REVA SUSHILKUMAR AGRAWAL, MUMBAI V. ASST CIT 12(3), MUMBAI

ITA 3328/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84394 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Depreciation; Business expenditure; Wrong claim; Reason to believe
• Section: 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BE NCH, MUMBAI , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 3328/MUM/2013 ( ( ( ( ( / ASSESSMENT YEAR : 2007-08 MRS. REVA SUSHILKUMAR AGRAWAL, FLAT NO. 15, AMEETA BLDG., 3 RD FLOOR, J. BHOSALE MARG, OPP. SACHIVALAYA, NARIMAN POINT, MUMBAI-400 021 / VS. THE ACIT-12(3), AAYAKAR BHAVAN, MUMBAI-400 020 ) !& ./ * ./ PAN/GIR NO. : AAHPA 9558Q ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY: SHRI VISHWAS MEHENDALE ,-)+ / . ! / RESPONDENT BY: SHRI LOVE KUMAR / 0& / DATE OF HEARING :01.12.2014 12( / 0& / DATE OF PRONOUNCEMENT :5.12.2014 !3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-10, MUMBAI DT.31.3.2013 PERTAINING TO A.Y.20 07-08. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 2,44,863/- U/ S. 271(1)(C) OF THE ACT. ITA NO. 3328/M/2013 2 3. THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF ELECTRONICS. DURING THE COURSE OF THE SCRUTINY ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED RENT FROM THE INDUSTRIAL GALA NO. 7C, OFFICE PREMISES 11D, OFFICE PREMISES DELHI AND OFFICE PREMISES (2C). THE AO FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE FLAT NAMED KASHMIRA AME ETA FLAT WHICH WAS USED BY THE ASSESSEE FOR RESIDENTIAL PURPOSES. SIN CE THE DEPRECIATION WAS CLAIMED ON THE ASSETS WHICH WERE NOT USED FOR THE P URPOSE OF BUSINESS, THE DEPRECIATION WAS DISALLOWED AND PENALTY PROCEED INGS WERE INITIATED FOR FILING INACCURATE PARTICULARS OF INCOME. THE A O FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED SOCIETY CHARGES OF RS. 2,7 2,577/-. ON FURTHER VERIFICATION, THE AO CAME TO KNOW THAT THE SOCIETY CHARGES ARE PAID FOR THE BUILDINGS WHICH WERE GIVEN ON RENT AND THE RENT AL INCOME RECEIVED THERE FROM IS OFFERED BY THE ASSESSEE UNDER THE HEA D INCOME FROM HOUSE PROPERTY.. SINCE THE SOCIETY CHARGES WERE NOT REL ATED TO THE BUSINESS EXPENSE OF THE ASSESSEE, THE SAME WERE DISALLOWED A ND PENALTY PROCEEDINGS WERE INITIATED FOR FILING INACCURATE PA RTICULARS OF INCOME. 3.1. DURING THE PENAL PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN HER CASE. IT WAS CLAIMED THAT THE DISALLOWANCE MAD E DURING THE ASSESSMENT PROCEEDINGS ARE DEBATABLE. IT WAS FURTH ER EXPLAINED THAT THE ASSESSEE WAS CARRYING ON BUSINESS FROM THE SAME PRE MISES IN WHICH SHE WAS RESIDING THEREFORE THE CLAIM OF DEPRECIATION CA NNOT BE SAID TO BE WITH MALAFIDE INTENTION AS THE FLAT WAS USED FOR THE PUR POSE OF CARRYING ON THE BUSINESS ACTIVITIES. THE SAME REASONING WERE OFFER ED FOR THE CLAIM OF SOCIETY CHARGES. 3.2. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S, THE AO OBSERVED THAT ASSESSEE HAS ACCEPTED THE ASSESSMENT. THE AO FURTHER OBSERVED THAT ITA NO. 3328/M/2013 3 THE KASHMIRA AMEETA FLAT ON WHICH THE DEPRECIATION WAS CLAIMED BY THE ASSESSEE AS A SELF OCCUPIED PROPERTY AND NOT AS A B USINESS PREMISE. THE AO FURTHER NOTICED THAT THE SOCIETY CHARGES WERE PA ID FOR THOSE GALAS WHICH WERE GIVEN ON RENT THEREFORE THE CLAIM OF BUS INESS EXPENDITURE WAS WITHOUT ANY BASIS. THE AO ACCORDINGLY LEVIED PENAL TY OF RS. 2,44,863/- U/S. 271(1)(C) OF THE ACT. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) AND REITERATED HER CONTENTION RELYING UPON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETR O PRODUCTS (P) LTD. 230 CTR 320. THE LD. CIT(A) OBSERVED THAT A LEGAL OR BONAFIDE CLAIM IS A ONE WHERE THERE IS ATLEAST SOME REASON TO BELIEVE THAT THE CLAIM CAN BE ADMITTED. ACCORDING TO THE LD. CIT(A), THERE IS NO PROVISION UNDER THE LAW TO GRANT DEPRECIATION IN THE CASE OF A PROPERTY , THE INCOME FROM WHICH IS OFFERED AS INCOME FROM HOUSE PROPERTY. HENCE, T HIS IS NOT A CASE WHERE THE ASSESSEES EXPLANATIONS WERE REJECTED BY THE DE PARTMENT. RATHER, THIS IS A CASE, THE ASSESSEE HAS MADE AN UNTENABLE CLAIM OR THERE IS NO EXPLANATION FOR THE CLAIM MADE BY THE ASSESSEE. SI MILARLY, ON THE CLAIM OF THE SOCIETY CHARGES, THE LD. CIT(A) OBSERVED THA T WHERE THE INCOME IS ASSESSABLE U/S. 22 OF THE ACT, THE DEDUCTIONS PERMI SSIBLE ARE THOSE PROVIDED U/S. 23 AND 24 OF THE ACT. STANDARD DEDUC TION OF 30% IS GIVEN IN ALL CASES WHERE INCOME IS OFFERED TO TAX AS HOUS E PROPERTY AND THERE IS NO PROVISION UNDER THE LAW TO CLAIM SOCIETY CHARGES AS A BUSINESS DEDUCTION. THE LD. CIT(A) CONFIRMED THE LEVY OF PE NALTY. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT MERELY BECAUSE CERTAIN DISALLOWANCES WERE MADE BY THE AO IN THE ITA NO. 3328/M/2013 4 ASSESSMENT PROCEEDINGS AND THE SAME WERE ACCEPTED B Y THE ASSESSEE, PENALTY CANNOT BE LEVIED ON SUCH DISALLOWANCES. IN SUPPORT, THE LD. COUNSEL RELIED UPON THE DECISION OF THE HONBLE HIG H COURT OF BOMBAY IN THE CASE OF RUCHA ENGINEERS PVT. LTD. IN TAX APP EAL NO. 16 OF 2011. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE ORDER OF THE LD. CIT(A). 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE DECISION RELIED UPON BY THE LD. COUNSEL. AT TH E VERY OUTSET, WE WOULD LIKE TO MENTION THAT THE DECISION RELIED UPON BY THE ASSESSEE IS TOTALLY ON DIFFERENT SET OF FACTS INASMUCH AS IN TH AT CASE, THE ASSESSEE HAS DISCLOSED EVERYTHING BY WAY OF NOTE TO ACCOUNTS W ITH THE AUDITED STATEMENT OF ACCOUNTS AND EVEN THE TAX AUDITORS HAV E BY WAY OF NOTE EXPLAINED THE POSITION OF THE ASSESSEE IN TREATING DIFFERENCE BETWEEN THE LIABILITY OF SALES TAX DEFERRAL LOAN APPEARING IN T HE BALANCE SHEET AND THE AMOUNT ACTUALLY PAID BY THE ASSESSEE CREDITED TO TH E CAPITAL RESERVE ACCOUNT IN THE BALANCE SHEET. 8.1. LET US NOW CONSIDER THE FACTS OF THE PRESENT C ASE. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS SHOWING RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IT IS ALSO NOT IN DI SPUTE THAT KASHMIRA AMEETA FLAT HAS BEEN DECLARED BY THE ASSESSEE AS SE LF OCCUPIED PROPERTY. THIS FACT WAS VERY MUCH IN THE KNOWLEDGE OF THE AS SESSEE WHILE CLAIMING DEPRECIATION ON THE KASHMIRA AMEETA FLAT EVEN IF IT WAS PARTIALLY USED FOR BUSINESS. THE CLAIM OF THE ASSESSEE IS NOT SUPPORT ED BY SEC. 32 OF THE ACT. THUS, IT IS NOT A CASE OF WRONG CLAIM BUT DEF INITELY A CASE OF FALSE CLAIM. BY CLAIMING DEPRECIATION ON A SELF OCCUPIED PROPERTY, THE ASSESSEE HAS SHOWN TOTAL DISREGARD TO THE RELEVANT PROVISIONS OF LAW. FURTHER, CLAIMING SOCIETY CHARGES AS BUSINESS EXPEN SES, THE SOCIETY ITA NO. 3328/M/2013 5 CHARGES WHICH WERE PAID FOR THE PROPERTIES RENTED O UT DOES NOT MAKE ANY COMMERCIAL SENSE. IF THE ASSESSEE WAS OF THE VIEW THAT SOCIETY CHARGES ARE ALLOWABLE EXPENSES, THEN THE ASSESSEE SHOULD HA VE CLAIMED THE SAME UNDER THE HEAD INCOME FROM HOUSE PROPERTY WHICH SH E DID NOT. CLAIMING THE SAME AS BUSINESS EXPENDITURE MAKES IT A FALSE CLAIM THEREBY DISTINGUISHING THE FACTS OF THE CASE IN HAND FROM T HE FACTS OF THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD (SUPRA). CONSIDERI NG THE PECULIAR FACTS OF THE CASE IN TOTALITY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DEC.2014 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 4 DATED : 5/12/2014 . . ./ RJ , SR. PS !3 !3 !3 !3 / // / ,0 ,0 ,0 ,0 5!(0 5!(0 5!(0 5!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 78 ,0 , , / DR, ITAT, MUMBAI 6. 8 9 / GUARD FILE. !3 !3 !3 !3 / BY ORDER, -0 ,0 //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI