SMT. MALATHI LAKSHMIKUMARAN,NEW DELHI vs. DCIT, NEW DELHI

2 iii. That the Ld. Commissioner (Appeals) has completely erred in holding that the assessing officer has formed an opinion regarding furnishing inaccurate particulars of income when in fact no such opinion was formed based on any material by the assessing officer. iv. That the Ld. Commissioner (Appeal) has erred in not appreciating the contention of the appellant that the claim of depreciation for the entire building was a purely bona fide mistake and mala fide and hence no penalty is imposable under Section 271(1)(c) and 274. v. That the Ld. Commissioner (Appeal) has erred in law in not appreciating the well settled legal position that mere claim of deduction which is held ineligible by the authorities does not call for any penalty under Section 271(1)(c) and 274. The Appellant further craves leave to raise other grounds in the course of the proceedings before this Hon’ble Tribunal.”

The brief facts of the case are that the assessee is an individual. She filed her return of income for the assessment year 2006-07, declaring total income of Rs. 34,56,750/- on 30th October, 2009. The case was not selected for scrutiny assessment. Subsequently, on coming to know that depreciation on building, bearing address, B-6/10, Safdarjung Enclave, New Delhi, disallowed for the assessment years 2008-09 and 2009-10 on the ground that the building was not in exclusive use for business purposes. The assessment was reopened by issuing notice under Section 148 of the Income-tax Act, 1961 (for short “the Act”), dated 07.05.2010. In response to the said notice, the appellant had withdrawn the claim of depreciation on the said building. Accordingly, the reassessment was completed under Section 143(3) r.w.s 147 of the Act vide order dated 23.12.2011 and thus the assessment reached the penalty. While the matter stood thus the learned Assessing Officer initiated penalty proceedings under Section 3 271(1)(c) of the Act. In response to the show cause notice, it was submitted that the claim of depreciation is always a matter of interpretation and the depreciation was sought to be disallowed by the Assessing Officer only on account of adopting different interpretation on the aspect of the use of the building. The assessee had agreed for addition, mere fact that the assessee himself agreed for the addition or withdrawn the claim for depreciation, does not ipso fact attract the penalty. The Assessing Officer, brushing aside the explanation offered by the assessee, proceeded to levy the penalty of Rs. 7,88,742/- under Section 271(1)(c) of the Act vide order dated 26th June, 2012. Being aggrieved by this order, an appeal was preferred before the Ld. CIT(A) who vide order dated 8th August, 2013 confirmed the order of penalty following the decisions of the Hon’ble Delhi High Court in the cases of CIT Vs. Escort Finance Ltd., 328 ITR 44 (Del); Commissioner of Income-Tax Vs. Zoom Communication P. Ltd. [2010] 327 ITR 510 (Del) and CIT Vs. MAK Data Ltd., dt. 22.01.2013. Hence, the assessee is before us with the present appeal.

Ld. Senior Counsel submitted that in the assessee’s own case on the same issue for the assessment year 2007-08 and 2005-06, this Hon’ble Tribunal deleted the penalty in ITA No. 4748/Del/2011 (A.Y. 2007-08) and ITA No. 945/Del/2013 (A.Y. 2005-06). Therefore, he submitted that the issue in appeal is covered by the decision of this Tribunal.

We heard the rival submissions and perused the material available on record. We have also gone through the order of the Tribunal quoted before us. The Tribunal rendered the findings on the merits of the issue vide paras 12 & 15 of the order as under: “12. There is no dispute on the fact that the assessee is the owner of two buildings situated at B-6/10 and B-4/158, Safdurjung Enclave, New Delhi. It is also not disputed that the assessee is carrying on her profession of consultancy which includes preparing, filing and processing of patent applications both in India and abroad. She is a Ph. D. in the field of Molecular Biology and has been working in the field of intellectual property rights/patent matters since 2003. She started technical consultation relating to IPAS and patent and is also attached to the law firms namely M/s Lakshmikumaran and Shridharan and individual Mr. V. Lakshmikumara, Advocate, who happens to be her husband and she derives income from both of them. Under these circumstances, the assessee is entitled deprecation as the twin condition of ownership and the use for the purpose of profession are complied with.

Even otherwise, we are of the considered opinion that the assessee has made a bona-fide claim. The expenditure given by the assessee is not false. Mere disallowance of the claim does not warrant levy of penalty either on the ground that there is furnishing of inaccurate particular or on the ground that this is concealment of income. In fact in this case, the assessee has disclosed all particular in the return of income. Merely because the assessee has not filed an appeal against the disallowance, the Assessing Officer cannot conclude that the claim is wrong or illegal. The reasons given by the assessee that an appeal was not filed to save herself of the mental agony of litigation is a possible explanation.” The Tribunal finally placing reliance on the decision of Hon’ble Punjab and Haryana High Court in the case CIT Vs. Rajiv Garg & Ors., 313 ITR 256 (P&H), deleted penalty.

In the result, the appeal filed by the assessee is allowed in full. The decision is pronounced in the open court on 30th September, 2015.