TMI Blog2019 (12) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... have drawn correct inference. The assessee failed to do so. As a logical corollary, the burden cannot be shifted to the Department. The burden of proof rests with the assessee. We are of the considered view that the Ld. CIT(A) has overlooked the above facts while passing the order dated 02.03.2017. A fortiori, he has not considered the fact that consequent to withdrawal of appeal before ITAT for AYs 2004-05 and AY 2005-06, the assessee re-worked its claim of depreciation for AY 2007-08 to AY 2014-15 before the Settlement Commission and as a result, the revised claim of depreciation on the basis of re-grouping of assets stood withdrawn. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a de novo order after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence regarding the claim of additional depreciation of ₹ 75,80,338.16/- on account of reclassification of certain assets during the year under consideration. As the matter has been restored to the file of the AO, we are not adverting to the case laws relied on by both sides. Appeals are allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.54 crores for various assessment years in the hands of the company and its directors and their spouses in addition to the regular income. Consequently, the assessee filed return of income on 12.02.2009 in response to notice u/s 153A dated 14.11.2008 issued and served by the AO. In the order u/s 143(3) r.w.s. 153A dated 30.12.2010, the AO arrived at a total income of ₹ 6,85,90,913/-. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act. Let us put simply the issue in dispute. In the return of income filed u/s 139, it was the contentions of the assessee that the claim of depreciation was not correct in as much as the groupings of the assets for the purpose of claiming depreciation were not correct, whereas while filing returns u/s 153A, the assets were regrouped and depreciation was re-computed which resulted in higher depreciation for AY 2004-05. During the course of penalty proceedings, the AO issued a show cause notice dated 02.01.2013 to the assessee asking it to explain as to why penalty u/s 271(1)(c) should not be imposed. In response to it, the assessee vide letter dated 14.03.2013 replied as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained finality prior to initiation of the search. Thus, the claim was disallowed by CIT(A) on technical ground there was no finding by the CIT(A) that the claim itself was wrong per se. 7.2 I also find that the facts of the case of CIT vs. Zoom Communication Private Limited on which the AO relied are different from this case. In the case of Zoom Communication Private Limited, the chance of the return being picked up for scrutiny was very low as observed by the Hon'ble Court. But in the present case, the appellant was aware of the fact that the return would be necessarily scrutinized as per the provisions of section 153A and, therefore, the principle on the basis of which the penalty was upheld is not applicable in this case. 7.3 Further, the observation of the AO that whenever there is a difference between the returned income and assessed income, there is an inference of concealment is not correct. As per the provisions of section 271(1)(c), where a claim is disallowed, the assessee is deemed to have concealed/file inaccurate particulars of income only if he fails to establish that the claim was bona fide. 7.4 In cases, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m cannot invite penalty [Waman Hari Pethe Sons Private Ltd. v. DCIT ITA No. 2730/Mum/2016 (Mumbai-Trib)]; that later or subsequent events do not affect imposition of penalty [Manjunatha Cotton Ginning Factory [2013] 35 taxmann.com 250 (Karnataka HC), HPCL Mittal Energy Ltd. v. Addl. CIT [2018] 97 taxmann.com 3 (Amritsar-Trib) (Third Member)] ; that satisfaction and reasons for levy of penalty as recorded in the notice u/s 274 and the penalty order, must be clear and unambiguous [Manjunatha Cotton Ginning Factory [2013] 35 taxmann.com 250 (Karnataka HC), HPCL Mittal Energy Ltd. v. Addl. CIT [2018] 97 taxmann.com 3 (Amritsar- Trib) (Third Member), Shri Swami Saran Garg v. ITO ITA No. 4549/Del/2011 (Delhi-Trib)]. 6.1 The Ld. counsel further submits that full disclosure of the fresh(revised) claim of depreciation was made by the assessee. Elaborating further, it is stated by him that (i) while filing return u/s 153A, the assessee had filed a note, disclosing the fresh (revised) claim of depreciation made on the basis of re-grouping of certain assets, (ii) even the AO was made aware of the revised claim of depreciation and re-grouping of assets and (iii) the re-gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of revised (lower) WDV which was lower for those later years. So, even though the assessee could claim lower (than the claim based on original WDV), it followed a consistent approach. It is argued that nothing mala fide was found about the revised claim of depreciation. Further, it is stated that nothing adverse was found by the Department or the AO that led the assessee to withdraw its claim of revised depreciation. Elaborating it, the Ld. counsel explains that the assessee challenged the order of the CIT(A) before the ITAT, however, later the assessee withdrew the second appeal (before the ITAT) on quantum addition (on revised claim of depreciation) vide letter dated 04.03.2015 stating that (i) the assessee is under a bona fide belief that it could make a fresh claim/revision in the return filed u/s 153A, (ii) but the assessee did not wish to press the ground (of revised depreciation) to buy peace of mind and avoid litigation cost and (iii) the claim of depreciation is a mere timing difference issue and it would not have an overall tax impact. Thus it is stated that a letter dated 15.06.2015 was filed before the ITAT requesting fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of additional depreciation amounting to ₹ 75,80,338/- by the assessee on account of reclassification of certain assets resulting in change of rate of depreciation disclosed in the return of income filed u/s 153A of the Act vis- -vis the return filed u/s 139(1) of the Act. Before the Income Tax Settlement Commission, Mumbai, (ITSC) the assessee had filed an application and disclosed Depreciation as under : 10. Issue No. 8-Depreciation Regrouping of assets 10.1 The applicant begs to submit that as stated in Annexure C, there was search and seizure in the premises of the Applicant on 30 May 2008, and consequently for AY 2003-04 to AY 2008-09 notices under section 153A of the Income Tax Act was issued requiring Applicant to file the return of income under the Act. 10.2 The applicant while filing the return of income under section 153A of the Act for the AY 2004-05 to AY 2009-10 had re-grouped/reclassified its assets to the correct rate of depreciation which had resulted in the excess depreciation claim of ₹ 1,23,51,251/- for AY 2004-05 to AY 2006-07. 10.3 However the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or AY 2004-05 to AY 2009-10 had regrouped/reclassified its assets to the rate of depreciation which had resulted in the excess depreciation claim of ₹ 1,23,51,251/- for AYs 2004-05 to 2006-07. In the instant case, we are concerned with AYs 2004-05 and 2005-06. The application filed by the assessee has since been rejected by the ITSC u/s 245D(2C) of the Act, treating it as invalid. 7.4 In the case of Jain Bros v. UoI (1970) 77 ITR 107, 116 (SC), it is held that although penalty has been regarded as an additional tax in a certain sense and for certain purposes, it is not possible to hold that penalty proceedings are essentially a continuation of the proceedings relating to assessment where a return has been filed. In CIT v. Chetan Dass Lachman Dass (1995) 214 ITR 726, 729 (Del), it is held that for all practical purposes, proceedings for imposition of penalty, though emanating from proceedings for assessment, are independent aspects of the proceedings. In CIT v. J.K. Synthetics Ltd. (1996) 219 ITR 267, 270 (Del), it is held that as the proceedings for imposition of penalty and assessment proceedings are two separate and inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the relevant documents/evidence from which the AO could have drawn correct inference. The assessee failed to do so. As a logical corollary, the burden cannot be shifted to the Department. The burden of proof rests with the assessee. 8. We are of the considered view that the Ld. CIT(A) has overlooked the above facts while passing the order dated 02.03.2017. A fortiori, he has not considered the fact that consequent to withdrawal of appeal before ITAT for AYs 2004-05 and AY 2005-06, the assessee re-worked its claim of depreciation for AY 2007-08 to AY 2014-15 before the Settlement Commission and as a result, the revised claim of depreciation on the basis of re-grouping of assets stood withdrawn. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a de novo order after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence regarding the claim of additional depreciation of ₹ 75,80,338.16/- on account of reclassification of certain assets during the year under consideration. As the matter has been restore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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