Income Tax Appellate Tribunal - Delhi
Lodhi Property Company Ltd., New Delhi vs Assessee on 26 August, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'D', NEW DELHI)
BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER
AND SHRI H. S. SIDHU ,JUDICIAL MEMBER
I.T.A. No.61& 62 /Del/2013
Assessment year : 2005-06 & 2006-07
Lodhi Property Company Ltd., Vs. ACIT, Circle 4(1),
15AB, Amon New Delhi, New Delhi
Lodhi Road, New Delhi - 110 003
GIR / PAN:AABCH0299N
(Appellant) (Respondent)
Appellant by : Shri R. S. Singhvi, CA
Respondent by : Ms. Kesang Y. Sherpr, Sr. DR
Date of hearing : 10.08.2015
Date of pronouncement : 26.08.2015
ORDER
PER H. S. SIDHU, JM:
The assessee by filling present appeals sought to set aside the common order dated 25.10.2012 passed by Ld. CIT(A) upholding penalty of Rs.54,85,590/- and Rs.56,60,190/- imposed by the A.O. u/s 271(1)(c) of the I. T. Act, 1961 (hereinafter referred as "Act") for the Assessment Years 2005-06 and 2006-07. Since, the issue involved in both these appeals is identical and both these appeals were heard together, therefore, for the sake of convenience, both these appeals are being disposed of by way of this common order. The grounds taken by the assessee in both these appeals are 2 ITA No61/Del/2013 identical and hence, grounds taken in I.T.A. No. 61/Del/2013 are reproduced as under:
"1. That on the facts and in the circumstances of the case, the CIT(A) erred in law in not holding that penalty of Rs. 54,85,590 imposed by the assessing officer under section 271(1)(c) of the Income-tax Act, 1961 ("the Act") is without jurisdiction and barred by limitation.
1.1 That on the facts and in the circumstances of the case, the CIT(A) erred in law in not holding that the penalty order dated 14.03.2012 passed by assessing officer was barred by limitation prescribed under section 275 of the Act.
2. That on the facts and in the circumstances of the case, the ClT(A) erred in law in upholding the penalty levied by the assessing officer upon the appellant without appreciating that there was no concealment of income or furnishing of inaccurate particulars of income by the appellant.
2.1 That on the facts and in the circumstances of the case, the CIT(A) erred in law in upholding the penalty order merely on the basis of the findings returned by the Tribunal in the quantum proceedings.
2.2 That on the facts and in the circumstances of the case, the CIT(A) erred in law in not appreciating that all material particulars were truly, fully and accurately furnished and disclosed by the appellant in the return of income and accompanying documents.
2.3 That on the facts and in the circumstances of the case, the CIT(A) erred in law in upholding the levy of penalty without appreciating that in none of the proceedings, any finding of particulars, having been concealed or inaccurately furnished, was returned or recorded by any of the authorities.
3. Without prejudice, that on the facts and in the circumstances of the case, the CIT(A) erred in law in failing to appreciate that the disallowances made in the quantum proceedings were debatable in
3 ITA No61/Del/2013 nature and were predicated on bona fide difference of opinion between the appellant and the assessing officer.
3.1 That on the facts and in the circumstances of the case, the CIT(A) erred in law in upholding the penalty levied by the assessing officer, without appreciating that the disallowance of expenses which were admittedly revenue in nature had been made purely on the basis of difference of opinion between the appellant and the assessing officer as regards the question whether there was complete cessation/ discontinuance of business by the appellant or a mere temporary lull.
3.2 That on the facts and in the circumstances of the case, the CIT(A) erred in law in upholding the penalty levied by the assessing officer, without appreciating that the expenditure written off by the appellant in relation to the Umaid Bhawan Palace Project pertained to salaries, expenses towards traveling, accommodation, consultancy charges, legal charges and technical assistance charges.
3.3 That on the facts and in the circumstances of the case, the CIT(A) erred in law in 'upholding the penalty levied by the assessing officer, without appreciating that the assessing officer had made disallowance thereof on the incorrect assumption that (a) expenditure incurred in relation to Umaid Bhawan Palace represented "project costs" and (b) at the time of incurring thereof, the assessee was not carrying on any business.
4. That without prejudice to above, on the facts and in the circumstances of the case, the CIT(A) erred in law in hurriedly upholding the penalty order, without waiting for the decision of the quantum appeal pending before Hon'ble Delhi High Court."
2. Briefly stated the facts of the case are that the assessee filed return of income for the Assessment Year 2005-06 and during processing, the case of assessee was picked up for scrutiny and consequently, notices dated 30.10.2006 and 19.06.2007, u/s 143(2), were issued. In response, Ld. A.R. appeared from time to time and submitted the documents relied upon by the 4 ITA No61/Del/2013 assessee. During the course of assessment proceedings, the A.O. disallowed Rs.1,95,500/-, Rs.7,99,025/-, Rs.1,39,33,353/- and Rs.63,142/- on account of fee paid to ROC, disallowance of claim of depreciation, disallowance of Umaid Bhawan Palace Project cost written off and disallowance of other expenses respectively by passing order and subsequently, assessed the income at Rs.1,49,91,020/- in I.T.A.No. 61/Del/2013 and Rs.9,63,961/- and Rs.1,58,51,811/- on account of disallowance of claim of depreciation and other expenses respectively in I.T.A.No. 62/Del/2013.
3. Against the assessment order passed by the A.O., assessee filed appeals before Ld. CIT(A), who vide impugned order dated 25.10.2012, upheld the order of A.O. dated 14.03.2012, against which assessee filed appeal before ITAT, who, vide order dated 21.07.2011, upheld the order of Ld. CIT(A). Against this order of ITAT dated 21.07.2011, assessee has filed appeal before Hon'ble Delhi High Court, which is pending for adjudication.
4. On the basis of assessment order dated 28.12.2007, penalty proceedings u/s 271(1)(c) were initiated to which, assessee filed reply dated 07.03.2012, finding no force in the contention of assessee, penalty @ 100% in both the years i.e. Rs.54,85,590/- and Rs.56,60,190/- were imposed.
5. The assessee again challenged the order passed by Ld. ACIT, Circle 4(1), New Delhi imposing penalty u/s 271(1)(c), before Ld. CIT(A), who has dismissed the appeal of assessee and the impugned order is now under challenge before ITAT.
6. The A.O. considered the same and rejected the contention raised by the assessee in reply dated 07.03.2012 and imposed penalty @ 100% in both the yeas. Aggrieved, the assessee filed appeal before Ld. first appellate 5 ITA No61/Del/2013 authority who dismissed the appeals of the assessee and upheld the penalty imposed by the A.O.
7. The Ld. A.R. contended inter alia, that the impugned order passed by Ld. CIT(A) is not justified in confirming the penalty on the alleged ground of furnishing inaccurate particulars of income; that's mere disallowance of a claim cannot be the basis for imposing penalty as all the particulars relating to disallowances, were duly furnished and there is no case of concealment or furnishing of inaccurate particulars of income; that the amount of expenses claimed by the assessee were admittedly revenue in nature and the disallowance of expenses is based upon difference of opinion between the appellant assessee and the A.O. The Ld. counsel for the assessee further submitted that Ld. CIT(A) vide impugned order has erred in law in upholding the penalty levied by A.O. without appreciating that the A.O. had made disallowance merely on the assumptions and surmises that expenditure incurred in relation to Umaid Bhawan Palace Project under the head 'project cost' at the time of incurring thereof and the assessee was not carrying on any business; that since the disallowances made in the quantum proceedings were debatable in nature and were disputed on bona fide difference of opinion. Ld. CIT(A) has erred in up[holding the order of A.O. and relied upon the judgement cited by Ld. A.R. as noted below:
i) CIT Vs Liquid Investors & Trading Co. (Del.)
ii) CIT Vs Nayan Builders & Developers (P) Ltd. 368 ITR 722
iii) CIT Vs Reliance Petroproducts (P) Ltd. 322 ITR 158 (S.C.)
iv) Karan Raghav Exports (P) Ltd Vs CIT 349 ITR 112 (Del.)
v) New Holland Tractors (P) Ltd. Vs CIT (Del)
vi) Carefour WC and C India P. Ltd. Vs DCIT 368 ITR 692.
vii) CIT Vs Samsung India Electronics Ltd. 356 ITR 354 (Del.) 6 ITA No61/Del/2013
8. On the other hand, Ld .D.R. relied upon the order of A.O. in imposing penalty u/s 271(1)(c) and impugned order passed by Ld. CIT(A) by contending inter-alia that since there was concealment of income and furnishing of inaccurate particulars, the order has been validly passed; That since the assessee acquired Lodhi Hotel and demolished it and planned to construct a new one, hence, business of Lodhi Hotel discontinued, the Assessee's plea that its hotel business was continuing and had only been suspended temporarily is factually incorrect; so, it is a case of discontinuation of the old business and the new business was yet to commence. Ld. D.R. further submitted that no interconnection, interdependence or interlacing between Umaid Bhawan Palace, Jodhpur, a new business and Lodhi Hotel business, which is evident from audit report filed with I. T. Return for Assessment Year 2004-05 has been established; that the assessee did not supply copy of agreement entered into between Umaid Bhawan Palace Project being a joint venture with Marudhar Hotels Pvt. Ltd. despite demand; that the assessee has not furnished any evidence to establish interconnection or interdependence or interlacing between its Lodhi Hotel business and Umaid Bhawan Palace Project; that none of the expenses claimed by the assessee qua Umaid Bhawan Palace Project have been incurred in financial year 2004-05, relevant to the Assessment Year 2005-06; that additions have been upheld by the ITAT vide order dated 21.07.2011 as the assessee has willfully furnished inaccurate particulars of its income; that the claim of ROC fee was made by the assessee whereas the same is not admissible as per judgements cited as PSIDC Ltd. Vs CIT, 225 ITR 792 (S.C.) and Brooke Bond India Ltd. Vs CIT 225 ITR 798 (S.C.);
"that since the assets in question have not been used for the purpose of 7 ITA No61/Del/2013 business, the claim of the depreciation thereon amounting to Rs.7,99,025/-"
are not allowable, hence added to the income of assessee; that the assessing authorities have disallowed the claim of project cost written off by the assessee for the Umaid Bhawan Palace is capital in nature - claiming expenses qua Umaid Bhawan Palace Project alleged to have been incurred in financial year 2004-05 relevant to Assessment Year 2005-06, and as such, the additions have been duly upheld by ITAT vide order dated 21.07.2011 and penalty has been rightly imposed and Ld. D.R. prayed for dismissal of appeal of the assessee.
9. We have heard both the parties, considered rival contentions and perused the material on record and the orders of authorities below as well as order of ITAT dated 21.07.2011. Undisputedly, the assessee has claimed expenses to the tune of Rs.1,49,91,020/- during the Assessment Year 2005- 06 on account of fee paid to ROC, depreciation, Umaid Bhawan Palace Project cost written off and other expenses in Assessment Year 2005-06, and Rs.1,68,15,772/- on account of claim of depreciation and other expenses in Assessment Year 2006-07, which have been disallowed by the A.O. being not sustainable. Ld. A.R. relied upon Hon'ble Apex Court's judgement in the case of CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (S.C.) wherein it is held that mere making a claim which is not sustainable in law, by itself does not amount to furnishing of inaccurate particulars of income of the assessee. For ready reference the operative portion of the above judgement is reproduced below:
"Words and Phrases - " Particulars", meaning of. A glance at the provisions of Section 271(1)(c) of the Income ax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of 8 ITA No61/Del/2013 his income. The meaning of the word "particulars" used in Section 271(12)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return canto amount to furnishing inaccurate particulars.
Decision of Gujarat High Court affirmed."
10. He further stated that keeping in view he findings of A.O., Ld. CIT(A) and the Tribunal, the admission of appeal filed by assessee before Hon'ble Jurisdictional High Court, whether penalty in dispute is leviable or not, is debatable at this stage therefore the penalty in dispute deserves to be deleted. In support of his contention, he relied upon the decision of Hon'ble Bombay High Court in the case of CITVs Nayan Builders and Developers dated 08.07.2014. It is further argued by Ld. Counsel for the assessee that the penalty is not leviable because the matter is admitted in the Hon'ble Delhi High Court and pending for adjudication and the issue is debatable. In support of his contention, he relied upon the order dated 08.07.2014 passed 9 ITA No61/Del/2013 by Hon'ble High Court of Bombay in the case of CIT Vs Nayan Builders and Developers, which reads as under:
"Having head Mr. Ahuja, Ld. Counsel appearing on behalf of the appellant, we find that this appeal cannot be entertained as it does not raise any substantial question of law. The imposition of penalty was found not to be justified and the appeal was allowed. As a proof that the penalty was debatable and arguable issue, the Tribunal referred to the order on assessee's appeal in quantum proceedings and the substantial questions of law which have been framed therein. We have also perused that order dated 27th September 2010 admitting income tax appeal No.2368 of 2009. In our view, there was no case made out for imposition of penalty and the same was rightly set side. The appeal raises no substantial question of law, it is dismissed. No costs."
11. Ld. Counsel for the assessee further stated that against the order of ITAT, assessee has filed appeal before Hon'ble Delhi High Court, which his pending for adjudication. He has also filed a copy of order dated 24.07.2014 of Hon'ble High Court to support this contention:
"In the High Court of Delhi at New Delhi I.T.A.278/2012 I.T.A.279/2012 I.T.A.280/2012 Hotel Scopevista Ltd. Appellant Through: Mr. Ajay Vohra, Ms Kavita Jha and Mr. Vaibhav Kulkarni, Advs.
Vs.
CIT Respondent
Through: Mr. Balbir Singh, Sr. Standing Counsel With Mr. Abhishek Singh Baghel, Adv.
Coram:
Hon'ble Mr. Justice Sanjiv Khanna Hon'ble Mr. Justice V. Kameswar Rao ORDER 24.07.2014, Heard.
10 ITA No61/Del/2013 The following substantial question of law is framed:
?Whether the Income Tax Appellate Tribunal is right in disallowing depreciation, expenditure incurred under the Memorandum of Understanding dated 1.7.2003 and administrative expenses on the ground that the assessee was not carrying on business?? Filing of paper book is dispensed with. Liberty is granted to the parties to file the documents/papers as per the Delhi High Court Rules.
Sanjiv Khanna, J
V. Kameswar Rao, J July 24, 2014."
12. Keeping in view the facts and circumstances explained above, we are of the considered view that against the quantum addition sustained up to the stage of ITAT, the assessee has filed appeal before Hon'ble Delhi High Court (supra), we are not adjudicating the merits of the case as it will prejudice to the interest of revenue authorities. In the interest of justice, we set aside the impugned order passed by first appellate authority dated 25.12.2012 and restore the matter to the A.O. who will decide the same after decision of Hon'ble High Court in the quantum appeal No.278, 279 and 280/2012, after giving adequate opportunity of being heard to the assessee.
13. In the result, both the appeals in I.T.A. Nos. 61/Del/2013 and 62/Del/2013, filed by assessee are allowed for statistical purposes.
14. Order pronounced in the open court on 26th Aug., 2015.
Sd./- Sd./-
( N. K. SAINI) (H. S. SIDHU)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date: 26th Aug., 2015
Sp
11 ITA No61/Del/2013
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
True copy.
By Order (ITAT, New Delhi).
S.No. Details Date Initials Designation
1 Draft dictated on 20/8 Sr. PS/PS
2 Draft placed before author 21/8 Sr. PS/PS
Draft proposed & placed before the
3 JM/AM
Second Member
Draft discussed/approved by Second
4 AM/AM
Member
5 Approved Draft comes to the Sr. PS/PS 26/8/15 Sr. PS/PS
6 Kept for pronouncement 26/8 Sr. PS/PS
7 File sent to Bench Clerk 26/8 Sr. PS/PS
Date on which the file goes to Head
8
Clerk
9 Date on which file goes to A.R.
10 Date of Dispatch of order