CJ International Hotels Ltd., New Delhi V. ACIT, New Delhi

ITA 6149/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6400 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR SENIOR
• Keywords: Depreciation; Difference of opinion; Change of opinion
• Section: 32; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NOS.6149 & 6150/DEL./2013 (ASSESSMENT YEARS : 2006-07 & 2007-08) M/S. CJ INTERNATIONAL HOTELS LTD., VS. ACIT, CIRCL E 3 (1), HOTEL LE MERIDIAN, WINDSOR PALACE, NEW DELHI. JANPATH, NEW DELHI. (PAN : AAACC0174E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARANDEEP SINGH, ADVOCATE REVENUE BY : SHRI B.R.R. KUMAR, SENIOR DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THESE APPEALS FILED BY THE ASSESSEE ARE AGAINST THE SEPARATE ORDERS OF THE CIT (APPEALS)-VI, NEW DELHI DATED 24.09.2013 AN D 27.09.2013 FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. 2. THE SOLE GROUND INVOLVED IN BOTH THE APPEALS IS AGAINST THE SUSTENANCE OF LEVY OF PENALTY BY THE CIT (A) U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) OF RS.83,157/- AND 2,22,970 /- FOR ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. SINCE, UNDISPUTED LY THE FACTS OF BOTH THE YEARS ARE COMMON WE DISPOSE OFF THE APPEALS BY THIS COMMON ORDER. ITA NOS.6149 & 6150/DEL./2013 2 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF RUNNING HOTEL IN THE NAME AND BRAND OF LE MERIDIAN IN NEW DELHI. ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CO NSIDERATION WERE COMPLETED U/S 147/143 ON 24.12.2009 ASSESSING THE T OTAL INCOME OF THE ASSESSEE AT RS.15,83,37,362/-. WHILE COMPLETING THE ASSESSMENT, AO MADE ADDITIONS UNDER THE HEAD INCOME FROM HOUSE PROPERT Y AND ALSO MADE A DISALLOWANCE OF DEPRECIATION ALLOWANCE VIS--VIS BU ILDING NAMELY WEST TOWER. THIS BUILDING IS LOCATED IN THE SAME COMPOU ND IN WHICH THE HOTEL BUILDING IS LOCATED. THE AO WAS OF THE OPINION THAT THIS BUILDING IS NOT USED FOR THE PURPOSE OF BUSINESS BY THE ASSESSEE. IT WAS FURTHER OBSERVED BY HIM THAT THE ASSESSEE HAD SUB-LICENSED OFFICES AND APAR TMENTS IN THIS BUILDING TO VARIOUS PARTIES FOR A PERIOD OF 9 YEARS AND 11 MON THS WHICH WAS RENEWABLE ON THE REQUEST OF SUB-LICENSEE. THE ASSESSEE WAS NO T CHARGING ANY RENT, LEASE ON LICENSE FEE FROM THE SUB-LICENSEE, HOWEVER, IT H AD RECEIVED INTEREST FREE SECURITY DEPOSIT IN THE YEAR OF ORIGINAL SUB-LICENS EE WHICH WAS SHOWN AS AN UNSECURED LOAN IN THE ASSESSEES BALANCE SHEET. THE SUB-LICENSE GRANTED WAS TRANSFERABLE BY THE LICENSEE TO ANY OTHER PERSON ON PAYMENT OF TRANSFER CHARGES TO THE ASSESSEE. PREMISED THESE FACTS, THE AO CONCLUDED THAT THE NOTIONAL INCOME DERIVED BY THE ASSESSEE BY GRANTING SUB-LICENSE OF OFFICES AND APARTMENTS IN WEST TOWER TO SUB-LICENSEES IS CHARG EABLE TO TAX AS INCOME UNDER THE HEAD HOUSE PROPERTY. HE FURTHER CONCLUD ED THAT SINCE THE ITA NOS.6149 & 6150/DEL./2013 3 BUILDING WEST TOWER WAS NOT BEING USED BY THE ASS ESSEE FOR ITS BUSINESS THE DEPRECIATION CLAIM THEREON WAS NOT ALLOWABLE AS A D EDUCTION U/S 32 OF THE ACT. 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE C IT(A) WHO VIDE ORDER DATED 08.06.2010 CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF DEPRECIATION ON WEST TOWER, HOWEVER, THE CIT(A) IN QUANTUM PROCEEDINGS DELETED THE ADDITION MADE BY THE AO OF RS.6,96,49,7 98/- AS NOTIONAL INCOME UNDER THE HEAD HOUSE PROPERTY . IT WOULD BE APPROPRIATE TO MENTION HERE THAT THE SIMILAR ADDITIONS WERE ALSO MADE BY THE DE PARTMENT FOR THE FIRST TIME IN ASSESSMENT YEAR 2001-02. IN APPELLATE PROCEEDIN GS FOR ASSESSMENT YEAR 2001-02 VIDE ORDER DATED 24.07.2007 IN ITA NOS. 151 9 & 1698/DEL/2005, THE TRIBUNAL HAS DELETED THE ADDITION ON ACCOUNT OF NOT IONAL INCOME UNDER THE HEAD HOUSE PROPERTY HOLDING THAT FOR THE PURPOSE OF SECTION 27 OF THE ACT THE APPELLANT IS NOT THE OWNER OF THE OFFICES AND APARTMENTS IN WEST TOWER BUILDING. FOR SAME REASONING, DISALLOWANCE OF DEPRE CIATION ALLOWANCE WAS SUSTAINED. THE ORDER PASSED BY TRIBUNAL IN ASSESSME NT YEAR 2001-02 HAS THEREAFTER ALSO BEEN UPHELD BY HONBLE JURISDICTION AL HIGH COURT VIDE ORDER DATED 18.11.2010 REPORTED IN 197 TAXMAN 230 (DEL). 5. THE AO IN HIS ORDER PASSED U/S 271(1)(C) OF THE ACT DATED 30.03.2012 HAS LEVIED PENALTY ON THE ISSUE RELATING TO DEPRECI ATION DISALLOWANCE OBSERVING AS UNDER :- KEEPING IN VIEW THE FACTS AND ISSUES INVOLVED IN T HE CASE, I AM OF THE OPINION THAT THE ASSESSEE HAS NOT FURNISHED ACCURAT E PARTICULARS OF ITS INCOME, ITA NOS.6149 & 6150/DEL./2013 4 AS IT WAS NOT THE OWNER OF THE PROPERTY KNOWN AS WE ST TOWER AND THEREFORE, NO NOTIONAL INCOME FROM HOUSE PROPERTY WAS TAXABLE IN ITS HANDS. IN THIS SITUATION, THE CLAIM OF DEPRECIATION ON THE SAME PR OPERTY WAS UNDISPUTEDLY / EX-FACIE BOGUS, I AM SATISFIED THAT THIS IS A FIT C ASE FOR IMPOSITION OF PENALTY FOR FURNISHING INACCURATE PARTICULARS IN RESPECT OF ITS INCOME AS PER THE PROVISION OF SEC. 271(1)(C). THEREFORE, CONSIDERING THE FACTS OF THE CASE AND THE GRAVITY OF THE DEFAULT COMMITTED BY THE ASSESSE E, I HEREBY IMPOSE A PENALTY OF RS.83,157/- U/S 271(1)(C) OF THE I.T. AC T FOR FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME. 6. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE CIT (A) WHO HAS CONCURRED WITH THE FINDINGS RECORDED BY THE AO AND LEVY OF PENALTY HAS BEEN SUSTAINED. 7. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 8. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT SINCE THE ADDITION MADE IN QUANTUM PROCEEDINGS HAS ITS GENESIS WITH THE APPELL ATE PROCEEDINGS FOR EARLIER ASSESSMENT YEARS IT WOULD BE APPROPRIATE TO CONSIDE R WHETHER PENALTY WAS SUSTAINED IN THOSE YEARS VIS--VIS THE ISSUE RELATI NG TO DEPRECIATION DISALLOWANCE. IT WAS SUBMITTED BY THE ASSESSEE THA T THE TRIBUNAL VIDE ORDER DATED 12.09.2008 IN ITA NO.4000/DEL/2007 HAD DELETE D LEVY OF PENALTY IN CASE OF ASSESSEE FOR ASSESSMENT YEAR 2001-02 WHICH WAS THE FIRST YEAR IN WHICH THESE DISALLOWANCES WERE MADE BY THE DEPARTME NT. THE LD. AR FURTHER SUBMITTED THAT POST PROCEEDINGS FOR AY 2001-02, REA SSESSMENT PROCEEDINGS WERE INITIATED BY THE DEPARTMENT IN ASSESSMENT YEAR 2000-01 AND IN THAT YEAR ALSO, LEVY OF PENALTY ON DEPRECIATION DISALLOWANCE HAS BEEN DELETED BY THE TRIBUNAL. IN THIS REGARD, OUR ATTENTION WAS INVITED TO THE ORDER DATED ITA NOS.6149 & 6150/DEL./2013 5 08.10.2014 PASSED BY THE TRIBUNAL FOR ASSESSMENT YE AR 2000-01 IN ITA NO.3626/DEL/2013. 9. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPORT ED LEVY OF PENALTY IN THE INSTANT CASE AND PLACED RELIANCE UPON THE ORDER S PASSED BY THE LOWER AUTHORITIES LEVYING / SUSTAINING THE PENALTY. 10. WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND MATERIAL PLACED ON RECORD. IT IS SEEN THAT IN IDENTICAL FACTUAL SCE NARIO, LEVY OF PENALTY VIS--VIS DEPRECIATION DISALLOWANCE HAS BEEN QUASHED BY THIS VERY COURT IN CASE OF ASSESSEE FOR ASSESSMENT YEAR 2001-02. THE TRIBUNAL IN ITS ORDER FOR ASSESSMENT YEAR 2001-02 HAS HELD AS UNDER : - THE ISSUE REGARDING DEPRECIATION THAT HAS BEEN DEC IDED AGAINST THE ASSESSEE BUT IT IS LINKED WITH THE INCOME FROM HOUS E PROPERTY AND NO PENALTY IS IMPOSABLE UPON THE ASSESSEE ON THIS AMOU NT ALSO. TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES OF THE CASE; WE DO NOT FIND ANY ERROR IN THE ORDER OF LEARNED CIT(APPE ALS), HENCE THE APPEAL OF THE REVENUE IS DISMISSED. THEREAFTER, IN APPELLATE ORDER FOR ASSESSMENT YEAR 2000-01, PENALTY ON DEPRECIATION DISALLOWANCE WAS QUASHED BY THE TRIBUN AL OBSERVING AS UNDER :- 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONG WITH DOCUMENTARY E VIDENCE FILED BY THE LD. COUNSEL FOR THE ASSESSEE AND WE ARE OF THE CONSIDERED VIEW THAT THE LD. FIRST APPELLATE AUTHORITY HAS PASSED T HE WELL REASONED ORDER AFTER DISCUSSING THE RELEVANT PROVISIONS OF L AW AS WELL AS THE CASE LAW RELATING TO THE ISSUE IN DISPUTE. 8. THE MAIN CONCLUDING PARAGRAPH I.E., 5.5 AT PAGE 12 & 13 OF THE IMPUGNED ORDER IS REPRODUCED AS UNDER : 5.5 IT IS ALSO SEEN THAT SIMILAR GROUNDS PENALTY HA S BEEN DELETED BY MY PREDECESSOR IN THE APPELLANT FOR THE A.Y. 20 01-02 (APPEAL ITA NOS.6149 & 6150/DEL./2013 6 NO.27/06/07 VIDE ORDER DATED 25.07.2007) WITH THE F OLLOWING OBSERVATION: 3. I HAVE CONSIDERED THE ARGUMENTS OF LD. AR A ND GONE THROUGH THE OBSERVATIONS OF THE AO. MY OBSERVATIONS ON THIS ISSUE ARE AS UNDER : I. I FIND THAT MAIN ADDITION WAS BY WAY OF PROPERTY INCOME FROM WASTE TOWER AMOUNTING TO RS.2,01,18,507/- WAS MADE IN CONNECTION WITH SUCH PROPERTY. FURTHER THROUGH THE FACT, I FOU ND THAT THESE ISSUES WERE INVOLVED IN APPELLANTS CASE EVEN IN EARLIER Y EARS AND UPTO A.Y.2000-01 AND NO ADDITIONS / DISALLOWANCES WERE M ADE. EVEN THE DEPRECIATION ON WATER TOWER WAS ALLOWED TO THE APPE LLANT UPTO A.Y.2000-01. THUS, THE ADDITION BY OF NOTIONAL INCO ME FROM HOUSE PROPERTY AMOUNTING TO RS.2,01,18,507/- AND DISALLOW ANCE OF DEPRECIATION AGAINST WASTE TOWER AMOUNTING TO RS.10 ,59,034/- WERE BASED ON DIFFERENCE OF OPINION. HENCE, THESE ADDITI ONS / DISALLOWANCES MAY BE JUSTIFIED FOR THE ASSESSMENT O F INCOME BUT THESE ARE NOT FIT FOR LEVYING THE PENALTY U/S 271(1 )(C). II. IN RESPECT OF REDUCTION OF CLAIM OF DEDUCTION U /S 80HHD, I FIND THAT IT WAS ALSO BASED ON DIFFERENCE OF OPINIO N ABOUT INTERPRETATION OF LEGAL PROVISION. HENCE, REDUCTION IN CLAIM OF DEDUCTION U/S 80HHD IS ALSO NOT FIT FOR LEVYING THE PENALTY U/S 271(1)(C). III. LAST DISALLOWANCES WAS RELATING TO INTEREST AM OUNTING TO RS.4,40,000/- I FIND THAT THE AO HAS DISALLOWED THE INTEREST TO THE EXTENT OF RS.44,00,000/- WHILE THE CIT(A) HAS UPHEL D THE DISALLOWANCE OF RS.4,40,000/- ONLY ON GOING THROUGH THE FACT, I FIND THAT THE ASSESSEE HAS CHARGED INTEREST (AT @ 8% AGA INST THE LOAN GIVEN TO FAMILY MEMBERS WHILE THE AO HAS ESTIMATED THE INTEREST CHARGEABLE @ 16%. THUS, THE DISALLOWANCE OF INTERES T WAS BASED ON DIFFERENCE OF OPINION AND INTERPRETATION OF LEGAL P ROVISION WHICH IS NOT FIT FOR LEVYING THE PENALTY U/S 271(1)(C). IV. IN THE LIGHT OF FACTS AND CIRCUMSTANCES MENTION ED ABOVE, I REACH TO THE CONCLUSIONS THAT THE AFORESAID ADDITIO NS / DISALLOWANCES WERE BASED ON CHANGE OF OPINION AND THERE WAS NO EL EMENT OF POSITIVE CONCEALMENT. HENCE, THE APPELLANT CANNOT B E HELD LIABLE FOR FURNISHING THE INACCURATE PARTICULARS. IN THIS SITU ATION, PENALTY LEVIED RS.1,02,98,2707/- IS CANCELLED. ITA NOS.6149 & 6150/DEL./2013 7 SINCE THERE IS NO CHANGE IN FACTS OF THE CASE, I HA VE NO REASON TO DEVIATE FROM THE FINDINGS OF MY PREDECESSOR AND RES PECTFULLY FOLLOWING THE SAME THE IMPUGNED PENALTY IS DIRECTED TO BE DELETED. 9. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES E XPLAINED ABOVE, WE ARE OF THE VIEW THAT LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE PENALTY IN DISPUTE BY FOLLOWING THE ORDER OF HIS PREDECESSOR PASSED IN ASSESSEES OWN CASE FOR THE A .Y. 2001-02 REPRODUCED ABOVE. NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY. THEREFORE, WE UPHOLD THE IMPUGNED ORDER BY DISMISSING THE APPEAL FILED BY THE REVENUE. RESPECTFULLY FOLLOWING THE ABOVE ORDERS PASSED BY T HE COORDINATE BENCHES OF TRIBUNAL, WE ARE INCLINED TO ALLOW THE RELIEF CLAIM ED BY THE ASSESSEE. AS A RESULT, LEVY OF PENALTY U/S 271(1)(C) OF RS. 83,157 /- AND RS 2,22,970/- IN ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY I S DELETED AND THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF MARCH, 2016. SD/- SD/- (PRASHANT MAHARISHI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF MARCH, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.