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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ : NEW DELHI
Before: SHRI J.S. REDDY & SHRI A.T. VARKEY
O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal is preferred by the assessee against the order of the CIT (Appeals)-V, New Delhi dated 05.06.2013 for the assessment year 2009-10.
The sole issue that is before us is deletion of penalty of Rs.1,95,017/- levied by the AO under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The assessee company is engaged in the business of construction of residential flats. It has construction contracts with DDA and Group Housing Societies. During the year under consideration, the assessee declared taxable
Rs.62,88,941/- on a turnover of Rs.34,70,27,097/-. The assessee was maintaining its regular books of accounts which were audited both under the Companies Act, 1956 and under section 44AB of the Act. The return of Income was selected for scrutiny u/s 143(2) of the Act and all the details along with audited accounts , tax audit reports as called for were duly furnished. The assessment was made under section 143(3) at Rs.70,63,560/- vide order dated 30.08.2011 and the AO made the disallowance of Rs.1,95,240/- being 10% of miscellaneous expenses, repair & maintenance etc. being unverifiable in nature and disallowance of Rs.5,79,374/- being loss on sale of asset which was debited to profit & loss account. The additions so made by the AO was agreed upon by the assessee, therefore, he did not prefer any appeal before the CIT (A) and the assessment became final.
3.1 The AO initiated penalty proceedings against the assessee. The assessee participated in the penalty proceedings and brought to the knowledge of the AO that the loss on sale of fixed asset of Rs.5,79,374/- was reflected in schedule 18 of the audited accounts. He further submitted that while computing the depreciation under the Act, the gross sale consideration was reduced and the depreciation has been claimed at the reduced WDV. However, he submitted that due to clerical mistake, the said amount was omitted in the computation.
He submitted that in the copy of the Income-tax computation, the said disallowance had been mentioned but inadvertently the amount was omitted.
He further submitted that even during the course of assessment proceedings, all the information relating to the sale of asset had been furnished and the bonafide mistake that was made was accepted and the said amount was offered for taxation. He further submitted that it is not the case wherein the said amount was reflected under wrong head or concealed but the same was duly reflected in the audited accounts. He therefore submitted that it was a bonafide mistake.
However, the AO was not convinced and levied a penalty at the minimum rate of 100% which comes to Rs.1,95,017/-.
Aggrieved by the said order of the AO, the assessee preferred an appeal before the ld. CIT (A) who has upheld the order of the AO.
Aggrieved by the said decision of the CIT (A), the assessee is before us.
Ld. AR for the assessee, while reiterating the submissions made before the lower authorities, submitted that one of the divisions of the assessee company, RMC Ghaziabad, had discontinued its business during financial year 2007-08. He submitted that the building was dismantled and disposed off during the year under consideration and sold off. He submitted that the sale consideration has been reduced from the block of fixed assets for computing depreciation under the Act. He further submitted that while computing the taxable income the loss on fixed assets aggregating to Rs.5,79,374/-, on the basis of which the penalty was imposed, has inadvertently been omitted to be added. The mistake being clerical since in the computation the said
disallowance has been mentioned but the figure was inadvertently omitted from the column due to linking. He submitted that these facts have already been brought to the knowledge of the AO during the course of assessment proceedings vide letter dated 18.08.2011. He also drew our attention to page 19 and page 6 of the paper book to justify this mistake. He submitted that mistake being bonafide and inadvertent was rectified during the course of assessment proceedings and as such, there was neither concealment nor any explanation that was furnished, was found to be false. Ld. AR further relied on the decision of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P) Ltd. vs. CIT – 348 ITR 306 (SC) to support its claim. He, therefore, prayed that the orders of the authorities below be set aside and the penalty levied be deleted.
We have heard both the parties and perused the material on record. We note that the assessee participated in the penalty proceedings and brought to the knowledge of the AO that the loss on sale of fixed asset of Rs.5,79,374/- was reflected in Schedule 18 of the audited accounts. We also note that while computing the depreciation under the Act, the gross sale consideration was reduced and the depreciation has been claimed at the reduced WDV. However, due to clerical mistake, the said amount was omitted in the computation. We find that in the copy of the Income-tax computation, the said disallowance had been mentioned but inadvertently the amount was omitted. We further note that in the balance sheet at col. No.18 of Other Expenses, Rs.5,79,374/- was shown
Loss on sale of fixed assets (page 19 of the paper book), however, in the computation in the head ‘Loss on sale / discard of assets, the amount was not reflected (page 6 of the paper book). We also find that even during the course of assessment proceedings, all the information relating to the sale of asset had been furnished and the bonafide mistake that was made was accepted and the said amount was offered for taxation. We note that it is also not a case wherein the said amount was reflected under wrong head or concealed but the same was duly reflected in the audited accounts. We find that there is no deliberate attempt on the part of the assessee either to conceal income or to file inaccurate particulars of income. The assessee at the time of assessment proceedings has given all the details before the completion of the assessment proceedings. His explanation given to the AO has not been found to be false. We also find support from the decision of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P) Ltd. v. CIT - 348 ITR 306 (SC) wherein it has been held as under:-
“19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.
We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars.”
Having regard to the above principles laid down, the claim of the assessee could not be regarded either as “false” or not “bonafide” so as to conclude that assessee has furnished inaccurate particulars of income. Therefore, we set aside the orders of the authorities below and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in open court on this 4th day of March, 2016.