DR. GEETA SHROFF,NEW DELHI vs. DCIT, NEW DELHI

ORDER PER H.S. SIDHU : JM

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXVIII, New Delhi dated 01.10.2014 pertaining to assessment year 2010-11 on the following grounds:-

1. Ld.CIT (A) erred in facts and in confirming

Penalty imposed u/s 271 (1) (c) at Rs.3,35,850/- by Ld. A.O.

a. The mistake in claiming Depreciation on land was never intentional. It was a Bonafide and inadvertent error. b. Assessee had furnished all the particulars in Return filed. c. Assessee never concealed the particulars of income nor submitted false information. d. Assessee had cooperated with Ld. A.O during the Assessment proceedings and submitted the information and documents as asked for:- e. Assessee had voluntarily computed and surrendered the Depreciation claimed on Land and gave complete working to arrive at cost of Land.

In fact, the Assessing Officer did not even contradict the plea of the Assessee that excess claim of depreciation was an inadvertent error. That part, other element present in the instant case gave a strong indication that the error was genuine and bonafide and thus levy of Penalty is Bad in Law.

3. That Ld.CIT (A) confirmed levy of Penalty by completely overlooking decided Case Laws cited and thus penalty imposed is bad in Law.

demand is bad in law.

2. The brief facts of the case are that Assessing Officer made disallowance of depreciation on property No. H-8, Green Park Extn., New Delhi. This property was purchased by the assessee on 16.3.2007 for a total consideration of Rs. 6 crores after execution of two purchase deeds. The assessee had at the time of purchase of property also purchased the land rights therein. The building comprise of ground floor, first floor, second floor, third floor, terrace and basement alongwith fixtures. The assessee has claimed depreciation on the entire value of land and building. A show cause notice was issued by the AO with regard to non-allowability of depreciation on the value of land included in the total consideration. The assessee in response to show cause enclosed a sheet showing the expense depreciation claimed. For the relevant year the amount of excess depreciation worked out to Rs. 10,86,880/-. The AO added Rs. 10,86,880/- towards disallowance of depreciation on land and Rs. 3,00116/- towards capitalization of patents, besides making other disallowances. Thereafter, penalty proceedings were initiated for disallowance of depreciation on land and capitalization of patents. In response thereto, the Assessee submitted its reply and after considering the reply of the assessee the AO was not satisfied with the assessee’s that the assessee had voluntarily agreed to surrender the tax on value of the depreciation wrongly taken on land and accordingly, the penalty of Rs. 3,35,850/- was levied upon the assessee by the AO vide his order dated 20.09.2013 u/s. 271(1)© of the I.T. Act.

4. Against the impugned order of the Ld. CIT(A) dated 01.10.2014, assessee is in appeal before the Tribunal.

In view of peculiar facts of the case, Ld. Counsel of the assessee submitted that imposition of penalty is not justified. He further submitted that where declaration was made by the assessee under the advice of Chartered Accountant and subsequently, the same was rectified, it was not a case of willful concealment warranting penalty u/s. 271(1)© of the Act. To support his aforesaid contentions, he relied upon the judgment of the Hon’ble Supreme Court of India dated 25.9.2012 in the case of Price Waterhouse Coopers Pvt. Ltd. vs. CIT, Kolkata passed in Civil Appeal No. 6924 of 2012; Judgement of the Hon’ble Suerme Court of India in the case of Dharmendra Textile Processors (2008) 322 ITR 158 and the Hon’ble Gujarat High Court decision in the case of ITO vs. Silk City Petrofiles Co. Ltd. reported 396 ITR 191 (Gujarat).

He submitted that the explanation furnished by the assessee before the AO was not substantiated by it by bringing any evidence. He further submitted that the assessee has concealed his income and has furnished inaccurate particulars by claiming unallowable depreciation on land. It was further submitted that in the said case, had the scrutiny of the case not taken place the concealment of such income would not have surfaced. It is as a result of the scrutiny proceedings and analysis of the AO that the veil on concealment of income and furnishing of inaccurate of particulars could be taken off and hence, the concealment is unearthed by the Department by its own efforts. It was further submitted that the it is clear that the intention of the assessee is malicious and not to offer its full income for taxation by taking all probable escape routes and there is a clear of concealment of income by furnishing inaccurate particulars of income. Hence, the AO has rightly imposed the penalty and Ld. CIT(A) has rightly confirmed the same.

However, on the advice of Chartered Accountant and Auditor, the assessee carried out bifurcation cost of land and cost of building and surrendered excess depreciation claimed at Rs. 10,86,880/- on land with and paid tax thereon. The assessee voluntarily agreed to surrender the tax on value of depreciation wrongly taken on land and the this mistake was never intentional. The assessee has voluntarily bifurcated the value of land and building and surrendered the values of depreciation on land and the act of the assessee under the bonafide belief. We further find that Assessee had furnished all the particulars in return filed and never concealed the particulars of income nor submitted false information. We also note that depreciation on full value was allowed in AY 2008-09 u/s. 143(1) of the Act and further 8 depreciation was allowed on full value in AY 2009-10 under section 143(3) of the Act. However, during the assessment proceedings fpr AY 2010-11 u/s. 143(3) of the Act, assessee was asked to segregate the value of land and building and accordingly, the assessee segregated the value of land based upon circle rate. In view of above, discussions, we find that penalty imposed by the AO and confirmed by the Ld. CIT(A) is not tenable. Our aforesaid view is fortified by the following case laws:-

- Hon’ble Supreme Court Judgment dated 25.9.2012 in the case of Price Waterhouse Coopers Pvt. Ltd. vs. CIT, Kolkata passed in Civil Appeal No.

6924 of 2012 wherein the Hon’ble Court has held that “we are satisfied that the assessee had committed an inadvertent and bonafide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars.

- Hon’ble Suerme Court of India in the case of Dharmendra Textile Processors (2008) 322 ITR 158 has held that that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue that by itself would not attract the penalty under section 271 (1)( c).

- Hon’ble Gujarat High Court decision in the case of ITO vs. Silk City Petrofiles Co. Ltd. reported 396

ITR 191 (Gujarat) has held “ For concealment of income (disallowance of claim effect of) Where declaration was made by assessee under advice of Chartered Accountant and subsequently, same was rectified, it was not a case of willful concealment warranting penalty under section 271(1)© (in favour of assessee) – (Head Notes Only)

7.1 In the background of the aforesaid discussions and respectfully follow the precedents, as aforesaid, we are of the considered view that the assessee has neither concealed the income nor furnished inaccurate particulars of income and there are no findings of the Assessing Officer and the Ld. CIT (Appeals) that the details furnished by the assessee in his return are found to be incorrect or erroneous or false. Under these circumstances, in our view the penalty in dispute is totally unwarranted and deserve to be deleted. Accordingly, we delete the penalty of Rs. 3,35,858/- made u/s. 271(1)(c) of the I.T. Act and quashed the orders of the authorities below on the issue in dispute.

Order pronounced on 05/10/2018.