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Maa Sharda Garments P. Ltd. Versus ITO, Ward 6 (1) , New Delhi.

2016 (5) TMI 710 - ITAT DELHI

Penalty u/s 271(1)(c) - disallowance or setting up of the business of manufacturing and export of garments - Held that:- By applying the parameters laid down by Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory ( 2013 (7) TMI 620 - KARNATAKA HIGH COURT ), it appears that there was full disclosure by the assessee, however the expenditure claimed was inadmissible in law. Respectfully following the ratio laid down above we are of the opinion that the disallowan .....

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claimed depreciation. The assessee in such a situation has filed wrong particulars of income, which is apparent from the face of the record. We, therefore, confirm the penalty levied by the ld. AO on the disallowance of the depreciation. - Decided partly in favour of assessee - I.T.A .No.6128/DEL/2013 - Dated:- 8-4-2016 - SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri V.P. Bansal, FCA For The Respondent : Shri P. Dam Kanunjana, Sr. DR ORDER .....

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f facts of the case are as under: 2.1. The assessee was engaged in the business of manufacturing and exports of Readymade Garments. The return of income for the A.Y. 2008-09 was filed on 30.09.2008 declaring an income of ₹ 3,63,484/-. The same was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and the assessment was completed u/s 143(3) vide order dated 30.11.2010 by the AO at the income of ₹ 10,08,934/-. The AO noted in the assessment order passed .....

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essee has booked certain expense in its P&L account, including depreciation of ₹ 2,80,521/- on the building let out for rent, which in any way is allowable as per provisions of the I.T. Act, 1961. The ld.AO disallowed the claim of business loss when no business activity has been performed during the year and the depreciation claimed on the let out building. 2.3. During the assessment proceedings, the AO initiated penalty proceedings u/s 271(1)(c) for filing inaccurate particulars of in .....

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n levied on two grounds which are; (i) the assessee had claimed expenses under the head business since the company was formed with the object of setting up of unit of manufacturing and export of readymade garments. The AO disallowed the expenses so claimed on the basis that the project could not be implemented; (ii) assessee had claimed depreciation against a property from which rental income was earned for the year under consideration. 6.1. The ld. AR submitted that the claim of expenses as wel .....

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e immovable property under the head Income from House Property . He thus submitted that claiming of depreciation on the immovable property could not be treated as a bonafide mistake. The ld. DR placed reliance on the decision of Hon ble Supreme Court in the case of Union of India (UOI) vs. Dharmendra Textile Processors reported in 306 ITR 277. Ld. DR submitted that the explanation appended to section 271(1)(c) of the Act indicates a strict liability on the assessee for concealment or for giving .....

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ed herein below: Failure to furnish returns, comply with notices, concealment of income, etc. 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of [such income, or Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under .....

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wed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. 8.1. From the said provision, it is apparent that, if the ld.AO in the course of assessment proceedings is satisfied that, any person has concealed the particulars of income or furnished inaccurate particulars of such income, then he may levy penalty on the assessee. Thus, there are t .....

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s books of accounts. 8.2. Hon ble Karnataka High Court in case of CIT vs. Manjunatha Cotton & Ginning Factory, reported in 359 ITR 565 has discussed the circumstances in which the section 271(1) (c ) could be levied. Hon ble Court held that; …………… After insertion of Explanation 1 to section 271(1)(c ), the law on concealment and penalty has become stiffer. The Explanation as it stands now is a complete code having the following features: (1) Every differenc .....

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in the proper context, in particular, clause (c ) of sub-section (1) of section 271 makes the intention of the Legislature manifest. It clearly sets out when penalty is leviable and when penalty is not leviable. The condition precedent for levying the penalty is the satisfaction of the authority that there is a concealment of the particulars of the income or inaccurate particulars are furnished to avoid payment of tax. 9. Let us analyse the disallowance made by the ld.Ao in the light of the rati .....

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