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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ NEW DELHI
ORDER PER N.K. SAINI, A.M.
This is an appeal by the Assessee against the order dated 11/09/2013 of the Ld. CIT(A) – VI, New Delhi. The only grievance of the assessee in this appeal relates to the confirmation of penalty levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 ((hereinafter referred as the Act).
2 Brijbasi Art Press Ltd.
Facts of the case in brief are that the assessee filed its return of income on 30.09.2009 declaring an income of Rs. 1,31,77,350/- which was processed u/s 143(1) of the Act, later on the case was selected for scrutiny. The AO framed the assessment at an income of Rs. 1,49,70,220/- by making the various additions on account of long term capital gain interest on FBT and depreciation on computer peripheral. The AO also initiated the penalty proceedings u/s 271(1)(c) of the Act.
The submissions of the assessee before the AO were as under : “The assessee under the bona fide belief deducted the whole amount of consideration from the block. As soon as the assessee came to know, it offered the long term capital gain on the value of land to be included in its income. Nothing has either been concealed nor inaccurate particulars have been furnished by the assessee. By deducting the full value of consideration of Rs. 46,00,000/- the assessee has also forgone the depreciation claim on the value of factory building amounting to Rs. 264078 being 10% of Rs. 2640787/-. Thus the assessee company has provided full particulars of income in its return of income to the best of its belief.”
3 Brijbasi Art Press Ltd. The reliance was placed in the judgment of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. reported at (2010) 322 ITR 158. The AO however, did not find any merit in the submissions of the assessee and considered Rs. 17,64,915/- added by the AO on account of long term capital gain as concealed income and accordingly penalty of Rs. 5,99,895/- was levied u/s 271(1)(c) of the Act.
4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the assessee was claiming depreciation on the total cost of the factory land and building, as it was not possible to segregate the cost of land from total cost but the AO held and assumed that 70% of the total value was that of the land and remaining 30% was of the factory building, though there was no separate value in the Sale Deed of the land & factory building. It was further submitted that the factory was sold subsequently and the assessee reduced the amount of Rs. 46,00,000/- from the WDV block of factory buildings, thereby reducing the WDV of the block as the value of the factory was included in the block of factory building and the profit earned on the sale of factory building was shown as income under the head ‘Other 4 Brijbasi Art Press Ltd. Income’. It was further submitted that during the course of regular assessment, the assessee segregated the cost of land and building on the basis of formula adopted by the AO and offered the capital gain tax, on the value of land accordingly the AO made the addition of Rs. 17,69,915/- on account of long term capital gain. It was further submitted that the assessee was under the bona fide belief that the amount was deductible from the block of factory buildings as it contained the value of land as well as value of factory building. Accordingly the assessee claimed depreciation on the value reduced by Rs. 46,00,000/-. It was further submitted that the time to file the revised return of income had already expired but the assessee furnished full particulars in respect of the sale of factory in its return of income, Profit & Loss Account and Balance Sheet. Therefore, nothing had been concealed nor inaccurate particulars were furnished in the return of income and the mistake was an inadvertent one not with the motive to defraud the Revenue. The assessee also pointed out mistake in calculation of the tax and the penalty.
The ld. CIT, however, did not find merit in the submissions of the assessee and sustained the penalty levied by the AO. Now the assessee is in appeal and had furnished an application under Rule 29 of the Income Tax Appellate
5 Brijbasi Art Press Ltd. Tribunal Rules, 1963 for admission of additional evidences stating therein as under :
“May it please vour honours The present appeal arises out of order of the Commissioner of Income 1. tax (Appeals)-VI, New Delhi dated 11.9.2013, whereby, the CIT(A) has upheld the order levying penalty of Rs.5,99,895/- under section 271(l)(c). The Appellant is engaged in the business of printing of posters, 2. calendars & religious pictures. The Appellant has its factories at (i) A-81, Sector-5, Noida, UP, (ii) Greater Noida, UP and (iii) Shivakasi, Tamilnadu. During the year, the Appellant had sold its factory building and the land at Shivakasi, Tamilnadu for a consideration of Rs.46,00,000/-. The Appellant had purchased this property In the assessment year 1994- 95 for Rs.9,25,055/-. For the assessment year 2009-10, return declaring income of Rs. 3. 1,31,77,350/- was filed on 30.9.2009, which was computed as under:
Net profit as per P&L A/c 2,26,08,586 Add: depreciation as per books 2,42,68,289 Donation 43,706 Gratuity 14,96,551 Roc fees 2,07,118 2,60,15,664 4,86,24,250 Less: Depreciation as per rules 3,06,42,870 Gratuity paid 6,81,449 Profit on sales of fixed assets 41,22,579 3,54,46,898 Total Income 1,31,77,350/-
Since the Appellant has been claiming depreciation on the entire cost of factory building and land at Shivakasi, Tamilnadu, therefore, on sale of the factory, the entire consideration of Rs.46,00,000/- was reduced from the block of fixed assets (building).
5.The assessment u/s 143(3) was made at an income of Rs. 1,49,70,219/-. In computing the income, the profit on sale of factory at Shivakasi was assessed as long term capital gain, which was computed at Rs. 17,64,915/-.
The Assessing Officer levied penalty of Rs.5,99,895/- u/s 271(l)(c), for the reason that the capital gain was not shown in the return and only after the query, the same was offered to tax under the head 'capital gain'.
7. In first appeal, the CIT(A) upheld the levy of penalty for the reason that in assessment years 2003-04 to 2008-09, Appellant claimed depreciation on the factory building including on land and that the penalty imposed therein was upheld in appeal and that during the year under consideration, the Appellant did not reflect capital gain on sale of the factory including the land situated at Shivakasi. Reason for filing additional evidence 8. It is submitted that the reason that the Appellant did not show capital gain on sale of the factory including the land situated at Shivakasi is to be seen in the context of the fact that the Appellant had reduced the entire sale consideration of Rs.46,00,000/- from the WDV of block of assets. Non declaration of capital gain is not to be seen in-isolation. It is submitted that though the non declaration of capital gain on sale of factory building with land was incorrect but the question is whether the conduct of the Appellant was bonafide. 9.The bonafide of the Appellant is evident from the fact that not only WDV of the factory building was reduced by the consideration of Rs.46,00,000/- in the year in question but in the later assessment years i.e. 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15 also the depreciation on the factory building was claimed on the reduced WDV. To substantiate that even in later years, the Appellant claimed depreciation on the block as reduced by Rs.46,00,000/-, the computation of income for assessment year 2010-11 to 2014-15 with balance sheets and the assessment orders for the respective years are being filed at pages 10 to 63 of the paper book. . The assessment orders for assessment years 2010-11, 2011-12 and 2012-13 would show that the Appellant has forgone the depreciation in the later years.
That the position that emerges is that by reducing the block of asset of factory building by the amount of sale consideration of Rs.46,00,000/- , the Appellant increased its income for all times to come. Thus seen in totality, the action of the Appellant of not declaring capital gain was not motivated to conceal the income / evade tax but the action was the result of past wrong. Since the Appellant in past has been claiming depreciation on the cost of factory building including land cost, therefore, the Appellant was under the impression that having claimed depreciation on the entire cost, the entire sale consideration has to be reduced from the block.
That the Appellant on account of wrong claim in past has suffered from all sides. In the assessment years earlier to the sale of factory building i.e. 2003-04 to 2008-09 depreciation was not allowed on the entire cost and year of sale i.e. 2009-10, capital gain was charged on the sale of factory and in the years subsequent to sale of factory i.e. 2010-11 to 2014-15, depreciation was claimed and allowed on the reduced WDV.
Appellant submits that though it made a wrong claim but the complete particulars were furnished, inasmuch as, in the computation of income, profit on sale of fixed assets was separately shown (page 2 of the paper book). Moreover, in the depreciation chart entire sale consideration of Rs.46,00,000/- was shown under the head "deletion" and accordingly, the block was reduced (page 9 of the paper book).
That the additional evidence by way of computation of income for the assessment years 2010-11 to 2014-15 with balance sheets and the assessment orders are vital to decide the issue of levy of penalty u/s 271(l)(c) of the Act. The evidence being filed is on the record of the Assessing Officer but for the later assessment years. Admission of additional evidence would not cause any prejudice to the department, rather, it would advance the cause of justice. In view of the above, it is submitted that in the interest of justice and to enable this Hon'ble Tribunal to arrive at a just decision, the additional evidence may be admitted and be adjudicated upon.
8 Brijbasi Art Press Ltd. It is submitted accordingly.
For : Brijbasi Art Press Ltd.”
6. During the course of hearing the ld. Counsel for the assessee reiterated the contents of the aforesaid application and requested to admit the additional evidences. In his rival submissions, the ld. DR opposed the admission of the additional evidences and submitted that the assessee did not furnish these documents either before the ld. CIT(A) or the AO, therefore, these should not be admitted. He, further, submitted that the assessee concealed the income and furnished inaccurate particulars of income. Therefore, penalty u/s 271(1)(c) of the Act was rightly levied by the AO and sustained by the ld. CIT.
7. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the assessee was claiming depreciation on the entire cost of factory building and land at Sivakashi, Tamilnadu. Later on when the factory was sold, its value was reduced from the block of fixed assets and no long term capital gain was shown on the land. The assessee furnished additional evidences by way of computation of income for the assessment years 2010-11 to 9 Brijbasi Art Press Ltd. 2014-15 with balance sheet and the assessment orders. These documents are vital to decide the issue under consideration and go to the root of the matter, therefore, these are admitted. However, since these documents were not available to the ld. CIT(A) for his consideration, we, therefore, deem it appropriate to set aside this issue back to the file of the Ld. CIT(A) to be adjudicated afresh in accordance with law, after considering the additional evidence furnished by the assessee first time before the ITAT and by providing due & reasonable opportunity of being heard to the assessee.
In the result, appeal of the assessee is allowed for statistical purposes. (Order Pronounced in the Court on 29/04/2016).