M/s Poonam Promoters & Developers Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3333/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1272 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 11-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: V S RASTOGI
• Keywords: Business income; Business expenditure; Block assessment; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA ITA NO. 3333/DEL/2012 ASSTT. YR. 2004-05 POONAM PROMOTERS & DEVELOPERS VS. DCIT CEN. CIR. 2 3, PVT. LTD., M-11, MIDDLE CIRCLE, NEW DELHI. CONNAUGHT CIRCUS, NEW DELHI. PAN: AAACP06882G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI V.S. RASTOGI ADV. RESPONDENT BY : SHRI BHIM SINGH SR. DR O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER D ATED 26-4-2012, CHALLENGING THE IMPOSITION OF PENALTY U/S 271(1)( C) AT RS. 1,54,797/- QUA THE ADDITION OF RS. 4,31,550/-, CLAIMED AS BUSINESS EXPENDITURE, PAID AS COMMISSION BY THE ASSESSEE FOR A PROPERTY HELD AS S TOCK IN TRADE WHICH WAS TO BE LET OUT TO FETCH A BUYER WHO MAY BE INTEREST ED IN BUYING A LET OUT PROPERTY. 2. THE ASSESSEE CHALLENGES THE PENALTY ON FOLLOWING GROUNDS: (I) THERE WAS NO CASE OF FURNISHING OF INACCURATE PARTI CULARS. (II) THE PARTICULARS WERE FURNISHED WITH RETURN. (III) ASSESSEE WAS UNDER BONA FIDE BELIEF FOR WHICH A PRO PER EXPLANATION HAS BEEN OFFERED. (IV) ASSESSMENTS HAVE BEEN FRAMED U/S 153C AND NO INFORM ATION WHAT- SO-EVER WAS RECOVERED EITHER FROM THE PREMISES OF P ERSON SEARCHED ITA 3333/DEL/2012 POONAM PROMOTERS & DEVELOPERS 2 ABOUT ANY UNDISCLOSED INCOME OF ASSESSEE. THEREFORE PROCEEDINGS U/S 153C WERE NOT APPLICABLE FOR THIS ADDITION. A P LEA WHICH CAN BE RAISED IN PENALTY PROCEEDINGS AGAIN. 3. BRIEF FACTS ARE: THE ASSESSEE IS A DEALER IN PRO PERTIES AND HELD THE IMPUGNED PROPERTY SITUATED IN M BLOCK CONNAUGHT PLA CE, NEW DELHI, AS STOCK-IN-TRADE. ACCORDING TO ASSESSEE, THE PROPERTY WAS FOR SALE; IN CONNAUGHT PLACE AREA IT IS MARKET PRACTICE THAT THE BUYERS ARE WILLING TO EASILY PURCHASE A PROPERTY WHICH IS LET OUT ON LUCR ATIVE RENT TO A GOOD TENANT. WITH THESE OBJECTS IN MIND, ASSESSEE ENGAGED THE SE RVICES OF A BROKER FOR FINDING SUCH TENANT. BROKER ACCORDINGLY FOUND ONE TO WHICH THIS PROPERTY WAS FIRST LET OUT AND SOLD IMMEDIATELY THEREAFTER. ADVANCE RENT FOR THREE MONTHS WAS RECEIVED AND AS A CONSIDERATION IN THIS DEAL, ASSESSEE PAID AMOUNT OF RS. 4,31,550/- AS BROKERAGE. THE PAYMENT IS GENUINE AND IS NOT DOUBTED BY ASSESSING OFFICER. ASSESSEE BELIEVED THA T THE BROKERAGE WAS PAID FOR STOCK IN TRADE AND DEBITED THIS AMOUNT TO BUSIN ESS EXPENDITURE AND FILED THE RETURN OF INCOME OFFERING BUSINESS INCOME ON SA LE OF PROPERTY AND RENTAL INCOME FOR ONE MONTH (2 MONTHS RENT WAS GIVEN TO BU YER). IT SHALL BE FURTHER WORTHWHILE TO NOTE THAT IMMEDIATELY THEREAFTER THE PROPERTY WAS SOLD TO A PURCHASER. THE ASSESSEE BECAME ELIGIBLE FOR ONE MON THS RENT AND THE BALANCE TWO MONTHS ADVANCE RENT WAS HANDED OVER TO THE NEW PURCHASER. THUS, THE ASSESSEE OFFERED ONE MONTHS RENTAL INCOM E AS HOUSE PROPERTY INCOME AND THE BROKERAGE PAID REMAINED IN THE BUSIN ESS EXPENDITURE. THOUGH NO INCRIMINATING MATERIAL WAS FOUND DURING T HE COURSE OF 153C ASSESSMENT, ASSESSING OFFICER WAS OF THE VIEW THAT THIS AMOUNT OF BROKERAGE WAS RELATABLE TO RENT RECEIVED FROM PROPERTY AND NO T AS BUSINESS EXPENDITURE, THE SAME WAS DISALLOWED. ASSESSEE PREFERRED FIRST A PPEAL WHICH WAS DISMISSED AND WAS NOT FURTHER CONTESTED. THE ASSESS ING OFFICER INITIATED ITA 3333/DEL/2012 POONAM PROMOTERS & DEVELOPERS 3 PENALTY PROCEEDINGS U/S 271(1)(C). BEFORE ASSESSING OFFICER THE ASSESSEE CONTENDED THAT THE PAYMENT OF COMMISSION TO BROKER WAS CONSEQUENT TO A BUSINESS DECISION TAKEN BY THE ASSESSEE TO SELL THE PROPERTY AFTER A PROPER LET OUT. THIS WAS A BUSINESS DECISION WHICH WAS BONA FI DE AND ACTED UPON. IT WAS FURTHER CONTENDED THAT ASSESSEE HAD FURNISHED A LL THE PARTICULARS IN THE RETURN OF INCOME AND MERELY BECAUSE THE HEAD OF EXP ENDITURE WAS CHANGED FROM BUSINESS INCOME TO HOUSE PROPERTY INCOME P ENALTY CANNOT BE LEVIED MERELY BECAUSE THE ASSESSEES QUANTUM APPEA L HAS BEEN DISMISSED. RELIANCE WAS PLACED ON HONBLE SUPREME COURT JUDGME NT IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) FOR THE PR OPOSITION THAT IF THE ASSESSEE HAS FURNISHED RELEVANT PARTICULARS IN THE RETURN OF INCOME, MERE DISALLOWANCE OF A CLAIM WILL NOT TANTAMOUNT TO FURN ISHING OF INACCURATE PARTICULARS. FURTHER RELIANCE IS PLACED ON CIT VS. DALMIA CEMENT 254 ITR 377 FOR THE PROPOSITION THAT ASSESSEE SPENT THIS AM OUNT IN THE INTEREST OF COMMERCIAL EXPEDIENCY WHICH WAS A BONA FIDE EXPLANA TION. LD. COUNSEL THUS CONTENDS THAT ALL THE RELEVANT PARTICULARS HAV ING BEEN FILED WITH THE RETURN OF INCOME AND ASSESSEES PROPER EXPLANATION FOR CLAIMING THE EXPENDITURE AS BUSINESS EXPENDITURE FACILITATING SA LE OF STOCK IN TRADE BEING A BONA FIDE EXPLANATION AND BELIEF, THERE WAS NO CASE OF FURNISHING OF ANY INACCURATE PARTICULARS. CIT(A) HAS OVERWHELMINGLY R ELIED ON THE FACT THAT ASSESSEES FIRST APPEAL WAS DISMISSED AND ADDITION WAS CONFIRMED. LD. COUNSEL PLEADS THAT PENALTY PROCEEDINGS ARE DISTINC T AND SEPARATE FROM ASSESSMENT PROCEEDINGS AND MERELY BECAUSE AN ADDITI ON IS SUSTAINED IN APPEAL, WILL NOT MECHANICALLY LEAD TO IMPOSITION OF PENALTY U/S 271(1)(C). WHILE DECIDING THE PENALTY ISSUE, THE BONA FIDES OF THE ASSESSEES EXPLANATION AND THE FACT OF DISCLOSURE OF PARTICULA RS IN THE RETURN, AS HELD BY HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA) IS TO ITA 3333/DEL/2012 POONAM PROMOTERS & DEVELOPERS 4 BE CONSIDERED. LD. COUNSEL FURTHER RAISED A PLEA TH AT CONSEQUENT TO HONBLE DELHI HIGH COURTS JUDGMENT DATED 7-8-2012 IN THE C ASE OF ANIL KUMAR BHATIA IN ITA NOS. 1626, 1632, 1998, 2019 & 2020 O F 2010; ITAT MUMBAI SPECIAL BENCH IN THE CASE OF M/S ALL CARGO GLOBAL L OGISTICS LTD. VS. DCIT (ITA NOS. 5018 TO 5022 & 5059/MUM/2010 DATED 6-7-20 12), THERE EXISTED A GENUINE DOUBT AS TO WHAT CONSTITUTE THE MATERIAL B ELONGING TO AND SUFFICIENT FOR INITIATION OF BLOCK ASSESSMENT. THE PENALTY CA NNOT BE SUSTAINED MORE SO WHEN THE ISSUE OF JURISDICTION WAS SUBJECT MATTER O F A JUDICIAL DEBATE FOR WHICH VARIOUS BENCHES OF ITAT, SPECIAL BENCH AND HO NBLE DELHI HIGH COURT TOOK DIVERGENT VIEWS. 4. THE LD. DR ON THE OTHER HAND RELIED ON HONBLE D ELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. 327 ITR 510 AND THE ORDERS OF LOWER AUTHORITIES. 5. LD. COUNSEL FOR THE ASSESSEE IN REJOINDER QUOTES ANOTHER JUDGMENT FROM HONBLE DELHI HIGH COURT IN THE CASE OF KANCHE NJUNGA ADVERTISING P. LTD. VS. CIT 340 ITR 595 WHICH HA EXPLAINED THE SCO PE OF ZOOM COMMUNICATION (SUPRA). 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. AS THE FACTS EMERGE, EARNING R ENT, THE INCURRING OF BUSINESS (BROKERAGE) EXPENDITURE AND BUSINESS INCOM E ON SALE OF PROPERTY I.E. STOCK IN TRADE WAS INCORPORATED IN THE BOOKS O F A/CS OF THE ASSESSEE AND PARTICULARS THEREOF WERE FILED WITH THE RETURN OF INCOME. THE ASSESSEE CLAIMS THAT THE PROPERTY WAS INTENDED TO BE SOLD AS PER TH E MARKET PRACTICES IN CONNAUGHT PLACE AND IN CONSEQUENCE THEREOF A BUSIN ESS DECISION WAS TAKEN TO FIRST LET OUT THE PROPERTY AND THEN SELL THE SAM E AS A GAINFUL LET OUT PROPERTY. THE ASSESSEES CONDUCT IS SUPPORTED BY TH E FACT THAT IMMEDIATELY AFTER LETTING OUT, THE PROPERTY WAS SOLD AND OUT O F THREE MONTHS ADVANCE RENT, ITA 3333/DEL/2012 POONAM PROMOTERS & DEVELOPERS 5 TWO MONTHS RENT WAS PASSED ON TO THE PURCHASER. TH E GENUINENESS OF THE RENT AND BROKERAGE HAS NOT BEEN QUESTIONED. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT (I) ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT THE BROK ERAGE WAS PAID CONSEQUENT TO A BUSINESS DECISION OF SALE OF THE PR OPERTY AFTER FIRST LETTING IT OUT AND THEN SALE. (II) RELEVANT DETAILS WERE FILED ALONG WITH RETURN OF IN COME. (III) PENALTY SHOULD NOT BE LEVIED MERELY BECAUSE IT IS L AWFUL TO DO SO AS HELD BY HONBLE SUPREME COURT IN THE CASE OF HINDUS TAN STEEL LTD. V. STATE OF ORISSA (1972) 83 ITR 26. THE JUDGMENT O F HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S (SUPRA) IS ALSO APPLICABLE TO ASSESSEES CASE. AS THE ASSESSEE BONA FIDE BELIEF IS DISCERNABLE AND THE RELEVANT DETAILS WERE FURNIS HED ALONG WITH RETURN OF INCOME, WE SEE NO JUSTIFICATION IN IMPOSI TION OF PENALTY. IN VIEW THEREOF, WE DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13-02-2013. SD/- SD/- ( B.C. MEENA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13-02-2013. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR