DIPAK KOTHARI (HUF), MUMBAI V. DCIT CIR 12(3), MUMBAI

ITA 298/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79552 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI
• Keywords: Difference of opinion

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, (JM) . . , , ./I.T.A. NO. 298/MUM/2013 ( ! ' # / ASSESSMENT YEAR :2006-07 ) DIPAK KOTHARI (HUF) 7 TH FLOOR, VAMAN TECHNO CENTRE, OFF- MAKWANA ROAD, MAROL, ANDHERI (E), MUMBAI-400059 / VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 12(3) AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( $% / APPELLANT) .. ( &'$% / RESPONDENT) $ ./ ( ./PAN/GIR NO. : AABHD7041M $% ) / APPELLANT BY : SHRI S C TIWARI &'$% * ) /RESPONDENT BY : SHRI DURGA DUTT + , * - . / DATE OF HEARING : 15.7.2014 /0#' * - . /DATE OF PRONOUNCEMENT : 31.7.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 14.11.2012 PASSED BY LD CIT(A)-23, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2006-07. THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF LD CIT(A) IN PARTIALLY CONFIRMING THE PENALTY LEVIED U/S 271(1)( C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE FACTS WHICH LED TO THE LEVY OF PENALTY U/ S 271(1)(C) OF THE ACT ARE STATED IN BRIEF. THE ASSESSEE HAD DECLARED RENTAL INCOME OF RS.94,51,850/- AND CLAIMED DEDUCTION U/S 24 OF THE ACT THEREON. ON EXAMINATIO N OF THE LEAVE AND LICENSE AGREEMENTS, IT WAS NOTICED THAT THE ASSESSEE HAS RE CEIVED A SUM OF I.T.A. NO.298/MUM/2013 2 RS.67,18,332/- ON ACCOUNT OF LETTING OUT OF THE PRE MISES AND THE BALANCE AMOUNT OF RS.27,58,434/- WAS RECEIVED FOR USAGE OF OFFICE EQUIPMENTS. THE AO TOOK THE VIEW THAT THE AMOUNT OF RS.27,58,434/- RECEIVED TOW ARDS USAGE OF OFFICE EQUIPMENTS IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND ACCORDINGLY ASSESSED THE SAME. AS A RESULT, THE DE DUCTION TOWARDS REPAIRS (STANDARD DEDUCTION) CLAIMED ON THE ABOVE SAID AMOU NT OF RS.27,58,434/- CAME TO BE DISALLOWED. THE AO CONSIDERED THAT THE WRONG DEDUCTION TOWARDS REPAIRS AS WELL AS DECLARATION OF INCOME UNDER WRONG HEAD H AVE RESULTED IN CONCEALMENT OF PARTICULARS OF INCOME AS WELL AS FURNISHING OF I NACCURATE PARTICULARS OF INCOME. ACCORDINGLY HE LEVIED A PENALTY OF RS.9,28,489/- ON THE AMOUNT OF RS.27,58,434/- REFERRED ABOVE. IT IS PERTINENT TO NOTE THAT THE ORDER OF THE AO ON QUANTUM ASSESSMENT WAS AFFIRMED BOTH BY LD CIT(A ) AS WELL AS BY THE TRIBUNAL. 3. THE LD CIT(A) CONFIRMED THE ACTION OF THE ASS ESSING OFFICER. HOWEVER, SINCE THE ASSESSEE HAD OFFERED THE AMOUNT OF RS.27,58,434 /- AS HOUSE PROPERTY INCOME AND SINCE THE AO HAS ASSESSED THE SAME AS IN COME AS INCOME FROM OTHER SOURCES, THE ASSESSEE SUBMITTED BEFORE LD CIT (A) THAT THE INCOME HAS BEEN ENHANCED ONLY TO THE EXTENT OF RS.8,35,640/-. ACCEPTING THE SAID CONTENTIONS, THE LD CIT(A) DIRECTED THE AO TO RE-CO MPUTE THE AMOUNT OF PENALTY LEVIABLE. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LD A.R SUBMITTED THAT THE TOTAL INCOME O F THE ASSESSEE CAME TO BE ASSESSED AT A HIGHER FIGURE ONLY DUE TO THE CHANGE IN ASSESSMENT OF HEAD OF INCOME. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS RELATING TO THE RENTAL INCOME AND HENCE IT IS NOT C ORRECT TO SAY THAT THE ASSESSEE I.T.A. NO.298/MUM/2013 3 HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT THERE WAS REASONABLE DIF FERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER WITH REGARD TO THE RENTAL RELATING TO USAGE OF OFFICE EQUIPMENT AND SUCH DIFFERENCE WOULD NOT L EAD TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THIS REGARD, THE LD A.R P LACED RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF RE LIANCE PETRO PRODUCTS LTD (322 ITR 158). 5. ON THE CONTRARY, THE LD D.R PLACED STRONG REL IANCE ON THE ORDER OF LD CIT(A). THE LD D.R SUBMITTED THAT THE ASSESSEE, BY OFFERING RENT RECEIVED FOR USAGE OF OFFICE EQUIPMENTS AS HOUSE PROPERTY INCOME , HAS CLAIMED STANDARD DEDUCTION FOR REPAIRS AND SUCH A CLAIM WOULD LEAD T O CONCEALMENT OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME . HE FURTHER SUBMITTED THAT THE DECISION RENDERED BY THE CASE OF RELIANCE PETRO PRO DUCTS LTD (SUPRA) HAS BEEN CONSIDERED AND DISTINGUISHED BY HONBLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATIONS LTD (327 ITR 510), WHEREIN THE HONB LE HIGH COURT HAS HELD THAT THE DEDUCTION CLAIMED, WHICH IS TOTALLY UNTENA BLE IN LAW, WOULD GIVE RISE TO PENALTY. HE FURTHER SUBMITTED THAT THE TRIBUNAL HA S CONSIDERED THE CLAIM OF THE ASSESSEE IN THE QUANTUM PROCEEDINGS AND REJECTED TH E SAME BY FOLLOWING THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN T HE CASE OF SULTAN BROTHERS (P) LTD (1964)(51 ITR 353). ACCORDINGLY HE SUBMITT ED THAT THE ASSESSEES ACTION IN OFFERING RENT RECEIVED FOR USAGE OF OFFICE EQUIP MENTS IS UNTENABLE IN LAW AND HENCE THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENALTY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE ASSESSEE HAS OFFERED THE RENTAL INCOME RECEIVED FOR USAGE OF OFFICE EQUIPMENTS I.T.A. NO.298/MUM/2013 4 AS HOUSE PROPERTY INCOME, WHERE AS THE AO HAS ASSES SED THE SAME INCOME UNDER OTHER SOURCES. BY OFFERING THE ABOVE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE ASSESSEE HAS CLAIMED DEDUCTION TOWARDS REPAIRS, WHICH IS ALLOWED AT A STANDARD RATE. HOWEVER WHILE ASSESSIN G THE SAID INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, THE DEDUCTION TOWAR DS REPAIRS WILL NOT BE ALLOWABLE AND HENCE THE TOTAL INCOME HAS INCREASED BY THE SAID AMOUNT, I.E., THE AMOUNT OF REPAIRS ALLOWED AT A STANDARD RATE. THU S, THE PENALTY U/S 271(1)(C) OF THE ACT HAS BEEN CONFIRMED BY THE LD CIT(A) IN R ESPECT OF THE AMOUNT RELATABLE TO THE REPAIRS. 7. ACCORDING TO LD A.R, THE ABOVE SAID DIFFERENC E BETWEEN THE ASSESSED INCOME AND RETURNED INCOME HAS RESULTED DUE TO REAS ONABLE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER WITH REGARD TO THE HEAD OF INCOME UNDER WHICH THE RENT RECEIVED FOR USAGE OF O FFICE EQUIPMENTS IS ASSESSABLE. WE HAVE ALREADY NOTICED THAT THE ENHA NCEMENT OF INCOME HAS RESULTED ON ACCOUNT OF STANDARD DEDUCTION ALLOWED T OWARDS REPAIRS WHILE COMPUTING INCOME UNDER THE HEAD INCOME FROM HOUSE P ROPERTY. BARRING THE DIFFERENCE IN THE HEAD OF INCOME, THERE IS NO ALLEG ATION THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME. WE HAVE ALREADY NOTICED THAT THE ORDER OF THE AO WA S CHALLENGED UPTO THE LEVEL OF THE TRIBUNAL AND THE ITAT, BY FOLLOWING THE DECI SION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF SULTAN BROTHERS (P) LT D (SUPRA), HAS HELD THAT THE RENT RECEIVED FOR USE OF OFFICE EQUIPMENT IS ASSESS ABLE AS INCOME FROM OTHER SOURCES. BUT, ACCORDING TO LD A.R, THE ASSESSEE WA S UNDER THE HONEST IMPRESSION THAT THE RENT RECEIVED FOR OFFICE EQUIPM ENT SHOULD BE OFFERED UNDER I.T.A. NO.298/MUM/2013 5 THE HEAD INCOME FROM HOUSE PROPERTY ONLY SINCE THEY WERE LET OUT ALONG WITH THE BUILDING, IN VIEW OF THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF SULTAN BROTHERS (P) LTD (SUPRA). WE NOTICE THAT TH E ASSESSEE HAS ENTERTAINED A HONEST BELIEF ON THIS ISSUE. IT IS A WELL SETTLED PROPOSITION OF LAW THAT THE ADDITIONS MADE IN ASSESSMENT PROCEEDINGS WILL NOT A UTOMATICALLY GIVE RISE TO PENALTY. IN THE PENALTY PROCEEDINGS, THE SAID ADDI TIONS NEED TO BE EXAMINED AFRESH IN TERMS OF THE EXPLANATIONS FURNISHED BY TH E ASSESSEE AND THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT. IN THE INSTANT CASE, THE EXPLANATIONS FURNISHED BY THE ASSESSEE HAVE NOT BEEN FOUND TO BE FALSE OR NOT BONA FIDE. HENCE, WE ARE UNABLE TO AGREE WITH THE VIEW OF THE LD CIT(A). AC CORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY.. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER PASSED BY LD CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COUR T ON 31ST JULY , 2014. /0#' + 1 2 3 31ST JULY, 2014 0 * , 4 SD S D ( /SANJAY GARG) ( . . / B.R. BASKARAN ) 6 / JUDICIAL MEMBER / ACCOUNTANT MEMBER + , MUMBAI: 31ST JULY,2014. . . ./ SRL , SR. PS I.T.A. NO.298/MUM/2013 6 ! ' / COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. &'$% / THE RESPONDENT. 3. + 7- ( ) / THE CIT(A)- CONCERNED 4. + 7- / CIT CONCERNED 5. 89 &-:! , . :! ' , + , / DR, ITAT, MUMBAI CONCERNED 6. ; , / GUARD FILE. < + / BY ORDER, TRUE COPY = (ASSTT. REGISTRAR) . :! ' , + , /ITAT, MUMBAI