SAHNEY KIRKWOOD P. LTD, MUMBAI V. DCIT RG 10(2), MUMBAI

ITA 1499/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59816 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 31-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 24-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: R MURLIDHAR
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI T.R. SOOD (ACCOUNTANT MEMBER) ITA NO. 1499/MUM/2010 ASSESSMENT YEAR-2004-05 M/S. SAHNEY KIRKWOOD PVT. LTD., 27, KIROL, VIDYA VIHAR (W), MUMBAI-400 086 PAN-AAACS 5304A VS. THE DCIT, RANGE 10(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R. MURLIDHAR RESPONDENT BY: SHRI VIVEK BATRA DATE OF HEARING : 31.01.2012 DATE OF PRONOUNCEMENT: 10.02.2012 O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2004-05 AGAINST ORDER OF LD. CIT(A) DT. 22.12.2009 VIDE WHI CH LD. CIT(A) HAS CONFIRMED ACTION OF ASSESSING OFFICER TO LEVY PENAL TY OF RS. 45,00,000/- U/S. 271(1)(C) OF THE ACT. 2. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL AR E THAT ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS ON ACCOUNT OF FOLLOWI NG CLAIMS WHICH WERE DISALLOWED DURING THE ASSESSMENT PROCEEDINGS: A) ASSESSEE CLAIMED EXPENSES OF RS. 33,94,513/- ON ACC OUNT OF REPAIRS AND OF ITS OWN DISALLOWED AN AMOUNT OF RS. 18,97,21 1/- WHILE COMPUTING ITS INCOME FOR INCOME TAX PURPOSES. AO DI SALLOWED BALANCE AMOUNT OF RS. 14,97,302/- ON THE GROUND THA T EXPENSES RELATED TO PROPERTY AND INCOME FROM THE SAID PROPER TY WAS ASSESSABLE U/S. 22 OF I.T. ACT. HOWEVER, LD. CIT(A) SUSTAINED DISALLOWANCE OF RS. 7,64,967/-. THEREFORE, AO HAS CONSIDERED THE ITA NO. 1499/M/10 2 SAID AMOUNT OF RS. 7,64,967/- FOR LEVY OF PENALTY O N ACCOUNT OF WRONG CLAIM OF ASSESSEE. B) THE ASSESSEE CLAIMED BROKERAGE EXPENSES OF RS. 5,24 ,988/- IN RESPECT OF LEASING OF VASHI FACTORY PREMISES. THE AO STATED THAT INCOME FROM SAID LEASED PROPERTY WAS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. HENCE, CLAIM OF ASSESSE E WAS WRONG AND INCORRECT AS BROKERAGE PAYMENT COULD NOT BE DED UCTED. THE AO HAS STATED THAT ASSESSEE DID NOT PRESS THIS GROU ND BEFORE LD. CIT(A). ACCORDINGLY, AO HAS CONSIDERED THE SAID DI SALLOWANCE OF RS. 5,24,988/- FOR LEVY OF PENALTY U/S. 271(1)(C) O F THE ACT. C) THE AO HAS STATED THAT ASSESSEE LET OUT ITS PROPERT Y AT VIDHYAVIHAR ON ANNUAL RENT OF RS. 5,64,000/- TO ONE M/S. MINICO N INSULATED WIRES (MIWL). MIWL IN TURN SUB-LET THIS PROPERTY TO VARIOUS THIRD PARTIES AND EARNED RENT OF RS. 153.70 LACS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT MIWL WAS R ELATED TO ASSESSEE COMPANY AND HELD THAT AGREEMENT FOR LETTIN G OUT THE PROPERTY WAS SHAM. HENCE, AO ASSESSED INCOME FROM HO USE PROPERTY U/S. 22 OF THE I.T. ACT AT RS. 107.31 LACS. ITAT ALSO CONFIRMED ACTION OF AO. THEREFORE AO HAS CONSIDERE D SAID AMOUNT FOR LEVY OF PENALTY U/S. 271(1)9C) OF THE ACT. IN VIEW OF ABOVE, AO HAS STATED THAT 100% TAX SOUGH T TO BE EVADED FOR ABOVE AMOUNTS COME TO RS. 40,56,011/- AN D THE MAXIMUM PENALTY @ 300% IS RS. 1,21,68,033/-. AO HA S LEVIED PENALTY OF RS. 45 LACS U/S. 271(1)(C) OF THE ACT. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE FIRS T APPELLATE AUTHORITY. 3. LD. CIT(A) HAS CONFIRMED THE ACTION OF AO AND DI SMISSED APPEAL OF ASSESSEE. HENCE, ASSESSEE IS IN FURTHER APPEAL BEF ORE TRIBUNAL. ITA NO. 1499/M/10 3 4. IN RESPECT OF PENALTY LEVIED ON ACCOUNT OF SUPPRE SSION OF PROPERTY INCOME ON THE GROUND THAT LETTING OUT OF PROPERTY T O MIWL WAS BOGUS AND SHAM, LD. AR SUBMITTED THAT ASSESSEE FILED APPEAL B EFORE HONBLE JURISDICTIONAL HIGH COURT AGAINST ORDER OF TRIBUNAL AND HONBLE HIGH COURT VIDE ITS ORDER DT. 29.7.2011 IN ITA NOS.1501, 1509, 1515 TO 1517 OF 2007 DECIDED THAT TRANSACTION BETWEEN ASSESSEE AND MIWL C OULD NOT BE ACCEPTED AS SHAM AND BOGUS AND ACCORDINGLY DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HE REFERRED PAGE-3 TO 6 OF PAPER BOOK WHICH IS A CO PY OF ORDER OF HONBLE HIGH COURT. HE SUBMITTED THAT FOR THE ASSESSMENT Y EAR UNDER CONSIDERATION ALSO HONBLE HIGH COURT BY ORDER OF THE SAME DATE I.E. 29.7.2011 BY FOLLOWING ITS EARLIER ORDER HELD THAT TRANSACTION BETWEEN AS SESSEE AND MIWL IS NOT BOGUS AND DECIDED THE ISSUE IN FAVOUR OF ASSESSEE B Y REVERSING ORDER OF TRIBUNAL AND REFERRED PAGES 1 & 2 OF PAPER BOOK-II T O SUBSTANTIATE HIS SUBMISSION. LD. AR SUBMITTED THAT IN VIEW OF ABOVE ORDERS OF HONBLE HIGH COURT, THE RENTAL INCOME OF MIWL COULD NOT BE ASSESS ED IN THE HANDS OF ASSESSEE. HENCE PENALTY ON THAT ACCOUNT IS NOT MAIN TAINABLE. LD. AR FURTHER SUBMITTED THAT PENALTY LEVIED ON ACCOUNT OF DISALLO WANCE OF RS. 7,64,967/- OUT OF EXPENSES CLAIMED IS ALSO NOT JUSTIFIED AS DISALL OWANCE OF CLAIM COULD NOT AMOUNT TO FURNISHING WRONG PARTICULARS OF INCOME. FURTHER, IN RESPECT OF PENALTY LEVIED ON ACCOUNT OF DISALLOWANCE OF BROKER AGE OF RS. 5,24,988/-, LD. AR SUBMITTED THAT IT WAS A BONAFIDE CLAIM OF ASSESS EE AND PENALTY SHOULD BE DELETED. ON THE OTHER HAND LD. DEPARTMENTAL REPRES ENTATIVE RELIED ON THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED SUBMISSIONS OF LD. REPRESENTATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. WE HAVE A LSO CONSIDERED ORDERS OF HONBLE JURISDICTIONAL HIGH COURT COPIES OF WHICH A RE PLACED ON RECORD. 6. (I) IN RESPECT OF LEVY OF PENALTY ON ACCOUNT OF S UPPRESSION OF INCOME OF PROPERTY NAMELY VIDHYAVIHAR BY CONSIDERIN G THE AGREEMENT FOR LETTING OUT OF PROPERTY BY ASSESSEE TO MIWL AS SHAM AND BOGUS, WE HOLD THAT LEVY OF PENALTY IS NOT MAINTAINABLE BE CAUSE HONBLE HIGH COURT HAS HELD THAT SAID AGREEMENT BETWEEN ASSESSE E AND MIWL IS ITA NO. 1499/M/10 4 NOT SHAM AND BOGUS. THEREFORE, THE SAID INCOME OF M IWL COULD NOT BE ASSESSED IN THE HANDS OF ASSESSEE AND ACCORDINGL Y, THERE IS NO SUPPRESSION OF INCOME BY ASSESSEE. HENCE, WE DELE TE PENALTY LEVIED IN REGARD TO SAID AMOUNT OF RS. 148.06 LAKHS. (II) IN REGARD TO LEVY OF PENALTY ON ACCOUNT OF DIS ALLOWANCE OF RS. 7,64,967/- OUT OF REPAIR EXPENSES CLAIMED BY ASSESS EE, WE OBSERVE THAT SAID EXPENSES RELATE TO PROPERTY FROM WHICH IN COME HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY U/S. 22 OF I.T. ACT. IT IS NOT DISPUTED THAT ASSESSEE WHILE COMPUTIN G HOUSE PROPERTY INCOME CLAIMED 30% DEDUCTION ON REPAIRS U/S. 24 OF THE ACT. THEREFORE, SAID CLAIM OF EXPENSES OF ASSESSEE WAS N OT JUSTIFIED. LD. AR HAS NOT BEEN ABLE TO BRING ON RECORD ANY FACT TH AT SAID CLAIM WAS MADE BONAFIDE BY ASSESSEE. THEREFORE, WE AGREE WIT H LD. CIT(A) THAT ASSESSEE HAS FURNISHED WRONG PARTICULARS OF IN COME TO CLAIM EXPENSES OF RS. 7,64,967/- IN RESPECT OF A PROPERTY WHOSE INCOME HAS BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFORE WE CONFIRM THE ORDER OF LD. CIT(A) FOR LE VY OF PENALTY @ 100% OF TAX SOUGHT TO BE EVADED ON AN AMOUNT OF RS. 7,64,967/- AS ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME TO CLAIM THE SAID AMOUNT. (III) IN RESPECT OF LEVY OF PENALTY ON ACCOUNT OF DISALLOWANCE OF BROKERAGE CLAIM OF RS. 5,24,988/-, WE OBSERVE THAT ASSESSEE CLAIMED SAID AMOUNT ON ACCOUNT OF BROKERAGE PAID TO ONE SHR I SHAILESH MEHTA FOR LEASING OF VASHI FACTORY PREMISES. THE ASSESS EE HAS NOT DISPUTED THE FACT THAT INCOME FROM SAID PROPERTY HA S BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFOR E CLAIM OF ASSESSEE WAS NOT JUSTIFIED IN ACCORDANCE WITH LAW. THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT CLAIM OF ASSESSEE W AS BONAFIDE. IT IS RELEVANT TO STATE THAT HONBLE DELHI HIGH COURT HAS HELD IN THE CASE OF CIT VS ZOOM COMMUNICATION PVT. LTD. 327 ITR 510 THA T IF ASSESSEES CLAIM IS WITHOUT ANY BASIS AND IS NOT IN ACCORDANCE WITH LAW, IT COULD ITA NO. 1499/M/10 5 NOT BE SAID THAT CLAIM OF ASSESSEE WAS BONAFIDE. S INCE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT ITS CLAIM WAS BONAF IDE, THE CASE OF HONBLE APEX COURT IN THE CASE OF RELIANCE PETRO PR ODUCTS PVT. LTD. 322 ITR 158 WILL NOT BE APPLICABLE AS IN THAT CASE IT WAS HELD THAT THE CASES INVOLVING REJECTION OF BONAFIDE CLAIM OF ASSE SSEE WOULD NOT ATTRACT PENALTY U/S. 271(1)(C) OF THE ACT. WE ARE OF THE CONSIDERED VIEW THAT CLAIM OF ASSESSEE FOR BROKERAGE AND REPAI RS OUT OF INCOME WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUS E PROPERTY IS NOT IN ACCORDANCE WITH LAW AND THEREFORE ASSESSEE C ANNOT ESCAPE FROM LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT AS T HE ASSESSEES CLAIM IS A CASE OF FURNISHING INACCURATE PARTICULARS OF I NCOME. 7. HENCE, WE CONFIRM THE ORDER OF LD. CIT(A) TO TH E EXTENT OF LEVY OF PENALTY @ 100% ON THE TAX SOUGHT TO BE EVADED OF RS . 7,64,967/- TOWARDS REPAIR AND OF RS. 5,24,988/- TOWARDS BROKERAGE. TH EREFORE, GROUND OF APPEAL TAKEN BY ASSESSEE IS ALLOWED IN PART. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED ON THIS 10 TH DAY OF FEBRUARY, 2012 SD/- SD/- ( T.R. SOOD) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 10 TH FEBRUARY, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI