TMI Blog2007 (8) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... ss claimed in the return of income relates to depreciation and miscellaneous expenditure. In the absence of any business done as admitted by the assessee by his letter dated February 1, 2006 the expenditure claimed cannot be allowed and depreciation is also not admissible and hence not allowed to be carried forward. Accordingly, the income is determined at 'nil' ignoring the loss returned. Further, in the computation statement, the assessee claimed business loss and also depreciation loss for earlier years starting from the assessment year 1998-99. The assessee has not filed the returns of income for the assessment years 1998-99, 1999-2000, 2000-01, 2001-02 and 2002-03 within the due date for filing the return of income. The assessee has claimed business loss and depreciation loss for the years 1998-99 to 2002-03 as under: -------------------------------------------------------------- Assessment Date of Business loss Depreciation Date of year filing (Rs.) loss (Rs.) lodging return of income -------------------------------------------------------------- 1998-99 1-10-2004 21,40,51,703 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny assessment done by you the business loss and depreciation were disallowed stating that the company has not done any business during the year. The carried forward business losses were also disallowed mentioning that the returns filed were belated. The assessee agreed the reasons and gave consent for disallowance. Finally the income-tax arrived was nil. We, therefore, request you to drop the section 271(1)(c) proceedings as there is no liability of income-tax." The Assessing Officer, however, did not accept the assessee's explanation. He observed that the assessee has not done any business from 1999-2000 and claimed depreciation loss at Rs. 4,75,69,600 which is not allowable. Further, the assessee has not filed returns of income in time as per the provisions of section 139(3) of the Act. He further observed that the depreciation is also a part of loss and it is carried forward only when the assessee files its return within the due date as per the provisions of section 139(3) of the Act. Since the assessee has filed the returns belatedly, it is not entitled to carry forward such loss. He also noted that though the assessee is not legally entitled to carry forward such loss, by ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival parties, we find that the additional ground raised by the assessee does not require any investigation of the facts and since it goes to the very root of the matter, therefore respectfully following the ratio of the decision of the honourable Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 the additional ground raised by the assessee is admitted. Learned counsel for the assessee while arguing all the grounds of appeal as common grounds of appeal, reiterates the same submissions as put forth before the Assessing Officer and the learned Commissioner of Income-tax (Appeals). He further submits that the company was under liquidation from December 24, 2002 to July 30, 2004, it was not supposed to file returns of income during the period of liquidation and hence the comments of the Assessing Officer that the returns were filed at leisure are not correct. He further submits that the company had taken necessary steps to file the return for the earlier years, which were not filed due to non availability of records. He further submits that the loss was claimed by the assessee in the normal course of business. The depreciation could not be absorbed for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer and sustained by the learned Commissioner of Income-tax (Appeals) be upheld. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the assessee filed return on October 1, 2004 showing a loss of Rs. 1,01,79,983, which comprises of business loss of Rs. 16,16,157 and depreciation loss of Rs. 85,63,826. While making the assessment, it was observed by the Assessing Officer that the loss claimed in the return of income relates to depreciation and miscellaneous expenditure. In the absence of any business done, as admitted by the assessee, the expenditure claimed cannot be allowed and depreciation is also not admissible and hence not allowed to be carried forward and accordingly completed the assessment at "nil" income ignoring the loss returned by the assessee. We further find that the Assessing Officer without initiating any penalty proceedings during the course of assessment proceedings initiated penalty proceedings under section 271(1)(c) of the Act. At this stage, the learned Departmental representative submits that treating the return as non est tantamounts to recording of satisfaction and init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of any business done, the expenditure claimed cannot be allowed and depreciation is also not admissible. The Assessing Officer while imposing the penalty under section 271(1)(c) of the Act was of the view that the assessee made a wrong claim and the case is liable for penalty in view of Explanation 4 to section 271(1)(c) of the Act. However, we find that it is settled law that the order imposing penalty is quasi-criminal in nature and, thus, the burden lies on the Department to establish that the assessee had concealed his income. Since the burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle vide Anantharam Veerasinghaiah and Co. v. CIT [1980] 123 ITR 457 (SC) [1980] Supp SCC 13. As regards imposition of penalty under section 271(1)(c) of the Act on the disallowance of miscellaneous expenditure, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the same, we are of the view that penalty under section 271(1)(c) is not leviable on this account also. As regards non initiation of penalty proceedings under section 271(1)(c) of the Act, we find that there is no discussion in the assessment order for initiation of penalty proceedings under section 271(1)(c) of the Act. Thus, it is evident that the Assessing Officer has not recorded any satisfaction in the assessment order for initiation of penalty proceedings under section 271 (1)(c) of the Act. In Anand Granites International Pvt. Ltd. v. Deputy CIT relied upon by learned counsel for the assessee, the Tribunal following the judgments of the honourable Delhi High Court in CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 and Diwan Enterprises v. CIT [2000] 246 ITR 571 (Delhi) has held that "in the present case, there is hardly any discussion in the assessment order for the additions made and the Assessing Officer has merely mentioned that notice under section 271(1)(c) is separately issued. Thus, it is evident that the Assessing Officer has not recorded any satisfaction in the assessment order for initiation of penalty proceedings under section 271(1)(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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