NISHILAND PARK LTD. Vs. INCOME TAX OFFICER
LAWS(IT)-2014-6-18
INCOME TAX APPELLATE TRIBUNAL
Decided on June 11,2014

Nishiland Park Ltd. Appellant
VERSUS
INCOME TAX OFFICER Respondents

JUDGEMENT

RAJENDRA,AM. - (1.) CHALLENGING the order dated 12.03.2008 of the CIT (A) -III, Mumbai, assessee has filed following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the penalty order passed u/s. 271(1)(c) is invalid and bad in law. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the penalty levied of Rs. 4,89,814/ - u/s. 271(1)(c) of the I.T. Act, 1961 and that too without appreciating fully and properly the facts of the case. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the penalty levied of Rs. 4,89,814/ - u/s. 271(1)(c) of the I.T. Act, 1961 although there has been neither any concealment nor furnishing of inaccurate particulars of income. 6. The Appellant craves leave to add, alter or delete any or all of the grounds of appeal.
(2.) ASSESSEE -company, engaged in the business of running Amusement Park and related entertainment services, filed its return of income on 22.10.2001 showing loss of Rs. 9.11 lakhs. Assessing Officer (AO) finalised the assessment on 31.03.2003, u/s. 143(3) of the Act, determining the income of the assessee at Rs.8820/ -after setting off the losses of earlier years.
(3.) DURING the assessment proceedings, AO found that assessee had debited Rs. 12,38,462/ - to Profit & Loss Account under the head 'Administrative and other expenses' as 'loss on account of sale of Motor Car sale'. He asked the assessee to file explanation in this regard. Assessee informed the AO that company had sold Motor Car which were shown as fixed assets.AO found, from the schedule showing block of assets, that assessee had reduced the value of Motor Cars to the tune of Rs.70.38 lakhs from WDV of Rs.78.68 lakhs, that the balance of Rs. 61.29 lakhs had been shown as WDV on Motor Cars as 31.03.2001.After considering the submission of the assessee, AO held that trading in Motor Cars was not the business of the assessee, that the Motor Cars appeared as fixed assets in the accounts and not as stock -in -trade, that they were the capital assets, that the loss incurred by the assessee on disposal of the Motor Car could not be treated as trading loss, the loss was not allowable as business expenditure also, that the assessee had reduced the value of Cars sold from the block of assets, that the assessee had claimed depreciation on all the assets in the earlier years, that only for the year under consideration it had opted not to avail depreciation allowance. He further held that whether the assessee claimed depreciation or not, fixed assets were to be treated as capital asset, that any loss on account of sale of such assets was to be considered as per the provisions of the Act. Referring to the provisions of section 50 of the Act, he held that profit/loss on sale of depreciable asset was to be treated as Short Term Capital Gain/Loss in case entire block of asset had been sold, that loss on account of sale of part of the block could not be allowed as revenue expenditure. Finally, the claim of loss on account of sale of Motor Cars, amounting to Rs. 12.38 lakhs, was disallowed.AO also initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars. Meanwhile, the assessee preferred an appeal before the First Appellate Authority (FAA), who decided the issue in favour of the department and held that there was no provision in the Act to allow any loss on sale of capital asset as revenue expenditure. His order was challenged by the assessee before the Tribunal. But, there also the assessee could not succeed. Assessee filed an MA against the order passed by the Tribunal and same was dismissed by the Tribunal holding that no mistake was apparent from the records that could be rectified u/s.254(2)of the Act. In response to the penalty notice assessee argued before the AO that it had incurred the loss on sale of Motor Cars, that it had not claimed depreciation on the Cars and hence was eligible for claiming loss, that as no depreciation was charged so question of invoking the provisions of section 50 of the Act did not arise, that penalty u/s 271(1)(c) of the Act could not be levied. After considering the submissions of the assessee, AO held that explanation offered by the assessee was not convincing, that it had sold Motor Cars -a capital asset, that not claiming depreciation on Motor Cars did not mean that Motor Cars ceased to be part of block of asset eligible for depreciation. Finally, he levied a penalty of Rs. 4,89,814/ - u/s 271(1) (c) of the Act.;


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