TMI Blog2007 (8) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1-2-2006 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 assessment year 1998-99, 1999-2000, 2000-01, 2001-2002 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: ------------------------------------------------------------ Asst. Date of filing Business Depreciation Date of Year Return of Income loss loss lodging ------------------------------------------------------------ 1998-99 1-10-2004 214051703 - - ----------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 271(1)(c) proceedings as there is no liability of Income-tax." 4. 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 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 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 for carry forward of such loss, by making such a claim for carry forward of such loss it made a wrong claim and, therefore, the assessee is liable for penalty in view of Explanation 4 to section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383, the additional ground raised by the assessee is admitted. 10. The ld. 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 ld. CIT(A). He further submits that the company was under liquidation from 24-12-2002 to 30-7-2004, 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 with 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 normal course of business. The depreciation could not be absorbed for want of profits and hence the same was claimed as unabsorbed depreciation. Unabsorbed depreciation forms part of the depreciation of the current year and can be claimed set off against profits available. Therefore, the unabsorbed depreciation cannot be termed as depreciation loss. The Assessing Officer could not br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 ld. Departmental Representative submits that treating the return as non est tantamounts to recording of satisfaction and initiation of penalty proceedings under section 271(1)(c). However, we find that the literal meaning of non est is 'it is not', absent, wanting.' Since the Assessing Officer has treated the returns filed by the assessee as belated i.e., beyond the time allowed under section 139(4) of the Act, therefore, the same are no returns in the eye of law and, therefore, no penalty can be levied on the assessee under section 271(1)(c) of the Act. This view finds support from the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 the 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 Veerasingaiah Co. v. CIT [1980] Supp. SCC 13. 14. As regards imposition of penalty under section 271(1)(c) of the Act on the disallowance of miscellaneous expenditure, we find that there is no material on record to show that the expenditure claimed by the assessee are personal or capital in nature or the same are not allowable under section 37(1) of the Act. Merely because, the assessee has not carried on any business during the year is not sufficient to hold that the miscellaneous expenditure claimed by the assessee are not allowable and, therefore, the assessee is liable to penalty under section 271 (1)(c) of the Act. Since the burden has not been discharged by the revenue to es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Anand Granites International (P.) Ltd. relied upon by the ld. 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 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 Act. Therefore, respectfully following the aforesaid judgments, we cancel the penalty." 17. We further find that the above decisions of the Honourable Delhi High Court have been considered by the Honourable Supreme Court in Dilip N. Shroff, wherein it has been held at page 547 which is extracted as under: "The explanation having regard to the decisions of this Court, must be preceded by a finding as to how and in what manner he furnished the particulars of his income. It is beyond any doubt or dispute that for the said purpo ..... 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