TMI Blog2013 (11) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... red under the head “income from house property” and not business income. The case under consideration is not a case of a small trader or a retailer carrying on a business at base level. Asssessee company is part of a Group that is advised by well qualified professionals – Considering the facts, disallowance of depreciation is confirmed – Decided against the Assessee. Penalty under section 271(1)(c) of the Income Tax Act – Held that:- In view of Explanation1 to section 271(1) (c), penalty for concealment of income or furnishing inaccurate particulars can be imposed if an assessee offers an explanation which is found by the AO / FAA to be false, or if the assessee offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide. In such matters the onus is on the assessee to offer an explanation in respect of the claims made by him in the return of income - Enactment of Section 271(1)(c) read with the Explanations is to provide for a remedy for loss of revenue. In other words, Section 271(1)(c) has to be strictly applied in the larger interest of discipline in filing correct returns by the assessees. Secondly, as per the established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ramed. Your Appellant crave leave to add to, alter or amend any of the above grounds of appeal, if felt necessary 2. The appellant, engaged in the business of investment and finance, filed its return of income on 27.10.2004 declaring the total income of Rs.1.54 Crores. The assessment was finalised by the Assessing Officer (AO) under section 143 (3) of the Income-tax Act(Act) on 30.11.2006 determining the income of the assessee at Rs.2.05 Crores. The reason for the difference between the assessed income and the returned income was that the AO had made two disallowances while assessing the income of the assessee. First disallowance was on account of depreciation claimed at Rs.1.07 Crores of factory building which had not been used for business and the second was disallowance amounting to Rs.37.57 lakhs made under section 14A of the Act. Penalty proceedings u/s.271(1)(c) of the Act were also initiated by the AO at the time of passing of the assessment order for furnishing inaccurate particulars of income. 2.1. Assessee preferred an appeal before the First Appellate Authority (FAA), who confirmed the order of the AO regarding the disallowances mentioned earlier. Further, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not acquired the said asset for the purpose of business-but it was an investment, that the asset had never been put to use for the purpose of business, that the said asset had been let out on rent and the income received was offered as income from house property, that the appellant had also not engaged itself in the business of manufacturing in the year, that it was carrying out business of financing and investing only during the AY under consideration, that the factory building in question could not have been used for any manufacturing activity, that no depreciation was allowable to the appellant on the asset concerned, that fully being aware of the provisions of the Act regarding the claim of depreciation and knowing that it was not entitled for the said claim the appellant had nevertheless made the claim, that it reduced the depreciation amount from the income chargeable to tax, that the Tax Auditor had added a rider, in his report auditor has stated that the asset in question was in passive use ,that passive usage had not been explained by the Auditor, that and it had also not been established that there was any active use of the asset for the purpose of business. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess or profession is concerned Act is very clear - it is a mandatory condition. In other words for claiming depreciation for a building it should be put to use for business or profession . Burden of proof is on assessee to prove that buildings was put to use for the business or profession. There is no doubt that keeping plant or machinery ready for use has been considered passive use of the asset and depreciation has been allowed for such assets. But, in such cases condition of using the asset for the business or profession has never been waived. Section 28-44 deal with income from business or profession. So, first and foremost condition for any claim under these sections is carrying on business or profession. In the case under consideration it is found that the asset in question was vacant for part period and not put to use by the assessee company for the purpose of carrying on its business and earning profits there from. Further, after the said asset was leased out from 07.11.2003 onwards, the income derived from it was offered under the head income from house property and not business income. The case under consideration is not a case of a small trader or a retailer carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal had come to a conclusion on the facts about the assets being put to use and in the alternative applying the principle of passive user, that the conclusions were irreversible. It was further held that Tribunal had recorded the finding that there was positive material to show the existence of the asset at the work site, and about the passive user it could not be termed to be one without any basis or illegal. Accordingly, the claim for depreciation was allowed by the Hon ble High Court. 5.2 In our opinion, facts of Geotech Construction Corporation (supra) are not at all applicable to the case under consideration. Assessee is engaged in the business of investment and finance. Neither before the AO and FAA nor before us assesseecompany has produced any evidence that it was carrying on business of letting out properties. Besides, rent received by the assessee for the factory building premises has been shown under the head income from house property. If, an assessee who is well aware of tax-laws, as stated earlier, shows particular item income of income under a particular head, judicial notice of such a fact has to be taken. If assessee was in the business of letting out properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him in the return of income. It is said that the object behind the enactment of Section 271(1)(c) read with the Explanations is to provide for a remedy for loss of revenue. In other words, Section 271(1)(c) has to be strictly applied in the larger interest of discipline in filing correct returns by the assessees. Secondly, as per the established principles of tax-jurisprudence assessee should file some positive evidences whenever he makes a claim for deductions u/s. 30-37 of the Act. Therefore, if any claim, resulting in loss to Revenue, is made by an assessee without supporting evidences, he exposes himself to penalty u/s. 271(1)(c). The very fact that the assessee company had claimed depreciation u/s. 32 of the Act that was not allowable under the provisions of the Act, proves that the assessee company had claimed excess depredation and thereby evaded payment of taxes to that extent. Considering the facts and circumstances of the case, it is clear that the assessee company had not been able to justify as to why it had not correctly furnished the particulars of its income for A.Y. under consideration. Therefore, penalty levied by the AO and confirmed by the FAA u/s 271(1)(c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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