TMI Blog2010 (10) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... ses at the rates applicable for residential premises. 4. Both the Learned Commissioner [Appeals] and the learned Assessing Officer erred in passing their orders without granting Your Appellant an adequate opportunity of being heard. 3. After hearing both the parties we find that the assessee had claimed depreciation in respect of Flat No.104, 10th Floor, Somerset House, 61, Bhulabhai Desai Road, Mumbai which was claimed to be used for business purposes. A survey u/s.133A was conducted at Flat No.104, 10th Floor, Somerset House, 61, Bhulabhai Desai Road, Mumbai on 20-9-2006. Mrs. Anju Bang Director of the company and also wife of Shri Dilip Bang who is also Director was present. A statement from Mrs. Anju Bang was recorded u/s. 133A(iii). The relevant portion of the statement extracted in the assessment order reads as under: Q.No.3 Please state the office address of the Shresth Securities Pvt. Ltd.? Ans. Only the address o the premises is given as office address and no books of accounts and no papers of any kind pertaining to Shresth Securities Private Ltd. is kept here. In fact this premises is used only as residence and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is why the papers were in that address. He further noticed that depreciation was claimed only in respect of premises and it was stated that the furniture and electrical fittings were acquired in the subsequent year, which clearly showed that premises were not put to use for business purposes. Accordingly, the claim for depreciation was rejected. 6. Before the CIT[A] similar submissions were reiterated. Alternatively, it was submitted that even if the premises were occupied by the directors for their residence the said use of the premises should be construed only for business purposes. Reliance was placed on certain cases. The ld. CIT[A] after examining the submissions, confirmed the action of the AO and decided the issue against the assessee vide paras 3.1 and 3.2 which are as under: 3.1 I have considered the submissions of the appellant and found the contentions of the appellant not acceptable. It is an admitted fact that the said premise was not used by the appellant for conducting any business. Though the appellant claimed that business was carried out from the said premises, but it filed no evidence to support its claim. in fact, statement of Mrs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Gujarat High Court in the case of Sayaji Iron And Engg. Co. vs. CIT [supra] has been followed. 8. On the other hand, the Ld.DR submitted that the statement of the director clearly shows that the premises were never used for business purposes. This statement is further fortified by the statement of Shri Kishore M. Bang and Shri Ajay Karia, Accountant, in which it has been clearly stated that the books of accounts were being maintained in the office at 38-B Khatau Building, opposite Union Bank of India, Fort, Mumbai. This clearly shows that these premises were never used for business purposes. As far as the claim that even if the same is used for the residence of the director of the firm, no resolution has been filed before the lower authorities or even before us and, therefore, it cannot be said that the company had allowed the use of premises for the purpose of residence of the director. 9. We have considered the rival submissions carefully. Admittedly, the premises were not used for the business purposes because no books of accounts or any other business activity was being carried out at flat No.104, 10th Floor, Somerset House, 61, Bhulabhai Desai R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before us there is no such material to show that the director was authorized by any resolution to use the said premises as residence. We had specifically asked the Ld.counsel of the assessee during the hearing, whether any resolution was passed in this regard or whether same has been shown as perquisite in the returns of the individual director who is using the premises. He admitted that neither any resolution was passed nor any perquisite value is being taxed in the hands of the director. 11. As far as the decision of the Mumbai Bench of the Tribunal in the case of Intersil India Ltd. Vs. ACIT [supra] is concerned, the issue regarding disallowance of vehicle expenses was raised in ground No.2 and the Tribunal has deleted the disallowance by following the decision of the Hon ble Gujarat High Court decision in the case of Sayaji Iron And Engg. Co. vs. CIT [supra] which we have already distinguished. Therefore, in our view, the disallowance of depreciation has been rightly made by the lower authorities because the premises were never used for business purposes. In these circumstances, we find nothing wrong in the order of the ld. CIT(A) and confirm the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... temporarily for residence of directors. 5. In lieu of this when survey team visited the premises, directors family was present. 6. Records of the company are kept at the premises where directors are employed and sit full time to comply with the statutory requirements. 7. But during the course of assessment proceeding to buy the peace we have surrendered and withdrawn the claim of depreciation. 8. Company has not concealed any facts, which could lead to concealment of Income, or any fact, which lead to unaccounted expenses. 9. Company was under the impression that it is statutory required and as per the Companies Act mandatory to claim depreciation on fixed assets. In liew of this it was claimed, but to buy peace we have withdrawn in income tax. 10. We request your honour to take a lenient view and drop the proceedings initiated u/s.271[1][c] of I.T.Act 191 and obliged. The AO did not accept the submissions and observed that it is a false claim and ultimately minimum penalty of ₹ 8,03,285/- was levied u/s.271[1][c]. 14. On appeal, the explanation given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were made in the books of accounts in respect thereof. The assessee also stated that since it was unable to furnish evidence for such loans, it offered the amount of ₹ 93,000/- as additional income. Penalty proceedings were then initiated against the assessee under s. 271(1)(c) of the IT Act, 1961. The Assessing Officer found the assessee s explanation in regard to the loans to be unacceptable and noted that it had itself offered the addition of ₹ 93,000/-. Applying Explanation 1(B) to s. 271(1)(c), imposed a penalty on the assessee. On these facts the Hon ble Supreme Court held as under: Held, affirming the decision of the High Court, that the penalty was validly levied. The Explanation to s. 271(1)(c) is a part of s. 271. When the Assessing Officer or the Appellate Assistant Commissioner issues to an assessee a notice under s. 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By virtue of the notice under s. 271 the assessee is put to notice that, if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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