EXCEL PAPER TUBE LTD, THANE V. ITO 8(1)(3), MUMBAI

ITA 4348/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8291 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 23-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K MEHTA
• Assessee Lawyers: PAYAL GADA
• Keywords: Business income; Business expenditure; Bonafide belief; Difference of opinion; Change of opinion
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . / BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 4348/MUM/2011 / ASSESSMENT YEAR 2006-07 EXCEL PAPER TUBE LIMITED, EXCEL HOUSE, SATIVALI, VASAI (EAST), THANE 401 208 PAN: AAACE 1383 K VS. THE INCOME TAX OFFICER 8(1)(3), AAYAKAR BHAVAN, MUMBAI. ( / APPELLANT ) ( ! / RESPONDENT ) ' / APPELLANT BY : MS. PAYAL GADA ! # ' /RESPONDENT BY : SHRI N.K. MEHTA # $%& / DATE OF HEARING : 23-10-2012 '( # $%& / DATE OF PRONOUNCEMENT : 07-11-2012 )* / O R D E R PER RAJENDRA, AM THE APPELLANT HAS FILED THIS APPEAL AGAINST THE ORD ER DT. 22-03-2011 OF THE CIT(A)-16, MUMBAI ON THE FOLLOWING GROUNDS: THE FOLLOWING GROUNDS OF APPEAL ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO, ONE ANOTHER: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) 16 (HE REINAFTER REFERRED TO AS THE CIT(A) ERRED IN CONFIRMING PENALTY OF RS. 2,71,522/ - LEVIED BY THE INCOME-TAX OFFICER- 8(1)(3), MUMBAI (HEREINAFTER REFERRED TO A S THE ASSESSING OFFICER) UNDER SECTION 271(1)( C ) OF THE ACT. THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER OUGHT NOT TO HAVE LEV IED THE IMPUGNED PENALTY UNDER SECTION 271(1)( C ) OF THE ACT. 2. THE CIT(A) ERRED IN CONFIRMING ACTION OF THE ASSESS ING OFFICER IN LEVYING PENALTY ON THE BASIS OF INCOME-TAX, INCLUDING SURCHARGE AND EDUCATION CESS. ITA NO. 4348/MUM/2011 EXCEL PAPER TUBE LIMITED, 2 THE APPELLANTS CONTEND THAT SURCHARGE ON INCOME-TAX AND EDUCATION CESS CANNOT BE CONSIDERED IN LEVYING THE PENALTY AS THE SAME IS NOT PART OF TAX 3. THE APPELLANTS CONTEND THAT THE IMPUGNED ORDER OF P ENALTY IS BAD IN LAW AND REQUIRES TO BE QUASHED. 2. ASSESSEE-COMPANY ENGAGED IN THE BUSINESS OF FINANCE AND INVESTMENT IN SHARES AND SECURITY, FILED ITS RETURN OF INCOME ON 22-11-2006 DECLARING INCOME AT NIL. ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (ACT) WAS FINALISED BY THE ASSESSING OFFICER (AO) ON 28-11-2008, DETERMINING T HE TOTAL INCOME OF THE ASSESSEE AT RS. 8.06 LAKHS. 3. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT TH E ASSESSEE HAD SHOWN INCOME FROM LEASE RENTALS (RS. 1.2 LAKHS) AND INTER EST INCOME (RS. 7.55 LAKHS) AS BUSINESS INCOME. HE FURTHER FOUND THAT ASSESSEE HA D ALSO CLAIMED EXPENSES OF RS. 7.25 LAKHS AS BUSINESS EXPENDITURE. AO HELD TH AT THE RENT RECEIPT OF RS. 1.2 LAKHS WAS TO BE TAXED AS INCOME FROM HOUSE PROPERT Y WHERE AS THE INTEREST INCOME HAD TO BE TREATED AS INCOME FROM OTHER SOURCES. HE INITIATED PENALTY PROCEEDINGS U/S. 271(1)( C ) OF THE ACT BY ISSUING NOTICE U/S. 274 OF THE ACT. ASSESSEE DID NOT SUBMIT ANY REPLY BEFORE THE AO. AO HELD THAT ASSES SEE HAD NO EXPLANATION TO OFFER AND HAD ACCEPTED THE STAND OF THE DEPARTMENT TO ASS ESS THE RENTAL INCOME AND INTEREST INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES, RESPECTIVELY. HE FURTHER HELD THAT THE A SSESSEE HAD DELIBERATELY TREATED THE RENTAL RECEIPTS AND INTEREST INCOME AS BUSINESS IN COME AND HAD CLAIMED EXPENSES AGAINST IT, THAT THE ASSESSEE HAD REDUCED ITS TAX LIABILITY, THAT SUBMISSION OF THE ASSESSEE ABOUT CHANGE OF OPINION WAS NOT TENABLE, T HAT THE ASSESSEE HAD FALSELY CLAIMED REDUCTIONS AND IT AMOUNTED TO CONCEALING TH E PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME WITHIN THE MEANING OF SECTION 271 (1)( C ) OF THE ACT. HE FINALLY HELD THAT ASSESSEE HAD FILED INACCURATE PARTICULARS OF INCOME AND HENCE IT WAS A FIT CASE TO LEVY PENALTY U/S. 271(1)( C ) OF THE ACT. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, HE HELD THAT ASSESSEE HAD NOT CARRIED OUT ANY MANUFACTURING ACTI VITIES, THAT IT HAD ENTERED INTO AGREEMENT WITH TWO COMPANIES FOR UTILIZING A PART O F THE FACTORY PREMISES ON RENT, THAT FAA HAD REJECTED THE CLAIM OF THE ASSESSEE IN QUANT UM APPEAL TO TREAT THE RENTAL AND INTEREST INCOME UNDER THE HEAD BUSINESS INCOME, T HAT ASSESSEE HAD NOT FILED APPEAL AGAINST THE ORDER OF THE FAA FOR THE AY 2003-04, TH AT ONCE THE ASSESSEE HAD ACCEPTED THE ORDER OF THE FAA IT HAD TO SHOW THE INCOME UNDE R PROPER HEAD. 4. BEFORE US AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT IN AY 2003-04, ISSUE OF TAXABILITY OF INTEREST INCOME/RENTAL INCOM E WAS DECIDED IN FAVOUR OF THE ASSESSEE, THAT ORDER OF THE TRIBUNAL FOR THE A.Y 20 03-04 DECIDING THE ISSUE AGAINST IT WAS DELIVERED ON 23-01-2009, THAT RETURN OF INCOME FOR THE AY UNDER CONSIDERATION WAS FILED ON 22-11-2006, THAT TILL THE FILING OF RE TURN, NOTHING WAS HELD AGAINST THE ASSESSEE, THAT ADDITIONS CONFIRMED IN QUANTUM APPEA L DID NOT MEAN THAT PARTICULARS FILED WERE INACCURATE BY THE ASSESSEE. DR RELIED U PON THE ORDERS OF THE AO AND THE FAA. HE FURTHER SUBMITTED THAT BY CLAIMING RENTAL AND INTEREST INCOME AS BUSINESS INCOME WAS FURNISHING OF INACCURATE PARTICULARS, T HAT ITAT AND FAA HAD HELD THAT BOTH THE INCOMES WERE TO BE TAXED UNDER THE HEADS INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES, THAT ASSESSEE HAD ACCE PTED THE ORDER OF THE FAA. ITA NO. 4348/MUM/2011 EXCEL PAPER TUBE LIMITED, 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. IN THE CASE UNDER CONSIDERATION, PENALTY U/S. 271(1 )( C ) HAS BEEN IMPOSED FOR TREATING THE TWO ITEMS OF INCOME UNDER THE HEAD BUSINESS IN COME, WHEREAS AS PER AO AND FAA SAME SHOULD HAVE SHOWN UNDER DIFFERENT HEADS I. E., INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. 6. WE FIND THAT SAME ISSUE WAS DECIDED BY THE D BENC H OF THE TRIBUNAL ON 27-11-2007 (ITA NO. 885/M/04 AY. 2000-01) IN THAT Y EAR, APPEAL WAS FILED BY THE ASSESSEE-COMPANY CHALLENGING THE ORDER OF THE FAA F OR THE AY CONCERNED. TRIBUNAL HAD DECIDED BOTH THE ISSUES AGAINST THE ASSESSEE. FOR THE AY 2003-04, AO HAD FILED AN APPEAL BEFORE THE TRIBUNAL AND VIDE ITS ORDER DT . 23-01-2009, E BENCH OF THE TRIBUNAL FOLLOWING THE EARLIER ORDER OF THE TRIBUNA L DECIDED THE ISSUE AGAINST THE ASSESSEE. THE RETURN OF INCOME FOR THE AY 2006-07 WAS FILED ON 21-11-2006 BEFORE THE ORDER FOR 2000-01 WAS DELIVERED BY THE TRIBUNAL . AT THAT TIME, EFFECTIVE ORDER AVAILABLE WAS OF FAA AND IN THE AY 2003-04, MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE FAA. IN THESE CIRCUMSTANCES, IF TH E ASSESSEE HAS REASONABLE BELIEF THAT INCOME RECEIVED BY IT UNDER BOTH THE HEADS HAD TO BE SHOWN AS BUSINESS INCOME IT WAS NOT AT FAULT. HERE, WE ARE NOT DECIDING THE QUANTUM APPEAL. QUESTION TO BE DECIDED HERE IS IMPOSITION OF PENALTY U/S. 271( C ) FOR FURNISHING INACCURATE PARTICULARS NEITHER THE AO NOR THE FAA HAD STATED AS HOW THE DE TAILS FILED BY THE ASSESSEE IN THE RETURN OF INCOME COULD BE TREATED AS INACCURATE PAR TICULARS. CONFIRMATION OF ANY DIS-ALLOWANCE OR ADDITION IN THE QUANTUM APPEAL IN THE APPELLATE PROCEEDINGS CANNOT BE BASIS FOR INVOKING THE PROVISIONS OF SECTION 271 (1)( C ) OF THE ACT. BEFORE IMPOSING PENALTY, IT MUST BE ESTABLISHED THAT ASSES SEE HAD FILED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF ITS INCOM E. IT IS NOT THE CASE OF THE AO OR THE FAA THAT ASSESSEE HAD NOT SHOWN INCOME EARNED B Y IT, IN ITS RETURN OF INCOME. THERE WAS DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE-COMPANY AS TO HOW TO TREAT THE ITEMS OF INCOME IN THE YEAR UNDER CONS IDERATION. IN OUR HUMBLE OPINION, WHEN BASIC FACT OF EARNING OF INCOME HAS NOT BEEN C ONCEALED, ASSESSEE CANNOT BE VISITED BY THE PENAL PROVISIONS. IN THE CASE UNDER CONSIDERATION, IN OUR OPINION, ASSESSEE HAD BONAFIDE BELIEF OF TREATING BOTH THE H EADS AS BUSINESS INCOME TILL THE ORDER FOR THE AY 2000-01 WAS DELIVERED. IN SHORT, WE ARE OF THE OPINION THAT THE ASSESSEE HAD NOT FURNISHED INACCURATE PARTICULARS O F HIS INCOME AND HENCE PENALTY LEVIED U/S. 271(1)( C ) OF THE ACT BY THE AO AND UP HELD BY THE FAA, DESERVED TO BE DELETED. GROUND NOS.1 TO 3 FILED BY THE ASSESSEE A RE DECIDED IN FAVOUR OF THE APPELLATE COMPANY. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2012. SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) )+ / JUDICIAL MEMBER & )+ / ACCOUNTANT MEMBER MUMBAI, ,) DATE: 7 TH NOVEMBER, 2012 TNMM ITA NO. 4348/MUM/2011 EXCEL PAPER TUBE LIMITED, 4 )* )* )* )* # ## # $- $- $- $- .-$ .-$ .-$ .-$ / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE !-$ $ //TRUE COPY// )* )* )* )* / BY ORDER, / // / / 0 0 0 0 DY./ASSTT. REGISTRAR , / ITAT, MUMBAI