Income Tax Appellate Tribunal - Delhi
Krishna Sachdeva, New Delhi vs Assessee on 16 September, 2009
I.T.A. No. 4384 /Del/2009
1/7
IN THE INCOME TAX APPELLATE TRIBUNAL,
NEW DELHI, BENCH 'F '
BEFORE SHRI DEEPAK R. SHAH, ACCOUTANT
MEMBER AND RAJPAL YADAV, JUDICIAL MEMBER
ITA No. 4384 /Del/2009
(Assessment Year 1998-99)
Krishna Sachdeva, Vs. DCIT, Circle 26(1),
112-A, Ekta Enclave, New Delhi.
New Delhi-110087
(Appellants) (Respondents)
PAN / GIR No. 9-K/CC-8/ABIPS7189P
Appellant by: Shri Rahul Khare, Adv.
Respondent by: Shri B K Gupta, Sr. DR
ORDER
PER RAJPAL YADAV, JM:
1. The assessee is in appeal before us against the order of Ld. CIT(A) dated 16.09.2009 passed for Assessment Year 1998-99. The grounds of appeal taken by the assessee are not in consonance with Rule 8 of ITAT Rules. They are argumentative and descriptive in nature. The solitary grievance, the assessee is that the Ld. CIT(A) has erred in confirming the penalty of Rs.2 lacs imposed u/s 271(1)(c).
I.T.A. No. 4384 /Del/2009 2/7
2. The brief facts of the case are that a notice u/s 142(1) of the Act was served on the assessee on 20.01.1999 directing her to file the return of income for the Assessment Year 1998-99. According to the A.O., the return was not filed. However, in response to the other notice, she has filed her return of income on 26.02.2000 declaring a loss of Rs.1,70,143/-. The A.O. had issued notice u/s 143(2) and in response to the notice Shri Rajiv Arora, CA, tax consultant of the assessee appeared from time to time. On scrutiny of accounts it revealed to the A.O. that in Schedule 'H' in P & L account the assessee has debited a sum of Rs.7 lacs under the head 'loss on sale of assets'. According to the A.O., the loss on sale of assets is a capital loss and it cannot be set of against the business income as per Section 71(3) of the I. T. Act. Hence, he disallowed the claim of the assessee. Similarly, the A.O. found that an audit fee of Rs.1.25 lacs payable pertained to the period before 01.04.1997, which is not allowable to the assessee in this accounting year. After considering these two items and the loss shown by the assessee in her return of income at Rs.1,70,143/-, he determined the taxable income of the assessee at Rs.6,54,860/-. The A.O. initiated the penalty proceedings u/s 271(1)(c) on I.T.A. No. 4384 /Del/2009 3/7 account of furnishing inaccurate particulars by debiting the capital loss in the P & L account and claiming the set-of of it against the business income. It emerges out from the penalty order that the A.O. had given an opportunity of hearing to the assessee vide notice dated 18.03.2008 whereby he directed the assessee to appear on 25.03.2008. According to the A.O., assessee did not attend the proceedings before him and he imposed the penalty of Rs.2 lacs.
3. On appeal, the assessee has filed the written submissions. She contended that he is an old lady of 87 years and she has not been carrying on any business activities for the last more than 12 years and she is not conversant with the complexities of tax laws. In pursuance to the notice issued by the A.O. requiring her to file the return, she approached the Chartered Accountant who has prepared the return. There was no intention to claim the loss because ultimately she is not going to earn any business income in future, which can be set of against this loss. The loss on sale of asset even if shown independently, then also, there would not be any taxable income. According to the assessee, she was not going to get any financial benefit by filing loss return because there was no scope for business in the I.T.A. No. 4384 /Del/2009 4/7 subsequent years. She relied upon the judgement of Hon'ble Supreme Court in the case of Motilal Padampat Sugar Mills Vs State reported in 118 ITR 326 and BTX Chemicals Pvt. Ltd. Vs CIT 155 Taxman 644 (Guj.) and CIT Vs Haryana Warehousing Corp. 314 ITR 215 (P & H). The Ld. CIT(A) has rejected the contention of the assessee on the ground that the assessee herself admitted that the return was compiled on the basis of audited accounts. She has the services of the C.A. and therefore, she cannot take the plea that she was not conversant with the complexity of tax laws. As far as the contention of the assessee is that she would not get any financial benefit because no business is being carried out for the last 12 years and there is no scope of any business activities in the subsequent yeas are concerned, Ld. CIT(A) has observed that nobody can be aptly certain about the future prospects of ones business and the sense of enterpreneurship always strive to gain profits. He rejected the appeal of the assessee.
4. The Ld. counsel for the assessee reiterated his contention as were raised before the 1st appellate authority. He further pointed out that the assessee had filed petition for insolvency that there has been no business activities against which such loss can be I.T.A. No. 4384 /Del/2009 5/7 claimed as set off. He emphasized that the assessee was not going to get any financial benefit by debiting this capital loss in the P & L account and setting of against the alleged business income. It indicates that there was no deliberate attempt at the end of the assessee. On the other hand, Ld. D.R. relied upon the order of Ld. CIT(A). He pointed out that the assessee has availed the services of the expert tax consultant and therefore, she is precluded to raise a plea that she was not conversant with the complexities of tax laws. In support of his contention, he relied upon the decision of Hon'ble High Court of Delhi rendered in the case of CIT Vs Escorts Finance Ltd. reported in 2009 TIOL 483 H.C.-DEL-IT in I.T.A. No.1005/2008.
5. We have duly considered the rival contentions and gone through the records. It is true that assessee has debited capital loss in the P & L account under the head 'loss on sale of assets'. This loss is in the nature of capital loss and cannot be debited to the P & L account,. It cannot be set of against the business income. This conduct of the assessee has to be seen with other surrounding circumstances. The assessee is an old lady of 87 years as alleged by the assessee before the CIT(A). She is not doing any business for the last more than 12 years and I.T.A. No. 4384 /Del/2009 6/7 there was no scope for business in the subsequent years. This conduct would indicate that if this capital loss was allowed to the assessee in the garb of business loss then it can be set of against business income in the subsequent years. But when there is no business activity for the last 12 years and no scope in the subsequent years, then it would indicate that it was a bona fide lapse while computing the income of the assessee for the purpose of filing the return. There appears not any deliberate attempt on the part of the assessee to hide a particular income from the department. It can be a possible error. The Hon'ble High Court of Punjab & Haryana in the case of CIT Vs Sidhartha enterprises Ludhiana reported in 908 of 2008 decided on 14.7.1999 has held that for visiting the assessee with penalty u/s 271(1)(c), there should be some element of deliberate default at the end of the assessee for furnishing inaccurate particulars of income. If an assessee has committed a mistake bona-fide then that would not be a case for imposing the penalty. The attending circumstances do indicate in the present case that there was no deliberate attempt at the part of the assessee to claim this capital loss in the P & L account.
I.T.A. No. 4384 /Del/2009 7/7 It is a bona fide mistake. Therefore, assessee does not deserve to be visited with penalty.
6. In the result, we allow the appeal of the assessee and delete the penalty.
7. This decision was pronounced in the open court on 31st Mar., 2010.
Sd.-/ Sd./-
(DEEPAK R. SHAH) (RAJPAL YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
st
Dated: 31 Mar., 2009
Sp.
Copy forwarded to
1. Appellant
2. Respondent
3. CIT True copy: By order
4. CIT(A)
5. DR Dy. Registrar, ITAT, New Delhi