Income Tax Appellate Tribunal - Delhi
Udaipur Hotels Ltd., New Delhi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H
'H' : NEW DELHI
BEFORE SHRI G.D.AGRAWAL,
G.D.AGRAWAL, VICE PRESIDENT AND
SHRI RAJPAL YADAV,
YADAV, JUDICIAL MEMBER
ITA No.4192/Del/2011
No.4192/Del/2011
Assessment Year : 2002-
2002-03
M/s Udaipur Hotels Limited, Vs. Assistant Commissioner of
61, Ground Floor, Income Tax,
World Trade Centre, Circle-
Circle-18(1),
Barakhamba Lane, C.R.Building,
New Delhi - 110 001. New Delhi - 110 002.
PAN : AAACU5446K.
(Appellant) (Respondent)
Appellant by : Shri Salil Agarwal, Advocate and
Shri S.Gupta, CA.
Respondent by : Shri K.V.K.Singh, Sr.DR.
ORDER
PER G.D.AGRAWAL, G.D.AGRAWAL, VP :
This appeal of the assessee is directed against the order of learned CIT(A)-XXI, New Delhi dated 24th August, 2011 for the AY 2002-
03.
2. Ground No.1 of the assessee's appeal reads as under:-
"That ld.CIT(Appeals) has erred both on facts and in law in confirming the action of the learned Assessing Officer in levying penalty of Rs.97,99,303/- u/s 271(1)(c) of the Income Tax Act, 1961."
3. The other grounds raised by the assessee are only arguments in support of above ground No.1.
2 ITA-4192/Del/2011
4. At the time of hearing before us, it was stated by the learned counsel that during the accounting year relevant to the assessment year under consideration, the assessee acquired the hotel, viz., Laxmi Vilas Palace, Udaipur under the disinvestment process of India Tourism Development Corporation Ltd. (ITDC). Till 25th February 2002, the business of the hotel was carried on by ITDC and, from 26th February 2002, by the assessee. The assessee filed the return disclosing the loss of `2,86,58,220/-. The Assessing Officer completed the assessment determining the loss at `12,09,193/-. Against the assessment order, the assessee filed the appeal before the learned CIT(A) which was dismissed by him vide order dated 29th March, 2007. Against the order of learned CIT(A), the assessee filed appeal before the ITAT. However, the assessee withdrew the appeal because the original return filed by the assessee was late and, therefore, the assessee was not entitled to carry forward of depreciation. Once the assessee is not entitled to carry forward of depreciation, the quantum of loss determined was only of academic importance, therefore, the assessee withdrew the appeal from the ITAT. The Assessing Officer levied the penalty under Section 271(1)(c) in respect of following two disallowances:-
(i) Deferred revenue expenditure, which was claimed as revenue expenditure.
(ii) Disallowance of business loss for the period 01.04.2001 to 25.02.2002.
5. The learned counsel for the assessee referred to the assessment order and pointed out that deferred revenue expenditure of `1,45,48,371/- was incurred by the ITDC on renovation of restaurant, bar & lounge, corridor, guest rooms, stair case, entrance lobby etc. He stated that in the hotel business, the expenditure on renovation of 3 ITA-4192/Del/2011 hotel premises was an expenditure in the nature of repairs and maintenance and was allowable as a revenue expenditure and rightly claimed as revenue expenditure. That the Assessing Officer disallowed it holding the same to be capital expenditure. That the expenditure was clearly in the nature of revenue expenditure and that the expenditure was incurred by ITDC from whom the assessee acquired the hotel. That the assessee had furnished all the particulars in this regard before the Assessing Officer. That the Assessing Officer had disallowed the loss of `1,62,58,105/- for the period 01.04.2001 to 25.02.2002 on the ground that the assessee could not produce necessary details in the form of bills, vouchers etc. It is submitted by the learned counsel that for the aforesaid period, the hotel was run by ITDC and not by the assessee. That the ITDC is a government undertaking and they had not supplied the necessary bills, vouchers etc. to the assessee. That the aforesaid facts were stated by the assessee to the Assessing Officer in the reply dated 21.02.2005 in which the assessee had also supplied the permanent account number of ITDC and had requested the Assessing Officer that the department can make necessary verification from ITDC. He further submitted that merely because the assessee withdrew the appeal from the ITAT and accepted the loss determined by the Assessing Officer, it would not amount to concealment of income. Even after the assessment by the Assessing Officer, the net result was loss. The assessee had filed the return late, therefore, it was not entitled to carry forward of loss. In this view of the matter, the assessee had withdrew the appeal from the ITAT. That the Hon'ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. - 322 ITR 158 (SC) has stated that the assessee cannot be penalized for furnishing of inaccurate particulars unless the details furnished by the assessee are found to be incorrect, bogus or false. It is not the case of the Revenue that the assessee furnished any inaccurate or false details. Therefore, the aforesaid decision of Hon'ble Apex Court would be squarely applicable. He also stated that in the 4 ITA-4192/Del/2011 following cases, the Hon'ble Jurisdictional High Court, while following the decision of Hon'ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (supra), has cancelled the penalty levied under Section 271(1)(c):-
(i) CIT Vs. Krishna Maruti Ltd. - 330 ITR 547 (Delhi).
(ii) CIT Vs. IFCI Ltd. - 328 ITR 611 (Delhi).
(iii) CIT Vs. Mushashi Autoparts India P.Ltd. - 330 ITR 545
(Delhi).
6. The learned DR, on the other hand, relied upon the orders of authorities below and he stated that the assessee has furnished inaccurate particulars in respect of business loss and deferred revenue expenditure. That the disallowance of these two expenditure was upheld by the CIT(A) and assessee withdrew its appeal from the ITAT.
He, therefore, submitted that the claim of this expenditure/loss by the assessee was wrong and penalty under Section 271(1)(c) was rightly levied by the Assessing Officer and sustained by the learned CIT(A). In support of this contention, he relied upon the decision of Hon'ble Jurisdictional High Court in the case of Commissioner of Income-tax Vs. Zoom Communication P.Ltd. - 327 ITR 510.
7. We have carefully considered the arguments of both the sides and have perused the material placed before us. We find that the Hon'ble Jurisdictional High Court in the case of Zoom Communication P.Ltd. (supra) relied upon by the learned DR considered the decision of Hon'ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (supra) relied upon by the learned counsel for the assessee and held as under:-
"In the case of Reliance Petroproducts P.Ltd. [2010] 322 ITR 158 (SC), the addition made by the Assessing Officer in 5 ITA-4192/Del/2011 respect of the interest claimed as a deduction under section 36(1)(iii) of the Act was deleted by the Commissioner of Income-tax (Appeals) though it was later restored, by the Tribunal, to the Assessing Officer. The appeal filed by the assessee against the order of the Tribunal was admitted by the High Court. It was, in these circumstances, that the Tribunal came to the conclusion that the assessee had neither concealed the income nor filed inaccurate particulars thereof. In recording this finding, the Tribunal felt that if two views of the claim of the assessee were possible, the explanation offered by it could not be said to be false. This, however, is not the factual position in the case before us. The facts of the present case thus are clearly distinguishable.
It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the disadvantage of the assessee. The court cannot overlook the fact that only a small percentage of the income-tax returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be 6 ITA-4192/Del/2011 liable to imposition of penalty, even if he was not acting bona fide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have.
We find that the assessee before us did not explain either to the income-tax authorities or to the Income-tax Appellate Tribunal as to in what circumstances and on account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee-company. We cannot lose sight of the fact that the assessee is a company which must be having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit. In the absence of any details from the assessee, we fail to appreciate how such deductions could have been left out while computing the income of the assessee-company and how it could also have escaped the attention of the auditors of the company."
7 ITA-4192/Del/2011
8. Thus, after considering the decision in the case of Reliance Petroproducts Pvt.Ltd. (supra), it was stated by the Hon'ble Jurisdictional High Court that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee but if the claim, besides being incorrect in law is mala fide, Explanation 1 to Section 271(1)(c) would come into play. If the assessee's claim is bona fide, then he will not be liable for penalty. Therefore, the precise question to be adjudicated by us is whether the assessee's claim was bona fide or mala fide.
9. After considering the facts of the case and the arguments of both the sides, we do not find any justification to hold the assessee's action to be mala fide. Undisputedly, during the year under consideration, the assessee acquired the hotel, viz., Laxmi Vilas Palace, Udaipur under the disinvestment process from ITDC. The Assessing Officer disallowed the expenditure which was incurred by ITDC during which, the hotel was run by them on the ground that the assessee could not produce the bills, vouchers etc. The assessee explained during the course of assessment proceedings itself that these details are in the possession of ITDC and not the assessee. The relevant portion of the assessee's reply dated 21.02.2005 addressed to ACIT, Circle-18(1), New Delhi reads as under:-
"The supporting bills, vouchers etc. are not available with us and they were with India Tourism Development Corporation Ltd., Government of India because they pertain to the period when the company was with them. The PAN of India Tourism Development Corporation Limited is AAACI0825J and they are being assessed at Circle 11(1), C.R.Building, New Delhi."
8 ITA-4192/Del/2011
10. However, the Assessing Officer, without making any verification or enquiry from ITDC, disallowed the expenses. Non-production of the vouchers may be justified for disallowing the expenditure claimed by the assessee but, it cannot be held to be an act of concealment, specially when the assessee had a reasonable cause for its inability to produce the same. So far as the disallowance of renovation expenditure holding the same as capital expenditure is concerned, we are of the opinion that in the case of a hotel whether an expenditure on the renovation of hotel premises i.e. restaurant, bar & lounge, corridor, rooms, staircase, entrance lobby etc. is a capital or revenue is a highly debatable issue. Therefore, merely because the expenditure was claimed by the assessee as a revenue expenditure but treated as capital expenditure by the Revenue would not be sufficient to hold that the assessee either furnished inaccurate particulars or concealed the income. It is not the case of the Revenue that the assessee furnished any inaccurate or false details. Moreover, in the case of the assessee, the returned loss was `2,86,58,220/- while the loss determined by the Assessing Officer after disallowance of certain expenditure was `12,09,190/-. The assessee has filed the return of income late for the year under consideration. Therefore, it is not entitled to carry forward of loss. In these circumstances, there cannot be any intention to disclose more loss. The appeal filed by the assessee in the quantum proceedings before the ITAT has been withdrawn by it solely on this ground i.e. the amount of loss determined is of academic value. In view of the totality of above facts, we do not find any justification to hold that the action of the assessee in claiming the expenditure was mala fide or with any bad intention. Merely because the Assessing Officer disallowed the expenditure, it would not amount to concealment of income or furnishing of inaccurate particular. In view of the above, we, respectfully following the decision of Hon'ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (supra) and of Hon'ble Jurisdictional High Court in the case of Zoom Communication 9 ITA-4192/Del/2011 P.Ltd. (supra), cancel the penalty levied under Section 271(1)(c) of the Act.
11. In the result, the appeal of the assessee is allowed.
Decision pronounced in the open Court on 20th July, 2012.
Sd/- Sd/-
(RAJPAL YADAV)
YADAV) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 20.07.2012
VK.
Copy forwarded to: -
1. Appellant : M/s Udaipur Hotels Limited,
61, Ground Floor,
World Trade Centre,
Barakhamba Lane,
New Delhi - 110 001.
2. Respondent : Assistant Commissioner of
Income Tax,
Circle-
Circle-18(1),
C.R.Building,
New Delhi
Delhi - 110 002.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar