Income Tax Appellate Tribunal - Delhi
N & N Chopra Consultants (P) Ltd., New ... vs Dcit, New Delhi on 27 April, 2018
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E": NEW DELHI
BEFORE
SHRI G.D. AGRAWAL, HON'BLE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No.:- 2998/Del/2016
N & N Chopra Consultants (P) Ltd. DCIT,
1006, Chiranjeev Tower, Circle-17(2)
43, Nehru Place Vs. New Delhi.
New Delhi 110 019
PAN AABCN6728Q
(Appellant) (Respondent)
Assessment Year: 2008-09
Assessee by: Shri Satish Aggarwal, CA
Department by : Shri S.R. Senapati, Sr. DR
Date of Hearing 31/01/2018
Date of 27/04/2018
pronouncement
ORDER
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER:
This appeal has been filed by the assessee against order dated 1.3.2016 passed by the Ld. CIT (Appeals)-6, Delhi for assessment year 2008-09 wherein, vide the impugned order, the Ld. CIT(Appeals) has upheld the levy of penalty of Rs. 13,31,975/- imposed u/s 271(1)(c) of the Income Tax Act, 1961 ( hereinafter called the 'Act').
2. The brief facts of the case are that return of income was filed declaring an income of Rs. 60,240,323/- on 23.9.2008. Subsequently, the case was selected for scrutiny assessment. Earlier a survey had been conducted on 9.8.2007 at the premises of the assessee situated at 1006, Chiranjiv Tower, Nehru Place, New Delhi. During the survey the assessee had made a surrender of Rs. 5,00,00,000/-. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee had credited an amount of Rs. 49,999,000/- under the head voluntary income and further the assessee had also shown an addition of fixed assets amounting to Rs. 5,94,34,866/- during the year under consideration. The AO required the assessee to produce the purchase bills of the additions made to the fixed assets. The assessee could not produce the bills regarding the purchase of fixed assets but submitted that the assets were duly entered in the fixed assets register maintained by him. The AO held that in absence of bills the existence of assets was not proved. He proceeded to disallow the depreciation of Rs. 70,50,000/- claimed on the assets which were not supported by the purchase bills. On appeal, the Ld. CIT (Appeals) gave partial 2 relief to the assessee by deleting the disallowance of depreciation on assets' purchase whose bills could be produced before the Ld. CIT (A). Thereafter, the AO proceeded to impose a penalty of Rs. 13,31,975/- u/s 271(1)(c) of the Act on the depreciation disallowance. This penalty was upheld by the Ld. CIT (Appeals). Now, the assessee has approached the ITAT and has challenged the confirmation of the penalty by the Ld. CIT (Appeals).
3. The Ld. AR submitted that the disallowance of depreciation was made as the assessee could not produce the copies of bills which had been destroyed due to flooding of its premises at 192/40, Chitranjan Park, New Delhi where the bills were stored. It was further submitted that this plea has been taken before the AO but the same was rejected. It was further submitted that the Ld. CIT (Appeals) had allowed partial relief to the assessee in the quantum appeal by allowing claim of depreciation on fixed assets amounting to Rs. 1,21,92,470/- for which the bills could be retrieved. It was further submitted that the explanation of the bills not being available was bona fide and that the Ld. CIT (Appeals) had also duly noted in his appellate order that the inability of the assessee to produce all the bills stemmed from the fact that the premises of the assessee had been flooded and the 3 bills and vouchers were destroyed. He also drew our attention to copy of letter written to the National Insurance Company Ltd. dated 22nd July, 2008 informing the insurance Company regarding the damage due to flooding by water and requesting the Insurance Company to depute a surveyor to assess the damages. It was submitted that the penalty deserved to be deleted as the assessee had a bona fide reason for non-production of the purchase bills.
4. In response, the Ld. Senior Departmental Representative placed reliance on the concurrent findings and observations of the lower authorities and submitted that the penalty had been rightly imposed and confirmed.
5. We have heard the rival submissions and have perused the material on record. The facts in this case are undisputed. It is the contention of the assessee that the reason for non production of the bills of purchase of fixed assets was that the premises of the assessee got flooded and part of the records got destroyed. The Ld. CIT (Appeals), while deciding the quantum appeal, has duly noted this fact and has admitted bills of fixed assets to the tune of Rs. 12,19,24,270/- under Rule 46A of the Income Tax Rules, 1962. The Ld. CIT (Appeals) has also noted that the 4 correspondence of the assessee with National Insurance Company was also filed before him and the same also corroborated the contentions of the assessee. Thereafter, the Ld. CIT (Appeals) gave partial relief to the assessee in the quantum proceedings to the extent of the bills which could be produced before him but denied relief in respect of bills which were not available to be filed before him. Penalty was also levied on the quantum addition which was upheld by the Ld. CIT (Appeals). Thus, the question before us is whether penalty u/s 271(1)(c) could have been imposed on the amount of depreciation claimed on addition to fixed assets which could not be substantiated due to the premises of the assessee having been flooded with water and the records having been destroyed. A perusal of the order of the Ld. CIT (Appeals) shows that the Ld. CIT (Appeals), in the quantum of proceedings, has accepted that there was a bona fide reason for non production of original bills before the AO with respect to addition to fixed assets. However, the Ld. CIT (Appeals) did not consider this explanation of the assessee a sufficient ground for deletion of penalty.
5.1 Explanation 1 to section 271 (1 ) (c) of the Act states that where in respect of any facts material to the computation of total 5 income of any person under the Act, such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purpose of clause (c) of section 271 (1)
(c), be deemed to represent the income in respect of which particulars have been concealed. In other words, the necessary ingredients for attracting Explanation 1 to section 271(1) (c) are that (i) the person fails to offer the explanation, or (ii) he offers the explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or (iii) the person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him. If the case of any assessee falls in any of these three categories, then the deeming provision provided in Explanation 1 to section 271 (1)( c) comes into play, and the amount added or disallowed in computing the total income shall 6 be considered as the income in respect of which particulars have been concealed, for the purposes of clause ( c) of section 271 (1), and the penalty follows. However, if the assessee is able to offer an explanation, which is not found by the authorities to be false, and assessee has been able to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him, the assessee shall be out of the clutches of Explanation 1 to section 271(1) (c) of the Act, and in that case, the penalty shall not be imposed.
5.2 In the present case, the assessee has discharged the onus cast on it in terms of Explanation 1 to sec. 271(1) (c) of the Act by submitting all material facts regarding the issue and an explanation which has not been found to be false. The addition had been made by the Assessing Officer without establishing conclusively the concealment of income during the course of assessment proceedings It is settled law that mere non- acceptance of explanation does not necessarily lead to inference of concealment. It is also settled law that where an explanation offered by the assessee has not been accepted, it is open to the Revenue to treat a particular sum as income from undisclosed sources. However, from the mere fact that the explanation of the 7 taxpayer has not been accepted, it cannot necessarily be inferred that the amount constituted concealed income which would attract penalty under section 271 (1)( c). The burden of proving that the assessee was guilty of offence is on the department. If apart from pointing out the falsity of explanation, or from rejecting the explanation, no material is brought in as evidence by the AO to prove concealment, it is to be held that the onus resting on the department has not been discharged. Accordingly, it goes without saying that the AO must have some definite evidence to refuse the assessee's claim or evidence or explanation before he proceeds to impose the penalty by discarding the explanation offered by the assessee. ITAT Delhi in the case of Nuchem Ltd vs. DCIT reported in 19 TTJ 177 (Del) has held that where certain additions and disallowances were made which were confirmed up to the stage of the Tribunal, unless there is a finding that the explanation given by the assessee was false, the claim of assessee cannot be treated as mala fide and it would be covered by the proviso to Explanation 1. Accordingly, under the facts and circumstances of the case we hold that it is not a fit case for levy of penalty and we, therefore, set aside the order of the Ld. CIT (Appeals) and direct the AO to delete the penalty. 8
6. In the final result the appeal of the assessee stands allowed.
This decision was pronounced in the Open Court on 27th April, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA)
HON'BLE PRESIDENT JUDICIAL MEMBER
Dated: 27 /04/2018
Veena
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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