ITO 3(2)(2), MUMBAI V. MOONROCK INVESTMENTS & TRADING CO. P. LTD, MUMBAI

ITA 1710/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55005 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-08-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 04-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Keywords: Business income; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) INCOME TAX OFFICER 3(2)(2), ROOM NO.673, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. M/S MOONROCK INVESTMENTS & TRADING CO.P..LTD. 602, TULSIANI CHAMBERS, NARIMAN POINT, MUMBAI PAN: AAACM3291L APPELLANT V/S RESPONDENT DATE OF HEARING : 9.8.2011 DATE OF PRONOUNCEMENT : APPELLANT BY : SHRI P.C.MAURYA RESPONDENT BY : NONE O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 1.12.2009 PASSED BY THE LE ARNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 1999-2000. 2. IN THIS CASE, THE FIRST NOTICE OF HEARING WAS SE NT TO THE ASSESSEE FIXING THE DATE OF HEARING ON 20.1.2011. T HEREAFTER, THE CASE WAS ADJOURNED TO 9.6.2011 AND 9.8.2011 AS THE BENCH DID NOT FUNCTION. ON THE LAST DATE OF HEARING I.E. 9.8.2011, AT THE TIME OF HEARING, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOU RNMENT OF ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 2 THE CASE. THEREFORE, WE DECIDE THE APPEAL EX-PARTE , QUA THE ASSESSEE, ON MERITS AFTER HEARING THE LEARNED D.R . 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE IS A COMPANY. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO OBSERVED THAT THE ASSESSEE TOOK LOANS FROM M/S MASHREQUE BANK. THE ASSESSEE ENTERED INTO AN AGR EEMENT WITH THE LENDING BANK WHEREBY IT HAD ALLOWED THE BANK TO OCCUPY ITS OFFICE PREMISES AND TO CONDUCT ITS BUSI NESS FOR SOME TIME AGAINST THE PAYMENT OF RENT. THE AO FURT HER OBSERVED THAT THE PROFIT AND LOSS ACCOUNT SHOWS O NLY ONE CREDIT ENTRIES, BEING INCOME FROM OPERATION RS.26, 85,000/- WHICH WAS NOTHING BUT RENTAL INCOME RECEIVED FROM M /S MASHREQUE BANK. ON BEING ASKED AS TO WHY THE INCO ME RECEIVED AS RENT FROM THE PROPERTY OFFERED UNDER T HE HEAD BUSINESS INCOME SHOULD NOT BE ASSESSED AS INCOME UN DER THE HEAD INCOME FROM HOUSE PROPERTY, THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS RUNNING THE BUSINES S CENTRE, HENCE THE INCOME FROM BUSINESS ASSETS IS CLASSIFIE D AS BUSINESS INCOME, AND THAT THE BUSINESS CENTRE IS A COMMERCIAL ASSETS AND THEREFORE THE INCOME IS TREAT ED AS BUSINESS INCOME. HOWEVER, THE AO WAS OF THE VIEW TH AT THE INCOME RECEIVED BY THE ASSESSEE IS LIABLE TO BE ASS ESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 3 THE HEAD INCOME FROM BUSINESS AND ACCORDINGLY, HE A SSESSED THE SAME AS INCOME FROM HOUSE PROPERTY. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (A) HELD THAT T HERE IS NO ROOM TO INTERFERE WITH THE VIEW TAKEN BY THE AO AND ACCORDINGLY CONFIRMED THE ACTION OF THE AO. SINCE IN THE ASSESSMENT PROCEEDINGS, THE AO HAS ALSO INITIATED P ENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, A CCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO E XPLAIN AS TO WHY THE PENALTY UNDER SECTION 271(1)( C ) SHO ULD NOT BE LEVIED. IN RESPONSE, IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAS NOT CONCEALED ANY INFORMATION, OR FACTS AT THE TIME OF FILING OF THE RETURN OR AT THE TIME OF ASSESSMENT PROCEEDINGS. THE ASSESSEE H AS CLAIMED RENTAL INCOME AS BUSINESS INCOME AS THE INC OME IS DERIVED FROM THE BUSINESS ASSETS HELD BY THE COMPAN Y, WHEREAS IN THE ASSESSMENT, THE AO HAS TREATED THE R ENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT IS SETTLED PRINCIPLE THAT IF THE ADDITION IS MADE DUE TO DIFFERENCE OF OPINION, NO PENALTY CAN BE LEVIED AS THERE IS N O NEW FACTS BROUGHT ON RECORD BY THE AO WHICH THE ASSESSEE HAS CONCEALED. THE ASSESSEE AFTER RELYING ON THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S KHOD AY ESWARSA AND SONS (1972) 83 ITR 569 (SC) SUBMITTED THAT THE PENALTY PROCEEDINGS BE DROPPED. THE AO AFTER ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 4 CONSIDERING THE ASSESSEES SUBMISSIONS AND KEEPING IN VIEW THE RATIO OF THE CERTAIN DECISIONS IN CIT V/S LAL CHAND TIRATH RAM (1997) 225 ITR 675 (P & H) AND CIT V/S SREENIVASA PAI (2000) 242 ITR 29 (KER) HELD THAT TH E PROVISIONS OF SECTION 271(1)(C) OF THE ACT ARE ATTR ACTED IN THE ASSESSEES CASE AND ACCORDINGLY HE IMPOSED THE PENA LTY OF RS.6,09,394/- VIDE ORDER DATED 27.3.2008 PASSED UND ER SECTION 271(1)( C ) OF THE ACT. 4. ON APPEAL, THE LEARNED COMMISSIONER OF THE INCOM E TAX (A) HELD THAT THE ADDITION MADE BY THE AO BY TR EATING THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY WAS JUSTIFIED BUT THE PENAL ACTION FOR CONCEALMENT OF INCOME WAS UNJUSTIFIED SINCE THE APPELLANT HAD NOT MADE CONS CIOUS EFFORTS TO CONCEAL THE PARTICULARS OF ITS INCOME AN D THAT NO MATERIAL HAS BEEN ESTABLISHED AGAINST THE APPELLAN T AND ACCORDINGLY HE DELETED THE PENALTY IMPOSED BY THE A O. 5. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE REVENUE IS IN A PPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE DELET ION OF PENALTY IMPOSED BY THE AO. 6. AT THE TIME OF HEARING, THE LEARNED D.R. SUBMIT S THAT FOR THE REASONS AS MENTIONED IN THE PENALTY ORDER, THE LEARNED COMMISSIONER OF INCOME TAX (A) WAS NOT JUST IFIED IN ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 5 DELETING THE PENALTY IMPOSED BY THE AO. HE, THERE FORE, SUBMITS THAT THE PENALTY IMPOSED BY THE AO BE REST ORED. 7. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS SHOW N RENTAL INCOME AS BUSINESS INCOME WHICH WAS ASSESSED BY TH E AO AS INCOME FROM HOUSE PROPERTY. THUS, THERE IS A CHANGE OF THE HEAD OF THE INCOME AND IT IS NOT THE CASE OF T HE REVENUE THAT THE ASSESSEE HAS NOT DISCLOSED THE COMPLETE PA RTICULARS OF ITS INCOME OR NO SUCH INCOME WAS SHOWN BY THE AS SESSEE. 8. IN ITO VS. ROBORANT INVESTMENT (I) LTD.(2006) 7 SOT 181 (MUM) THE TRIBUNAL AFTER CONSIDERING VARIOUS D ECISIONS INCLUDING THE JUDGMENT IN K.P. MADHUSUDHANAN VS. CI T (2001) 251 ITR 99(SC) WHILE OBSERVING THAT THE AFOR ESAID JUDGMENT, IN OUR VIEW, SUPPORTS THE CASE OF THE ASS ESSEE MORE THAN THE CASE OF THE DEPARTMENT HAS HELD VIDE PARA -10 OF THE ORDER DATED 14.12.05 AS UNDER :- 10. IN VIEW OF THE FOREGOING, WE ARE OF THE OPINION THAT MERE REJECTION OF A LEGAL CLAIM OF THE ASSESSEE FOR TAXABILITY OF INCOME UNDER A PARTICULAR HEAD OF INCOME IS NOT BY ITSELF SUFFICIENT TO WARRANT IMPOSITION OF PENALTY. TAX MATTERS ARE HIGHLY COMPLEX AND HENCE THERE IS BOUND TO BE A GENUINE DIFFERENCE OF OPINION IN MATTERS OF LAW BETWEEN THE TAX COLLECTORS AND THE TAX PAYERS. IT IS INDEED VERY DIFFICULT FOR THE ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 6 ASSESSEE TO PREDICT, IN ADVANCE, AS TO WHAT VIEW THE ASSESSING OFFICER OR APPELLATE AUTHORITIES WOULD TAKE ON THE LEGAL CLAIM MADE BY THE ASSESSEE. CASES INVOLVING GENUINE DIFFERENCE OF OPINION ON MATTERS OF LAW BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER ARE CLEARLY OUTSIDE THE SCOPE OF EXPLANATION 1 TO SECTION 271(1) PROVIDED THE ASSESSEE HAS MADE FULL DISCLOSURE OF ALL THE RELEVANT FACTS AND ALSO ACTED BONA FIDE. TESTED ON THE AFORESAID PARAMETERS, WE FEEL THAT THE LEARNED COMMISSIONER (APPEALS) HAS CORRECTLY CANCELLED THE IMPUGNED PENALTY. HIS ORDER IS, THEREFORE, CONFIRMED. 9. THE ABOVE VIEW HAS BEEN REITERATED BY THE TRIBU NAL IN OTHER CASES INCLUDING IN THE CASE OF DEVANSHI WAREH OUSING GANGA HOUSE, MUMBAI AND OTHERS VS. ITO IN ITA NOS. 2638,2639& 2640/M/08 FOR THE ASSESSMENT YEAR 2004-0 5 ORDER DATED 1.10.2009 AND IN THE CASE OF RECLAMATI ON PROPERTIES (I) PVT. LTD. AND OTHERS VS. ACIT IN ITA NO.2239 & 2240/MUM/2006 FOR ASSESSMENT YEAR 2002-03 ORDER DAT ED 17.12.2009 AND ALSO IN THE CASE OF ACIT V/S M/S. SANGHVI SWISS REFILLS P. LTD. IN ITA NO.3893/MUM/2007(AY-2 001-02) ORDER DATED 7.5.2010 IN WHICH ONE OF US (J.M.) WAS THE PARTY. 10. RECENTLY THEIR LORDSHIPS IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) A FTER CONSIDERING VARIOUS DECISIONS INCLUDING DILIP N. SH ROFF VS. JCIT (2007) 291 ITR 519(SC) AND UNION OF INDIA VS. ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 7 DHARMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC ) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER : A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 8 11. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS AND KEEPING IN VIEW THAT THERE IS NO FINDING OF THE AO THAT TH E DETAILS FURNISHED BY THE ASSESSEE ARE FOUND TO BE INCORRECT OR FALSE WE ARE OF THE VIEW THAT, UNDER SUCH CIRCUMSTANCES, THE PENALTY IS NOT LEVIABLE. FURTHER MAKING OF WRONG C LAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INF ORMATION, WHICH MAY CALL FOR LEVY OF PENALTY U/S. 271(1)(C) O F THE ACT. THIS VIEW ALSO FINDS SUPPORT FROM THE RECENT DECISI ONS IN CIT VS. SIDHARTHA ENTERPRISES (2010) 322 ITR 80 (P&H) A ND CIT VS. SHAHABAD CO-OP. SUGAR MILLS LTD. (2010) 322 ITR 73(P&H). ACCORDINGLY WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE PENALTY IMPOSED BY T HE AO. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE, REJ ECTED. 12. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH AUGUST, 2011. SD SD (RAJENDRA SINGH) (D .K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 24TH AUGUST, 2011 SRL: ITA NO.1710/MUM/2010 (ASSESSMENT YEAR:1999-2000) 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI