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Tera Construction Pvt. Ltd., 2802, Top Floor, Bara Bazar, Kashmeri Gate, Delhi 110006. Vs. ITO, Ward 16(2), New Delhi.
March, 20th 2015


                       ITA No.1435/Del/2008
                      Assessment Year : 2001-02

Tera Construction Pvt. Ltd.,       Vs. ITO,
2802, Top Floor, Bara Bazar,           Ward 16(2),
Kashmeri Gate,                         New Delhi.
Delhi ­ 110006.


            Assessee By        :    None
            Department By      :    Shri T. Vasanthan, Sr. DR

         Date of Hearing               :   18.03.2015
         Date of Pronouncement         :   19.03.2015

     This appeal by the assessee is directed against the order passed by

the CIT(A) on 7.2.2008 upholding the penalty of Rs.17,49,622/-

imposed by the AO u/s 271(1)(c) of the Income-tax Act, 1961
                                                        ITA No.1435/Del/2008.

(hereinafter also called `the Act') in relation to the assessment year


2.   Before proceeding with the matter, we want to set out the relevant

facts under which this appeal has again come up before the Tribunal for

consideration and decision. The Tribunal vide its original order dated

28.3.2013 accepted the assessee's contention that the AO did not record

proper satisfaction in the assessment order before initiating penalty

proceedings u/s 271(1)© of the Act.      Resultantly, the penalty was

deleted. The Revenue approached the Hon'ble Delhi High Court. Vide

its judgment dated 11.3.2014, the Hon'ble Delhi High Court vacated the

view of the Tribunal in deleting the penalty on the basis of lack of

proper satisfaction. Accordingly, the matter has been remanded for

deciding penalty on merits.

3.   We have heard the ld. DR and perused the relevant material on

record. There is no appearance from the side of the assessee despite

notice. We are, therefore, proceeding to dispose of this appeal ex parte

qua the assessee.

                                                           ITA No.1435/Del/2008.

4.   Briefly stated, the facts of the case are that the assessee is a builder

and promoter. No business activity was carried on during the year

relevant to the assessment year under consideration.           Some rental

income was earned apart from some interest on FDRs, etc. This rental

income was declared under the head `Income from house property' on

which deduction u/s 24 was claimed for `Other expenses', namely,

depreciation, building maintenance expenses, commission, etc. The AO

held that such expenses were not separately allowable as deduction

because the same were covered under the composite deduction allowable

under the head `Income from house property.' He, therefore, computed

the total income by assessing the rental income under the head `Income

from house property' as was declared by the assessee without allowing

any separate deduction for the expenses which were claimed by the

assessee. Penalty amounting to Rs.17,49,622/- was imposed in respect of

the disallowance of deductions claimed by the assessee against the

income under the head `Income from house property,' which the ld.

CIT(A) upheld in the first appeal.

                                                          ITA No.1435/Del/2008.

5.   At this juncture, it is relevant to mention that the assessee

challenged the additions made by the AO in the quantum proceedings.

The Tribunal, vide its order dated 28.3.2013, disposed of the assessee's

quantum appeal. A copy of such order is available on record. It can be

seen from the order passed by the Tribunal in quantum proceedings that

the assessee's contention for assessing rental income under the head

`Profits and gains of business or profession' has been rejected and,

resultantly, claim for depreciation amounting to Rs.1,83,951/-, building

maintenance expenses of Rs.22,15,072/- and commission paid for letting

out building at Rs.5,39,000/- has been rejected. The assessee's further

claim for deduction of Rs.10 lac for getting the property vacated has also

been found to be unacceptable.          Similar is the position regarding

disallowance of Rs.9,15,800/- towards maintenance expenses and

Rs.70,000/- paid as architect fees in respect of building let out by the

assessee. In view of the above Tribunal order, it becomes clear that the

assessee's contention for claiming deductions towards various expenses

etc. against income from house property have been held to be not

                                                        ITA No.1435/Del/2008.

6.    Here is a case in which the assessee earned rental income to the

tune of Rs. 84.00 lac on which it claimed deduction u/s 24(i) for a sum

of Rs.18.75 lac. Despite that, it further claimed deduction for various

expenses and allowance in respect of let out property from which rental

income was earned. Such claim for deduction of various expenses etc.

in the computation of income under the head `Income from house

property' is patently and ex facie untenable. It is not an issue on which

two opinions can possibly be formed and the assessee chose to follow

the view favourable to it. The provisions of Chapter IV-C are simple

and plain in not admitting any deduction for expenses etc., of the nature

which have been claimed by the assessee, within its ambit. As the

assessee knowingly made a wrong claim which is patently inadmissible,

we cannot, but, uphold penalty u/s 271(1)(c) of the Act. Our view is

fortified by a recent judgment from the Hon'ble jurisdictional High

Court in CIT vs. NG Technologies Ltd. (2015) 370 ITR 7 (Del), in which

the assessee claimed deduction for loss on sale of fixed assets in its

Profit & Loss Account. The Hon'ble Delhi High Court upheld the

penalty in respect of such patently inadmissible claim. The facts of the
                                                            ITA No.1435/Del/2008.

instant case are on all fours with that of NG Technologies Ltd. (supra)

inasmuch as here also the assessee claimed deduction for expenses and

depreciation, etc. against income from house property, which is clearly

not allowable. We, therefore, approve the view taken by the ld. CIT(A)

in affirming the instant penalty.

7.        In the result, the appeal is dismissed.

          The order pronounced in the open court on 19.03.2015.

               Sd/-                                         Sd/-
        [C.M. GARG]                                     [R.S. SYAL]
     JUDICIAL MEMBER                                ACCOUNTANT MEMBER

Dated, 19th March, 2015.
Copy forwarded to:
     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT

                                                     AR, ITAT, NEW DELHI.

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