Shri Atulbhai Babubhai Shah, Ahmedabad V. The ACIT.,Range-10, Ahmedabad

ITA 2493/AHD/2012

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3870 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-01-2020
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N DIVATIA AR SHRI L P JAIN
• Keywords: Business income; Depreciation; Business expenditure; Principle of natural justice; Wrong claim; Difference of opinion; Set aside
• Section: 271(1)(c); 143(3); 48; 2(A); 13; 22

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANTMEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER SL. NOS ITA NO(S) ASSESS- MENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 76/AHD/2011 2007-08 SHRI ATULBABUBHAI SHAH 401/402ASHANKSHA OPP.ADANI SUPER MARKET NAVRANGPURA AHMEDABAD PAN: ACKPS8827K THE JCITRANGE-10 AHMEDABAD 2. 966/AHD/2014 2007-08 -DO-ASSESSEE THE ACIT, CIRCLE-11 AHMEDABAD 3. 2493/AHD/2012 2009-10 -DO-ASSESSEE THE ACIT CIRCLE-10 AHMEDABAD ASSESSEE BY : SHRI S.N. DIVATIA, AR REVENUE BY: SHRI L.P.JAIN, SR.DR / DATE OF HEARING 06/02/2020 / DATE OF PRONOUNCEMENT 02/03/2020 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) XIV, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NOS.C IT(A)-XVI/JCIT-R- 10/311/09-10 DATED 22/10/2010, CIT(A)-XVI/ACIT/CIR. 10/052/12-13 DATED 20/02/2014 & CIT(A)-XVI/ACIT/CIRC.10/557/11-12 DATE D 21/08/2012 IN THE ASSESSMENT ORDERS PASSED UNDER S.143(3) OF THE INC OME TAX ACT, ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 2 - 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 2 6/12/2008,DATED 31/12/2009 AND PENALTY U/S 271(1)(C) OF THE ACT DAT ED 28/03/2012 AND ASSESSMENT ORDER U/S.143(3) DATED 21/12/2011 RELEVA NT TO ASSESSMENT YEARS (AYS) 2007-08, 2007-08 AND 2009-10 RESPECTIVELY. FIRST WE TAKE UP ITA NO.76/AHD/2011 FOR AY 2007-08, WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 11.1. THE ORDER PASSED U/S.250 ON 22.10.2010 FOR A .Y. 2007-08 BY CIT(A)-XVI, AHMEDABAD UPHOLDING ORDER U/S.143(3) DATED 31.12.20 09 IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2. THELD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN PASSING THE IMPUGNED ORDER WITHOUT ALLOWING SUFFICIENT OPPORTUN ITY TO THE APPELLANT. THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING FULLY AND PR OPERLY THE SUBMISSIONS MADE AND MATERIAL PRODUCED BY THE APPELLANT. 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AN D ON FACTS IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS.14,26,813/-. 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLOWANCE OF EXPENS ES OF RS.14,26,813/-. 2.3. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN UPHOLD ING THAT THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR AND THE APPELLANT HAD FAIL ED TO PROVE THE SAME. THE APPELLANT WAS NOT ALLOWED SUFFICIENT OPPORTUNITY TO PRODUCE EVIDENCE IN THIS REGARD. 3.1. THE LD.CIT(A) HAS ERRED IN UPHOLDING THAT RENT AL INCOME FROM LEASE OF BUNGALOW TO SHELL INDIA MARKETING PVT.LTD., WAS ASS ESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT HOUSE PROPERTY. 3.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THAT THE INTENTION BEHIND LETTING OUT TO SHELL INDIA MARKETING PVT.LTD., WAS LAND AND NOT HOUSE PROPERTY SO THAT INCOME WAS NOT ASSESSABLE AS PROPERTY INCOME. 4.1. THELD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF INTEREST EXPENSES OF RS.8,00,387/-. IT IS, THEREFORE, PRAYED THAT THE ADDITIONS UPHELD BY THE CIT(A) MAY KINDLY BE DELETED. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 3 - 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IS THAT T HE ORDER PASSED BY THE LEARNED CIT (A) IS BAD IN LAW AND AGAINST NATURAL J USTICE AS THE SAME WAS PASSED WITHOUT GRANTING SUFFICIENT OPPORTUNITY. HOW EVER, THE LEARNED AR DID NOT PRESS THIS GROUND BEFORE US. ACCORDINGLY WE DIS MISS THE SAME. 3. THE SECOND ISSUE RAISED BY THE ASSESSEE IS THA T THE LEARNED CIT (A) ERRED IN HOLDING THAT THERE WAS NO BUSINESS ACTIVITY AND CONFIRMING THE DISALLOWANCES OF EXPENSES OF RS. 14,26,813/-. 4. DURING ASSESSMENT PROCEEDINGS, THE AO OBSERV ED THAT THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION CLAIMED BUSINESS EXPEN SES OF RS.14,26,813/- AGAINST NIL BUSINESS INCOME. THE ASSESSEE CLAIMED T HAT DUE TO LULL IN THE MARKET, THERE WAS NO BUSINESS TRANSACTION CARRIED O UT DURING THE YEAR. BUT HE INCURRED THE EXPENSES IN ORDER TO SUSTAIN HIS BUSIN ESS. 4.1. HOWEVER, THE AO HELD THAT ASSESSEE HAS NOT CARRIED BUSINESS ACTIVITY DURING THE YEAR AND THE INCOMES DISCLOSED BY THE AS SESSEE WERE RELATED TO OTHER SOURCES. THEREFORE, THE BUSINESS EXPENSES AS CLAIMED BY THE ASSESSEE ARE NOT ELIGIBLE FOR DEDUCTION. ACCORDINGLY, THE AO DISALLOWED THE ENTIRE BUSINESS EXPENSES OF RS.14,26,813/- AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE, PREFERRED AN APPEAL BEFORE LEAR NED CIT (A). 5. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMIT TED THAT THE AO HAS DISALLOWED THE EXPENSES WITHOUT VERIFYING THE FACT THAT THE BUSINESS IS ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 4 - CONTINUING. HE ONLY SUBMITTED THAT DUE TO LULL IN T HE MARKET NO BUSINESS TRANSACTION TOOK PLACE DURING THE YEAR. 5.1. THE LEARNED CIT (A) AFTER CONSIDERING THE SU BMISSION OF THE ASSESSEE AND ASSESSMENT ORDER HELD THAT THE ASSESSEE HAS NOT SUBMITTED ANYTHING WITH REGARD THAT THE BUSINESS WAS NOT CLOSED. THEREFORE IN ABSENCE OF ANY DETAIL SUCH AS WHEN HE STARTED BUSINESS AND WHEN SLOWDOWN CAME IN MARKET AND WHEN HE RESTARTED HIS BUSINESS AFTER LULL IN MARKET , THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. ACCORDINGLY THE LEARNED CIT (A) CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED AR BEFORE US FILED A PAPER BOOK RU NNING FROM PAGES 1 TO 71 AND SUBMITTED THAT THE BUSINESS ACTIVITIES OF THE A SSESSEE WERE NOT DISCONTINUED/CLOSED DOWN. AS SUCH THERE WAS A LULL IN THE BUSINESS ACTIVITIES AND THEREFORE IT COULD NOT SHOW ANY INCOME UNDER TH E HEAD BUSINESS AND PROFESSION. THE LEARNED AR FURTHER CLAIMED THAT THE ASSESSEE IN THE ASSESSMENT YEAR 2010-11 HAS RE-STARTED ITS BUSINESS ACTIVITIES. THE LEARNED AR IN SUPPORT OF HIS CONTENTION DREW OUR ATTENTION ON THE FINANCIAL STATEMENTS FOR THE ASSESSMENT YEAR 2010-11. 6.2. THE LEARNED AR ALSO BUTTRESSED HIS CONTENTIO N BY FILING THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT FOR THE ASSES SMENT YEAR 2006-07 WHEREIN THE BUSINESS ACTIVITIES OF THE ASSESSEE WER E SHOWN. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 5 - 6.3. IN VIEW OF THE ABOVE THE LEARNED AR CLAIMED THAT THERE CANNOT BE DISALLOWANCE OF THE EXPENSES INCURRED BY THE ASSESS EE TO KEEP ITS BUSINESS ALIVE. 7. ON THE OTHER HAND THE LEARNED DR SUBMITTED TH AT THERE WAS NO BUSINESS ACTIVITY CARRIED OUT BY THE ASSESSEE IN THE YEAR UN DER CONSIDERATION. SIMILARLY, THE ASSESSEE HAS NOT JUSTIFIED WEATHER THE EXPENSES INCURRED BY THE ASSESSEE WERE INCURRED TO KEEP THE BUSINESS ALIVE. THE LEARN ED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS AS DISCUSS ED ABOVE ARE NOT IN DISPUTE. THEREFORE, WE ARE NOT REPEATING THE SAME F OR THE SAKE OF BREVITY AND CONVENIENCE. FROM THE FOREGOING DISCUSSION, THE ISS UES ARISE FOR OUR CONSIDERATION STAND AS UNDER: 1. WHETHER THE ASSESSEE WAS ENGAGED IN BUSINESS ACTIVI TY OR BUSINESS WAS CONTINUING OR CLOSED? 2. WHETHER THE EXPENSES INCURRED WERE WHOLLY AND SUBST ANTIALLY FOR THE PURPOSE OF BUSINESS OR NOT? 8.1. REGARDING THE QUESTION NO.1, THE UNDISPUTED FACT IS THAT THERE WAS THE BUSINESS ACTIVITY FROM THE TRANSACTIONS OF LAND DEA LING IN THE ASSESSMENT YEAR 2006-07 AS EVIDENT FROM THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT. THE RELEVANT FINDING OF THE AO IN THE ASSESSME NT ORDER STANDS AS UNDER: THE ASSESSEE IS TRADING IN LAND. HE IS ALSO DOING IN INVESTMENT IN SHARES AND STOCKS AND IN REAL ESTATE. DURING THE YEAR, THE ASSESSEE H AS SOLD THE LAND WHICH WAS LYING WITH HIM AS CLOSING STOCK SINCE ASSESSMENT YEAR 200 4 05. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXX ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 6 - 4. , IN VIEW OF THE ABOVE, THE TOTAL INCOME OF THE ASSESSEE IS DETERMINED AS UNDER: INCOME FROM BUSINESS AND PROFESSION AS PER STATEME NT 259510 8.2. SIMILARLY, WE ALSO NOTE THAT THE ASSESSEE HA S CARRIED OUT THIS ACTIVITY IN THE ASSESSMENT YEAR 2010-11 AS EVIDENT FROM THE FIN ANCIAL STATEMENTS. THE RELEVANT EXTRACT OF THE FINANCIAL STATEMENT OF THE ASSESSEE THESE AS UNDER: PARTICULARS 1APR - 2009 TO 31 - MAR - 2010 PARTICULARS 1APRI - 2009 TO 31 - MAR - 2010 OPENING STOCK PURCHASE ACCOUNTS FUTURES & OPTIONS PUCHASE A/C. 11,29,170.00 11,29,170.00 SALES ACCOUNTS FUTURES & OPTIONS SALES A/C. 11,24,130.00 11,24,130.00 8.3. FROM THE ABOVE THERE REMAINS NO DISPUTE TO THE FACT THAT THE ASSESSEE CARRIED ON ITS BUSINESS ACTIVITIES IN THE IMMEDIATE PREVIOUS ASSESSMENT YEAR I.E. 2006-07 AND IN A.Y. 2010-11 BUT IN BETWEEN THE RE WAS NO BUSINESS ACTIVITY FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10. 9. THE NEXT ISSUE ARISES WHETHER THE TEMPORARY LU LL IN THE BUSINESS ACTIVITIES AMOUNT TO CLOSURE OF THE BUSINESS. THE ANSWER CERTA INLY IS IN NEGATIVE. IT IS BECAUSE THERE CAN BE A SITUATION WHEN THE ASSESSEE IS NOT ABLE TO GENERATE ANY BUSINESS BUT IT HAS TO INCUR THE EXPENSES TO KE EP ITS BUSINESS SETUP IN EXISTENCE. THUS IN SUCH A SITUATION THE ASSESSEE CA NNOT BE DENIED THE CLAIM OF EXPENSES INCURRED DURING THE PERIOD WHEN HE WAS NOT ABLE TO GENERATE THE BUSINESS. FURTHERMORE, IT IS ALSO IMPORTANT TO NOTE THAT THE BUSINESS IS GOVERNED BY THE MARKET FORCES WHICH ARE BEYOND THE CONTROL OF THE ASSESSEE. THUS MERELY LULL IN THE BUSINESS ACTIVITIES DOES NO T MEAN THAT THE ASSESSEE HAS CLOSED DOWN ITS BUSINESS ACTIVITIES. ACCORDINGL Y, WE HOLD THAT THE ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 7 - ASSESSEE CANNOT BE DEPRIVED FROM THE BENEFIT OF CLA IMING THE DEDUCTION FOR THE EXPENSES INCURRED TO KEEP THE SETUP OF THE BUSI NESS IN EXISTENCE. 10. REGARDING THE QUESTION NO.2 AS DISCUSSED ABOVE , WE NOTE THAT THE EXPENSES INCURRED BY THE ASSESSEE TO KEEP THE BUSIN ESS SETUP IN EXISTENCE ARE ELIGIBLE FOR DEDUCTION. BUT IT IS EQUALLY IMPOR TANT TO ASCERTAIN WHETHER THE EXPENSES INCURRED BY THE ASSESSEE ARE REALLY ESSENT IAL TO KEEP ITS BUSINESS SETUP IN EXISTENCE DURING THE LULL PERIOD. AS SUCH, IN OUR CONSIDERED VIEW ALL THE EXPENSES INCURRED BY THE ASSESSEE DURING THE LU LL PERIOD ARE NOT ELIGIBLE FOR DEDUCTION EXCEPT THOSE EXPENSES WHICH WERE NECE SSARY TO INCUR OR KEEP ITS BUSINESS SETUP IN EXISTENCE. IN THE CASE ON HAN D, THIS ASPECT HAS NOT BEEN VERIFIED BY THE AUTHORITIES BELOW. NOW AGAIN THE QU ESTION ARISES WHETHER THE ISSUE FOR THE DEDUCTION OF THE EXPENSES CLAIMED BY THE ASSESSEE SHOULD BE SET ASIDE TO THE FILE OF THE AO TO FIND OUT THE EXP ENSES WHICH WERE NECESSARY TO BE INCURRED FOR KEEPING THE STATUS OF THE BUSINE SS ALIVE. CONSIDERING THE FACTS AVAILABLE ON RECORD, WE NOTE THAT ALL THE DET AILS OF THE EXPENSES INCURRED BY THE ASSESSEE WERE AVAILABLE BEFORE THE AUTHORITI ES BELOW, THEREFORE WE FEEL THAT THE REVENUE SHOULD NOT BE GIVEN FRESH INN ING FOR DETERMINING THE EXPENSES INCURRED BY THE ASSESSEE WHICH ARE TO BE A LLOWED/DISALLOWED AS THE CASE MAY BE. 10.1. IN VIEW OF THE ABOVE AND AFTER CONSIDERIN G THE FACTS IN TOTALITY, WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND DIRE CT THE AO TO DELETE THE ADDITION MADE BY HIM. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 8 - 11. THE ISSUE RAISED BY THE ASSESSEE IN GROUND NO S. 3 AND 4 IS INTERCONNECTED. THEREFORE, WE HAVE CLUBBED BOTH OF THEM FOR THE PURPOSE OF ADJUDICATION. THE ISSUE RAISED IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 24(A) AND 24(B) OF TH E ACT ON THE GROUND THAT THE INCOME FROM LETTING OUT THE LAND IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. 11.2. THE ASSESSEE IS THE OWNER OF BUNGALOW BEAR ING PLOT NO 93 OF TOWN PLANNING SCHEME NO. 3 WHICH WAS LET OUT TO M/S SHEL L INDIA MARKETING PVT. LTD. VIDE AGREEMENT DATED 7 TH SEPTEMBER 2006. THE ASSESSEE REVISED SUCH AGREEMENT BY EXECUTING SUPPLEMENTARY DEED DATED 11 TH SEPTEMBER 2006. THE ASSESSEE UNDER THE SUPPLEMENTARY DEED AUTHORIZE D THE LESSEE TO MAKE THE CHANGES AS PER ITS REQUIREMENT IN THE PROPERTY LET OUT TO IT SUBJECT TO THE CONDITION THAT THE LESSEE SHALL EITHER RETURN THE O RIGINAL PROPERTY OR IT WILL COMPENSATE 1 MONTH RENT TO HIM (THE ASSESSEE). 11.3. THE ASSESSEE ACCORDINGLY CLAIMED TO HAVE R ECEIVED RENT FROM THE LESSEE WHICH IS CHARGEABLE TO TAX UNDER THE HEAD IN COME FROM HOUSE PROPERTY. THUS THE ASSESSEE CLAIMED THE DEDUCTION A GAINST SUCH RENTAL INCOME UNDER THE PROVISIONS OF SECTION 24 (A) AND 2 4(B) OF THE ACT FOR RS. 18,17,612/- AND RS. 8,00,388/- RESPECTIVELY. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 9 - 11.4. THE AO DURING THE ASSESSMENT PROCEEDING DE PUTED THE INSPECTOR TO VERIFY THE PROPERTY LET OUT BY THE ASSESSEE TO THE LESSEE AS DISCUSSED ABOVE. 11.5. THE INSPECTOR OF THE INCOME TAX IN TURN SUB MITTED THAT THE BUNGALOW HAS BEEN DEMOLISHED BY THE LESSEE AND THE PIECE OF LAND IS BEING USED FOR THE PURPOSE OF PATROL PUMP ACTIVITY. 11.6. IN VIEW OF THE ABOVE THE AO HELD THAT THE R ENT RECEIVED BY THE ASSESSEE IS FROM LETTING OUT THE LAND AND NOT THE H OUSE PROPERTY. THEREFORE THE SAME CANNOT BE TREATED INCOME UNDER THE HEAD HO USE PROPERTY BUT THE INCOME FROM OTHER SOURCES. EVENTUALLY, THE ASSESSEE CANNOT BE ALLOWED DEDUCTION CLAIMED BY HIM UNDER THE PROVISIONS OF SE CTION 24(A) AND 24(B) OF THE ACT. 11.7. THE AO ALSO OBSERVED THAT THE SUPPLEMENTARY DEED BY THE ASSESSEE DATED 11 TH OF SEPTEMBER 2006 IS SELF-SERVING DOCUMENT AND CAN NOT BE RELIED TO INFER THAT THE IMPUGNED RENTAL INCOME IS TAXABLE UNDER THE HEAD HOUSE PROPERTY. THE AO FINALLY HELD THAT THE IMPUGNED REN TAL INCOME IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND THUS THE AO DENIED THE BENEFIT FOR THE CLAIM OF THE ASSESSEE UNDER SECTION 24(A) AND 24(B) OF THE ACT. THE AO FURTHER OBSERVED THAT THE ASSESSEE IS NOT EN TITLED FOR THE DEDUCTION OF INTEREST EXPENSES AGAINST THE RENTAL INCOME CHARGEA BLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES FOR THE REASON THAT THE I NTEREST EXPENSES WAS NOT INCURRED FOR THE RUNNING OF SUCH RENTAL INCOME. ACC ORDINGLY THE AO DENIED THE DEDUCTION TO THE ASSESSEE FOR RS. 8,00,387/- AND AD DED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 10 - AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A). 11.8. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUB MITTED THAT HE HAS GIVEN THE BUNGALOW TO THE LESSEE AS PER THE SUPPLEMENTARY DEED DATED 11-9-2006. THE INSPECTOR OF THE INCOME TAX VISITED TO THE PROP ERTY IN DISPUTE AND SUBMITTED IN HIS REPORT THAT THE BUNGALOW WAS DEMOL ISHED AND THERE WAS A PIECE OF LAND. BUT THE INSPECTOR VISITED TO SUCH PR OPERTY AFTER A GAP OF 3 YEARS FROM THE DATE OF THE AGREEMENT. THEREFORE, THE REPO RT OF THE INSPECTOR DOES NOT ESTABLISH THE FACT THAT THERE WAS NO BUNGALOW A T THE TIME OF RENT AGREEMENT. 11.9. THE ASSESSEE FURTHER SUBMITTED THAT THE CHA NGES EFFECTED BY THE LESSEE IN THE SAID BUNGALOW WERE APPROVED BY THE MU NICIPAL CORPORATION DATED 30 TH NOVEMBER 2007. THUS, IT CAN BE INFERRED THAT THE B UNGALOW WAS IN EXISTENCE TILL 31 ST OF MARCH 2007. 11.10. THE ASSESSEE ALSO FILED THE MUNICIPAL CORP ORATION BILL TILL 24 JULY 2007 WHICH ALSO PROVES THAT THE BUNGALOW WAS IN EXISTENC E. 11.11. THE ASSESSEE ALSO CLAIMED THAT AS PER THE AG REEMENT, THE LESSEE HAS TO RETURN THE BUNGALOW IN THE ORIGINAL FORM OR IT W ILL COMPENSATE 1 MONTH RENT TO HIM. AS SUCH, THE SUBSEQUENT EVENT HAPPENED ON THE INSTANCE OF THE LESSEE CANNOT CHANGE THE CHARACTER OF THE INCOME IN HIS HANDS. ACCORDINGLY SUCH INCOME SHOULD BE CHARGEABLE TO TAX UNDER THE H EAD HOUSE PROPERTY. 11.12. HOWEVER, THE LEARNED CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO BY OBSER VING AS UNDER: ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 11 - 4.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE AO. I AGREE WITH THE AO THAT EXISTENCE OF BU NGLOW IS NOT THE REAL ISSUE. THERE IS NOTHING ON RECORD THAT THE LESSEE HAS ENJOYED TH E BUNGLOW AS HOUSE PROPERTY OR INTENDED TO ENJOY IT. ON THE CONTRARY, AS STATED B Y THE AO THE INTENTION OF THE APPELLANT AS WELL AS THE LESSEE WAS CLEARLY TO GIVE AND TAKE THE LAND ON WHICH THE LESSEE RIGHT FROM THE BEGINNING WANTED TO CONSTRUCT A PETROL PUMP. IT CANNOT BE ARGUMENT OF THE AO THAT PERSON WHO WANTED TO TAKE B UNGLOW ON RENT DECIDED TO DEMOLISH AND MAKE PETROL PUMP WITHOUT THE INTENTION BEING VERY CLEAR RIGHT IN THE BEGINNING. THE AO HAS QUOTED FROM THE DEED TO SHO W THAT THE LESSEE WAS TAKING THE LEASE OF PLOT ON RENT. PAGE 6 OF THE LEASE AGR EEMENT CLEARLY SHOWS THAT THE LESSER HAS DELIVERED TO THE LESSEE VACANT AND PEACE FUL POSSESSION F THE ENTIRE SAID LAND. IN THE AGREEMENT ITSELF, THE INTENTION IS VE RY CLEAR BECAUSE ON PAGE NUMBER EIGHT AND NINE CLAUSE (IX), AND CLAUSE (XIV) CLEARL Y SHOW THAT THE LESSEE SHALL HAVE THE RIGHT TO CARRY ON ANY CONSTRUCTION ON THE SAID LAND FOR RUNNING ITS BUSINESS. IF THE INTENTION WAS TO MAKE ANY CONSTRUCTION FOR RUNN ING ITS BUSINESS THEN ENJOYMENT OF BUNGLOW CAN NEVER BE THE INTENTION IN THE BEGINN ING ALSO. IN VIEW OF THIS REASON, I AGREE WITH THE AO THAT THE INCOME EARNED BY THE A SSESSEE IS NOT INCOME FROM HOUSE PROPERTY, BUT INCOME FROM OTHER SOURCES. IN VIEW OF THIS REASON, THIS GROUND OF APPEAL IS DIMSMISSED. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) , THE ASSESSEE IS IN APPEAL BEFORE US: 12. THE LEARNED AR BEFORE US SUBMITTED THAT THE ASSESSEE HAS LET OUT THE BUNGALOW TO THE PARTY AS EVIDENT FROM THE SUPPLEMEN TARY AGREEMENT OF LEASE PLACED ON PAGES 41 TO 47 OF THE PAPER BOOK. THEREFO RE, ANY SUBSEQUENT CHANGE IN THE SAID BUNGALOW SHOULD NOT CHANGE THE C HARACTER OF THE INCOME IN THE HANDS OF THE ASSESSEE. 12.1 WITHOUT PREJUDICE TO THE ABOVE THE LEARNED AR ALSO CLAIMED THAT THERE WAS NO CHANGE IN THE BUNGALOW TILL THE END OF THE Y EAR UNDER CONSIDERATION AS EVIDENT FROM THE MUNICIPAL CORPORATION TAX BILL FOR ASSESSMENT YEAR 2006- 07 AND 2007-08 WHICH ARE PLACED ON PAGES 48 TO 51 O F THE PAPER BOOK. 12.2 THE LEARNED AR WITHOUT PREJUDICE TO THE ABOVE ALSO SUBMITTED THAT IF THE RENTAL INCOME IS TREATED AS INCOME FROM OTHER S OURCES THEN ALSO BENEFIT OF INTEREST EXPENSES SHOULD BE EXTENDED TO THE ASSE SSEE. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 12 - 13. ON THE OTHER HAND, THE LEARNED DR BEFORE US SUBMITTED THAT THE ENTIRE BUNGALOW WAS DEMOLISHED AND IT BECAME A PIECE OF LA ND. 13.1 THE LEARNED DR ALSO CLAIMED THAT THE SUBSTANCE OF THE LEASE AGREEMENT WAS TO LET OUT THE LAND ONLY. THEREFORE, ANY RENTAL INCOME AGAINST THE USE OF SUCH LAND HAS TO BE TREATED AS INCOME FR OM OTHER SOURCES. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AU THORITIES BELOW. 14. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE RELATES WHETHER THE ASSESSEE HAS GIVEN A PIECE OF LAND ON R ENT TO THE LESSEE OR THE BUNGALOW. ON PERUSAL OF THE ORIGINAL AGREEMENT DATE D 7 TH SEPTEMBER 2006, THERE IS NO AMBIGUITY THAT THE ASSESSEE HAS GIVEN U P PIECE OF PLOT TO THE LESSEE. HOWEVER, THE ASSESSEE SUBSEQUENTLY WITHIN 4 DAYS OF THE ORIGINAL AGREEMENT ENTERED INTO SUPPLEMENTARY DEED WITH THE PARTY TO JUSTIFY THAT HE HAS GIVEN THE BUNGALOW TO THE PARTY WITH THE RIGHT TO CHANGE/DEMOLISH THE SAME AS PER ITS REQUIREMENT. THE DISPUTE IN THE PRE SENT CASE TO BE ADDRESSED IS WHETHER THE ASSESSEE HAS GIVEN A PIECE OF PLOT O R THE BUNGALOW TO THE PARTY. WITHOUT GOING INTO THE CONTROVERSY AS DISCUS SED ABOVE, WE FIND THAT THE SUBSTANCE IN THE ENTIRE FLOW OF TRANSACTION WAS THAT THE LAND AFTER DEMOLISHING THE BUNGALOW WILL BE USED FOR THE PURPO SE OF THE PETROL PUMP. THE LESSEE WAS NOT INTERESTED IN THE BUNGALOW AT AL L. IT IS BECAUSE THE LESSEE IMMEDIATELY AFTER ENTERING INTO THE LEASE AGREEMENT STARTED THE PROCESS OF GETTING APPROVAL FROM VARIOUS AUTHORITIES FOR THE P URPOSE OF PETROL PUMP. THIS FACT CAN BE VERIFIED FROM THE COMMENCEMENT LETTER I SSUED BY THE AHMADABAD MUNICIPAL CORPORATION TO THE LESSEE DATED 30-11-200 7 WHERE THE LESSEE GOT NOC FROM CERTAIN AUTHORITIES AS DETAILED UNDER: I. NOC FROM MINISTRY OF COMMERCE AND INDUSTRY DEPT OF EXPLOSIVE FOR PETROL PUMP VIDE LETTER DATED 27/11/2006, ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 13 - II. NOC FROM POLICE DEPARTMENT VIDE LETTER DATED 08/02/ 2007 AND III. NOC FROM ARCHAEOLOGICAL SURVEY OF INDIA VIDE LETTER DATED 19-04- 2007. 14.1. FINALLY, THE AHMADABAD MUNICIPAL CORPORATIO N ON THE BASIS OF ABOVE MENTIONED NOCS ISSUED THE COMMENCEMENT LETTER VIDE ORDER DATED 30/11/2007. FROM THE ABOVE MENTIONED FACTS IT IS TR ANSPIRED THAT THE LESSEE NEVER USED THE BUNGALOW/BUILDING. AS SUCH, THE LESS EE WAS ONLY USING LAND FOR THE PURPOSE ITS PETROL PUMP BUSINESS. THUS THE RENT PAID BY THE LESSEE TO THE ASSESSEE WAS TOWARDS THE USE OF LAND AND NOT FO R THE USE OF THE BUNGALOW. 14.2. WE ALSO NOTE THAT THE ASSESSEE HAS TAKEN TW O DIFFERENT STANDS. FIRSTLY, HE SUBMITTED THAT HE HAS LET OUT THE LAND TO THE PA RTY BUT SUBSEQUENTLY CHANGED HIS STAND BY REVISING THE RENT AGREEMENT FO R LET OUT OF THE BUNGALOW. IN SUCH A SITUATION, IT IS DIFFICULT TO BELIEVE ON THE STATEMENT OF THE ASSESSEE TO ASCERTAIN WHEN HE WAS SPEAKING THE TRUTH. IN HOL DING SO, WE DRAW SUPPORT AND GUIDANCE FROM THE JUDGMENT OF THE HON'BLE CALCU TTA HIGH COURT IN THE CASE OF EASTERN COMMERCIAL ENTERPRISE (1994) 210 ITR 103 (CAL) WHEREIN IT WAS HELD THAT A MAN INDULGING IN DOUBLE-SPEAKING CANNOT BE SAID BY ANY MEANS A TRUTHFUL MAN AT ANY STAGE-AND NO COURT CAN DECIDE O N WHICH OCCASION HE WAS TRUTHFUL. 14.3. ACCORDINGLY, THE IMPUGNED RENT CANNOT BE C LASSIFIED AS INCOME UNDER THE HEAD HOUSE PROPERTY. TO TAX THE RENT INCOME UND ER THE HEAD HOUSE PROPERTY, THERE HAS TO BE A HOUSE PROPERTY OR THE L AND PERTINENT THERETO AS ENVISAGED UNDER THE PROVISIONS OF SECTION 22 OF THE ACT. BUT IN THE CASE ON ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 14 - HAND, EVEN IF WE ASSUME THAT THERE WAS THE BUNGALOW FOR SOME TIME, THE RENT RECEIVED THERETO CANNOT BE CLASSIFIED AS INCOM E UNDER THE HEAD HOUSE PROPERTY AS LEASE AGREEMENT WAS NEVER INTENDED FOR THE USE OF BUNGALOW. ACCORDINGLY, THE ONLY OPTION AVAILABLE TO TAX THE I MPUGNED RENTAL INCOME FROM THE LAND IS UNDER THE HEAD INCOME FROM OTHER SOURCE S. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION UNDER SECTION 24(A) AND 24(B) OF THE ACT WITH RESPECT TO SUCH RENTAL INCOME AS DISCUSSED ABOVE. 15. REGARDING THE CLAIM OF THE ASSESSEE FOR THE I NTEREST EXPENSES AGAINST THE INCOME FROM OTHER SOURCES, WE NOTE THAT THE PRO VISIONS OF SECTION 57 OF THE ACT REQUIRE ALLOWING THE DEDUCTION OF THE EXPEN SES INCURRED IN GENERATING THE INCOME UNDER THE HEAD OTHER SOURCE. INDEED THE ASSESSEE HAS INCURRED INTEREST EXPENSES BUT FAILED TO JUSTIFY BASED ON DO CUMENTARY EVIDENCE THAT SUCH INTEREST EXPENSES WERE INCURRED IN CONNECTION WITH IMPUGNED LAND/INVESTMENTS/BUNGALOW. ACCORDINGLY, WE ARE NOT CONVINCED WITH THE ARGUMENT OF THE LEARNED AR FOR THE ASSESSEE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AUTHORITIES BELOW. TH US, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. COMING TO ITA NO. 966/AHD/2014 FOR AY 2007-08 16. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1.1 THE ORDER PASSED U/S.250 20.2.2014 FOR A.Y. 200 7-08 BY CIT(A)-XVI, ABAD CONFIRMING THE PENALTY OF RS.13,62,000 LEVIED BY AO IN RESPECT OF DISALLOWANCES OF BUSINESS EXPENSES OF RS.14,26,813 AND RENTAL INCOME TREATED AS INCOME FROM OTHER SOURCES BY RS.26,18,000 IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FURNISHED AND T HE EVIDENCE PRODUCED BY THE APPELLANT. THE LD.AO HAS GRIEVOUSLY ERRED IN HOLDI NG THAT THE APPELLANT HAD KNOWINGLY MADE FALSE, INCORRECT, INAPPROPRIATE, BOG US AND MISCHIEVOUS CLAIM. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 15 - 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN UPHOLDING THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS IN T HE RETURN OF INCOME IN RESPECT OF THE AMOUNT AGGREGATING TO RS.40,44,813 CONSISTING O F DISALLOWANCE OF BUSINESS EXPENSES OF RS.14,26,813 AND RENTAL INCOME TREATED AS INCOME FROM OTHER SOURCES BY RS.26,18,000 AND THEREBY LEVYING PENALTY OF RS.1 3,62,000. 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THAT THE APPELLA NT HAD FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF RS.40,44,813 AN D THEREBY LEVIED PENALTY U/S.271(1)(C) OF RS.13,62,000. 3.1. THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT T HE CLAIM OF BUSINESS EXPENSES AND LEASE RENT AS PROPERTY INCOME WERE GENUINE AND THE EXPLANATION OFFERED BY HIM WAS DULY SUBSTANTIATED SO THAT THE PROVISIONS OF SEC.27 1(1)9C) WERE NOT ATTRACTED. 3.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE HELD THAT THE PROVISION S OF SEC.271(1)(C) WERE ATTRACTED IN RESPECT OF BUSINESS DISALLOWANCE AND RENTAL INCO ME TREATED AS INCOME FROM OTHER SOURCES. 3.3. IN ANY VIEW OF THE MATTER, THE PENALTY PROCEED INGS U/S.271(1)(C) INITIATED ONLY IN RESPECT OF DISALLOWANCE OF BUSINESS EXPENSE S, THE PENALTY LEVIED BY AO IN RESPECT OF RENTAL INCOME TREATED AS OTHER SOURCES I S WHOLLY ILLEGAL AND UNLAWFUL. IT IS THEREFORE PRAYED THAT PENALTY OF RS.13,62 LAK HS LEVIED BY THE AO AND CONFIRMED BY THE CIT(A) SHOULD BE DELETED. 17. THE EFFECTIVE ISSUED RAISED BY THE ASSESSEE IN ALL THE GROUNDS OF APPEAL IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE PENALTY OF RS.13,62,200/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) FOR FURNI SHING INACCURATE PARTICULAR OF INCOME ON ACCOUNT OF DISALLOWANCES OF EXPENSES OF RS. 14,26,813/- AND DISALLOWANCES OF DEDUCTION FOR RS. 26,18,000 CLAIMED UNDER SECTION 24 OF THE ACT. 18. AT THE OUTSET, WE NOTE THAT THE FACTS RELATE D TO DISALLOWANCES AS DISCUSSED IN THE ABOVE ISSUE OF THE ASSESSEE, HAVE ALREADY BEEN ELABORATED BY US IN SOMEWHERE IN THE PRECEDING PARAGRAPH OF TH IS ORDER IN ITA NO. 76/AHD/2011. THEREFORE, WE ARE NOT INCLINED TO REPE AT THE SAME FOR THE SAKE OF BREVITY AND CONVENIENCE. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 16 - 18.1. WE FURTHER NOTE THAT THERE ARE TWO ADDITION S/DISALLOWANCES WHICH WERE MADE TO THE TOTAL INCOME OF THE ASSESSEE IN TH E QUANTUM PROCEEDINGS AND THE ASSESSEE FURTHER FOR SUCH ADDITIONS/DISALLO WANCES WAS VISITED WITH THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY T HE AUTHORITIES BELOW. 19. REGARDING THE PENALTY IMPOSED ON THE ADDITION / DISALLOWANCE OF BUSINESS EXPENSES OF RS. 14,26,813/-, WE NOTE THAT THE ADDITION MADE BY THE AO HAS ALREADY BEEN DELETED BY US VIDE PARAGRAPH NO . 10 AND 10.1 OF THIS ORDER BEARING ITA NO. 76/AHD/2011. ACCORDINGLY IN O UR CONSIDERED VIEW ONCE THE QUANTUM ADDITION ITSELF STANDS DELETED THEN THE RE SHOULD NOT BE ANY PENALTY ON THE ASSESSEE BASED ON SUCH ADDITION/DISA LLOWANCE. HENCE WE DIRECT THE AO DELETE THE PENALTY WITH RESPECT TO AD DITION OF RS. 14 26,813/- ON ACCOUNT OF BUSINESS EXPENSES DISALLOWED. 20. COMING TO THE NEXT PART OF PENALTY IMPOSED O N ADDITION OF RS. 26,18,000/- BEING DISALLOWANCES OF DEDUCTION CLAIM ED UNDER SECTION 24(A) AND 24(B) OF THE ACT. THE FIRST PART OF THE PENALTY UNDER SECTION 24(A) OF THE ACT REPRESENTS THE DISALLOWANCE OF THE STANDARD DED UCTION CLAIMED BY THE ASSESSEE AGAINST THE RENTAL INCOME UNDER THE HEAD H OUSE PROPERTY. 20.1. THE PROVISIONS OF SECTION 24(A) OF THE ACT, MANDATES TO ALLOW THE BENEFIT OF THE STANDARD DEDUCTION TO THE ASSESSEE O N ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES OF THE RENTED PROPERTY FROM GR OSS RENTAL INCOME TAXABLE UNDER THE HEAD HOUSE PROPERTY. THE STANDARD DEDUCTION UNDER SECTION 24(A) OF THE ACT, IS BEING STATUTORY IN NAT URE AND HAS TO BE ALLOWED IRRESPECTIVE OF THE ACTUAL EXPENSES INCURRED BY THE ASSESSEE. IN THE PRESENT CASE THE ASSESSEE HAS SHOWN THE INCOME UNDER THE HE AD HOUSE PROPERTY AND ACCORDINGLY THE DEDUCTION UNDER SECTION 2(A) OF THE ACT WAS CLAIMED. BUT THE ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 17 - CLAIM OF THE ASSESSEE WAS DENIED ON THE GROUND THAT THE IMPUGNED RENTAL INCOME WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY. ACCORDINGLY, THE DEDUCT ION CLAIMED AGAINST SUCH RENTAL INCOME WAS DENIED AUTOMATICALLY. NOW THE CON TROVERSY ARISES WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULAR OF INCOME BY TREATING THE IMPUGNED INCOME UNDER THE HEAD HOUSE PROPERTY. 20.2. THERE IS NO DISPUTE TO THE FACT THAT THE AS SESSEE HAS EARNED LEASE RENTAL AND DECLARED THE CORRECT RENTAL INCOME BUT T HE SAME WAS DECLARED UNDER THE WRONG HEAD I.E. UNDER INCOME FROM HOUSE P ROPERTY INSTEAD OF INCOME FROM OTHER SOURCES. THUS, IT IS TRANSPIRED T HAT THE ASSESSEE HAS DECLARED HIS INCOME UNDER THE WRONG HEAD WHICH CAN BE INACCURATE CLAIM BUT THE SAME CANNOT BE TREATED AS INACCURATE PARTICULAR S OF INCOME. IT IS BECAUSE THE DEDUCTION UNDER SECTION 24(A) OF THE ACT IS AUT OMATIC AGAINST THE INCOME CHARGEABLE TO TAX UNDER THE HEAD HOUSE PROPERTY. TH US, IN OUR CONSIDERED VIEW A WRONG CLAIM BY THE ASSESSEE CANNOT TANTAMOUN T AS INACCURATE PARTICULARS OF INCOME. IN HOLDING SO WE FIND SUPPOR T AND GUIDANCE FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. RELIANCE PETROPRODUCTS (P) LTD. REPORTED IN 322 ITR 158 WHE REIN IT WAS HELD AS UNDER: THEREFORE, IT MUST BE SHOWN THAT THE CONDITIONS UN DER SECTION 271(1)(C ) EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE N O DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED, BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF H IS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. [PARA 8] THE WORD 'PARTICULARS' MUST MEAN THE DETAILS SUPPLI ED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDI NG TO TRUTH OR ERRONEOUS. IN THE INSTANT CASE, THERE WAS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT O R ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF I NVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF THE CLAIM, WHIC H IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INAC CURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. [PARA 9] ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 18 - THE REVENUE CONTENDED THAT SINCE THE ASSESSEE HAD C LAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY WERE INCORRECT, IT AMO UNTED TO CONCEALMENT OF INCOME. IT WAS ARGUED THAT THE FALSEHOOD IN ACCOUNT S CAN TAKE EITHER OF THE TWO FORMS: (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND , THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONE'S INCOM E AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. SUCH CONTENTIO N COULD NOT BE ACCEPTED AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF IT S EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN TH E RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, W HICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT , BY ITSELF, WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IF THE CONTENTION OF THE REVENUE WAS ACCEPTED, THEN IN CASE OF EVERY RETURN WHERE TH E CLAIM MADE WAS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, T HE ASSESSEE WOULD INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NO T THE INTENDMENT OF THE LEGISLATURE. [PARA 10] 20.3. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESS EE DID NOT CLAIM THE DEDUCTION UNDER SECTION 24(A) OF THE ACT WITH MALA- FIDE /DISHONEST INTENT. 20.4. WE FURTHER NOTE THAT THE ISSUE INVOLVED IN HAND IS DEBATABLE IN NATURE AND THERE CAN BE DISPUTE TO CLASSIFY THE IMPUGNED R ENTAL INCOME UNDER THE HEAD HOUSE PROPERTY/INCOME FROM OTHER SOURCES. IN H OLDING SO WE DRAW SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE G UJARAT HIGH COURT IN THE CASE OF CIT VS. SAMBHAV MEDIA LTD. WHERE IT WAS HEL D AS UNDER: IT APPEARS THAT THE ASSESSEE MADE A CLAIM OF STATU TORY DEDUCTION UNDER SECTION 24 OF THE ACT AS WELL AS ALSO FOR DEPRECIAT ION. AT THE TIME OF ASSESSMENT, ALL RELEVANT MATERIAL FACTS WERE DISCLO SED BY THE ASSESSEE AND DEPRECIATION WAS ALSO CLAIMED ON ITS BUSINESS ASSET S. BOTH ASSESSING OFFICER AND CIT(A) FOUND THAT ASSESSEE WAS DIS-ENTITLED TO CLAIM DOUBLE DEDUCTION OF DEPRECIATION AS WELL AS DEDUCTION UNDER SECTION 24 OF THE ACT. THE TRIBUNAL RIGHTLY HELD THAT THERE WAS NO CONCEALMENT OF INCOM E NOR WAS THERE ANY FILING OF INACCURATE PARTICULARS OF INCOME. THUS, O N FINDING THE CONDUCT OF THE ASSESSEE BONA FIDE AND THIS BEING A MATTER OF BONA- FIDE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE DEPARTMENT REG ARDING ALLOWABILITY OF THE CLAIM, IT WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED BY BOTH THE AUTHORITIES. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 19 - 20.5. IN THE LIGHT OF THE ABOVE STATED DISCUSSIO N AND AFTER CONSIDERING THE FACTS IN TOTALITY, WE HOLD THAT THERE CANNOT BE ANY PENALTY ON ACCOUNT OF DISALLOWANCE OF THE DEDUCTION CLAIMED BY THE ASSESS EE UNDER SECTION 24(A) OF THE ACT. 21. NOW COMING TO THE 2 ND PART OF THE DISPUTE WHETHER THE ASSESSEE HAS INCURRED INTEREST EXPENSES IN THE EARNING OF IMPUGN ED RENTAL INCOME, IN THIS REGARD WE NOTE THAT THE PENALTY PROCEEDINGS ARE DIS TINCT FROM THE ASSESSMENT PROCEEDINGS. THEREFORE THE ADDITION MADE DURING THE ASSESSMENT PROCEEDINGS DOES NOT AUTHORIZE THE AO IPSO FACTO TO LEVY THE PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. AS SUCH THE AO IS UNDER THE O BLIGATION TO CARRY OUT THE NECESSARY VERIFICATION BEFORE REACHING TO THE CONCL USION THAT THE ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULAR OF INCOME OR CO NCEALED THE PARTICULARS OF INCOME. 22. IN THE INSTANT CASE, THE PENALTY WAS INITIATE D ON ACCOUNT OF THE DISALLOWANCE OF THE INTEREST EXPENSES AGAINST THE I MPUGNED RENTAL INCOME. HOWEVER, THE ASSESSEE CLAIMED THAT THE INTEREST WAS PAID ON THE MONEY BORROWED WHICH WAS INVESTED IN THE IMPUGNED PROPERT Y FROM WHERE HE WAS GETTING THE RENTAL INCOME. THE ASSESSEE HAS ALSO FU RNISHED THE DETAILS OF THE PARTIES FROM WHOMHE HAS BORROWED FUND WHICH WAS UTI LIZED FOR THE PURPOSE OF THE INVESTMENTS. HOWEVER THE AO WITHOUT VERIFYIN G THE GENUINENESS OF THE DETAILS FURNISHED BY THE ASSESSEE HAS LEVIED THE PE NALTY MERELY ON THE GROUND THAT SUCH INTEREST EXPENSES WAS DISALLOWED DURING T HE QUANTUM PROCEEDINGS. AS SUCH THE PENALTY PROCEEDINGS BEING DISTINCT AND SEPARATE FROM THE ASSESSMENT PROCEEDINGS, THE AO IS UNDER THE OBLIGAT ION TO CARRY OUT THE FRESH VERIFICATION AS HELD BY THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF NATIONAL TEXTILES VS. CIT REPORTED 249 ITR 125. THE RELEVANT EXTRACT OF THE JUDGMENT IS EXTRACTED BELOW: ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 20 - IN THE INSTANT CASE, THE CASH CREDITS WERE NOT SAT ISFACTORILY EXPLAINED BY EVIDENCE AND DOCUMENTS. THE PARTIES WHO HAD ADVANCED THE ALL EGED TEMPORARY LOANS WERE NEITHER DISCLOSED WITH THEIR PARTICULARS NOR ANY SU PPORTING DOCUMENTS WERE ON RECORD. ONLY TWO ENTRIES WERE EXPLAINED. THE ACCOUN TANT WHO HAD ARRANGED THE LOAN WAS NOT PRODUCED STATING THAT HE HAD LEFT THE SERVI CE AND RELATIONS WITH HIM WERE STRAINED. ON THIS STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCEEDINGS, THE DEPARTMENT WAS JUSTIFIED IN TREATING THE CASH CREDI TS AS INCOME OF THE ASSESSEE BUT MERELY ON THAT BASIS BY RECOURSE TO EXPLANATION 1 , PENALTY UNDER SECTION 271(1)( C ) COULD NOT HAVE BEEN IMPOSED WITHOUT THE DEPARTMENT MAKING ANY OTHER EFFORT TO COME TO A CONCLUSION THAT THE CASH CREDITS COULD IN NO CIRCUMSTANCES HAD BEEN AMOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIOUS PA RTIES. THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO PRODUCE THE ACCOUNTAN T BUT THE DEPARTMENT ALSO IN PENALTY PROCEEDINGS MADE NO EFFORT TO SUMMON HIM. A PPLYING THE TEST ( II ) DISCUSSED ABOVE, THEREFORE, IT WAS A CASE WHERE THERE WAS NO CIRCUMSTANCE TO LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE S CASE, THAT THE CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS, WAS FALSE. THE FA CTS AND CIRCUMSTANCES WERE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT IT COUL D HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FROM DIFFERENT PARTIES. THEREFORE, EVEN TAKING RECOURSE TO EXPLANATION 1 , THE CIRCUMSTANCE OR STATE OF EVIDENCE ON WHICH TH E CASH CREDITS WERE TREATED AS INCOME, COULD NOT BY THEMSELVES JUS TIFY IMPOSITION OF PENALTY WITHOUT ANYTHING MORE ON RECORD PRODUCED BY THE ASS ESSEE OR THE DEPARTMENT. IT WAS, ACCORDINGLY, HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN LAW IN CONFIRMING THE PENALTY LEVIED UNDER SECTION 271(1)( C ). 22.1. IN VIEW OF THE ABOVE, WE HOLD THAT THE AO CAN NOT JUST LEVY THE PENALTY MERELY ON THE GROUND THAT THE ADDITIONS WERE MADE D URING THE QUANTUM PROCEEDINGS. AS SUCH THE AO HAS TO CARRY OUT NECESS ARY VERIFICATION BY ISSUING THE NOTICE TO THE PARTIES BEFORE LEVYING THE PENALT Y. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT NO PENALTY CAN BE LEVIED UN DER SECTION 271(1)(C) OF THE ACT FOR THE REASONS AS STATED ABOVE. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. COMING TO ITA NO. 2493/AHD/2012 FOR AY 2009-10 23. THE ASSESSEE HAS RAISES FOLLOWING GROUND OF A PPEAL. 1.1. THE ORDER PASSED U/S.250 ON 21.8.2012 FOR AY 2 009-10 BY CIT(A)-XVI, ABAD, UPHOLDING THE PARTLY THE DISALLOWANCES MADE BY AO IS WHOLLY ILLEGAL UNLAWFUL AND WITHOUT JURISDICTION. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 21 - 2.1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF EXPENSES TO THE EXTENT OF RS.10.0 L ACS. 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THE DISALLOWANCE OF EXPENSES TO THE EXT ENT OF RS.10 LACS NOR HELD THAT THE APPELLANT HAD FAILED TO DEMONSTRATE THAT THE SA ID EXPENSES WERE INCURRED FOR BUSINESS PURPOSES. 3.1. THELD.CIT(A) HAD GRIEVOUSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF INTEREST PAID OF RS.7,99,137. 24. THE INTERLINKED ISSUE RAISED BY THE ASSESSEE VIDE GROUND NOS. 1 AND 2 IS THAT THE LEARNED CIT (A) ERRED IN LAW AND IN CONFIR MING THE PART DISALLOWANCES OF BUSINESS EXPENSES OF RS. 10 LAKHS. 25. AT THE OUTSET, WE NOTE THAT THE SIMILAR IDENT ICAL RAISED BY THE ASSESSEE IN ITA NO. 76/AHD/2011 WHICH HAS BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE VIDE PARAGRAPH NO. 10 AND 10.1 OF THIS ORD ER. FOR THE DETAIL DISCUSSION PLEASE REFER THE RELEVANT PARAGRAPH AS D ISCUSSED ABOVE. THEREFORE RESPECTFULLY FOLLOWING THE SAME AND TO MAINTAIN PAR ITY WITH THE FINDINGS, WE ALLOW THE GROUND RAISED BY THE ASSESSEE IN HIS FAVO UR. 26. SECOND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCES OF INTEREST EXPENSES O F RS. 7,99,137/- 27. AT THE OUTSET, WE NOTE THAT THE IDENTICAL ISS UE RAISED BY THE ASSESSEE IN ITA NO. 76/AHD/2011 WHICH HAS BEEN DECIDED BY US IN FAVOUR OF THE REVENUE VIDE PARAGRAPH NO. 15 OF THIS ORDER. FOR TH E DETAIL DISCUSSION PLEASE REFER THE RELEVANT PARAGRAPH AS DISCUSSED ABOVE. TH EREFORE RESPECTFULLY FOLLOWING THE SAME AND TO MAINTAIN PARITY WITH THE FINDINGS, WE DISMISS THE GROUND RAISED BY THE ASSESSEE IN HIS FAVOUR. ITA NOS.76/AHD/2011, 966/AHD/2014 & 2493/AHD/2012 SHRI ATULBABUBHAISHAH VS.JT.CIT/ACIT ASST.YEARS 2007-08 & 2 009-10 - 22 - 28. IN THE RESULT, APPEAL OF THE ASSESSEE IS PART LY ALLOWED. 29. IN THE COMBINED RESULT, ALL THE THREE APPEALS O F THE ASSESSEE ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 02/03/2020 SD/- SD/- (MS.MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 02/03/2020 . . , . . . / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! '# $ / CONCERNED CIT 4. $ ( ) / THE CIT(A)-XVI, AHMEDABAD 5. %&''# , '# , ! / DR, ITAT, AHMEDABAD 6. '*+, / GUARD FILE. / BY ORDER, % //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 13.2.20 ( WORD PROCESSED BY HONBLE AM IN HIS COMPUTER BY DRA GON ) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14.2.20/2.3.20 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.3.3.20 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 3.3.20 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER