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TMI Blog2012 (12) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... oticed by the assessing officer in the course of the assessment proceedings that the assessee-company had claimed depreciation of Rs.39,52,300/- in respect of a property at No.3, Eastern Avenue, Maharani Bagh, New Delhi. The property was purchased on 29.4.2004 for Rs. 3.5 crores from one Smt. Heminder Kumari, on which stamp duty and taxes of Rs.25 lakhs were also paid. The sale deed executed on 29.4.2004 was registered. It would appear that the assessee had raised a loan in order to acquire the property. It was further noticed by the assessing officer that the property was sold by the assessee on 18.9.2004 to a company, viz. Hindustan Udyog Limited for a consideration of Rs. 4.5 crores. An agreement of sale was executed on the said date; possession of the property was however, not given, nor was any sale deed executed and registered. The assessing officer found on examination of the facts that the property was residential in nature and had not been put to use for the purpose of the assessee's business. He sent his Inspector to make local inquiries about the ownership of the property. The Inspector was informed by the caretaker that the property remained vacant since it was sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt resulted in a loss and thus there was no motive or intention to claim any undue tax benefit. It was submitted that all the particulars regarding the acquisition and use of the property were on record and the claim of depreciation was made as per the Income Tax Rules, that the claim was thus bona fide and that mere disallowance of the claim in the assessment does not automatically lead to the conclusion that the assessee either concealed its income or furnished inaccurate particulars thereof. In support of these submissions, the assessee relied on several authorities. 8. The CIT(Appeals) noted that the fact that the assessee bought and sold the property in quick succession and held it for a short period of about four months or so, that it did not invest its own funds but raised a loan of Rs.3.5 crores from its sister concern M/s. Morgan Security and Credits Pvt. Ltd. and the further possibility that the arrangements for the sale of the property would have been taken much before the date on which the agreement to sell was executed, given the fact that property sales take time to get finalized, were all indicative of the intention of the assessee to make a surplus or profit by sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assets" and not as investment. The assessee company does not own any other property and the property had been purchased for the purpose of business activities but the same was not found suitable for commercial activities and therefore, the same was sold in the following years. We are convinced with the arguments made by the learned counsel for the assessee. The explanation submitted appears to be bona fide and all the facts were on record and nothing has been concealed therein. Penalty proceedings and the assessment proceedings are separate proceedings. Though the disallowance of depreciation has been made in the assessment proceedings but the explanation submitted in the penalty proceedings appears to be satisfactory and bona fide that the assessee had acquired the premises for the business purposes for claim of depreciation. Mere disallowance in the assessment proceedings will not lead to the penalty under section 271(1)(c) of the Act. Reliance has been placed on the following decisions: (1) Addl. CIT vs. Delhi Cloth & General Mills Co. (1986) 157 ITR 822 (Del); & (2) CIT vs. Ajaib Singh & Co. (2002) 253 ITR 630 (P&H). In the circumstances and facts of the case and the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely the assessment resulted only in a loss despite the disallowance of depreciation and this was indicative of the fact that the assessee could not have had any intention to conceal its income or furnish inaccurate particulars thereof. According to learned counsel for the assessee, the claim of depreciation was bona fide; at any rate there was full disclosure of all material particulars and merely because the assessing officer took a different view of the facts, the conclusion that the assessee concealed its income did not automatically follow. Strong reliance is placed on the judgment of the Supreme Court in CIT vs. Reliance Petroproducts (P.) Ltd., (2010) 322 ITR 158. 12. We find it difficult to agree with the contentions of the learned counsel for the assessee. Even if it is assumed for the sake of argument that the assessee continued to remain the owner of the property throughout the year, the other condition of Section 32, that the property should have been used for the purpose of the assessee's business has not been satisfied. There is no proof that Smt. Ritu Aggarwal, the director, resided in the property and it was only a claim made before us by the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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