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
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