LD. AO ON THE DISALLOWANCE OF THE DEPRECIATION. 9.3. WE, ACCORDINGLY, DIRECT THE AO TO CALCULATE TH E PENALTY U/S 271(1)(C) ONLY ON THE ADDITION CONFIRMED BY US ON D EPRECIATION THAT HAS BEEN DISALLOWED. IN VIEW OF THE ABOVE DISC USSIONS, THE GROUNDS OF THE ASSESSEE STANDS PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.04.2 016 SD/- SD/- (J.S. REDDY) (BEENA A. PILL AI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08.04.2016 I.T.A. NO. 6128/D/2013 8 KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSTT. REGISTRAR