M/s Compshan Information Technology Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6745/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6411 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 11-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR CHOPRA
• Assessee Lawyers: C K HANSH
• Keywords: Depreciation; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC-I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-6745/DE L/2015 (ASSESSMENT YEAR-2009-10) COMPSHAN INFORMATION TECHNOLOGY PVT.LTD., X-1, OKHLA INDL. AREA, PHASE-II, NEW DELHI-110020. PAN: AACCC2664H (APPELLANT) VS ITO, WARD-3(4), NEW DELHI (RESPONDENT) ASSESSEE BY SH.C.K.HANSH, CA REVENUE BY SH. MANOJ KUMAR CHOPRA, SR.DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 25.09.2015 OF CIT(A) -2, NEW DELHI PERTAINING TO 2009-10 AY WHEREIN THE PENALTY IMPOSED U/S 271(1)(C ) HAS BEEN UPHELD IN APPEAL. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEES RETURNED INCOME WAS SUBJECTED TO SCRUTINY AFTER ISSUANCE OF NOTICE U/S 143(2) ETC. THE ASSESSEE WAS STATED TO BE ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY. THE AO CONSIDERING THE RENTAL INCOME RECEIVED BY THE ASSES SEE AND THE CLAIM MADE IN THE RETURN IN VIEW OF NO BUSINESS ACTIVITY REQUIRED THE ASSESSEE TO EXPLAIN WHY DEPRECIATION AND THE OTHER EXPENSES CLAIMED IN P&L A/C SHOULD NOT BE DISALLOWED. ON BEHALF OF THE ASSESSEE IT WAS EXPLA INED THAT IN VIEW OF THE FACT THAT THE ASSESSEE WAS NOT ABLE TO GENERATE BUSINESS FROM INFORMATION TECHNOLOGY AS A RESULT THEREOF ITS PROPERTY WAS LEASED OUT ON RENT. FOR READY-REFERENCE, THE RELEVANT EXTRACT IS REPRODUCED FROM THE ASSESSMENT ORDER HEREUNDER:- DATE OF HEARING 11.02.2016 DATE OF PRONOUNCEMENT 16.03.2016 I.T.A .NO.-6745/DEL/2015 PAGE 2 OF 4 A PERUSAL OF RETURN FILED AND SUBSEQUENTLY DETAIL FURNISHED BY THE ASSESSEE COMPANY DURING THE ASSESSMENT PROCEEDINGS SHOWS THAT IT HAS LET OUT ITS PROPERTY AT GURGAON AND EARNED RENTAL I NCOME TO THE TUNE OF RS.5,85,500/- AS RENT FROM M/S SDG EXPORTS (P.) LTD . HOWEVER, THE ASSESSEE HAS CLAIMED A DEPRECIATION OF RS.4,52,283/ - ON THE SAME RENTED OUT PROPERTY. IT HAS ALSO CLAIMED DEPRECIATION OF RS.1,51,638/- ON MOTOR CAR AND RS.19,823/- ON PLANT & MACHINERY. BESIDES THIS, THE ASSESSEE HAS ALSO CLAIMED AN EXPENSE OF RS.13,215/- IN PROFI T & LOSS ACCOUNT AS SELLING AND ADMINISTRATIVE EXPENSES. SINCE, NO BUS INESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE DURING THE YEAR, THE AS SESSEES AUTHORIZED REPRESENTATIVE VIDE NOTE SHEET ENTRY DATED 14.11.20 11 WAS ASKED TO EXPLAIN AS TO WHY THE DEPRECIATION AND EXPENSES CLA IMED IN THE P&*L ACCOUNT MAY NOT BE DISALLOWED. 2.1. IN RESPONSE THERETO THE ASSESSEE IS FOUND TO H AVE STATED VIDE LETTER DATED 28.11.2011 THAT THAT THE SAID PREMISE ON WHICH DEPRECIATION WAS CLA IMED WAS USED BY THE ASSESSEE AS WELL AS THE LESSEE. THEREF ORE, DEPRECIATION SHOULD BE ALLOWED. AS REGARDS CLAIM OF THE EXPENSES, IT HAS BEEN EXPLAINED THAT THESE EXPENSES ARE NECESSARY TO KEEP THE COMPANY RUNNING AND ARE ALLOWABLE. 3. THE EXPLANATION OFFERED WAS NOT ACCEPTED AND WIT H REGARD TO THE CLAIMS MADE IN THE P&L A/C AN ADDITION OF RS.4,09,500/- WA S MADE TO THE INCOME OF THE ASSESSEE. THE SAID ADDITION WAS SUBJECTED TO P ENALTY PROCEEDINGS U/S 271(1)(C). IN THE PENALTY PROCEEDINGS, THE ASSESSE E REITERATED THE ARGUMENTS MADE BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS. APART FROM THAT IT WAS ALSO AGITATED THAT NO INACCURATE PARTICULARS HAVE BEEN F ILED. MERELY BECAUSE THE HEAD OF INCOME WAS CHANGED THE ADDITION HAS BEEN MA DE MERELY BECAUSE THERE WAS A LULL IN BUSINESS, IT WAS SUBMITTED IT CANNOT BE SAID THAT THE ASSESSEE MADE A FALSE CLAIM. NOT CONVINCED WITH THE EXPLANA TION, PENALTY AMOUNTING TO RS.1,33,374/- WAS IMPOSED. 4. THE ASSESSEE WAS UNSUCCESSFUL IN ITS APPEAL BEFO RE THE CIT(A) WHO CONFIRMED THE ORDER. I.T.A .NO.-6745/DEL/2015 PAGE 3 OF 4 5. BOTH THE PARTIES HAVE BEEN HEARD. WHEREAS THE LD . AR RE-ITERATED THE SUBMISSIONS ADVANCED BEFORE THE TAX AUTHORITIES. T HE LD. DR RELIES UPON THE ORDERS OF THE TAX AUTHORITIES. 6. HAVING HEARD THE SUBMISSIONS AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD, CONSIDERING THE EXPLANATION OFFERED BY THE ASSESSEE I AM OF THE VIEW THAT ALTHOUGH THE EXPLANATION OF THE ASSESSEE IN REGARD TO THE CHANGE IN HEAD OF INCOME ARISING DUE TO A LULL IN INFORMATION TECHN OLOGY BUSINESS CANNOT BE ACCEPTED IN THE QUANTUM PROCEEDINGS BUT IN THE PECU LIAR FACTS OF THE PRESENT CASE IN THE PENALTY PROCEEDINGS IT CANNOT BE OUTRIG HTLY REJECTED. LOOKING AT THE SCALE OF THE ASSESSEES BUSINESS AND THE ADVICE TO WHICH HE WOULD HAVE BEEN CAPABLE OF GETTING REPORTING OF INCOME UNDER A WRON G HEAD ON THE BELIEF THAT THE EXPENSES WERE INCURRED TO KEEP THE COMPANY RUNNING AND MAINTAIN ITS EXISTENCE FOR WHICH PURPOSES PART OF THE PROPERTY W AS LEASED CAN BE ACCEPTED IN THE ABSENCE OF ANY ACTIVE CONCEALMENT ON THE PART O F THE ASSESSEE AND FINDING THAT ALL RELEVANT FACTS WERE AVAILABLE ON RECORD, I AM OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES, THE PENALTY ORDER DESERVES TO BE QUASHED AND THE IMPUGNED ORDER DESERVES TO BE SET ASIDE AS THE EXPLANATION OFFERED BY THE ASSESSEE IN THE PENALTY PROCEEDINGS CAN BE ACCEPTED AS BONAFIDE AND PLAUSIBLE. ACCORDINGLY THE IMPUGNED ORDER IS DIRECTED TO BE SE T ASIDE AND THE PENALTY ORDER IS QUASHED. ORDERED ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16 TH OF MARCH, 2016. SD/- (DIVA SINGH) JU DICIAL MEMBER DATED:16/03/2016 *AMIT KUMAR* I.T.A .NO.-6745/DEL/2015 PAGE 4 OF 4 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTA NT REGISTRAR ITAT NEW DELHI