DCIT CIR 3(1), MUMBAI V. SHRUTI PROPERTIES P. LTD), MUMBAI

ITA 8030/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5135 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 19-11-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 22-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Bonafide belief; Wrong claim; Tax effect; Bonafide mistake

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 8030/M/10 ASSESSMENT YEAR: 2003 - 04 D.C.I.T., CIRCLE 3(1) ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN , MUMBAI - 400020 VS. M/S. SHRUTI PROPERTIES PVT. LTD. 78 - A, NARIMAN BHAVAN, NARIMAN POINT, MUMBAI 400 021 PAN: AAACS6501P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.C. SHAH, A.R. REVENUE B Y : SHRI ASHOK SURI, D.R. DATE OF HEARING : 21.11.13 DATE OF PRONOUNCEMENT : 12.12.13 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE REVENUE HAS PREFERRED THE PRESENT APPEAL AGAINST THE ORDER OF THE CIT(A) DATED 03.09.10 RELEVANT TO ASSESSMENT YEAR 2003 - 04. THE REVENUE HAS CHALLENGED THE ACTION OF THE CIT(A) IN DELETING THE PENALTY OF RS.1,13,80,360/ - WHICH WAS LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT IN RESPECT OF WRONG CLAIM OF DEPRECIATION OF RS.3,09,66,960/ - . 2. DU RING THE ASSESSMENT PROCEEDINGS , THE AO DISALLOWED THE CLAIM OF THE ASSESSEE IN RELATION TO DEPRECIATION OF RS.3,09,66,960/ - ON OFFICE PREMISES. THE SAID DISALLOWANCE WAS FURTHER CONFIRMED BY THE CIT(A) AND THEN BY THE ITAT VIDE ORDER DATED 12.01.10. THE AO ALSO INITIATED PENALTY PROCEEDINGS AND IMPOSED A PENALTY OF RS.1,13,80,360/ - UPON THE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY WAY OF PUTTING A WRONG FUL CLAIM OF ITA NO .8030/M/10 M/S. SHRUTI PROPERTIES PVT. LTD. 2 DEPRECIATION ON OFFICE PREMISES. IN APPEAL THE LD. CIT(A) DELETED THE PENALTY OBSERVING THAT THE CASE OF THE ASSESSEE WAS NOT THAT OF CONCEALMENT OF INCOME RATHER THE SAME WAS RELATING TO DISALLOWANCE OF CLAIM OF DEPRECIATION. HE FURTHER OBSERVED THAT THE PURPOSE OF MAKING ANY WRONG CLAIM IS TO GET BENEFIT IN TAX PAYMENT. IN THE YEAR UNDER CONSIDERATION THERE WAS A BUSINESS LOSS TO THE ASSESSEE AND THE DEPRECIATION WAS ONLY TO BE CARRIED FORWARD. HENCE , IT WAS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS TO REDUCE THE TAX LIABILITY . HE FURTHER HELD THAT THE CLAIM OF DEPRECIATION ON THE PART OF ASSESSEE WAS BONAFIDE THOUGH DISALLOWED BY THE AO , AND THEREFORE DELETED THE PENALTY IN QUESTION. THE REVENUE IS THUS IN APPEAL BEFORE US. 3 . WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUG H THE RECORDS. THE CONTEN TION OF THE LD. A.R. BEFORE US HAS BEEN THAT THOUGH THE ASSESSEE HAS FAILED TO FURNISH EVIDENCE IN SUPPORT OF ITS CLAIM OF USE OF PREMISES FOR BUSINESS PURPOSE OF THE ASSESSEE , STILL THE CLAIM OF DEPRECIATION BY THE ASSESSEE WAS B ONAFIDE. MERELY, BECAUSE THE ASSESSEES CLAIM HAS BEEN DISALLOWED IN THE QUANTUM PROCEEDINGS ITSELF IS NOT A GROUND FOR IMPOSITION OF PENALTY. THE ASSESSEE HAS NOT CONCEALED ITS INCOME. THE OFFICE PREMISES WAS IN FACT USED BY THE DIRECTORS OF THE COMPAN Y DURING THE DAY TIME AND THE SEVERAL PERSONS USED TO VISIT THE PREMISES IN QUESTION AS THE SAME WAS PUT FOR SALE. HE HAS FURTHER CONTENDED THAT IT IS COMPULSORY AND MANDATORY TO PROVID E DEPRECIATION ON FIXED ASSETS UNDER COMPANYS ACT. THE ASSESSEE HAD RIGHTLY CLAIMED THE DEPRECIATION AS IT WAS HIS RIGHT UNDER THE STATUTE. HE HAS FURTHER SUBMITTED THAT THE WORD USED HAS BEEN INTERPRETED BY THE COURTS NOT ONLY ACTUAL USER BUT ALSO TO INCLUDE PASSIVE USER. IN SUPPORT OF HIS CONTENTION THE LD. A.R. HAS PL ACED RELIANCE ON VARIOUS CASE LAWS INCLUDING CIT VS. RELIANCE PETRO PP RODUCTS LTD. 322 ITR 158 AND CIT VS INDIAN METALS AND FERRO ALLOYS LTD. 211 ITR 35. ON THE OTHER HAND THE CONTENTION OF THE LD. D.R. ITA NO .8030/M/10 M/S. SHRUTI PROPERTIES PVT. LTD. 3 HAS BEEN THAT EVEN WRONGFUL CLAIM OF DEPRECI ATION INVITES PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. HE HAS RELIED IN THIS RESPECT ON AN ANOTHER AUTHORITY OF THE HONBLE DELHI HIGH COURT STYLED AS CIT VS. MORGAN FINVEST ( P .) LTD. [2013] 30 TAXMANN.COM 6 (DELHI) . 4. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE CLAIM OF DEPRECIATION WAS DISALLOWED BY THE AO ON THE GROUND THAT THE PROPERTY IN QUESTION WAS NEVER USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE AO HAD FURTHER OBSERVED THAT THERE WAS NO ELECTRIC ITY CONNECTION AND NO TELEPHONE CONNECTION IN THE PREMISES IN QUESTION. EVEN THE WARD INSPECTOR VISITED THE PREMISES MANY TIMES AND FOUND THAT NOBODY WAS THERE TO CONDUCT THE BUSINESS TRANSACTIONS IN THE PREMISES. DESPITE GRANT OF PROPER OPPORTUNITIES TH E ASSESSEE FAILED TO FURNISH ANY EVIDENCE BEFORE THE AO IN SUPPORT OF HIS CLAIM THAT THE PREMISES IN QUESTION WAS USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THE FINDING OF THE AO WAS FURTHER CONFIRMED BY THE LD. CIT(A) AND THEN BY THE ITAT. IT WAS AL SO OBSERVED BY THE ITAT WHILE CONFIRMING THE ORDER OF THE LOWER AUTHORITIES THAT EVEN THE ASSESSEE HAD FAILED TO SUBMIT ANY EVIDENCE BEFORE THE TRIBUNAL IN SUPPORT OF ITS CLAIM. 5. EVEN BEFORE US ALSO, THE LD. A.R. HAS MADE GENERAL CLAIMS REGARDING THE USE OF PROPERTY IN QUESTION FOR THE BUSINESS OF THE ASSESSEE , BUT HAS FAILED TO FURNISH EVEN AN IOTA OF EVIDENCE IN THIS REGARD. SO FAR THE ASPECT OF BONAFIDE CLAIM OF DEPRECIATION IS CONCERNED, WE FIND THAT NO SUCH BONAFIDE IS FOUND ATTRIBUTABLE TO THE C ONDUCT OF THE ASSESSEE IN THIS CASE. THE ASSESSEE WAS IN THE KNOWLEDGE THAT THE PREMISES WAS NOT USED DURING THE RELEVANT YEAR FOR THE BUSINESS OF THE ASSESSEE, STILL IT MADE A FALSE CLAIM IN THE RETURN OF INCOME. EVEN, DURING THE ASSESSMENT PROCEEDINGS AND IN APPELLATE PROCEEDINGS UPTO THE LEVEL OF TRIBUNAL , THE ASSESSEE TRIED TO JUSTIFY ITS CLAIM OF USER BUT MISERABLY FAILED TO DO SO. IT IS NOT A CASE WHERE THE ASSESSEE HAS MADE A WRONG CLAIM ITA NO .8030/M/10 M/S. SHRUTI PROPERTIES PVT. LTD. 4 UNDER BONAFIDE BELIEF OR UNDER A BONAFIDE MISTAKE RATHER IN THIS CASE THE ASSESSEE HAS TRIED TO JUSTIFY HIS WRONGFUL CLAIM UP TO THE LEVEL OF TRIBUNAL WHICH H AS NOT BEEN ACCEPTED. THE CONTENTION OF THE LD. A.R. , THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEPRECIATION UNDER COMPANYS ACT AND IT WAS MANDATORY FOR IT TO CLAIM THE SAME IN ITS RETURN OF INCOME , HAS NO FORCE OF LAW. UNDER THE INCOME TAX ACT THE CLAIM OF DEPRECIATION CAN BE ALLOWED ON AN ASSET WHICH IS USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE. 6. AT THIS STAGE, THE LD. A.R. HAS CONTENDED THAT THE CL AIM OF WRONG DEPRECIATION WAS A BONAFIDE ONETIME MISTAKE OF THE ASSESSEE AS FOR THE SUBSEQUENT YEARS THE ASSESSEE HAS NOT CLAIMED ANY SUCH DEPRECIATION. HE HAS RELIED UPON COPIES OF THE IT RETURNS OF THE ASSESSEE FOR SUBSEQUENT ASSESSMENT YEARS I.E. ASSES SMENT YEAR 2004 - 05 AND ASSESSMENT YEAR 2005 - 06 WHEREIN A NOTE HAS BEEN MADE THAT NO DEPRECIATION HAS BEEN CLAIMED IN RESPECT OF THE PROPERTY IN QUESTION AS THE SAME WAS NOT PUT TO USE DURING THE SAID FINANCIAL YEAR S . HE HAS FURTHER RELIED UPON AN ANOTHER AUTHORITY OF THE HONBLE KARNATAKA HIGH COURT STILED AS MAHADESHWARA MOVIES VS. CIT 144 ITR 127 (KARNATAKA). IN OUR VIEW, THIS CONTENTION OF THE LD. A.R. IS AGAIN OF NO HELP TO THE ASSESSEE . AS OBSERVED ABOVE, WRONGFUL CLAIM OF DEPRECIATION BY THE AS SESSEE IN THIS CASE WAS NOT A BONAFIDE MISTAKE RATHER THE ASSESSEE HAD CLAIMED THE SAME AS A MATTER OF RIGHT AND EVEN TRIED TO JUSTIFY HIS CLAIM OF USER OF PROPERTY UP TO ITAT. WHEN T HE ASSESSEE HAS FAILED TO PROVE ITS CLAIM AND THE SAME HAS BEEN FOUND TO BE WRONGFULLY MADE BY THE CONCERNED AUTHORIT IES, THEN THE ASSESSEE NOW HAS COME WITH THIS STAND OF ONETIME BONAFIDE MISTAKE WHICH CANNOT BE ACCEPTED AT THIS STAGE. THE HONBLE DELHI HIGH COURT IN THE CASE OF MORGAN FINVEST (P.) LTD. (SUPRA) HAS UPHELD THE ACTION OF THE AO IN LEVYING PENALTY UNDER SECTION 271( 1 )(C) IN A CASE WHERE THERE WAS COMPLETE LACK OF EVIDENCE TO SHOW THAT PROPERTY WAS USED FOR THE PURPOSE ASSESSEES ITA NO .8030/M/10 M/S. SHRUTI PROPERTIES PVT. LTD. 5 BUSINESS AND ATTEMPTS MADE BY ASSESSEE SHOW ED CONTRARY AND THE SAME WERE INDICATIV E OF A FRIVOLOUS CLAIM. FROM T HE FACTS OF THE PRESENT CASE ALSO , IT CAN BE GATHERED THAT THE ATTEMPTS MADE BY THE ASSESSEE ARE INDICATIVE OF FRIVOLOUS NATURE OF CLAIM. THE CONTENTION OF THE REVENUE THAT THE PROPERTY WAS NOT PUT TO USE DURING THE RELEVANT ASSESSMENT YEAR IS ALSO PROVED FROM THE PERUSAL OF SUBSEQUENT IT RETURNS OF THE ASSESSEE WHERE THE ASSESSEE HAS ADMITTED THAT THE SAID PROPERTY WAS NOT PUT TO USE EVEN IN SUBSEQUENT ASSESSMENT YEARS. WE DO NOT AGREE WITH THE FINDING OF THE CIT(A) THAT IN THIS CASE THERE WAS NO TAX LIABILITY F OR THE YEAR UNDER CONSIDERATION, H ENCE , THE CLAIM OF DEPRECIATION HAS NO BEARING ON THE TAX EFFECT. IT HAS BEEN MENTIONED BY THE CIT(A) HIMSELF THAT SUCH CLAIM WAS TO BE CARRIED FORWARD WHICH WAS ADJUSTABLE AGAINST T HE INCOME FOR THE FUTURE ASSESSMENT YEARS AND THE SAME WOULD HAVE RESULTED IN REDUCTION OF TAX LIABILITY AGAINST THE INCOME FOR SUBSEQUENT ASSESSMENT YEARS. UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFICATION IN THE ACTION OF THE CIT(A) IN DELETING THE PENALTY IN QUESTION. 7. ACCORDINGLY , THE ORDER OF THE CIT(A) IS SET ASIDE AND THE APPEAL OF THE REVENUE IS HEREBY ALLOWED AND THE LEVY OF THE PENALTY BY THE AO FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY WAY OF MAKING A WRONGFUL CLAIM OF DEPRECIATION UPON PROPERTY IS HEREBY CONFIRMED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12. 2013. SD/ - SD/ - ( D. KARUNAKARA RAO ) (SANJAY GARG) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 12.12. 2013. * KISHORE ITA NO .8030/M/10 M/S. SHRUTI PROPERTIES PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY/ / [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.