Ambience Hospitality Pvt. Ltd vs. DCIT (Delhi High Court)

DATE: November 23, 2017 (Date of pronouncement)
DATE: November 30, 2017 (Date of publication)
AY: 2007-08
FILE: Click here to download the file in pdf format
S. 276C/277 Prosecution: Submission that claim of depreciation on land was a “mere clerical mistake” is not acceptable if the assessee did not file a revised return to correct the alleged mistake. A claim in a return which is scrutinized by the auditors and the directors cannot be considered as a mere accounting mistake

(i) After giving careful consideration to the entire facts, it is seen that the main contention of the learned counsel for the petitioner is that the fact with regard to charging of depreciation on the land along with the building and the same shown under a common head in the balance sheet of the assessment year 2007-2008 as ‘property’, is a mere clerical mistake and the same was suo moto corrected by the company in the balance sheet of subsequent year, i.e 2008-2009 and was informed about it to the Assessment Officer(AO) vide letter dated 08.12.2009. Perusal of the record shows that after the assessment of the Balance Sheet of the year 2007-2008 by the assessing Officer, two order sheet entry dated 04.09.2009 and 23.11.2009 was made by the AO whereby the AO had asked the petitioner to explain the claim of depreciation on building as shown in the said balance sheet for the assessment year 2007-2008.

(ii) The explanation given above proves that only after the order sheet entry made by the Department of Income Tax, that the correction was made by the petitioner in the subsequent Assessment year 2008-2009. It was on 08.12.2009, when the petitioner sent the letter to the AO by stating that :- “…This mistake came to notice of the auditors next year while preparing and certifying the balance sheet and the tax audit report relating to assessment year 2008-2009. In the balance sheet for that year land has been segregated and appears as the distinct item in Schedule of the fixed assets. In the tax audit report and in the income tax return also depreciation has been claimed only on the building. It is therefore, prayed that depreciation on building may kindly be allowed after excluding the cost of land namely Rs. 3,18,00,000/-..”Therefore, the contention of the learned counsel for the petitioner that the mistake in the balance sheet was suo moto rectified in the balance sheet of the subsequent year much before it was scrutinised by the Assessment Officers cannot be accepted.

(iii) Proceeding further with the case, the another contention of the counsel for the petitioner that the alleged mistake was mere clerical in nature, not deliberate and no element of mens rea is present, also, does not hold any ground as it has been rightly held by the learned ACMM that no sincere efforts were put in by the petitioner after detection of the alleged mistake by filing the revised return immediately thereafter. It was specifically stated by DW-2 during his cross examination that “The said mistake was detected in or about August 2008 i.e. prior to the finalization of accounts/audit report for assessment year 2008-2009 dated 20.09.2008. The said mistake was corrected in the year 2008-2009. ……We have suto moto corrected the mistake vide letter dated 08.12.2009…” It makes it apparent that the alleged mistake was detected in the month of August by the company but only on 08.09.2009, the same was informed by the petitioner to the Assessment Officer. The petitioner had ample time to rectify its mistake by either bringing the same into the notice of the Assessing Officers soon after its detection or by filing a revised IT return to that effect. But, no action was taken by the petitioner until 08.12.2009, which casts a serious doubt on the story of the petitioner.

(iv) It is a manifest procedure that before filing of the Income Tax return for the assessment year 2007-2008 by the petitioner, the same is scrutinized, firstly, by the auditors of the company. Secondly, by the directors of the company before endorsing their signatures on the final Balance Sheet. Therefore, it cannot be considered as a mere accounting mistake.

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