Hotel Marina, New Delhi vs Assessee
- CitationI.T.A .No.-1197/Del/2013
Ratio decidendi
The rule this decision rests on
The Tribunal's reasoning rests on the following principles, stated in the order the Tribunal takes them. Where an assessee, having claimed a deduction or computed income on the basis of an arithmetical error, voluntarily files a revised computation disclosing the correct position, and the error is accepted as a bonafide human mistake, the penalty under section 271(1)(c) is not attracted, so long as the assessee's explanation is accepted as bona fide on the facts and circumstances of the case. The assessee's failure to challenge the quantum addition in appeal does not, by itself, demonstrate that the mistake was not inadvertent or that the assessee accepted a concealment, since the revised computation was the assessee's own correction of an acknowledged arithmetical error and its non-challenge is consistent with that correction.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Hotel Marina, vs ACIT, G-59, Connaught Circus, New Delhi-110001 Circle-31(1), PAN-AACFH5086K New Delhi (APPELLANT) (RESPONDENT)
Appellant by Sh. U.N.Marwah, FCA Respondent by Sh.T.Vasanthan, Sr. DR
Date of Hearing 09.04.2015 Date of Pronouncement 24.04.2015
ORDER PER DIVA SINGH, JM
By the present appeal filed the assessee assails the correctness of the order dated 27.12.2012 of CIT(A)-XXVI, New Delhi pertaining to 2008-09 assessment year on the following ground:-
1. "That on facts and in law the learned CIT(A), erred in confirming the penalty of Rs.5,04,232/- levied by learned ACIT, Circle-31(1), New Delhi by invoking the Provisions of Section 271(1)(c) of the Income Tax Act, 1961 for the reasons stated in the impugned order."
2. The facts as enumerated in the impugned order are extracted hereunder for ready-reference:-
2. "The brief facts of the case are that the appellant, a partnership firm, is engaged in the business of running of a hotel under the name and style of "Hotel Marina", having its principal place of business at Connaught Circus, New Delhi and a branch in the name of "Holiday Inn" at Agra. In the course of assessment proceedings, the Assessing Officer examined the details of appellant's claim of long term capital loss on sale of 352 sq.ft. area (32% of 1100 sq ft.) at Ludhiana Project, Ferozpur Road, Circuit Road Ludhiana. On examination of the details, the Assessing Officer found that though the appellant claimed to have sold only 32% of 1100 sq.ft. area, the indexation cost has been claimed in respect of entire area of 1100 sq.ft. The Assessing Officer therefore, made the following queries as per order sheet entry dated 20.10.2010:
I.T.A .No.-1197/Del/2013
• "To give a detailed working of loss on sale of shop at Ludhiana as per the submission given today and also at page no.39 of submissions (balance sheet of assessee) given on 11.2.2010.
• The cost of construction attributed to be clarified."
3. The assessee as per record in the assessment proceedings accepted that due to an arithmetical error inadvertently instead of taking assessee's share as 32% the calculation was made on the total sale consideration. Accordingly revised computation of income was filed.
4. As a result of this long term capital gain of Rs.15,11,487/- was accepted.
Accordingly the AO after hearing the assessee imposed penalty u/s 271(1)(c) holding that had he not questioned the facts would not have been noticed. Further being also of the view that the assessee by filing Revised computation of income infact admitted to concealing the particulars of its income. The explanation offered by the assessee that it was an inadvertent mistake was not accepted.
5. The assessee went in appeal before the CIT(A) re-iterating the arguments offered before the AO including the argument that there ultimately was no change in the return of income or tax payable due to the adjustment of long- term capital loss brought forward from 2007-08 assessment year as such there is no concealment or furnishing of inaccurate particulars of income. Not convinced with the explanation offered holding that had the return not been picked up for scrutiny, the assessee would have taken the benefit of a wrong claim. In view of the same, penalty imposed of Rs.5,04,232/- was confirmed.
6. Aggrieved by this the Assessee is in appeal before the Tribunal.
7. The Ld. AR inviting attention to the material available on record submitted that the assessee had returned an income of Rs.13,20,92,656/- which comprises of the following sources:-
(a) Income from Hotel Business Rs.11,88,65,252/-
(b) Income from House Property Rs. 42,59,926/-
(c) Income from Other Sources Rs. 86,67,478/- (d) Long Term Capital Loss C/ F - Rs 85,514/ Total RS.13,20,92,656/ -
7.1. Inviting attention to the assessment order and the penalty order it was submitted that the assessee had available determined brought forward Long Term Capital Loss of Rs.18,08,107/- to be set off against the Long Term
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Capital Gains. The long term capital loss was determined in the original computation and the revised computation in the following manner:-
2. The computation of Long Term capital Loss as above was determined as Under :-
Original Revised 2.1 Amount of 32% share in sale of 1100 sq. Ft. 23,64,816/- 23,64,816/-
2.2 Indexed Cost of Acquisition (Originally computed 24,50,330/- 8,53,329/-
on basis of 1100 sq. ft instead of 352 sq. ft.) Long Term Capital Loss (-) 85,514/- -
Long Term Capital Gain - 15,11,487/- Set-off against B/F long term capital loss of Rs. 18,08,107/- 15,11,487/-
7.2. It was submitted that the revised computation was admittedly filed on 01.11.2010 (Paper Book page-43 - 46) alongwith a letter setting out the reasons for the filing of Revised computation of income on account of inadvertent arithmetic mistake. The said argument was advanced in the assessment order and this fact has been noted by the AO. The argument it was submitted was consistently made in the penalty order and also before the CIT(A). The bonafide mistake made on account of human error where admittedly the assessee over the years has been showing rental income from the said property to the extent of its share i.e. 32% of the total 1100 sq ft. the occasion to file inaccurate particulars does not arise, as this fact was made available on record by the assessee only in the computation the indexed cost adopted was for 1100 sq ft instead of 32% of 1100 sq ft. In these circumstances, relying upon the following decisions, it was his prayer that the penalty order may be quashed:-
S.No. Case Name Citation
1. Price Water house Coopers Pvt. Ltd. vs. CIT (SC) [2012] 348 ITR 306
2. CIT vs. Reliance Petro Products (SC) (2010) 322 ITR 158
3. CIT vs. Societex (Delhi HC) [2013] 212 Taxman 73
4. CIT vs. Deeksha Holidays Ltd. (Delhi HC) (2010)186 Taxman 183
5. CIT vs. Sumangal Overseas Ltd (Delhi HC) 2011 (11)TMI45
6. CIT vs. Smt. Neenu Dutta (Delhi HC) [2013] 35 taxmann.com 454
7. Saket Agarwal vs. ITO (ITAT Delhi) Income Tax Appeal (L) No.1860 Of 2009
8. CIT vs. Bennett Coleman & Co. Ltd (Bombay HC) [2013] 215 Taxman 93
9. CIT v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com (Karnataka HC) 250
10. CIT vs Somany Evergreen Knits Ltd. (Bombay HC) ITA No.1332 of 2011
11. Sarv Kapoor vs DCIT (ITAT-Agra) [2012] (10)-TMI-801
12. Radheshyam Sarda vs. ACIT (ITAT Indore) 2012 12 TMI 320 ITAT
13. Chiman Lal Mani Lal Patel vs. ACIT (Ahmd.)-ITAT ITA No.508/Ahd/2010
3 I.T.A .No.-1197/Del/2013
14. Amruta Organics PVt. LTd. vs DCIT (Pune) ITA No.1121/PN/2011
15. Kamal Sood v. Deputy Commissioner of Income [2013] 32 taxmann.com Tax (Amritsar-Trib.) 47
8. The Ld. Sr. DR appearing on behalf of the Revenue vehemently argued that the very fact that the assessee has not challenged the addition made in the quantum demonstrates the fact that the assessee has accepted the addition and on facts when the quantum is not challenged the occasion to argue inadvertent mistake does not arise.
9. We have heard the rival submissions and perused the material available on record. On a consideration thereof, we are of the view that consistently the assessee has stated that on account of an inadvertent arithmetic mistake the index cost of 1100 sq ft was mistakely taken in the calculations instead of 32% of the 1100 sq ft which was the extent of the assessee share. The argument of the Revenue that the revised computation filed by the assessee was not challenged in appeal is totally devoid of merit as the mistake is accepted by the assessee. For the purposes of the penalty proceedings, we are required to consider whether the mistake on facts is a bonafide mistake of human error or is it a case which attracts the rigours of section 271(1)(c). It is seen from a perusal of the following extract of para 3.3 of page 3 of the assessment order that the Revised computation was filed by the assessee in the following circumstances:-
"During the current year out of the areas still held and owned by the assessee from which rental income was being earned, the assessee sold 352 sq. ft area (32% of 1100 sq.ft.) for a gross consideration of Rs.23,64,816/-. The assessee in its return of income has inadvertently, due to a arithmetical error, computed the long term capital loss on such sale at Rs.85,514/-. The said error was a result of all figures of cost were computed assuming the sale of 1100 sq. ft. instead of 352 sq.ft. which was the sale of area of the assessee and consideration has been disclosed according to such area. However, on re-verification of the same the assessee, in fact has earned a long term capital gain of Rs.15,11,487/-. Revised computation of income and long term capital gain is enclosed herewith."
10. In the circumstances the argument that the assessee did not challenge the same in the quantum proceedings cannot be said to be a valid ground for upholding the impugned order. It is seen that consistently the assessee has argued that the inadvertent mistake has occurred due to an arithmetical mistake. Accepting the explanation as a bonafide explanation the mistake in
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the peculiar facts and circumstances of the case, considering the judicial precedent on facts to our mind does not attract the rigours of section 271(1)(c). In the circumstances where the assessee accepts it as a bonafide mistake and file a revised computation, it is expected will not be challenged by the assessee as it is as a result of its own mistake. In the said factual background, considering the requirements of section 271(1)(c) and the judicial precedent relied upon, we are of the view that the mistake having occurred on account of a human error in the peculiar facts and circumstances looking at the overall factual material on record, deserves to be accepted. Accordingly setting aside the impugned order as quash the penalty imposed. The said order was pronounced in the open Court in the presence of the parties.
11. In the result the appeal of the assessee is allowed.
The said order was pronounced in the Open Court on 24th April, 2015.
Sd/- Sd/- (T.S.KAPOOR) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: the 24th April, 2015 *Amit Kumar*
Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT NEW DELHI
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