TaxTMI 
TaxTMI 
2014 (7) TMI 766
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....ve 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....
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....on 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. 5. Assessee preferred an appeal before the FAA. After considering the submission of the assessee and the penalty order, FAA held that claim of loss attracted penal provisions, that the Car were capital asset and were eligible for depreciation, that sale of the assets were to be treated as per the provisions of section 50 of the Act, there was neither any logic nor any element of rational for claiming the entire loss on sale of Motor Cars, that the claim made by the assessee was not bonafide, that incorrect particulars of income included latently wrong claim made in computation of income, that claim of loss on capital asset had been claimed as revenue loss, that the said assets were depreciable assets, that the loss on sale of Motor Cars claimed as revenue loss was an independent item of profit and loss account, that it was clubbed with a varieties of expenses under the head administrative and other expenses, there was nothing bonafide about the claimed made by the assessee, that explanation 1 to se....
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....and we find on infirmity in the order of the CIT(A). We therefore, confirm the same" While rejecting the MA, filed by the assessee, Tribunal has, on 09. 03. 2011, held as following: "5. We have carefully heard the submissions of the rival parties and perused the material available on record. We find that the Tribunal with regard to ground No. 1 that:- "On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in confirming the disallowance of loss on sale of Motor Car of Rs. 12, 38, 469/- or alternatively he ought to have allowed the claim of depreciation when the facts shows that no depreciation was allowed. " has held vide para No. 10 of its order dated 11. 1. 08 as under: "Having heard the rival submissions and from careful perusal of the record, we find that the lower authorities have given a categorical finding that these cars were shown as part of the block of asset and in earlier years, depreciation was claimed thereon. In this year, the WDV was shown at Rs. 71, 39, 050/-. Undisputedly, the assessee is not a dealer or a trader in cars and these cars have been acquired as an asset for being used for the purpose of assessee's business of ....
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....part of its stock in trade. Cars were part of block of assets. So, any loss suffered or profit earned on sale of such cars cannot be treated as part of business activities. The assessee in not in a position to controvert the categorical finding of fact given by the Tribunal that it had charged depreciation on motor cars for the AY. 2001-02. Even if depreciation was not charged the nature of cars would not change from the part of block assets to the part of stock in trade. Revenue loss can be claimed only for business-activities carried out by an assessee. As the cars were part of block asset, so loss arising out of their sale has to be computed under appropriate head and not under the head revenue loss. The assessee has stated that it was a bonafide mistake. We are of the opinion that the claim made by the assessee about the loss was not a bonafide. Two views are not possible about the said claim-only one view is possible. By claiming revenue loss on sale of fixed assets the assessee had filed inaccurate particulars of income. Therefore, we are of the opinion that the order of the FAA does not suffer from any legal infirmity. Now, we would like to discuss the cases relied upon b....
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....tiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income, have been disclosed by him, then the amount added or disallowed in computing the total income of such person, as a result thereof, shall for the purpose of clause (c) be deemed to represent the income in respect of which particulars have been concealed. Thus, in case of failure of the assessee to offer any explanation or the explanation furnished by him being found false, penalty may be imposed on him. However, if an explanation is offered by the assessee, mere failure on his part to substantiate it will not be enough to warrant penalty, if the explanation is bona fide and all the facts relating to the same were disclosed by him in the return. Explanation 1 to section 271(1)(c) would be inapplicable in respect of any amount added or disallowed as a result of rejection of the explanation furnished by the assessee, provided that his explanation is shown to be bona fide and all the facts relating to the same and material to the computation of his total income were disclosed by him...... If the explanation is neither substantiated ....