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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI N. K. BILLAIYA & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 17/08/2015 passed by CIT(A)-1, New Delhi for Assessment Year 2008-09.
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 Income Tax Act, 1961.
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.
That the learned CIT (Appeals) erred in law and on facts in coming to the conclusion that appellant’s agreeing to disallowance of 60% instead of 50%
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done purely to buy peace with the department, implies concealment.
That the penalty of Rs.250,000 is bad in law and be deleted.”
The assessee company is engaged in the business of publication of business magazines. It owns a premise known as C- 35, Sector -62, Noida, U.P. A part of this premise was given on lease vide lease 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 house property for regarding premises at C- 35, Sector -62, Noida, U.P. and claimed 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 property. During the course of assessment proceedings, the Assessing Officer deputed 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 stated that one third of the said premises is being used by the assessee for its business purposes and two third of the said premises was rented out to M/s Glyph International. Accordingly the Assessing Officer disallowed the excess depreciation 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 disallowance. Thereafter, show cause notice was issued by the AO vide his letter dated 18.03.2014 fixing the date of hearing on 25.03.2014. The assessee filed its submissions which was considered by the AO and held that the assessee tried 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 that 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/-.
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Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that the assessee is a company in the business of publishing of commercial magazines for certain industries. The business is being carried on from premises located at C-35, Sector-62 Noida. These premises are partly let out and are partly being used 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 conducting the tax audit had worked out the depreciation on the complete building and the assessee relied on the tax audit report and claimed the depreciation accordingly. For tax audit report, the Ld. AR referred Clause 14 of the tax audit report read along with Schedule-1. The Ld. AR further submitted that the assessee had no chartered accountant working on its payroll and as such it completely relied on the tax audit report while claiming the depreciation. The Ld. AR further submitted that the error when pointed out during the course of assessment was accepted by the assessee and it offered 50% disallowance on the portion let out. The assessee had worked out the disallowance based on the 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 renovation of the portion being used for the purpose of the business after letting out the property. However, the Assessing Officer, disallowed 2/3rd of the depreciation based on the area ignoring the cost of construction. Even while working out the area, the Assessing Officer allocated proportionately the common area such as driveway etc. despite the fact that these were exclusively being 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 disallowance, especially in view of the fact that the assesee going forward had got the premises vacated and
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had started using the same for business purposes. The Ld. AR further submitted that the assessee on realizing its genuine & inadvertent mistake not only surrendered and paid tax on the excess depreciation 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 genuine and inadvertent mistake and imposed a penalty of Rs. 2,50,000 on the disallowance of depreciation of leased premises which was confirmed by the CIT(A) relying on the order of the Assessing Officer. The Ld. AR pointed out the Computation of Income where the assessee claimed depreciation under income tax of Rs. 41,51,001 as certified by the tax auditor in his tax audit report referring Point No. 14 of the tax audit report read along with Schedule 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 concealed any facts nor did it provide any inaccurate particulars at the time of filing of return. The assessee had disclosed income from house property in the computation of income and had also disclosed the depreciation which was as per the tax audit report attached to the return. Thus there was no concealment 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 Section 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 depreciation. Therefore, the Ld. AR submitted that no penalty is leviable as the mistake was bonafide and not intentional. The Ld. AR relied upon the following decisions:-
� Oxford Softech Pvt. Ltd. Vs. ITO-ITA No. 5100/del/2011-ITAT Delhi
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� 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. Supreme Court-322 ITR 158 � DCIT Vs. M/s Societex ITAT Delhi ITA NO. 1397/Del/2012 � B. L. International Vs. ACIT New Delhi-ITA No. 1590/Del/2014 � CIT(A) Vs. Hari Machiens Ltd 311 ITR 285 (Hon’ble Delhi High Court) � Prafful Industries Pvt. Ltrd. Vs. DCIT- ITA No. 4023/Del/2016-ITAT Delhi � CIT(A) Vs. Bennett Coleman & Co. Ltd. (Bombay) 2012-259 CTR 383)
The Ld. DR relied upon the penalty order and order of the CIT(A).
We have heard both the parties and perused the material 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 appellant has made a claim of depreciation on a part of the premises which was belonging 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 inaccurate particulars of income. It has also submitted that when this mistake was pointed out by the Assessing Officer, it not only surrendered the excess 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 Hon’ble Supreme Court in the case 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 citation of the judgment has not been provided. The appellant claimed that it was a bonafide error and penalty is not leviable. However, the facts speak otherwise. On detection of
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the claim of depreciation by the Assessing Officer, it was found that appellant had offered only 50% claim of the depreciation as its 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 the I. T. Act. It is also seen that had it been a bonafide mistake it would not have been repeated year after year. The appellant claimed depreciation as well 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 inadvertently. The claim of the appellant was planned one and was with the intention to claim both the benefits and to evade taxes. Accordingly, the levy of penalty by the Assessing Officer for claiming depreciation on the 2/3rd 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 decision reliance is placed on the judgment of Hon’ble Delhi High Court in the case 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 appellant’s case, therefore, the ratio of the above judgment is squarely applicable in the case of appellant’s case. The judgments cited by the appellant of Price Water House Coopers and CIT(A) Vs. Societex are not identical with the facts of the appellant case as the mistake in those case was bonafide whereas in the appellant’s case it was malafide which has been repeated year after year. Therefore, the penalty levied by the Assessing Officer is confirmed.
In result, the appeal is dismissed.”
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The CIT(A) has given categorical finding that the mistake in present case was not bonafide. From the records also, we can see that the assessee company only offered 50% claim of depreciation as its income and conveniently/deliberately concealed the actual fact that 2/3 part of the premises was on rent. In fact, the assessee repeated the said claims of depreciation as well as deduction u/s. 24 in A.Y. 2006-07 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.
In result, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 17th JANUARY, 2019.
Sd/- Sd/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER
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
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Date of dictation 14.01.2019
Date on which the typed draft is placed before the 15 .01.2019 dictating Member
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. 17.01.2019 PS/PS
Date on which the final order is uploaded on the 17.01.2019 website of ITAT
Date on which the file goes to the Bench Clerk 17.01.2019
Date on which the file goes to the Head Clerk