Brijwasi Art Press Ltd., New Delhi v. DCIT, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.4212 & 4213 /DEL/2010 ASSESSMENT YEAR : 2003-04 & 2007-08 BRIJWASI ART PRESS LTD. DCIT E-46/11 OKHLA INDL. AREA CIRCLE-3 (1) PHASE-II NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACB AAACB AAACB AAACB- -- -0044 0044 0044 0044- -- -L LL L APPELLANT BY : SHRI N.C. AGGARWAL C.A. RESPONDENT BY : MRS. ANUSHA KHURANA SR. DR. ORDER PER A.K. GARODIA AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD CIT(A)-VI NEW DELH I BOTH DATED 2.7.2010 FOR ASSESSMENT YEAR 2003-04 AND 2007-08 RESPECT IVELY. FOR THE SAKE OF CONVENIENCE BOTH THESE ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER. 2. LD AR OF THE ASSESSEE SUBMITTED AN APPLICATION DATED 14.2.2011 BEFORE THE BENCH SEEKING PERMISSION TO WITHDRAW ITS APP EALS FOR ASSESSMENT YEAR 2007-08 I.E. IN I.T.A. NO.4213/DEL2010. THE ASSESSEE IS PERMITTED TO WITHDRAW THE APPEAL BECAUSE REVENUE A LSO DID NOT HAVE ANY OBJECTION IN THIS REGARD. PAGE 2 OF 9 ITA NO4212 & 4213/DEL/10 3. ACCORDINGLY THIS APPEAL OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. 4. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSME NT YEAR 2003-04 I.E. IN I.T.A. NO.4212/DEL/2010. 5. THE ONLY GROUND RAISED BY THE ASSESSEE IS AS UNDER:- WHETHER THE LD ASSESSING OFFICER AS WELL AS LD CIT(A) WA S JUSTIFIED IN IMPOSING AND SUSTAINING THE PENALTY AMOUNT ING TO `.90 295.00 UPON THE ASSESSEE COMPANY U/S 271(1)( C) OF THE INCOME TAX ACT 1961. 6. BRIEF FACTS OF THE CASE TILL THE STAGE OF IMPOSITION OF PENALTY BY THE ASSESSING OFFICER ARE NOTED BY LD CIT(A) IN PARA 2 OF HIS ORDER WHICH IS REPRODUCED BELOW: PARA 2: BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY FILED ITS RETURN OF INCOME ON 2.12.2003 DECLARING AN INCOME OF `.7140625/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 30.10.2005 WHEREIN THE ASSESSING OFFICER MADE ADDITION OF `.245705/- BEING DEPRECIATION DISALLOWED ON THE LAND . AGAINST THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) WHO UPHELD THE ACTION OF THE ASSESSING OFFIC ER ON THE ISSUE OF DEPRECIATION VIDE APPEAL NO.240/05-06 DATED 23.1.200. THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE HON'BL E ITAT AGAINST THE ORDER OF CIT(A) AND THE HON'BLE TRIBUNA L HAD SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE FOLLOWING REMARKS:- PAGE 3 OF 9 ITA NO4212 & 4213/DEL/10 WE HAVE HEARD THE RIVAL SUBMISSION ON THIS ISSUE. WE ARE OF THE VIEW THAT THE FACTS PLEADED BY THE ASSESSEE BEFOR E THE CIT(A) REQUIRES VERIFICATION BY THE ASSESSING OFFICER. IF SUCH FACTS ARE FOUND TO BE CORRECT BY THE ASSESSING OFFICER THEN THE ASSESSING OFFICER SHALL WORK OUT THE ELIGIBLE DEPRECIATI ON AFTER EXCLUDING THE VALUE OF THE LAND. THE ORDER OF CIT(A ) ON THIS ISSUE IS THEREFORE SET ASIDE AND THE ISSUE IS REMANDED TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN THE LIGHT OF THE DIRECTIONS GIVEN ABOVE. AS PER THE DIRECTIONS OF THE HON'BLE ITAT ASSESSMENT U/S 143(3) WAS COMPLETED IN 22.12.2008 AFTER PROVIDING O PPORTUNITY TO ASSESSEE AND NECESSARY VERIFICATION. DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE CLAIMED 10% DEPRECIATION OF `.351008/- ON LAND & BLDG. OF `.3510082/-. SINCE T HE DEPRECIATION ON LAND IS NOT AVAILABLE AS PER THE PROV ISIONS OF THE ACT THE ASSESSEE WAS ASKED TO FURNISH THE BIFURCATION OF THE VALUE OF LAND AND BUILDING. THE ASSESSEE FAILED TO FIL E THE REQUIRED BIFURCATION OF THE LAND & BUILDING. THE ASSE SSING OFFICER TREATED 70% OF TOTAL VALUE TOWARDS THE VALUE OF LAN D AND THE BALANCE 30% OF THE VALUE TOWARDS THE VALUE OF THE BU ILDING. ACCORDINGLY THE ASSESSING OFFICER DISALLOWED 70% DEPRE CIATION CLAIMED BY THE ASSESSEE ON LAND AMOUNTING TO `.245705/ -. THE PENALTY PROCEEDINGS U/S 271(1)(C ) WERE ALSO INITIATED ON THIS ISSUE. DURING THE PENALTY PROCEEDINGS THE ASSESSEE FILED ITS SUBMISSIONS AND AFTER CONSIDERING THE SAME THE ASSESSING OFFICER CONCLUDED THAT ALTHOUGH THE DEPRECIATION IS NOT ALLOWABLE ON LAND U/S 32 OF THE ACT YET THE ASSESSEE HAS CLAIMED T HE PAGE 4 OF 9 ITA NO4212 & 4213/DEL/10 SAME. FURTHER DUE TO THE FACT THAT ASSESSEE HAS NOT PROV IDED NECESSARY BIFURCATION OF LAND & BUILDING AS REQUIRED B Y THE ASSESSING OFFICER AND IN THE ABSENCE OF THE SAME THE ASSESSI NG OFFICER WAS LEFT WITH NO ALTERNATIVE BUT TO MAKE THE DISALLOWANCE ON AD HOC BASIS. MOREOVER THE ASSESSEES CONTENTION THAT SINCE IN THE EARLIER YEARS THE DEPARTMENT ACCEPTED THE ISSU E OF DEPRECIATION ON LAND HENCE IT SHOULD BE ACCEPTED IN THIS YEAR ALSO IS NOT ACCEPTABLE IN VIEW OF THE PRINCIPLES OF RE S JUDICATA WHICH IS NOT APPLICABLE IN THE INCOME TAX PROCEEDING S. IT WAS FURTHER ADDED BY THE ASSESSING OFFICER THAT IN FACT DU RING THE COURSE OF SET ASIDE ASSESSMENT PROCEEDINGS VIDE WRITTEN REP LY DATED 12.12.2008 THE ASSESSEE DID NOT PRESS THE MATTER B EFORE THE ASSESSING OFFICER KEEPING IN VIEW OF THE COMPLEX N ATURE OF THE ISSUE. THUS THE ASSESSING OFFICER WAS OF THE VIEW THAT IT IS ESTABLISHED BEYOND AN IOTA OF DOUBT THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON LAND INCORRECTLY AND HAS THU S FURNISHED INACCURATE PARTICULARS OF ITS INCOME. HE THEREFORE INVOKED THE PROVISIONS OF SECTION 271(1)( C) AND IMPOSED A PENALTY OF `.90 295/-. 7. BEING AGGRIEVED WITH THE PENALTY ORDER PASSED BY T HE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE LD CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE BEFORE U S THAT THE ASSESSEE HAS NOT CONCEALED ITS INCOME AND HAS NOT FILED IN ACCURATE PARTICULARS OF INCOME. RELIANCE WAS PLACED ON THE JUD GMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF CIT V. RELIANCE A PPETRO PRODUCTS AS REPORTED IN 322 ITR 158 AND ALSO ON ANOTHER JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF HINDUSTAN STEEL V. STAT E OF ORISSA REPORTED IN 83 ITR 26. AT THIS JUNCTURE IT WAS POIN TED OUT BY THE BENCH PAGE 5 OF 9 ITA NO4212 & 4213/DEL/10 THAT AFTER CONSIDERING THIS JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA) HON'BLE DELHI HIGH COURT HAS CONFIRMED PENALTY IN THE CASE OF ZOOM COMMUNICATI ON PVT. LTD. AS REPORTED IN 227 ITR 510 (DEL.). IN REPLY LD AR OF THE ASSESSEE COULD NOT SHOW US AS TO HOW THIS JUDGMENT OF HON'BLE DELHI HI GH COURT RENDERED IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. (SUPRA) IS NOT APPLICABLE IN THE PRESENT CASE. 9. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE A UTHORITIES BELOW AND SHE ALSO PLACED RELIANCE ON THE SAME JUDGMEN T OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF ZOOM COMMU NICATION PVT. LTD. (SUPRA). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENTS CITED BY BOTH SIDES. REGARDING THE JUDGMENT OF HON'BLE APEX COURT RENDER ED IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS (SUPRA) WE FIND THAT THIS JUDGMENT HAS DULY BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. (SUPRA). 11. REGARDING JUDGMENT OF HON'BLE APEX COURT RENDER ED IN THE CASE OF HINDUSTAN STEEL V. STATE OF ORISSA WE FIND THAT T HIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DI FFERENT. IN THAT CASE IT WAS HELD THAT IMPOSITION OF PENALTY WILL NOT BE JUSTIFIED WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIO NS OF THE ACT OR WHERE THE BREACH AROSE FROM A BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE . NOW THE QUESTION IS WHETHER THE ACTION OF THE ASSESSEE OF CLAIMI NG DEPRECIATION ON LAND PORTION ALSO CAN BE SAID TO BE A TECHNICAL O R VENIAL BREACH OF THE PROVISIONS OF THE INCOME TAX ACT 1961. IN OUR C ONSIDERED OPINION THE ANSWER IS NO. ON THE SECOND ASPECT AS TO WHETHER THE BREACH AROSE PAGE 6 OF 9 ITA NO4212 & 4213/DEL/10 FROM A BONA FIDE BELIEF OF THE ASSESSEE WE FIN THAT IT CANNOT BE A BONA FIDE BELIEF OF ANY BODY EVEN OF A LAYMAN THAT DEPRE CIATION CAN BE CLAIMED ON LAND OR THAT IN A CASE OF COMPOSITE PURCHA SE OF A BUILDING ALONG WITH LAND NO PORTION OF THE VALUE IS RELATABL E TO LAND. HENCE IN OUR CONSIDERED OPINION THE ACTION OF THE ASSESSEE OF CL AIMING DEPRECIATION ON THE ENTIRE VALUE OF LAND AND BUILDI NG PURCHASED BY IT CANNOT BE ACCEPTED AS BONA FIDE ACTION AND HENCE TH IS JUDGMENT OF HON'BLE APEX COURT IS NOT APPLICABLE IN THE PRESENT C ASE. 12. NOW WE CONSIDER THE APPLICABILITY OF THE SECOND JUDGMENT OF HON'BLE APEX COURT CITED BY LD AR OF THE ASSESSEE I.E. THE JUDGMENT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPR A). WE FIND THAT THIS JUDGMENT OF HON'BLE APEX COURT HAS BEEN DULY CON SIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNI CATION PVT. LTD. (SUPRA). IT WAS OBSERVED BY HON'BLE DELHI HIGH COURT I N THIS CASE THAT PENALTY WILL NOT BE IMPOSABLE IF IT IS FOUND THAT THE ASSESSEE IS ABLE TO SUBSTANTIATE THE EXPLANATION OFFERED BY HIM OR IN A C ASE WHERE HE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION IF IT IS FOU ND THAT THE EXPLANATION IS BONA FIDE. FOR THIS PURPOSE WE REPROD UCE PARA NO.16 OF THIS JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED I N THE CASE OF ZOOM COMMUNICATION PVT. LTD. (SUPRA). THE PROPOSITION OF LAW WHICH EMERGES FROM THIS CASE W HEN CONSIDERED IN THE BACKDROP OF THE FACTS OF THE CASE BE FORE THE COURT IS THAT SO LONG AS THE ASSESSEE HAS NOT CONCEALED AN Y MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY H IM HAS NOT BEEN FOUND TO BE INCORRECT HE WILL NOT BE LIABLE T O IMPOSITION OF PENALTY U/S 271(1)( C) OF THE ACT EVEN IF THE CLAIM MADE BY HIM IS UNSUSTAINABLE IN LAW PROVIDED THAT HE EITHER SUBSTAN TIATES THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION EVEN IF NOT SUBSTANTIATED IS FOUND TO BE BONA FIDE. IF THE EXPLAN ATION IS PAGE 7 OF 9 ITA NO4212 & 4213/DEL/10 NEITHER SUBSTANTIATED NOR SHOWN TO BE BONA FIDE EXPL ANATION -1 TO SECTION 271(1)( C) WOULD COME INTO PLAY AND THE A SSESSEE WILL BE LIABLE TO FOR THE PRESCRIBED PENALTY. 13. NOW IN THE LIGHT OF THIS LEGAL POSITION AS PER THE JUDGMENT OF HON'BLE DELHI HIGH COURT WE EXAMINE THE FACTS OF T HE PRESENT CASE. IN THE PRESENT CASE THE ASSESSEE HAS PURCHASED A BUILDING ALO NG WITH LAND FOR `.35.10 LAKHS IN THE YEAR 1995 AND WITHOUT ALLOCATING ANY PART OF THIS PRICE OF LAND AND BUILDING TOWARDS LAND THE ASSESSEE HAS BEEN CLAIMING DEPRECIATION @ 10% ON THIS ENTIRE VALUE OF LAND & BUILDING AS IF THE SAME IS THE VALUE OF BUILDING ONLY AND NO PORT ION OF THE PRICE PAID BY THE ASSESSEE IS RELATABLE TO LAND. THIS CANNOT BE A BO NA FIDE ASSUMPTION BY ANY PERSON EVEN BY A LAYMAN THAT WHEN A BUILDING IS PURCHASED ALONG WITH LAND NO PART OF THE PURCHASE PR ICE OF SUCH LAND & BUILDING IS RELATABLE TO LAND. IN FACT MAJOR PORTI ON OF SUCH COMBINED PRICE IS RELATABLE TO LAND IN MOST OF THE CASES. HAD T HERE BEEN A DIFFERENCE IN ALLOCATION ONLY IT COULD HAVE BEEN A BONA FIDE CASE UNDER WHICH PENALTY IS NOT IMPOSABLE IF SOME PORTION OF THE COMPOSITE PRICE WOULD HAVE BEEN ALLOCATED BY THE ASSESSEE TOWARDS LAND C LAIMING NO DEPRECIATION THEREON AND SUCH ALLOCATION HAVING BEEN INCREASED BY THE ASSESSING OFFICER IT CAN BE ACCEPTED THAT THE ACTION O F THE ASSESSEE IS BONA FIDE AND FOR MERE DIFFERENCE IN ESTIMATION OF L AND VALUE PENALTY IS NOT JUSTIFIED BUT IN THE PRESENT CASE NO PORTION OF COMBINED PRICE OF LAND & BUILDING HAS BEEN ALLOCATED BY THE ASSESSEE TOWA RDS LAND AND FOR THE ENTIRE PRICE PAID BY THE ASSESSEE FOR LAND & BUILDING THE ASSESSEE HAS BEEN CLAIMING DEPRECIATION AND THEREFORE I N THE FACTS OF THE PRESENT CASE THE ACTION OF THE ASSESSEE IS NOT BONA FIDE IN OUR CONSIDERED OPINION. THEREFORE THE JUDGMENT OF HON'B LE APEX COURT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA ) DOES NOT HELP THE ASSESSEE IN THE PRESENT CASE. PAGE 8 OF 9 ITA NO4212 & 4213/DEL/10 14. AS PER ABOVE DISCUSSION WE HAVE FOUND THAT NONE OF THE JUDGMENTS OF HON'BLE APEX COURT ON WHICH RELIANCE HA VE BEEN PLACED BY THE LD AR OF THE ASSESSEE IS RENDERING ANY HELP TO TH E ASSESSEE IN THE PRESENT CASE. WE HAVE ALSO DISCUSSED ABOVE THAT THE A SSESSEES EXPLANATION IS NOT BONA FIDE BECAUSE NOT ALLOCATING A NY PORTION OF THE COMBINED PRICE OF LAND & BUILDING TOWARDS LAND CANNO T BE ACCEPTED AS A BONA FIDE ACTION OF THE ASSESSEE AND HENCE IN THE FA CTS OF THE PRESENT CASE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD CIT(A) AS PER WHICH HE HAS CONFIRMED THE PENALTY I MPOSED BY THE ASSESSING OFFICER BECAUSE LD CIT(A) HAS FOLLOWED THE JUDG MENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF ESCO RTS FINANCE LTD AS REPORTED IN 183 TAXMAN 453 AND LD AR OF THE ASSESSEE COULD NOT POINT OUT ANYTHING TO SHOW THAT THIS JUDGMENT OF HON' BLE DELHI HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE. WE THER EFORE DECLINE TO INTERFERE IN THE ORDER OF LD CIT(A) ON THIS ISSUE. 15. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. 16. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY O F 18TH FEBRUARY 2011. SD/- SD/- (I.P. BANSAL) (A.K. GAROD IA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 18.2.2011. HMS 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 DEL HI. TRUE COPY. (ITAT NEW DELHI). PAGE 9 OF 9 ITA NO4212 & 4213/DEL/10