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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 04.12.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of penalty-order dated 17.02.2022 passed by learned NFAC, Delhi [“AO”] u/s 270A of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal on the grounds mentioned in Appeal Memo (Form No. 36).
Page 1 of 7 Nirvindhya Shiksha Avam Sanskriti Prachar Samiti, Rajgarh - AY 2017-18
The registry has informed that present appeal has been filed on 05.02.2024 against impugned order dated 04.12.2023 and hence there is a small delay of 3 days. Ld. AR for assessee submitted that “03.02.2024- 04.02.2024” were non-working days being “Saturday-Sunday” and therefore the appeal could be filed only on next working day i.e. Monday, 05.02.2024.
Hence, the present appeal having been filed on 05.02.2024 is well within time and there is no delay. Ld. DR for revenue fairly agreed. Thus, the issue of delayed filing is resolved and it is found that there is no delay. We therefore proceed for hearing.
The background facts leading to present appeal are such that the assessee, a charitable society registered u/s 12A/12AA of the Act, filed return of AY 2017-18 on 10.10.2017 declaring a total income of Rs. Nil after claiming exemption u/s 11/12 of the Act. The return was taken up by AO for scrutiny-assessment through notices u/s 143(2)/142(1). During scrutiny-proceedings, the AO observed that the assessee has claimed ‘depreciation’ of Rs. 52,49,523/- as revenue expenditure even while claiming cost of assets as ‘application of income’ u/s 11/12. When the AO show- caused assessee on this issue, the assessee submitted a categorical reply that depreciation had been claimed only on those assets whose cost was not claimed previously as ‘application of income’. However, the AO rejected such submission of assessee and finally, while passing assessment-order u/s 143(3) on 28.12.2019, disallowed depreciation claim of Rs. 52,49,523/-. The AO, however, determined total income at Rs. Nil due to re-working of Page 2 of 7 Nirvindhya Shiksha Avam Sanskriti Prachar Samiti, Rajgarh - AY 2017-18 exemption u/s 11/12. Subsequently, the AO passed penalty-order dated 17.02.2022 imposing a penalty of Rs. 7,20,926/- u/s 270A(1) treating the disallowance of Rs. 52,49,523/- as ‘under-reporting of income’. Aggrieved by penalty so imposed, the assessee carried matter in first-appeal before CIT(A)
but did not get any success. Now, the assessee has come in next appeal before us by way of this appeal.
Ld. AR for assessee carried us to following paras of assessment-order u/s 143(3) wherein the AO has made impugned disallowance:
“During the year under consideration, on perusal of the record it has been found that the assessee has claimed depreciation of Rs. 52,49,523/- as revenue expenditure. The assessee has earlier claimed capital expenditure as applicable of income. Thus the assessee has claimed depreciation as revenue expenditure even when the capital expenditure has been claimed as application of income. Accordingly, the assessee has been asked to justify its claim of treating depreciation as revenue expenditure, when the cost of the assets has been treated as application of income. The assessee in response has submitted that “depreciation has been claimed only on those assets the cost of which has not been previously applied for the purpose of section 11(1) of the Income-tax Act”. The submission made by the assessee is considered and found to be unacceptable. The practice of claiming depreciation as revenue expenditure when the cost of the asset has been claimed as application of income is not to be followed principally. For the year the assessee on one hand has claimed depreciation as revenue expenditure and on other hand has claimed cost of assets as application of income, which is not allowable. Accordingly, claim of assessee of depreciation of Rs. 52,49,523/- as revenue expenditure for the year under consideration is disallowed as per provisions of section 11(6) of the Income-tax Act. Penalty proceedings u/s 270A of the Income-tax Act are being initiated separately for under reporting of income. (Disallowance of Rs. 52,49,523/-)”
Referring to above, Ld. AR made three-fold contentions as under:
Page 3 of 7 Nirvindhya Shiksha Avam Sanskriti Prachar Samiti, Rajgarh - AY 2017-18 (i) Firstly, during assessment-proceeding, when the AO show-caused assessee to justify the claim of ‘depreciation’ when the cost of assets had already been claimed as ‘application of income’, the assessee immediately filed a reply to AO stating that ‘depreciation has been claimed only on those assets the cost of which had not been previously claimed as application’ but still the AO has made disallowance of depreciation in utter disregard to the factual submission of assessee. Ld. AR submitted that there is no basis with the AO for rebutting the assessee’s factual reply. Further, the AO had no basis at all to rest his conclusion that the assessee had claimed
‘depreciation’ on those assets for which cost was also claimed as ‘application of income’. Hence, the action of AO is grossly baseless.
(ii) Secondly, the assessee filed return declaring total income at Rs. Nil and the AO has also determined total income of assessee at Rs. Nil in assessment-order even after making impugned disallowance. Thus, the total income of assessee remained at Rs. Nil. Therefore, in such a peculiar situation, there is no mechanism in section 270A to charge/ compute penalty.
(iii) Thirdly, even if it is assumed (which though is not correct) that the assessee claimed depreciation on those assets whose cost had also been claimed as application of income, the law prohibiting depreciation in such cases, had come into statute by way of introduction of sub-section (6) in section 11 w.e.f. 01.06.2020 and Page 4 of 7 Nirvindhya Shiksha Avam Sanskriti Prachar Samiti, Rajgarh - AY 2017-18 prior to amendment, there were numerous decisions given by various appellate forums in favour of assessee holding that the ‘depreciation’ was also allowable even when the cost had been allowed as ‘application of income’. Since there were numerous decisions in support of assessee’s claim, the assessee’s case is very much protected by decision in CIT Vs. Reliance Petroproducts (P) Ltd.
(2010) 322 ITR 158 (SC).
Ld. DR for revenue placed a heavy reliance upon the orders of lower- authorities and submitted that the assessee has made an unsupported submission before lower-authorities that the ‘depreciation’ was claimed only on those assets for which cost was not claimed as ‘application of income’.
The assessee has not filed any detail or document in support of such a submission.
We have considered rival submissions of both sides and carefully perused the orders of lower-authorities and examined the issue involved in the light of legal provisions. Admittedly, the AO has disallowed the ‘depreciation’ claim of made by assessee on the footing that the assessee is also claiming cost of assets as ‘application of income’ and hence there is a dual claim. The AO show-caused assessee in response to which the assessee denied making such dual claim. Before us also, Ld. AR for assessee is strongly harping on such a submission of assessee. However, on perusal of orders of lower-authorities, we find that the assessee has not filed any detail/document to show that there was no dual claim of ‘depreciation’ and Page 5 of 7 Nirvindhya Shiksha Avam Sanskriti Prachar Samiti, Rajgarh - AY 2017-18 ‘application of income’ qua the same assets. Hence, in the situation, it is necessary that the factual position is correctly ascertained. Therefore, we remand this issue back to the file of AO who shall grant one more opportunity to assessee to show, by filing complete details/documents, that there was no dual claim in the form of ‘depreciation’ and ‘application of income’ on same assets. The AO shall consider the details/documents submitted by assessee and take a well-reasoned decision. Further, the assessee shall also be at liberty to raise the 2nd contention as noted above before AO to the effect that the mechanism of section 270A for charging/computing penalty fails because of the fact that the total income determined by both assessee and AO was Rs. Nil. If the assessee raises such a claim, the AO shall also look into the same.
Before parting, we would like to deal the 3rd contention raised by Ld.
AR as narrated above. On a careful study of Income-tax Act, 1961, we find that the section 11(6) was brought in statute through Finance (No. 2) Act, 2014 w.e.f. 01.06.2015 and not from 01.06.2020 as submitted by Ld. AR.
Hence, the provision of section 11(6) was very much applicable to AY 2017- 18 under consideration before us. Therefore, the claim made by assessee is against the provision of section 11(6) and the assessee cannot get benefit of any decision in its favour rendered in the context of pre-amended law. Even the judgement in case of Reliance Petroproducts (supra) would not help assessee as in that case, the penalty was imposed for disallowance u/s 14A whereas in present case, the assessee claimed depreciation which was Page 6 of 7 Nirvindhya Shiksha Avam Sanskriti Prachar Samiti, Rajgarh - AY 2017-18 against the provision of section 11(6) and would not fall in the categorically of bona fide claim. Therefore, the 3rd contention raised by Ld. AR fails.
Resultantly, this appeal is allowed for statistical purpose.
Order pronounced in open court on 10.09.2024.
Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 10.09.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore
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