Ice Infowave (P) Ltd., Mohali vs Assessee

during the year. The Assessing Officer asked the assessee to

produce bills of addition to fixed assets on which depreciation

had been claimed. On examination of this information, it was

noted that on certain purchase bills of fixed assets amounting to

Rs. 5,37,157/-, the address was mentioned as M/s ICE Infowave

(P) Ltd., House No. 128, Sector 18, Chandigarh. The Assessing

Officer asked the assessee to explain why these assets were

delivered at this address when there is no business operation of

the company is being carried out from the above noted address.

It was directed why depreciation be not disallowed. The

assessee submitted that since the Director of the company was

dealing with the activities of the assessee company, his address

may have been written on the bill and all the assets have been

used for the purpose of business activity. The explanation of

the assessee was also called for as to which of the Director was

residing at the given address but no such details were filed. It

was observed that remaining bills of purchase of addition to

fixed assets are in the name of the company. One of the

Director was found to be residing at the above address but the

company has never carried out any business operation from this

address. The Assessing Officer, therefore, held that use of the 3

equipment is doubtful as the company has not made any sale

during the period. The depreciation was, therefore, disallowed.

6. The assessee explained before ld. CIT(Appeals) that one of

the promoter Director namely Shri Patrick Thomas Edward

Hanratty, a British citizen used to stay at the aforesaid address

and just because the bill bears the address of the Director and

not of the company, disallowance is unjustified. The ld.

CIT(Appeals) also noted the report submitted by the Inspector to

say that no such Director was residing at the given address.

The ld. CI T(Appeals), therefore, held that the assessee has failed

to establish that these equipments were used for the purpose of

business of assessee company and accordingly, confirmed the

addition.

7. On ground No. 3, the assessee has challenged the

disallowance of the expenses of Rs. 27,100/-. The Assessing

Officer disallowed the expenditure on two cash bills of mobile set

for Rs. 27,100/- issued by M/s Raj Hans Photo Centre as there

is no name on these bills. The assessee explained that cash

bills are issued without mentioning the name of the purchaser.

The ld. CI T(Appeals), however confirmed the addition and

dismissed this ground of appeal of the assessee.

8. On ground No. 4, the assessee challenged the disallowance

of hospitality expenses of Rs. 81,006/-. The Assessing Officer

noted that assessee produced the books of account alongwith

vouchers and found that vouchers for hospitality expenses were

not produced. The addition was, accordingly made. 4

9. The ld. CI T(Appeals) noted that assessee has voluntarily

offered to make the addition at assessment stage and

accordingly, dismissed this ground of appeal of the assessee.

10. After considering rival submissions, we do not find any

merit in the appeal of the assessee on all the three effective

grounds of appeal. The ld. counsel for the assessee has not

been able to submit any convincing evidence or argument during

the course of hearing of the appeal as to why these additions be

deleted. The depreciation was correctly disallowed because

assessee failed to establish that the purchased assets were used

for the purpose of business. The finding of fact recorded by the

authorities below have not been challenged through any

evidence or material on record. Further, the expenses could not

be allowed because the assessee failed to prove that cash bills of

mobile sets have been used for the purpose of business and the

hospitality expenses were correctly disallowed because the

assessee has accepted and voluntarily agreed for addition before

the Assessing Officer. In the absence of any evidence or

material on record to contradict the finding of facts recorded by

the authorities below, we do not find any merit in all these

grounds of appeal of the assessee. The same are, accordingly,

dismissed.

11. In the result, I TA No. 1069/CHD/2012 is dismissed.

12. ITA 690/CHD/2013 is directed against the order of ld.

CIT(Appeals), Chandigarh dated 01.04.2013 for assessment year

2006-07 challenging the levy of penalty under section 271(1)(c)

of the Act. The Assessing Officer levied penalty on disallowance 5

of depreciation in a sum of Rs. 3,22,295/-. The ld. CIT(Appeals)

confirmed the penalty and dismissed appeal of the assessee.

13. The facts are same as noted above in quantum appeal No.

1069/CHD/2012 on which on ground No. 2, we have dismissed

the appeal of the assessee on the same issue. The facts noted

above clearly reveal that assessee produced the purchase bills of

the fixed assets before the Assessing Officer. The bill was in the

name of the assessee company, however the address was given of

house No. 128, sector 18, Chandigarh from where, no business

operations were carried out by the assessee. The explanation of

the assessee was not found convincing by the Assessing Officer

with regard to the use of the assets for the purpose of business

and accordingly, disallowance out of depreciation was made.

14. The ld. CI T(Appeals) also confirmed the quantum addition

which is also confirmed by us above. However, the facts clearly

reveal that the assessee produced the bill of purchase of the

asset and also tried to explain before ld. CI T(Appeals) that one of

the Promoter Director resided at the given address temporarily

but the explanation of the assessee and confirmation was not

accepted by the ld. CI T(Appeals). Since the purchase bill was

found to be in the name of the assessee company, therefore, on

mere disallowance of the depreciation on account of failure to

prove that said asset was used for the purpose of business

would not disclose that the assessee has concealed the

particulars of income or filed inaccurate particulars of income.

It is a case of mere disallowance of the depreciation in the

absence of filing convincing evidence before the Assessing

Officer regarding user of the asset for the purpose of business. 6

It is well settled law that levy of the penalty in each and every

case is not automatic and it depends upon facts and

circumstances of each case. The facts and circumstances noted

above clearly reveal that it may not be a fit case of levy of

penalty merely because the explanation of the assessee was not

acceptable to the authorities below. We, therefore, found that

assessee has not concealed the particulars of income or filed

inaccurate particulars of income. The levy of penalty is,

therefore, not justified in the facts and circumstances of the

case. We, accordingly, set aside orders of authorities below and

cancel the penalty under section 271(1)(c) of the Act.

15. In the result ITA No. 690/CHD/2013 is allowed.

16. In the result, appeal of the assessee in ITA No.

1069/CHD/2012 is dismissed, however assessee's appeal in ITA

No. 690/CHD/2013 is allowed.

Order pronounced in the Open Court on 12 T H

January,2015.

Sd/- Sd/-

(T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 12 t h January,2015. 'Poonam' Copy to:

The Appellant, The Respondent, The CIT(A), The CIT,DR

Assistant Registrar, ITA T Chandigarh