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TMI Blog2016 (6) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... in law, the penalty levied ought to be deleted. 2. Without prejudice to the above, the Ld CIT-(A) has further erred in confirming the levy of penalty u/s 271(1)(c) of the Act, on account of disallowance of depreciation of Rs. 1,67,426/- on account of rent from running business centers was assessed as "income from house property" as against business income computed by the appellant. On the facts and circumstances of the case and in law, the penalty levied on disallowance of depreciation to the extent of Rs. 1,67,426/- ought to be deleted." 4. The brief facts of the case are that the assessee company is engaged in the business of money changing, travel arrangement, freight forwarding, business centre and insurance agent. 5. During the course of the assessment proceedings u/s 143(3) read with Section 143(2) of the Act , the A.O. noticed that the assessee company had claimed depreciation on fixed asset amounting to Rs. 18,05,436/- which included depreciation on additions to fixed assets at different branches. The A.O. asked the assessee company to furnish necessary documentary evidences regarding the fixed assets, but the assessee company failed to furnish necessary documentary e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) vide orders dated 16.02.2010. During the penalty proceedings u/s 271(1)(c) of the Act, the assessee company submitted that the documentary evidences in respect of the addition to the fixed assets could not be produced from its various branches spread all over the country. The assessee company submitted that the statutory auditors in their report u/s 44AB of the Act did not make any adverse comments regarding the details of additions to the fixed assets and penalty u/s 271(1)(c) of the Act cannot be levied merely on the reason that there were non-production of documentary evidences. The assessee company relied on the decision of Chennai Tribunal reported in Gem Granites (Karnatka) v. DCIT (2009)120 TTJ 992(Chennai. Trib.). The assessee company submitted that merely because the learned CIT(A) has confirmed the quantum assessment additions, penalty cannot be levied as the Revenue has to prove the onus that the assessee has concealed particulars of income or furnished in-accurate particulars of income. The assessee company submitted that the assessee company has brought forward losses, hence, the income is assessable u/s 115JB of the Act and under these circumstances no penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that the assessee company has produced inaccurate particulars of income. The assessee company submitted that after the completion of the assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the assessee company submitted the evidences for purchase of fixed assets and the disallowance has been reduced by the AO by passing rectification orders u/s 154 of the Act. The learned CIT(A) observed that the assessee company has failed to produce the documents with respect to the addition on fixed assets. The auditors certificate is not a conclusive factor as otherwise there was no requirement for legislature to give powers and duties to the A.O. to make scrutiny and assess the income of the assessee company. The learned CIT(A) observed that the addition to the income on account of depreciation has been made due to non production of evidences with respect to additions to the fixed asset. With respect to the income declared from the rent received from letting out of residential premises which was given on rent for residential purposes and the assessee company declared the said rental income as business income and claimed depreciation is without any basis and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no concealment of income or furnishing of inaccurate particulars of income by the assessee company. The ld. Counsel also relied on the decision of the Hon'ble Supreme Court in the case of UOI v. Rajasthan Spinning & Weaving Mills [2009] 23 DTR 158 (SC) and other decisions of Hon'ble Bombay High Court in the case of CIT v. M/s S.M. Construction , ITXA No. 412 of 2013 Bom. HC and CIT v. Dalmia Dychem Industries Ltd.[2015] 279 CTR 0133 (Bom. HC) and the decision of Hon'ble Rajasthan High Court in the case of Anoopgarh Kraya Vikraya Sahakari Samiti Ltd. v. ACIT, [2015] 374 ITR 0558 (Raj. HC). 10. The ld. D.R., on the other hand, submitted that the primary onus is on the assessee company to produce the evidences with respect to the purchase of fixed assets. The onus has not been discharged by the assessee company. He further relied upon the orders of authorities below and the decision of the Tribunal in the case of M/s Times Guaranty Ltd. v. ACIT in ITA No. 1681/Mum/2007 for the assessment year 1993-94 dated 10th October, 2014. 11. We have considered the rivals contentions and perused the material available on record and the case laws relied upon by both the sides. We have ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake it out of clutches of penalty provisions u/s. 271(1)(c) of the Act. The assessee company explained that there is heavy loss incurred by the assessee in its business and even the tax is computed to be payable under the provisions of 115JB of the Act as against under the normal provisions of the Act. We have observed that the CBDT has come out with circular no 25/2015 dated 31-12-2015 , whereby the CBDT stated that it is it is now a settled position that prior to 1- 4-2016, where the income tax payable on the total income as computed under the normal provisions of the Act is less than the tax payable on the book profits u/s 115JB of the Act, then penalty under section 271(1)(c) of the Act, is not attracted with reference to additions /disallowances made under normal provisions. It is further clarified that in cases prior to 1-4-2016, if any adjustment is made in the income computed for the purpose of MAT, then the levy of penalty u/s 271(1)(c) of the Act, will depend on the nature of adjustment. The afore-stated circular is reproduced below: "SECTION 115JB, READ WITH SECTIONS 115JA AND 271(1)(c), OF THE INCOME-TAX ACT, 1961 - MINIMUM ALTERNATE TAX - PENALTY UNDER SECTION 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under normal provisions. It is further clarified that in cases prior to 1-4-2016, if any adjustment is made in the income computed for the purpose of MAT, then the levy of penalty u/s 271(1)(c) of the Act, will depend on the nature of adjustment. 6. The above settled position is to be followed in respect of section 115JC of the Act also." We have observed that the assessee company did raised this contention before the AO that in view of decision of Hon'ble Delhi High Court in the case of Nalwa Sons Investments Limited(supra) , the tax-payer is not liable to penalty u/s 271(1)(c) of the Act as the tax is payable on the income computed u/s 115JB of the Act and not under the normal provisions of the Act as there are losses including carried forward of accumulated losses . The similar plea of non-leviability of penalty u/s 271(1)(c) of the Act on the grounds that the assessee company was charged to tax u/s 115JB of the Act owing to losses under the normal provisions of the Act was raised by the assessee company based on the decision of Hon'ble Delhi High Court in the case of Nalwa Sons Investments Limited(supra) before the AO, which contention was rejected by the AO at threshold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company had submitted that the claim made by the assessee company was a right and bona-fide claim relying upon recent decision of Hon'ble Supreme Court in the case of Chennai Properties & Investments Ltd. v. CIT, [2015] 373 ITR 0673 (SC). The assessee company submitted that the assessee company made a bona fide claim by claiming of rental income as business income. The assessee company had submitted that the depreciation has been rightly claimed on these residential properties although the said claim has not been allowed by the Revenue authorities , which has also been accepted by the assessee company but that will not make the assessee company exigible to penalty u/s 271(1)(c) of the Act. The complete particulars of income were furnished was the contention of the assessee company. In our considered view and based on facts and circumstances of the case , the assessee company had given a bona-fide explanation to substantiate the claim of depreciation made by the assessee company with respect to the rented properties although the revenue has not accepted the explanation of the assessee company . In our considered view keeping in view facts and circumstances of the case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of Rs. 1,67,426/- ought to be deleted. 3. Without prejudice to the ground no. 1 & 2 above, no penalty u/s 271(1)(c) of the Act, can be levied in respect of the disallowance made by the Assessing Officer, as the appellant had paid the tax on deemed income under the provision of section 115JB of the Act. On the facts and circumstances of the case and in law, the penalty levied ought to be deleted." 14. Our decision in ITA No. 3416/Mum/2013 for the assessment year 2006-07 shall apply mutatis-mutandis to this appeal namely ITA No. 3417/Mum/2013 as the issue involved in both these appeals are identical. We order accordingly. 15. In the result appeal of the assessee company in ITA No. 3417/Mum/2013 for the assessment year 2007-08 is partly allowed as indicated above. Now we shall take up assessee company's appeal in ITA No 3418/Mum/2013 for the assessment year 2008-09. 16. The grounds of appeal raised by the assessee company in this appeal read as under:- "1. Learned Commissioner of Income - Tax (Appeals) (CIT-(A)) has erred in confirming the action of the Assessing Officer (AO) in reopening the assessment u/s 147 of the Income Tax Act, 1961 (Act) by holding that inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this case in A. Y. 2007-08 the assessee had shown similar rental income of Rs. 46,80,864/- under the head, 'Misc. Income' which was offered to tax 'under the head, 'business' and while computing the order u/s 143(3) this rental income was assessed as 'income from house property', which was claimed under the head business leading to the assessee disclosing a substantially lower income at Rs.NIL as against income assessed at Rs. 13,30,275/-. The assessee filed an appeal against the assessment which was dismissed by the then CIT(A). A similar situation existed in AY 2006-07 wherein the assessee had shown rental income of Rs. 29,52,451/- under the head business income and depreciation was claimed on this property. The claim of income under the head business income was disallowed while assessing the income u/s 143(3) of the IT Act and the same was assessed under the head, house property at Rs. 5,79,244/-. In view of the above facts, I am of the opinion that income has escaped assessment within the meaning of Section 147 of the Act for which notice u/s 148 is being issued." 18. The assessee company vide letter dated 8th November, 2010 requested to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the bills were not produced and a total amount of depreciation of Rs. 42,014/- was disallowed by the AO and added back to the income of the assessee company which was agreed upon by the assessee company, vide assessment orders dated 16.12.2011 passed by the AO u/s. 143(3) read with Section 147 of the Act. It was further observed by the A.O. from the P&L account for year ended on 31st March, 2008 that the assessee company has debited an amount of Rs. 91,48,771/- under the head general expenses. The assessee company was asked to provide the documentary evidence to prove the genuineness of the general expenditure of Rs. 91,48,771/- .The assessee company could not produced the details called for by the AO w.r.t. to claim of general expenditure of Rs. 91,48,771/- . The assessee company submitted that the assessee company's business have many branches all over the country and there was an administrative inconvenience to collect the details from all the branches. The A.O., however, allowed to produce the documentary evidence as and when they are available before the expiry of the statutory time limit to rectify the assessment and 10% of the claim of the general expenses of Rs. 91,48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the A.O. cannot deny the assessee company's claim. The fixed assets have been verified by the auditors. The learned CIT(A) rejected the contention of the assessee company and held that it was incumbent on the assessee company to produce the documents/evidences which the assessee company failed to do so and hence the A.O. has rightly made the additions, as held by the learned CIT(A) vide appellate orders dated 27.02.2013. With respect to the addition of Rs. 9,14,877/- being 10% out of general expenses of Rs. 91,48,771/- , the assessee company submitted that the accounts were audited and the auditors have not made any objection. To support this contention, the assessee company relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. SSP Pvt. Ltd. The learned CIT (A), however, held that the auditors certificate cannot be accepted as the A.O. has been given statutory duties and powers to scrutinize and make the assessment. The learned CIT(A) relied upon the decision of Hon'ble Rajasthan High Court in the case of Jaipur Electro Private Limired v. CIT 134 CTR 237(Raj.) The learned CIT(A) held that the A.O. has the right and duty to enquire about the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is a very old company incorporated in the year 1949 and the objects are placed in paper book page 16, whereby letting out of properties is listed as one of the objects for which company was formed and entitled to carry out business . The learned CIT (A) just followed the earlier year orders and rejected the claim of the assessee company. With respect to ground No. 3, the ld. Counsel for the assessee company submitted that the depreciation has been disallowed amounting to Rs. 42,014/-. The assessee company has produced 97% of the bills and vouchers and only 3% of the vouchers could not be produced. The learned counsel for the assessee company submitted that the assessee company's business is not doing well and incurring losses , hence the vouchers could not be collected from all the branches due to administrative difficulties. With respect to the ground No. 4 regarding addition of Rs. 9,14,877/-,it was submitted that the ld. CIT(A) confirmed disallowance of 10% of the expenses as made by the AO, which disallowance is on very higher side and the assessee company requested for reduction/deletion of the additions so made by the Revenue. 23. The learned D.R. submitted that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion amounting to Rs. 42,014/- on purchase of new fixed assets whereby the assessee company failed to produce evidences to substantiate its claim of purchase of new fixed assets, we find that no documentary evidence has been produced by the assessee company to prove the genuineness of the purchases of new fixed assets. It is incumbent upon the assessee company to have produced the evidences to the satisfaction of the Revenue as the claim of deduction of the expenses in the return of income has been made by the assessee company and primary onus to prove its claim in return of income lay on the assessee company , which the assessee company failed to do so. In earlier years also, similar addition has been made and the assessee company has accepted these additions on confirmation of the additions by the learned CIT(A) after the first appeal stood dismissed by the learned CIT(A) against the quantum additions. In view of our above discussions and reasoning, addition of Rs. 42,014/- towards disallowance of depreciation on purchase of new fixed assets , to the income of the assessee company needs to be confirmed/ sustained. We find no infirmity in the orders of the learned CIT(A which we c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,30,275/- as against the disclosure of substantially lower income at NIL . The assessee company filed appeal for the assessment year 2007-08 with the learned CIT(A) which was dismissed by the learned CIT(A). Similar and identical was the position for the assessment year 2006-07 with respect to the treatment of rental income and consequentially escapement of income . In our considered view, there is a tangible information/material which has come to the possession of A.O. having close nexus and live link with the formation of belief by the AO that income has escaped assessment based on which he has formed reason to believe that income has escaped assessment. Earlier, the Revenue has processed the return u/s 143(1) of the Act. No scrutiny assessment has been made u/s 143(3) of the Act. There is no opinion which was formed by the A.O. earlier and thus there is no question of any change of opinion. The reasons recorded were duly furnished to the assessee company by the Revenue. In our considered view, we do not find any irregularity or infirmity in the re-opening of the assessment by the Revenue in the instant case u/s 147/148 of the Act based on our discussions and reasoning above, hen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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