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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI O.P. KANT
against separate impugned order of even date 29.9.2014 passed by the Ld. CIT(Appeals) VI, New Delhi for the assessment year 2005-06 and 2007-08 in relation to the penalty proceedings u/s 271(1)(c). In assessment year 2005-06 the assessee has challenged the levy of penalty u/s 271(1)(c) of Rs. 6,03,980/- made on following disallowances:- a) Disallowance of depreciation on assets purchased from Deltron Ltd. by invoking the provisions of Expl.3 to Section 43(1) as to the actual cost of the assets Rs.12,23,215 b) Capital items in repairs and maintenance in Respect of which Depreciation was directed to be allowed by CIT (A). Rs. 2,60,914 c) Disallowance u/s 14A Rs. 1,66,432 In the assessment year 2007-08 the assessee has challenged the levy of penalty of Rs. 4,38,876/- on the following disallowances :- a) Disallowance of depreciation on assets purchased from Deltron Ltd. by invoking the provisions of Expl.3 to Section 43(1) as to the actual cost of the assets Rs.10,40,302 b) Capital items in repairs and maintenance in respect of which Depreciation was directed to be allowed by CIT (A). Rs. 65,349 c) Disallowance u/s 14A Rs. 1,98,200
At the outset Ld. Counsel for the assessee submitted that disallowance on account of depreciation on assets by invoking the provision of Expl. 3 to section 43(1) has been decided in favour of the assessee by Tribunal vide order dated 16.10.2015, passed in ITA Nos.
134/Del/2009, 5656/Del/2010. Thus, on this disallowance no penalty can be levied. Regarding rest of the disallowances he submitted these are routine disallowances of expenditure on which no penalty can be levied. Lastly, regarding penalty levied on disallowance u/s 14A he submitted that assessee before AO has stated that no specific have been incurred, however later on it offered only Rs. 1,66,432/- for disallowance on account of accountant’s salary. AO however has enhanced the disallowance at Rs. 16,00,575/-. However, the Ld. CIT (A) disallowance was restricted to Rs. 1,66,432/-. Before the Tribunal department’s appeal was dismissed. Thus, even on disallowance of Rs. 1,66,432/-, it was purely offered on adhoc basis despite the fact that assessee has categorically stated that no amount was attributable within the meaning of section 14A.
On the other hand Ld. DR has strongly relied upon the order of the AO.
After considering the relevant finding given in the impugned order as well as the material placed on record, we find that so far as disallowance of depreciation in both the years made after invoking the provision of Exp.3 of section 43(1), in the quantum proceedings the said addition has been deleted by the Tribunal. Therefore, penalty on such disallowance has no legs to stand. In so far as disallowance of repair and maintenance are concerned, we find that same has been made by treating certain expenditure to be in capital in nature. On such treatment of expenses from revenue to capital account cannot lead to inference that assessee has furnished inaccurate particulars of income and therefore, levy of penalty on such disallowance cannot be sustained and same is directed to be deleted. Lastly, on the issue of disallowance u/s14A also, we find that assessee has disclosed all the relevant expenditures pertaining to its business in the profit and loss account and has categorically stated that no expenditure can be said to be attributable for the earning of exempt income. AO has mechanically made disallowance u/s 14A without specifying any item of expenditure which can be said to be attributable for the purpose of earning of exempt income. Even though Rule 8D has not been made applicable for the assessment years 2005-06 and 2007-08 still he proceeded to apply the said formula. Accordingly, on these facts it cannot be said that assessee has furnished any kind of inaccurate particulars and therefore, levy of penalty on this score is also deleted.
Thus, the penalties levied by the AO in both the years are deleted.
In the result appeal of the assessee is allowed.