Delhi High Court
Cit vs Societex on 19 July, 2012
Author: S. Ravindra Bhat
Bench: S. Ravindra Bhat, R.V. Easwar
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision : 19th July, 2012.
+ ITA 1190/2011
CIT ..... Appellant
Through Mr. Abhishek Maratha, sr. standing counsel
with Ms. Anshul Sharma, Adv.
versus
SOCIETEX ..... Respondent
Through Mr. Kaanan Kapur, Adv.
CORAM:
MR. JUSTICE S. RAVINDRA BHAT
MR. JUSTICE R.V. EASWAR
S. RAVINDRA BHAT,J: (OPEN COURT)
The Revenue claims to be aggrieved by the order dated 25.3.2011 of the
Income Tax Appellate Tribunal („Tribunal‟, for short) whereby its appeal was
dismissed. It urges that the Tribunal fell into error in holding that the penalty to the
extent of Rs.10,09,948/- under Section 271(1)(c) of the Income Tax Act, 1961 („Act‟,
for short), was not leviable on the assessee.
2. The assessee is engaged inter alia in rendering consultancy services. It had,
for the assessment year 1997-98, claimed depreciation in respect of the properties -
one at Bangalore and the other at Khan Market, New Delhi. In the first round, the
matter came for the determination of the CIT (Appeals), who concluded that
depreciation was allowable only to the extent of 2/3rd claim in respect of the Bangalore
property and that for the Khan Market property such deduction could not be claimed.
ITA 1190/2011 Page 1 of 4
The total amount added back for these were Rs.9,561/- and 1,71,683/-. The assessee
had also made provision for taxation to the extent of Rs.23,50,000/- under the head
"current liabilities" and the provision was not added back to the profit as per the profit
and loss account, in the return of income. In the assessment, this too was disallowed.
In the above circumstances, the Assessing Officer by separate orders initiated penalty
proceedings under Section 271(1)(c) which culminated in an order of 31.1.2001. The
matter was carried in appeal to the CIT (Appeals) who deleted the penalty on the
ground that inaccurate particulars in terms of Section 271(1)(c) had not been
furnished. The Tribunal, on appeal by the Revenue, held that no satisfaction was
recorded by the Assessing Officer in the assessment proceedings that the assessee was
guilty of filing inaccurate particulars of income and agreed with the CIT (Appeals) on
his ground. The Tribunal also examined the levy on merits and held that no penalty
was imposable in respect of the depreciation claim vis-à-vis Khan Market and
Bangalore properties, but held that penalty was imposable with reference to the claim
for deduction of the provision for taxation.
3. The assessee and the revenue filed cross-appeals before this Court in ITA
Nos.1332 and 1494/2006. They were disposed of by order of this Court on 29.9.2008
remitting the matter for reconsideration, to the Tribunal, on merits.
4. The Tribunal by its impugned order held that having regard to the
circumstances, the penalty could not be levied. The essential reasoning of the
Tribunal is to be found in para 6 of its impugned order which reads as follows :
"6. We have heard both the sides. The provision made for advance tax
of Rs.23,50,000/- debited in the P&L account not added back to income
is bonafide mistake. Assessee paid advance tax in the month of March
only. It is the first time that provision was debited in P&L account. Had
there been any intention to file inaccurate particulars then the assessee
could not have paid the advance tax in the last month of assessment
year. The assessee concern is a firm which is not having expert
chartered accountants at its payroll. Further, this was the first year in
which the provision for taxation was debited to the P&L account. In
such a situation, it is a human bonafide clerical mistake occurred while
ITA 1190/2011 Page 2 of 4
making the statement of income. The assessee rectified the mistake as
soon as it was detected. Even the Assessing Officer failed to detect the
mistake while making the order u/s 143(1)(a). After considering all the
relevant facts and circumstances holistically, we hold that the mistake
was bonafide and assessee cannot be visited with the penalty u/s
271(1)(c) for filing inaccurate particulars of income and the case laws
relied upon are also not applicable. Accordingly, the ground is
dismissed."
5. Mr. Maratha relied upon the decision of CIT vs. Zoom Communication Pvt.
Ltd. (2010) 327 ITR 510 as well as decision of CIT Vs. Escorts Finance Ltd. (2010)
328 ITR 44. It was urged that in this case, the assessee‟s behaviour was not one of
furnishing a claim that was incorrect in law but showed a conscious knowledge of the
claim which could not be granted. It was emphasized that under no circumstances the
assessee could have claimed provision for tax as that is not deductable under any
provision of law. Therefore, the penalty order made by the Assessing Officer was
warranted in the circumstances. Ld. counsel also relied upon the decision reported as
CIT vs. Escorts Finance Ltd. (supra). Ld. counsel for the assessee contended that it is
evident that the CIT(Appeals) has partially accepted the assessee‟s claims to the extent
that the depreciation was granted in respect of the Bangalore property. Ld. counsel
stressed upon the fact that the Khan Market property had been let out only from
August, 1996 and under the circumstances there seems to have been a mechanical
repetition of the claim in the return filed. So far as the question of furnishing
inaccurate particulars with regard to the provision of taxation is concerned, ld. counsel
submitted that it was inadvertent and even the record showed that such a claim had
been made for the first time during the assessment year.
6. Zoom Communication Pvt. Ltd. (supra) is premised on the footing that even if
inadvertent by particulars are not given, if the authority finds that the explanation
given is not bona fide penalty u/s. 271 would be warranted. Similar observations
were made in CIT v. Reliance Petro Products Pvt. Ltd., (2010) 322 ITR 158. In the
ITA 1190/2011 Page 3 of 4
present case, so far as the question of depreciation is concerned what emerges from the
previous discussion is that the CIT(Appeals) had accepted the assessee‟s claim for
depreciation to the extent of 2/3rd in respect of the Bangalore property. It is also the
matter of record that the Khan Market property was let out for the first time in the
latter part of the concerned assessment year i.e. in August, 1996. In these
circumstances, the benefit of inadvertence or mechanical or repetitive claim being
made can be given to the assessee. Similarly, as far as the provision for taxation is
concerned, we notice that the Tribunal by the impugned order had stated in the extract
reproduced above that the assessee had made a claim for deduction of the provision
for the first time in the year under appeal; in other words, there was no history of
furnishing such accurate particulars by the assessee for the previous years. Having
regard to these circumstances and the fact that the CIT(Appeals) as well as the
Tribunal had held in favour of the assessee, this Court is of the opinion that no
substantial question of law arises in this case.
Appeal is dismissed.
S. RAVINDRA BHAT, J.
R.V.EASWAR, J. JULY 19, 2012 vld ITA 1190/2011 Page 4 of 4