|CORAM:||H. S. Sidhu (JM), L. P. Sahu (AM)|
|CATCH WORDS:||concealment of income, furnishing inaccurate particulars of income, penalty|
|DATE:||September 21, 2017 (Date of pronouncement)|
|DATE:||September 29, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 271(1)(c) penalty: The quantum of returned income (Rs. 34.94 crore) and tax paid (Rs.10.85 crore) vis-a-vis the addition/ disallowance (Rs. 13 lakh) indicates whether there was a mala fide intention to conceal. Deferral of depreciation allowance does not result in concealment of income or furnishing of furnishing of any inaccurate particulars. No penalty can be levied for a sheer accounting error of debiting loss incurred on sale of a fixed asset to the P&L A/c instead of reducing the sale consideration from the WDV of the block|
(i) The assessee has filed his return of income for the assessment year in dispute on 14.10.2010 declaring total income of Rs. 34,74,20,950/-. Assesse has also filed his revised return of income on 31.3.2012 declaring total income of Rs. 34,94,15,822/- and AO has completed the assessment u/s. 143(3) of the Act on 08.1.2013 at the total income of Rs. 35,10,91,350/- by making the addition of Rs.11,40,000/- on account of depreciation allowance for the first half added back on Bentley Car offered and added to the computation of income to avoid litigation; Loss on fixed assets omitted to be added back due to oversight amounting to Rs. 1,69,498/- and reversal of professional fee offered to tax in earlier years – payments not received amounting to Rs. 3,66,027/-. It is pertinent to mention here that during the assessment proceedings assessee has given his explanation supported by documentary evidences on the addition in dispute, especially on the depreciation issue that he has forgone the benefit of 50% depreciation added back on account of Bentley Car and offered the amount of tax vide his letter dated 20.11.2012 to avoid litigation, which is placed at page no. 34 of the Paper Book filed before us. The contents of the said letter is reproduced below:-
“While going through my records for the financial year 2009-10, I have noticed that the addition of one car of Bentley make was made by me in May, 2009 by making an advance payment of Rs. 22 lacs and another advance payment was made in 9 October, 2009 for Rs. 40 lacs. However, the balance payment of Rs. 90 lacs was made in November, 2009 when actual transfer documents were signed. There is no documentary proof available with me to confirm that the purchase of car was prior to 30 September and thus eligibility for full year. The Tax Auditor, however, certified claim of depreciation for full year. In order to avoid any unnecessary tax implications, I, voluntarily on my own motion, have attached a revised computation of my taxable income by disallowing 50% of the depreciation claimed on this addition and has reduced my claim for refund of tax to Rs. 6,87,300/-. You are requested to take the attached computation of my income and tax liability into consideration while framing the assessment. For any further information/ clarification, please let me know.”
(ii) We further note that during the appellate proceedings, the assessee has filed an affidavit which is placed in Paper Book at page no. 87 to 92 wherein it was stated that assessee has received a copy of 10 assessment order dated 12.1.2013 in which it was noticed that one of the disallowance relates to depreciation claimed in respect of Bentley Car Number DL3C BN 3636 owned by assessee. At the time of assessment his account asked the assessee for evidence to establish that the assessee was using the car for professional purposes since the day of its acquisition in May, 2009. It was stated in the affidavit that it is obvious that there is no documentary evidence which could support the fact that the assessee owned the car since May, 2009 as the registration of the car in his name was completed in November, 2009 for which part payment was made in May, 2009. He further stated that assessee was personally driving the car and had never maintained any log books in respect of a car which is under his personal use and in order to avoid any suggestion the assessee had made a claim which was not justified and accordingly he advised his accountant not to pursue the matter any further and to withdraw the claim. On perusing the detailed affidavit, it is established that the car was used for his professional pursuits. We have also perused the page no. 68 & 94 of PB which are the copy of the Motor Insurance Cover Note dated 04.05.2009 and copy of Credit Card statement of Standard Chartered Bank of the assessee; the page no. 106, 107, 111, are the copies of ledger account of the assessee for the period 31.3.2006 to 31.3.2010 showing the date 16.05.2009 on which date a payment of Rs. 22 lacs was debited to Mr. K. Iyer towards part payment of Bentlay Car; copy of Bank statement of assessee showing DD dated 16.5.2009 to Mr. PK Iyer of Rs. 22 lacs and page no. 111 is a copy of cash receipt received from Sh. 11 Harish N. Salve, 42, Purvi Marg, Vasant Vihar, New Delhi – 57 of Rs. 1,52,00,000/- of Draft/Cheque No. 083239 and 002199 and 004606 dated 16.5.2009, 15.10.2009 and 23.11.2009 of Citi Bank in full and final payment towards the Benteley Car RegistrationNo. DL3CBN 3636 of Mr. P.K. Iyer, 36, Sarojini Devi Road, Secunderabad – 500003. In view of the above, it is crystal clear that there is no documentary evidence which could support the fact that the assessee owned the car since May, 2009 as the registration of the car in his name was completed in November, 2009 for which part payment was made in May, 2009 after the full payment was made and on completion of custom requirements.
(iii) Moreover, the claim for depreciation only gets deferred to subsequent Years by claiming it for half year. In our view the deferral of depreciation allowance does not result into any concealment of income or furnishing of furnishing of any inaccurate particulars. However, it was a sheer accounting error in debiting loss incurred on sale of a fixed asset to profit and loss account instead of reducing the sale consideration from wdv of the block under block concept of depreciation. There was a sheer accounting error in debiting loss incurred on sale of a fixed asset to profit & loss account instead of reducing the sale consideration from wdv of the block under block concept of depreciation. There was a separate line item indicated loss on fixed asset of RS.1,69,429/- in the Income & Expenditure Account which was omitted to be added back in the computation. The error went un-noticed by the tax auditor as well as the same was overlooked while certifying the Income & Expenditure Account 12 and by the tax consultant while preparing the computation of income. Hence, there was no intention to avoid payment of taxes.
(iv) The quantum of assessee tax payments clearly indicates the assessee intention to be tax compliant. Moreover, the assessee with a returned income of 34.94 crores and tax payment of more than Rs.10.85 crores which does not show any mala fide intention to conceal an income of RS.13.09 lacs (not even 0.4% of returned income) with an intention of evading tax of Rs.4 lacs (not even 0.4% of taxes paid).
(v) Therefore, in view of the abovementioned facts and circumstances, the allegation that assessee was having any mala fide intention to conceal his income or for furnishing inaccurate particulars of income is not correct, hence, the penalty in dispute needs to be deleted.
(vi) We further note that the case laws relied upon by the Ld. DR are distinguishable to the facts of the present case, hence, the same are not applicable in the present case. Whereas the facts and circumstances of the case law cited by the Ld. Counsel of the assessee i.e. decision of the ITAT, Mumbai Bench in the case of CIT vs. Royal Metal Printers (P) Ltd. Passed in ITA No. 3597/Mum/1996 AY 1991-92 dated 8.10.2003 reported in (2005) 93 TTJ (Mumbai) 119 in which the Judicial Member was the Author of decision is similar and identical to the present case, wherein it was held penalty under section 271(1)(c) of the Act could not be levied simply because the assessee had withdrawn the claim for depreciation after the survey operation and penalty was deleted. In the present case, it is also noted that AO has not brought on record any material or evidence on the basis of which it could be concluded that the assessee had concealed income or furnished inaccurate particulars of income.
(vii) Keeping in view of the facts and circumstances of the case, we are of the considered view that the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty. Accordingly, we set aside the orders of the authorities below and delete the levy of penalty in dispute.
i) MAK Data P. Ltd. Vs. CIT (38 Taxmann.com 448) /(2013 358 ITR 593
ii) CIT vs. Escorts Finance Ltd. (183 Taxman 453).
iii) CIT vs. Zoom Communication (P) Ltd. 191 Taxman 179 (Delhi).
iv) BA Balasubramaniam and Bros. Co. Vs. CIT (1999) 236 ITR 977 (SC).
v) CIT vs. Reliance Petroproducts (2010) 189 Taxman 322 (SC)
vi) Union of India vs. Dharmendra Textile Processors (2007) 295 ITR 244.