ACIT - 17(2), MUMBAI V. JAI HIND OIL MILLS COMPANY, MUMBAI

ITA 2569/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1472 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-04-2016
• Court: TRIBUNAL
• Department Lawyers: S R KIRTANE
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Business income; Depreciation; Search and seizure; Wrong claim; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 2569 / MUM/20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) ACIT 17(2), MUMBAI VS. M/S. JAI HIND OIL MILLS COMPANY, 387 - 389, NARSHI NATHA STREET, KATHA BAZAR, MUMBAI 400 00 9 PAN/GIR NO. AACFJ5169K APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI S.R.KIRTANE ASSESSEE BY SRI REEPAL G. TRALSHAWALA DATE OF HEARING 1 9 / 12 /2016 DATE OF PRONOUNCEME NT 23 / 12 /2016 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2011 - 12 IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WAREHOUSING OF GOODS. I N THE ORIGINAL RETURN OF INCOME THE ASSESSEE HAD OFFERED THE INCOME FROM WARE HOUSING UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' AND CLAIMED DEDUCTION UL S.24(1) @ 30%. SUBSEQUENTLY, THE ASSESSEE FILED REVISED COMPUTATION OF INCOME TREATING W AREHOUSING CHARGES AS BUSINESS INCOME IN VIEW OF FINALITY OF ASSESSMENT IN ITS CASE FOR A.Y. 2 010 - 11 WHEREIN THE AO HAD TREATED WAREHOUSING CHARGES AS BUSINESS INCOME A ND NOT INCOME FROM HOUSE PROPERTY AS OFFERED BY THE ITA NO. 2569/MUM/2016 M/S. JAI HIND OIL MILLS COMPANY 2 ASSESSEE . DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THAT IT HAD ACCEPTED THE ORDER OF THE AO FOR A. Y. 2010 - 11 AND NOT PREFERRED FURTHER APPEAL AND DECIDED TO FOLLOW THE SAME IN SUBSEQUENT YEARS BY CONSIDERING WAREHOUSING INCOME AS BUSINESS INCOME. FURTHER THE ASSESSEE STATED THAT IT HAS FILED A REVISED RETURN FOR A.Y.2012 - 13 ALSO OFFERING WAREHOUSING INCOME AS BUSINESS INCOME AND PAID TAX THEREON. THE ASSESSEE STATED THAT REVISED RETURN FOR A. Y. 2011 - 12 COULD NOT BE FILED AS THE TIME LIMIT FOR FILING THE REVISED RETURN HAD ALREADY EXPIRED BY THE TIME THE ASSESSEE RECEIVED THE ASSESSMENT ORDER FOR A.Y. 2010 - 11. HOWEVER THE AO WAS OF THE OPINION THAT THE ASSESSEE HAD OFFERED INCOME FROM WAREH OUSING UNDER 'HOUSE PROPERTY INCOME' TO AVAIL DEDUCTION U /S.24(A) . IN HIS SUBMISSION TO THE AO THE ASSESSEE HAD STATED THAT IT HAS FILED A REVISED RETURN BUT ON PERUSAL OF THE RECORDS IT WAS REVEALED THAT NO REVISED RETURN HAS BEEN FILED BY THE ASSESSEE . C ONSIDERING THE FACTS OF THE CASE, THE AO TREATED THE WAREHOUSING CHARGES AS BUSINESS INCOME AND HELD THAT IT WAS AN AFTERTHOUGHT BY THE ASSESSEE OF FILING A REVISED RETURN. THUS THE AO WAS OF THE OPINION THAT THE ASSESSEE HAD MAD E A WRONG CLAIM OF DEDUCTIO N BY FILING INACCURATE PARTICULARS OF ITS INCOME . ACCORDINGLY PENALTY U/S.271(1)(C) WAS LEVIED. 4. BY THE IMPUGNED ORDER CIT(A) DELETED THE PENALTY AFTER OBSERVING AS UNDER: - DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, GROUNDS OF APPEAL AN D WRITTEN SUBMISSIONS MADE BEFORE ME. THE APPELLANT SEEKS TO CHALLENGE THE VALIDITY OF THE PENALTY ORDER AS WELL AS THE MERITS OF THE CASE. I WOULD PREFER TO DEAL WITH THE MERITS FIRST. ITA NO. 2569/MUM/2016 M/S. JAI HIND OIL MILLS COMPANY 3 5 .1 THE FACTS ARE NOT IN DISPUTE. THE APPELLANT RETURNED THE WAREHOU SING CHARGES AS INCOME FROM HOUSE PROPERTY WHICH WAS ASSESSED AS INCOME FROM BUSINESS. THIS CHANGE OF HEAD OF INCOME HAS BEEN MADE IN THE ASSESSMENT ORDER FOR THE AY 2010 - 11, I.E. THE PRECEDING AY. THE APPELLANT ACCEPTED THIS ORDER AND DID NOT FILE APPEAL . CONSEQUENTLY THE SAME STAND WAS TAKEN BY THE AO IN THE PRESENT AY. I FIND THAT UPTO A Y 2009 - 10, WAREHOUSING CHARGES HAVE BEEN RETURNED BY THE APPELLANT AS HOUSE PROPERTY INCOME AND THIS POSITION HAS BEEN ACCEPTED BY THE AO IN SCRUTINY ASSESSMENTS. IN AY 2010 - 11, THE AO TOOK A DIFFERENT VIEW THAT WAR EHO USING CHARGES HAVE TO BE ASSESSED AS BUSINESS INCOME. THE APPELLANT ALSO ACCEPTED T IS ORDER OF THE AO CITING BUSINESS PRUDENCE. IN THE CURRENT YEAR, HAVING RECLASSIFIED THE HEAD OF INCOME FOR WAREHOUSING CH ARGES, THE AO LEVIED PENALTY ON THE GROUNDS THAT THE APPELLANT H A S CONCEALED INCOME TO THE EXTENT OF 1,00,08,31 8 WHICH WAS THE CLA IM U/.S2.4(A)IN THE ORIGINAL ROI . THE AO OVERLOOKED THE FACT THAT THE APPELLANT HAS FILED A REVISED COMPUTATION BEFORE THE AO DURING ASSESSMENT AS THE TIME FOR FILING REVISED RETURN HAD LAPSED. THE AO HAS ALSO OVERLOOKED THE FACT THAT THE APPELLANT HAS FILED A REVISED ROI FOR THE AY 2012 - 13 ACCEPTING THIS STAND OF THE AO. I ALSO NOTE THAT IN THE PRESENT CASE, THE QUANTUM OF WAREH OUSING CHARGES HAS NOT BEEN DISTURBED. MERELY THE CLASSIFICATION OF THE SAME HAS CHANGED FROM HOUSE PROPERTY TO BUSINESS INCOME. CONSEQUENTLY, THE DEDUCTION U/S 24 HAS BEEN NATURALLY DENIED TO THE APPELLANT. ON THESE FACTS, I AM AFRAID I CANNOT AGREE WITH THE AO ON THE ISSUE OF PENALTY ON RECLASSIFICATION OF WAREHOUSING RECEIPTS. THE FACTS OF THIS CASE ARE SQUARELY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BENNETT COLEMAN & CO LTD. 259 CTR 383 (BOM)(HC). IN PARA 3 OF THE SAID J UDGMENT, THE HON'BLE HIGH COURT HAS HELD AS UNDER: - 'SO FAR AS QUESTION (II) IS CONCERNED, THE RESPONDENT - ASSESSEE HAD CLAIMED PREMIUM ON REDEMPTION OF DEBENTURES AS INCOME FROM CAPITAL GAINS. WHEREAS THE ASSESSING OFFICER HELD THAT THE REDEMPTION OF DEB ENTURES IS REVENUE RECEIPT ASSESSABLE TO TAX UNDER THE HEAD IN COME FROM OTHER SOURCES. THE CI T(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE RESPONDENT - ASSESSEE DID NOT FILE ANY FURTHER APPEAL ON THE QUANTUM PROCEEDINGS. THEREAFTER, THE ASSESSING OF FICER LEVIED PENALTY UNDER SECTION 271 ( 1 )(C) OF THE ACT ON THE RESPONDENT - ASSESSEE. THE CI T(A) ALSO CONFIRMED THE LEVY OF PENALTY UPON THE RESPONDENT- ASSESSEE. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE RESPONDENT - ASSESSEE HAD DISCLOSED THAT THE AMOUNT RECEIVED ITA NO. 2569/MUM/2016 M/S. JAI HIND OIL MILLS COMPANY 4 AS PREMIUM ON REDEMPTION OF DEBENTURES IN ITS COMPUTATION OF INCOME. FURTHER, THE TRIBUNAL RECORDS THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE RESPONDENT - ASSESSEE HAD CONCEALED ANY PARTICUL ARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME BY STATING INCORRECT FACTS. THE ASSESSING OFFICER CONSIDERED THE SAID PREMIUM RECEIVED ON REDEMPTION OF DEBENTURES TO BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE THE RESPONDENT - ASSES SEE CONSIDERED THE SAME TO BE TAXABLE UNDER THE HEAD CAPITAL GAINS. IN VIEW OF THE FACT THAT THERE IS ONLY A CHANGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY FACTS THAT THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE, THE TRIBUNAL DELETED THE PEN ALTY IMPOSED UNDER SECTION 271(1 )(C) OF THE ACT. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THAT THE FINDING OF THE TRIBUNAL IS PERVERSE. IN THESE CIRCUMSTANCES, WE SEE NO REASON TO ENTERTAIN THE PROPOSED QUESTION {II).' IT IS CLEAR THAT THE RATIO OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT CITED SUPRA VERY CLEARLY APPLY TO THE FACTS OF THIS CASE. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE COURT, I HOLD THAT THERE IS NO CASE OF LEVYING PENALTY ON THE ISSUE OF WAREH OUSI NG CHARGES BEING ASSESSED AS BUSINES S INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY. 2 THE AO HAS ALSO LEVIED PENALTY ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION. THE APPELLANT ADMITTED BEFORE THE AO THAT THIS WAS AN INADVERTENT MISTAKE WHICH HAS HAPPENED DUE T O A CASCADING EFFECT FROM A Y 2006 - 7 ONWARDS. HOWEVER THE AO WAS NOT CONVINCED AND LEVIED PENALTY ON THIS DISALLOWANCE TOO. BEFORE ME, THE APPELLANT SUBMITTED THAT ON IDENTICAL FACTS THE A O HAS DROPPED PENALTY IN HIS CASE ON THIS ISSUE FOR THE AY 2006 - 07 TO 2009 - 10. HE HAS FILED COPIES OF THE LETTER OF THE A O DROPPING PENALTY FOR THOSE YEARS. IN THOSE LETTERS, I OBSERVE THAT THE A O HAS MADE A CATEGORICAL STATEM ENT THAT THERE IS NO MALAFIDE INTENTION ON PART OF THE APPELLANT ON THIS ISSUE AND THEREFORE PENALTY IS DROPPED. THE A O HAS THE REFORE IN THE EARLIER YEARS ACCEPTED THAT THERE IS NO MALAFIDE INTENTION ON THE ISSUE OF INCORRECT CLAIM OF DEPRECIATION. WITH THESE FACTS, I AM AT A LOS S TO UNDERSTAND AS TO HOW THE AO SAYS THERE IS MALAFIDE ON THE PART OF THE APPELLANT ON THE ISSUE O F IN CORRECT DEPRECIATION. THE AO HAVING ADMITTED IN THE EARLIER YEARS THAT, THIS IS AN INADVERTENT MISTAKE ON PART OF THE APPELLANT, CANNOT NOW TURN AROUND AND HOLD THE CONDUCT OF THE APPELLANT AS MALAFIDE. IN ANY CASE, THE A O HAS OVERLOOKED THE FACT THAT THIS ISSUE AROSE IN AY 2006 - 07 AND THE DISALLOWANCE OF DEPRECIATION IN THIS YEAR IS ONLY A CASCADING EFFECT. IN THESE CIRCUMSTANCES, I HOLD THAT THERE IS NO CASE FOR LEVY OF PENALTY ON THIS ISSUE. ITA NO. 2569/MUM/2016 M/S. JAI HIND OIL MILLS COMPANY 5 5. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT PENALTY HAS BEEN LEVIED WITH RESPECT TO THE ADDITIONS MADE BY CHANGING HEAD OF INCOME SO OFFERED BY THE ASSESSEE. THE CIT(A) HAS RECORDED A CATEGORIC FINDING TO THE EFFECT THAT THERE WAS A FULL DISCLOS URE BY THE AS SESSEE ON ALL THE MATERIAL FACTS AND AFTER APPLYING THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF BENNETT COLEMAN & CO. LTD., 259 CTR 383 DELETED PENALTY SO IMPOSED. 6. I ALSO FOUND THAT ON IDENTICAL FACTS AO HAS DROPPED PENALTY IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2006 - 07 TO 2009 - 10. COPIES OF THE LETTER OF THE AO DROPPING PENALTY FOR THESE ORDERS WERE ALSO PLACED ON RECORD. A DETAILED FINDING SO RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED BY LEARNED DR BY BRINGING ANY POSIT IVE MA TERIAL ON RECORD. ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING THE PENALTY SO IMPOSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 23 / 12 / 2016 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 23 / 12 /201 6 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI ITA NO. 2569/MUM/2016 M/S. JAI HIND OIL MILLS COMPANY 6 BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//