Narrow escape for noted lawyer Mr Salve; ITAT deletes penalty; rules deferral of depreciation benefits does not amount to concealment of income
By TIOL News Service
NEW DELHI, OCT 03, 2017: THE issue before the Tribunal is - Whether if assessee makes an accounting error and then decides to forego depreciation benefits to avoid litigation, such deferral of allowance can be construed as concealment of income. NO is the answer.
Facts of the case:
The Assessee i.e., Mr. Harish Salve, who is a renowed advocate, filed his return declaring at Rs. 34,74,20,950/-, which was subsequently revised at Rs. 34,94,15,822/-. The case of assessee was selected for scrutiny and the assessment was completed u/s 143(3) at an income of Rs. 35,10,91,350/-, after making disallowances on account of depreciation on Bentley Car of Rs. 11,40,000/-; disallowance of loss on fixed assets of Rs. 1,69,498/-; and addition on account of reduction in professional receipts of Rs. 3,66,027/-. The AO thereafter initiated penalty proceedings u/s 271(1)(c) and held that Assessee had concealed his income and had furnished inaccurate particulars by wrongly claiming depreciation on Bentley car and wrong expenses under the head 'loss on fixed assets'. On appeal, the CIT(A) confirmed the penalty levied of Rs. 4,04,635/-.
ITAT held that,
++ during the assessment proceedings, assessee has given his explanation supported by documentary evidences on the addition in dispute, especially on the depreciation issue that he has forgone the benefit of 50% depreciation added back on account of Bentley Car and offered the amount of tax vide his letter to avoid litigation. It is also noticed that during assessment, the Assessee was asked to establish that he was using the car for professional purposes since the day of its acquisition in May, 2009. There is no documentary evidence which could support the fact that assessee owned the car since May, 2009 as the registration of the car in his name was completed in November, 2009 for which part payment was made in May, 2009 on completion of Custom requirements. He further stated that assessee was personally driving the car and had never maintained any log books in respect of a car which is under his personal use and accordingly he advised his accountant not to pursue the matter any further and to withdraw the claim. On perusing the detailed affidavit, it is established that the car was used for his professional pursuits. Moreover, the claim for depreciation only gets deferred to subsequent Years by claiming it for half year. In our view, the deferral of depreciation allowance does not result into any concealment of income or furnishing of any inaccurate particulars. However, it was a sheer accounting error in debiting loss incurred on sale of a fixed asset to P&L A/c instead of reducing the sale consideration from wdv of
the block under block concept of depreciation;
++ there was a separate line item indicated loss on fixed asset of RS.1,69,429/- in the Income & Expenditure Account which was omitted to be added back in the computation. The error went un-noticed by the tax auditor as well as the same was overlooked while certifying the Income & Expenditure Account and by the tax consultant while preparing the computation of income. Hence, there was no intention to avoid payment of taxes. The quantum of tax payments clearly indicates the assessee's intention to be tax compliant. Moreover, the assessee with a returned income of Rs 34.94 crores and tax payment of more than Rs.10.85 crores which does not show any mala fide intention to conceal an income of Rs.13.09 lacs with an intention of evading tax of Rs.4 lacs. Therefore, in view of such facts and circumstances, the allegation that assessee was having any mala fide intention to conceal his income or for furnishing inaccurate particulars of income is not correct, hence, the penalty in dispute needs to be deleted.
(See 2017-TIOL-1356-ITAT-DEL)
