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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI RAMIT KOCHAR & SHRI RAVISH SOOD
O R D E R
PER RAMIT KOCHAR, Accountant Member:
This appeal, filed by assessee, being is directed against appellate order dated 09.03.2017, in appeal No. CIT(A)-20/ITO-12(2)(4)/IT-248/2014-15, passed by learned Commissioner of Income Tax (Appeals)-20, Mumbai (hereinafter called ―the CIT(A)‖), for assessment year(AY) 2010-11, the appellate proceedings had arisen before learned CIT(A) from penalty order dated 26.03.2014 passed by learned Assessing Officer (hereinafter called ―the AO‖) u/s 271(1)(c) read with Section 274 of the Income-tax Act, 1961 (hereinafter called ―the Act‖) for AY 2010-11.
The grounds of appeal
raised by assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called ―the tribunal‖) read as under:- “1. In the circumstances of the case on facts and in law the learned CIT(A) erred in justifying the levy of penalty U/s 271(1)(c) explanation 1 of I.T. Act by the AO without any evidence, cogent findings of concealment of income or filing of inaccurate particulars by the assessee.
2. The learned CIT (A) erred in relying on Commissioner of Income-tax v. Harparshad and company Ltd (328 ITR53) and in holding that the penalty U/s 271(1)(c) is automatic civil liability for loss of revenue without proof of any false/bogus/fictitious claim of deductions or allowances or filing of inaccurate particulars for concealment of income by the assessee.
3. The learned CIT (A) erred in relying on CIT v. Escorts Finance Ltd (328 ITR 44) wherein the penalty was justified on the basis of claim of the company which was ex facie bogus whereas the facts of the assessee's case the claim was not established or proved as ex facie bogus or proved false but were based on Legally sound case of the company in support of its claim.
4. On facts in circumstances of the case and in law the CIT (A) erred in rejecting the assessee's submissions for non levy of penalty based on the authorities of various legal decisions of Hon'ble High Courts and Hon'ble Supreme Court.
5. The Ld. CIT(A)'s order in support of penalty is erroneous and contrary to the law as the said order is in gross violation of principles of natural justice.
6. On facts in circumstances of the case the Ld, CIT (A) should have set aside the penalty u/s 271(1)(c).
7. The Appellant craves leave to add/amend/alter and modify the grounds of appeal as it may be advised.”
3. Before we proceed further, it is pertinent to mention at this stage itself that in this case several hearings have taken place Before ITAT, Mumbai Benches, Mumbai since 18th September 2018 when this appeal filed by the assessee was first listed for hearing, wherein the assessee is consistently not appearing before the Tribunal. The appeal was fixed for hearing before the Bench on 18.09.2018 , then on 18.10.2018 , 26.11.2018 , 08.01.2019 and 03.04.2019, wherein none appeared on behalf of the assessee before the Bench when the appeal was called for hearing before the Bench. The Bench on all these occasions were pleased to adjourn the hearing date in order to give opportunity to assessee to present its case before the tribunal, in order to adhere to principles of natural justice. On the last occasion on 03rd April 2019, the directions were issued by the Bench to serve notice on the assessee through learned Departmental Representative (DR). The Revenue has placed on record( communications placed now on record in file) compliance of directions of the Bench vide communication of Mrs. Preeti Shivkumar, ITO 12(2)(4), Mumbai addressed to Assistant Registrar, ITAT, ‗H‘ Bench, Mumbai that notice issued to the assessee for hearing before the Bench fixed for 13.05.2019 was duly served on the assessee. There are other inter- department communications also filed by Revenue which are all placed in file. When the appeal again came up for hearing on 13.05.2019, again none appeared for assessee when this appeal was called for hearing , despite evidence on record as to service of notice to the assessee for hearing fixed for 13.05.2019. Under these circumstances and background , this appeal filed by the assessee with the tribunal was heard by the Division Bench on 13.05.2019 and now we proceed to adjudicate this appeal filed by the assessee on merits in accordance with law based on material on record and after hearing contentions of the learned DR which was in the absence of the assessee. This appeal was filed by the assessee before the tribunal on being aggrieved by the appellate order dated 09.03.2017 passed by learned CIT(A) confirming levying of penalty on the assessee u/s 271(1)(c) of the 1961 Act. It is well established that the litigant has to be vigilant as to its rights and duties while pursuing its disputes with the Courts and any delay ,latches and lapses on part of the litigant without having any sufficient cause shall be to the determinant of the litigant.
The brief facts of the case are that the assessee has earned income from house property . The assessee has set off business losses to the tune of 19,71,729/- and un-absorbed depreciation of Rs. 23,63,091/- against the aforesaid income from house property. The AO did not allow the said set off of business loss and unabsorbed depreciation against income from house property, as there was no business activity conducted by the assessee during the year under consideration and hence as per the AO , the business losses and un- absorbed depreciation cannot be set off against income from house property , which set off was ultimately denied by the AO vide assessment order dated 26.11.2012 passed by the AO u/s 143(3) of the 1961 Act.
The matter in quantum against assessment framed by the AO went up to ITAT, Mumbai. The tribunal in and CO No. 46/Mum/2015 , vide common order dated 04.02.2016 was pleased to hold that the assessee did not carry out on any business during the year under consideration and hence set off of current year business loss as well brought forward loss did not arise by holding as under: “ 10. With regard to the determination of the business income, the ld. CIT(A) has held that the assessee did not carry on any business and hence the question of setting off of current year as well as brought forward losses of the assessee does not arise. We notice that the said decision of the ld. CIT(A) is in accordance with law. Hence, we do not find any reason to interfere with the order of the CIT(A) on this issue.”
This non allowance of set off of business losses and unabsorbed depreciation led to levying of penalty by the AO u/s. 271(1)(c) read with Section 274 of the Act, which was later confirmed by Ld. CIT(A) vide appellate order dated 09.03.2017, wherein Ld. CIT(A) held as under:-
―5.3 I have gone through the penalty order and the submissions made by the appellant. In the present case the undisputed facts are that the assessment order u/s 143(3) was completed on 26.11.2012 at a total income of Rs. 1,02,43,220/- as against 'Nil' income after making disallowance on account of business loss of Rs. 19,71,729/- and unabsorbed depreciation of Rs. 23,63,091/- against income from House Property. The only activity of the assessee was to let out premise and had accordingly offered the income from the same under the head "Income from House Property" and thereupon had claimed the deductions available u/s 24 of the I.T Act. The assessee had also claimed business loss of Rs. 19,71,729/- and unabsorbed depreciation of Rs. 23,63,091/- which were set off against income from House Property. The stand taken by the assessee with regard to allowabitity of the business loss and unabsorbed depreciation was not accepted by the A.O. since the assessee had not earned any business income and had not offered any receipts as business receipts. In view of this the A.O. levied a penalty of Rs.13,17,829/- on the assessee. 5.4 It is observed that the additions made by the Ld. AO as per the assessment order were not contested in appeal by the appellant. In the case of Commissioner of Income-tax v. Harparshad and Company Assessment year 2004-05 Ltd. (328 ITR 53), it has been held by the Hon'ble Delhi High Court that the findings given in assessment proceedings are relevant and have probative value. Where the assessee produces no fresh evidence or presents any additional or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified. Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision, it has further been observed that the Explanations appended to section 271(1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The object behind enactment of section 271(1)(c) read with the Explanations indicates that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276C of the Act. During the proceedings before me, the appellant has taken an argument that claim of business loss and unabsorbed depreciation setoff was fully and truly disclosed in the return of income and the accompanying documents. It has further been argued that these details were filed during the assessment proceedings. The said argument of the appellant is liable to be rejected in view of the decision of the Hon'ble Delhi High Court in the case of Commissioner of Income-tax v. Escorts Finance Ltd. 328 ITR 44, whereby it has been held that merely because information was available in the tax audit report that would not absolve the assessee. Even if there was no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which was made was ex facie bogus, it could attract penalty provision. It was not a case where two opinions about the applicability of a particular section or provision of law were possible. Therefore, it could not be a case of a bona fide error on the part of the assessee. Hon'ble Delhi High Court further held that in such circumstances, it was, thus, not a "wrong claim" preferred by the assessee, but was a clear case of "false claim" and therefore, penal provisions were clearly attracted. It is noted that the ratios of the aforesaid decisions are clearly applicable in the instant case where also the appellant apparently made untenable claims and deliberately engaged itself in taking a chance knowing that the revenue picks up only a very small percentage of cases for scrutiny and therefore, it might get away even by making a wrong claim. Under these circumstances and placing a strong reliance on the decisions of the High Court decisions as cited above, it is held that the Ld. AO has rightly levied penalty under section 271(1)(c) of the Act in the case of the assessee. Having regards to the facts of the case the levy of penalty of Rs. 13,17,829/- on the assessee is found to be in order and the same is upheld. Accordingly these grounds of appeal are dismissed.
7. The assessee is not appearing before the tribunal as we have seen above in this order and Ld. DR at the outset submitted that the quantum has been decided against the assessee in along with CO No. 46/Mum/2015, vide common order dated 04.02.2016 passed by tribunal and prayers were made to uphold penalty levied by the AO u/s 271(1)(c) of the 1961 Act which was later confirmed by learned CIT(A).
8. We have considered the contentions of learned DR and perused the material on record . There is only one effective grievance of the assessee in its appeal which is with respect to penalty of Rs. 13,17,829/- levied by the AO u/s 271(1)(c) of the 1961 Act which was later confirmed by learned CIT(A) . We have observed that the assessee has earned income from house property to the tune of Rs. 67,50,000/- which was offered for taxation under the head ‗Income from House Property‘. The assessee had received above rent for the period from June 2009 to March 2010 with respect to its office unit No. 8, admeasuring 5000 sft. built up area on 2nd Floor, C-Wing, Laxmi Towers at Bandra Kurla Complex, Mumbai. The said property is the only property held by the assessee and this property had remained vacant for 2 months viz. April and May 2009. The AO adopted fair market value u/s 23(1)(a) of Rs. 82,62,000/- for previous year relevant to impugned assessment year with respect to aforesaid property to compute income under the head ‗Income from House Property‘. However, the fact remains that the income was offered to tax by assessee under the head ‗Income from House Property‘ which was also assessed by the authorities below under the head ‗Income from House Property‘. The assessee did not had any other source of income during previous year relevant to impugned assessment year. The assessee did not had any business activities during the year under consideration. We have observed that the assessee has sought to set off business losses to the tune of Rs. 19,71,729/- and unabsorbed deprecation to the tune of Rs. 13,325,259/- against the aforesaid ‗Income from house property‘. We have observed that this finding of fact that the assessee has not conducted any business during the year under consideration has become final in view of decision of the tribunal in and CO No. 46/Mum/2015 ,vide common order dated 04.02.2016, wherein tribunal held as under:
“ 10. With regard to the determination of the business income, the ld. CIT(A) has held that the assessee did not carry on any business and hence the question of setting off of current year as well as brought forward losses of the assessee does not arise. We notice that the said decision of the ld. CIT(A) is in accordance with law. Hence, we do not find any reason to interfere with the order of the CIT(A) on this issue.” Despite no business being conducted by the assessee during the previous year relevant to impugned assessment year , still the assessee sought to set off business losses and depreciation against ‗income from house property‘ by invoking provisions of Section 71 of the 1961. The assessee in statement of fact filed with tribunal has taken a feeble plea that letting out of this commercial office is business of the assessee wherein by which the assessee is itself contradicting its own stand of offering said income under the head ‗Income from House Properties‘. The assessee owned only one property during the previous year under consideration as described above in this order situated at Laxmi Tower at BKC, Mumbai which was let out for 10 months from June 2009 to March 2010. There is no other activity of the assessee apart from letting out this commercial premises. The tribunal in quantum has also decided that the assessee has not done any business during the year under consideration and the said finding of fact has attained finality . The decision of Hon‘ble Supreme Court in the case of Raj Dadarkar & Associates v. ACIT reported in (2107) 394 ITR 592(SC) which elaborately discussed the chargeability of income to tax under the head ‗Income from House Property‘ also rebut the aforesaid contention of the assessee that letting out of the commercial office is business of the assessee. The assessee was fully aware that there was no business conducted by it during the entire previous year and its expenses as well deprecation on assets can neither be allowed as business deduction nor it can be allowed as set off against other incomes. Provisions of Section 37(1) and Section 32 are unambiguous on this aspect which requires business user, and relevant provisions are extracted below:
“32. (1) [In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed—] *** *** ***‖ (Emphasis supplied by us)