M/S. MILLENIUM AUTOMATION & SYSTEM LTD.,NEW DELHI vs. DCIT, NEW DELHI

This appeal preferred by the assessee is directed against the order dated 31.08.2015 in appeal No.499/14-15 passing by the Commissioner of Income Tax (Appeal) [in short “CIT(A)”]-6, Delhi for 2011-12 Assessment Year where Ld.CIT(A) confirmed the penalty of Rs.5,55,000/- levied by the AO.

Briefly stated facts are that the assessee is a company, engaged in the business of purchase and sale of computer & accessories and have was also deriving rental income. For AY 2011-12, the assessee filed return of income on 28.09.2011 declaring a total income of Rs.2,54,77,981/- and during the course of scrutiny assessment u/s 143(3) of the Income Tax Act, 1961 (in short “Act”), the AO observed that the assessee had declared income from house property in respect of rent receipt of Rs.1,20,28,152/- and claimed eligible deduction u/s 24 of the Act 1 besides depreciation in respect of the building. The AO disallowed depreciation of Rs.16,27,486/- and added back to the income of the assessee. Simultaneously, AO initiated proceedings u/s 271(1)(c) of the Act and concluded them by order dated 21.08.2014 with the levy of penalty of Rs.5,55,000/-. Appeal preferred by the assessee was dismissed by the Ld.CIT(A). Hence, the assessee filed this appeal challenging the levy of penalty as confirmed by the Ld.CIT(A), both on the questions of law and facts.

At the outset, it is the arguments of the Ld. Counsel for the assessee that notice issued u/s 274 r.w.s. 271 of the Act does not speak of any specific limb of section 271(1)(c) of the Act i.e. whether it is a concealment of income or furnish inaccurate particulars thereof. Reliance is placed on CIT vs SSA’s Emerald Meadows 73 taxmann 248 [2016]; CIT vs SSA’s Emerald Meadows 73 taxmann 241 [2016]; Chintels India Ltd. vs ACIT 49 CCH 134 (Del. Trib.) [2017]; M.G. Contractors Pvt. Ltd. vs DCIT to 7038/Del/2014 dated 19.09.2016 (Del. Trib.); and Smt. Parmeshwari Devi vs ITO ITA No.2284/Del/2015 dated 15.02.2016. [Del. Trib.].

In our view, since the matter is covered by judgement of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.”

The SLP filed against the decision of the Hon’ble Karnataka High Court was dismissed by the Hon’ble Apex Court in CIT vs SSA’s Emerald Meadows [2016] 73 taxmann.com 248 (SC). These decisions are followed by a Co-ordinate Bench of this Tribunal in a number of cases.

Now, coming to the facts of this case, vide page No.1 of the Paper Book, the assessee produced the copy of notice u/s 274 of the Act wherein both the limbs of section 271(1)(c) of the Act namely concealment of particulars of the income or furnishing of inaccurate particulars thereof, are mentioned and this note does not specify under which limb, the assessee is charged, defend themselves. The decisions relied upon by the assessee, therefore, are applicable to the facts of the case and the proceedings u/s 271(1)(c) of the Act, are bad for want of valid notice.

Even otherwise, the penalty proceedings are initiated consequent to the disallowance of depreciation on the ground that the assessee claimed the eligible deduction u/s 24 of the Act and also the depreciation in respect of the very same property. However, the order dated 09.11.2015 passed u/s 154/143(3) of the Act passed by the AO in this matter clearly shows that the AO had considered different properties as such the disallowance was deleted to an extent of Rs.8,13,742/-. It shows that there was mistaken identity of the property at the time of the assessment proceedings. Further, mere disallowance of depreciation in this peculiar set of facts and circumstances does not invite the proceedings u/s 271(1)(c) of the Act. Ratio of the Hon’ble Apex Court in CIT vs Reliance Petro Products P.Ltd. [2010] 322 ITR 158 [SC] applies to the facts of this case at hand and respectfully following the same, we direct the AO to delete the penalty.

In the result, the appeal of the assessee is allowed.