M/s Valco Industries Ltd., Chandigarh V. Pr.CIT-Central Gurgaon, Chandigarh

ITA 41/CHANDI/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7611 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 19-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA
• Keywords: Principle of natural justice
• Section: 27

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “एकल” च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “SMC” CHANDIGARH ी संजय गग , या यक सद य BEFORE: SH. SANJAY GARG, JUDICIAL MEMBER आयकर अपील सं./ ITA No.41/CHD/2021 नधा रण वष / Assessment Year : 2013-14 M/s Y.D. Solutions, House No. 2133, Sector 38-C, Chandigarh. बनाम The ITO, Ward-4 (5), Chandigarh. थायी लेखा सं./PAN NO: AABFY0386N अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri Tej Mohan Singh, Advocate राज व क! ओर से/ Revenue by : Shri Ashok Khanna, Addl.CIT स ु नवाई क! तार&ख/Date of Hearing : 01.12.2021 उदघोषणा क! तार&ख/Date of Pronouncement : 01.12.2021 Hearing through Video Conferencing आदेश/ORDER T h e p r e s e n t a p p e a l h a s b e e n p r e f e r r e d b y t h e a s s e s se e a g a i n s t t h e o r d e r d a t e d 1 4 . 1 1 . 2 0 1 9 o f t h e C o m m i s s i on e r o f I n c o m e T a x ( A p p e a l s ) , C h a n d i g a r h ( h e r e i n a f t e r r e f e rr e d t o a s ‘ C I T ( A ) ’ ) p e r t a i n i n g t o 2 0 1 3 - 1 4 a s s e s s m e n t y e a r . Th e a s s e s s e e i n t h i s a p p e a l h a s t a k e n f o l l o w i n g g r o u n d s o f a p p e al : i) That the Ld. CIT (A)-2, Chandigarh has erred in law and on facts in confirming the Penalty u/s 271(l)(c) allegedly for furnishing of inaccurate particulars of income. The conclusion drawn is based on surmises and conjectures. Hence it is prayed that penalty imposed u/s 271(l)(c) be deleted. ii) That the Ld.CIT (A)-2 Chandigarh has erred in law and on facts in not considering the established principles laid down by the Hon' Supreme Court and other judicial pronouncements for imposing the penalty u/s 271(l)(c), thus denying the natural justice to the appellant. It is, hence ITA-41/CHD/2020 A.Y. 2013-14 Page 2 of 6 prayed that the justice be provided to the appellant by following those principles. iii) That the Appellant reserves the right to alter, add or delete any grounds of appeal at the time of hearing. 2 . A p e r u s a l o f t h e a b o v e g r o u n d s o f a p p e a l r e v e a l s t h a t t h e a s s e s s e e i n t h i s c a s e h a s a g i t a t e d t h e l e v y o f p e n al t y u / s 2 7 1 ( 1 ) ( c ) o f t h e I n c o m e T a x A c t , 1 9 6 1 ( i n s h o r t ‘ t he A c t ’ ) . T h e b r i e f f a c t s o f t h e c a s e a r e t h a t t h e a s s e s s e e w a s a p a r t n e r s h i p f i r m t h a t c a m e i n t o e x i s t e n c e w i t h e f f e c t f r o m 1 1 . 04 . 2 0 1 1 . T h e m a i n o b j e c t o f t h e f i r m a s p e r p a r a 3 o f t h e p ar t n e r s h i p d e e d w a s "That the nature of the business of the partnership shall be to provide, deal, offer, develop, run, sell, outsource information technology, clients need based IT Solutions and its related activities, space solution or to do such business or businesses as may be decided mutually by the parties from time to time." D u r i n g F Y 2 0 1 1 - 1 2 t h e a s s e s s e e h a d p u r c h a s e d o n e i n d u s t r i a l p l o t N o . C - 8 2 , P h a s e - 7 , M o h a l i m e a s ur i n g 5 0 0 0 s q . y a r d s w i t h t h r e e s t o r e y b u i l d i n g f r o m M / s S p r a y E n g i n e e r i n g D e v i c e s L i m i t e d t h r o u g h a n ' A g r e e m e n t to S a l e ' o n 2 6 . 0 7 . 2 0 1 1 f o r t o t a l c o n s i d e r a t i o n o f R s . 2 8 , 0 0 ,0 0 , 0 0 0 / - . A p o r t i o n o f t h e s a i d p r o p e r t y w a s l e t o u t b y M / s S p ra y E n g i n e e r i n g D e v i c e s L t d . t o M / s D i s h n e t W i r e l e s s L im i t e d v i d e a l e a s e d e e d d a t e d 2 0 . 0 7 . 2 0 1 1 f o r m o n t h l y r e n t o f Rs . 1 7 , 5 0 , 0 0 0 / - . A f t e r p u r c h a s e o f p r o p e r t y , t h e a s s e s se e s t a r t e d r e c e i v i n g r e n t f r o m b o t h M / s S p r a y E n g i n e e r i n g D e v ic e s ITA-41/CHD/2020 A.Y. 2013-14 Page 3 of 6 L i m i t e d ( t h e p r e v i o u s o w n e r ) a n d M / s D i s h n e t W i r e l es s L i m i t e d ( t h e t e n a n t t o p r e v i o u s o w n e r ) . T h e a s s e s s e e h a d s h o w n t h e r e n t r e c e i v e d f r o m t h e a b o v e p a r t i e s a s bu s i n e s s I n c o m e i n i t s I T R a n d n o t u n d e r t h e h e a d H o u s e P r o pe r t y I n c o m e . T h e a s s e s s e e w a s a s k e d t o e x p l a i n t h e r e a s on s f o r r e p o r t i n g t h e i n c o m e u n d e r t h e h e a d ' b u s i n e s s i n c o me ' a n d n o t u n d e r t h e h e a d ' i n c o m e f r o m t h e h o u s e p r o p e r t y '. 3 . T h e a s s e s s e e r e p l i e d v i d e l e t t e r d a t e d 0 3 . 1 1 . 2 0 15 t h a t t h e f i r m w a s f o r m e d o n 1 1 . 0 4 . 2 0 1 1 . T h e m a i n o b j e c t s o f t h e f i r m w e r e t o p r o v i d e I T r e l a t e d s o l u t i o n s a n d t o p ro v i d e s p a c e s o l u t i o n s . S o t h e a s s e s s e e f i r m w a s p r o v i d i n g f u r n is h e d s p a c e t o t h e p a r t i e s a s p e r t h e i r r e q u i r e m e n t a l o n g w i t h t h e f u r n i t u r e , I T e q u i p m e n t s , w o r k s t a t i o n s , p o w e r b a c k- u p s e t c . A s t h e f i r m w a s n o t p r o v i d i n g o n l y t h e v a c a n t s p a c e o n r e n t b u t p r o v i d i n g t h e s p a c e w i t h v a r i o u s o t h e r f i x t u r e s a s p e r r e q u i r e m e n t o f p a r t y , a c c o r d i n g t h e i n c o m e f r o m s p ac e r e n t a l s h a s b e e n s h o w n a s i n c o m e f r o m B u s i n e s s a n d P r o f e s s io n . 4 . H o w e v e r , t h e A O d i d n o t g e t s a t i s f i e d w i t h t h e ab o v e r e p l y o f t h e a s s e s s e e a n d h e l d t h a t t h e b u s i n e s s a ct i v i t y o f t h e a s s e s s e e w a s r e l a t e d t o i n f o r m a t i o n t e c h n o l o g y s o l u t i o n s a n d r e l a t e d s o l u t i o n s a c t i v i t y . H e , t h e r e f o r e , t r ea t e d t h e a f o r e s a i d r e n t a l i n c o m e a s i n c o m e f r o m h o u s e p r o p e rt y . Th e a s s e s s e e c a r r i e d t h e m a t t e r u p t o t h e l e v e l o f Tr i b un a l b u t c o u l d n o t s u c c e e d . ITA-41/CHD/2020 A.Y. 2013-14 Page 4 of 6 5 . I n t h e m e a n t i m e , t h e A O l e v i e d t h e i m p u g n e d p e n al t y u / s 2 7 1 ( 1 ) ( c ) o f t h e A c t o n t h e g r o u n d t h a t t h e a s s e s s e e h a d w r o n g l y s h o w n t h e r e n t a l i n c o m e a s ‘ b u s i n e s s i n c o m e’ w h e r e a s i t w a s t o b e o f f e r e d f o r t a x a t i o n a s ‘ i n c o me f r o m h o u s e p r o p e r t y ’ . H e , t h e r e f o r e , h e l d t h a t t h e a s s es s e e h a d f u r n i s h e d i n a c c u r a t e p a r t i c u l a r s o f i n c o m e a n d l e v ie d t h e i m p u g n e d p e n a l t y @ 1 0 0 % o f t h e i n c o m e t a x s o u g h t t o b e e v a d e d . 6 . T h e C I T ( A ) c o n f i r m e d t h e p e n a l t y s o l e v i e d b y t he A O . T h e r e f o r e , t h e a s s e s s e e h a s c o m e i n a p p e a l b e f o r e th i s T r i b u n a l . 7 . I h a v e h e a r d t h e r i v a l c o n t e n t i o n s a n d g o n e t h r ou g h t h e r e c o r d . Th e l d . c o u n s e l f o r t h e a s s e s s e e h a s s u b mi t t e d t h a t a s p e r s u b m i s s i o n s m a d e t o t h e l o w e r a u t h o r i t i e s , it w a s e v i d e n t t h a t t h e a s s e s s e e w a s u n d e r b o n a f i d e b e l i e f t h a t t h e a f o r e s a i d i n c o m e o f t h e a s s e s s e e w a s r e q u i r e d t o b e a s s e s s e d a s b u s i n e s s i n c o m e . T h a t t h e r e w a s n o c o n c e a l m e n t of i n c o m e b y t h e a s s e s s e e , n e i t h e r a s s e s s e e f u r n i s h e d a n y i n ac c u r a t e p a r t i c u l a r s o f i n c o m e . H e h a s s u b m i t t e d t h a t m e r e ly b e c a u s e t h e A O h a s a s s e s s e d t h e i n c o m e u n d e r d i f f e r e n t h e a d, t h a t d o e s n o t i n v i t e p e n a l t y u / s 2 7 1 ( 1 ) ( c ) o f t h e A c t . He h a s f u r t h e r p o i n t e d o u t t h a t e v e n i n t h e p r e c e d i n g y e a r, t h e a s s e s s e e h a d o f f e r e d t h e s a m e i n c o m e a s b u s i n e s s i nc o m e ITA-41/CHD/2020 A.Y. 2013-14 Page 5 of 6 w h i c h w a s a c c e p t e d b y t h e A O i n s c r u t i n y a s s e s s m e n t p r o c e e d i n g s . 8 . I h a v e c o n s i d e r e d t h e r i v a l s u b m i s s i o n s . A d m i t te d l y t h e a s s e s s e e h a s n o t c o n c e a l e d t h e a f o r e s a i d r e n t a l i n co m e r e c e i v e d f r o m t w o p a r t i e s . T h e i n c o m e w a s d u l y o f fe r e d f o r t a x a t i o n , h o w e v e r , a s i n c o m e f r o m b u s i n e s s a n d p r o fe s s i o n . T h e a s s e s s e e i n t h i s r e s p e c t h a s r e l i e d u p o n i t s o bj e c t s w h e r e i n i t h a s b e e n m e n t i o n e d t h a t o n e o f t h e o b j e ct o f t h e a s s e s s e e w a s t o p r o v i d e s p a c e s o l u t i o n s t o i t s c l i en t s . T h e a s s e s s e e t a k i n g s h e l t e r u n d e r t h e a f o r e s a i d o b j e c t , r e t u r n e d t h e i n c o m e f r o m t h e s p a c e r e n t e d o u t b y i t t o t w o pa r t i e s a s b u s i n e s s i n c o m e . H o w e v e r , t h e i n c o m e t a x a u t h o r i t i es a n d e v e n a p p e l l a t e a u t h o r i t i e s d i d n o t a g r e e w i t h t h e af o r e s a i d p l e a o f t h e a s s e s s e e a n d h e l d t h a t t h e a s s e s s e e w a s p r i m a r i l y i n t h e a c t i v i t y o f p r o v i d i n g I T S o l u t i o n s a n d r e l a te d a c t i v i t i e s a n d t h a t r e n t i n g o f p r o p e r t y w a s n o t t h e b u s i n e s s ac t i v i t y o f t h e a s s e s s e e . M a y i t b e s o , o n e f a c t w h i c h i s a p p ar e n t o n t h e f i l e i s t h a t t h e a s s e s s e e h a d n o t c o n c e a l e d h i s i n co m e a n d u n d e r t h e b o n a f i d e b e l i e f , o f f e r e d t h e s a m e f o r t a xa t i o n . H o w e v e r , t h e i n c o m e t a x a u t h o r i t i e s a s s e s s e d i t u n de r d i f f e r e n t h e a d . E v e n t h e p e r t i n e n t f a c t o n t h e f i le i s t h a t i n t h e i m m e d i a t e p r e c e d i n g a s s e s s m e n t y e a r , t h e a s s e s se e h a d o f f e r e d t h e s a m e i n c o m e a s i n c o m e f r o m b u s i n e s s a n d w h i c h w a s a c c e p t e d b y t h e A O u n d e r s c r u t i n y a s s e s s m e n t ITA-41/CHD/2020 A.Y. 2013-14 Page 6 of 6 p r o c e e d i n g s . U n d e r t h e c i r c u m s t a n c e s f o r t h e a s s e ss m e n t y e a r u n d e r c o n s i d e r a t i o n , t h e a s s e s s e e c a n s a f e l y be s a i d t o b e h a v i n g b o n a f i d e b e l i e f f o r o f f e r i n g t h e s a m e u n de r t h e s a m e h e a d i . e . ‘ i n c o m e f r o m b u s i n e s s o r p r o f e s s i o n ’ . I n v i e w o f t h i s , I d o n o t f i n d t h a t i t i s a f i t c a s e f o r l e v y o f p e n a l t y u / s 2 7 1 ( 1 ) ( c ) o f t h e A c t . T h e r e f o r e , t h e i m p u g n e d p e n a lt y l e v i e d b y t h e A O i s o r d e r e d t o b e d e l e t e d . A p p e a l o f t h e a s se s s e e s t a n d s a l l o w e d . 9 . I n t h e r e s u l t , t h e a p p e a l o f t h e a s s e s s e e i s a l lo w e d . Order pronounced on 01.12.2021. S d /- ( संजय गग ) (SANJAY GARG ) या यक सद य/ Judicial Member “Poonam” आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. आयकर आय ु /त (अपील)/ The CIT(A)+ 5. -वभागीय त न2ध, आयकर अपील&य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File