SUNIL T. DOSHI, MUMBAI V. JCIT RG 24(2), MUMBAI

ITA 456/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0216 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 27-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 29-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: MRS RUCHI TAMHANKAR
• Keywords: Deemed owner of house property; Depreciation; Opportunity of being heard
• Section: 143(3)

Judgement Text

1 ITA 456 & 457/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO. 456/MUM/2016 - AY 2010-11 I.T.A NO. 457/MUM/2016 - AY 2005-06 SHRI SUNIL T DOSHI M/S VEPARI & CO ORICON HOUSE, 4 TH FLOOR 12, K. DUBASH MARG MUMBAI-400 023 PAN : ABXPD4329F VS THE DY.CIT, CIR.24(2) / 30(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY MRS RUCHI TAMHANKAR REVENUE BY SHRI V JUSTIN DATE OF HEARING 25-01-2018 DATE OF PRONOUNCEMENT 21-02-2018 O R D E R PER G MANJUNATHA, AM : THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST SEPARATE ORDERS OF CIT(A)-41, MUMBAI DATED 19-11-2015 FOR TH E ASSESSMENT YEARS 2010-11 AND 2005-06, RESPECTIVELY. SINCE FAC TS ARE IDENTICAL, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NO.456/MUM/2016 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) 41, MUMBAI, ([CIT(A)], ERRED IN CONFIRMING THE PENALTY OF RS.48,3697- LEVIED BY THE DEPUTY COMMISSIONER OF INCOME- 2 ITA 456 & 457/MUM/2016 TAX, RANGE 24(2), MUMBAI (AO) IN RESPECT OF CLAIM O F DEPRECIATION OF RS.1,43,700/- ON COMPUTER BY INVOKING EXPLANATION 1 OF THE PROVIS IONS OF SECTION 271(1}(C) OF THE ACT. 2. THE APPELLANT SUBMITS THAT, IT HAS NEITHER CON CEALED THE PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 3. THE APPELLANT SUBMITS THAT, THE FACTS IN THE C ASE OF THE APPELLANT DO NOT JUSTIFY LEVY OF PENALTY U/S.271(1)(C) OF THE ACT, AS THE AO HAS NOT DISCHARGED THE ONUS CAST ON HIM BY LAW FOR LEVY OF PENALTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 18-10- 2010 DECLARING TOTAL INCOME AT RS.1,82,35,396. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE STATEMENT OF HOUSE PROPERTIES FILED BY THE ASSESSEE THAT THE ASSESSEE OWNED 4 HOU SE PROPERTIES AND CLAIMED TWO PROPERTIES AS USED FOR HIS OWN BUSINESS . THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY ANNUA L LETTING VALUE OF HOUSE PROPERTY SHALL NOT BE COMPUTED UNDER THE PROV ISIONS OF SECTION 23(1) OF THE INCOME-TAX ACT, 1961. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT OUT OF 4 PROPERTIES, ON E FLAT AT NO.1304, BLDG NO.9, MAN SPACE, QUIESCENT HOUSE, MALAD (W), M UMBAI IS SELF OCCUPIED PROPERTY FOR OWN RESIDENCE. IN RESPECT OF PROPERTIES SITUATED AT ANKUR, GOREGAON (W), MUMBAI AND UNIT NO.218, LINKWA Y ESTATE PREMISES CO-OPERATIVE SOCIETY LTD, MALAD, THESE ARE USED FOR HIS OWN BUSINESS ARE NOT UNDER THE NAME AND STYLE OF M/S AL LIANCE MEDIA & ENTERTAINMENT PVT LTD, A COMPANY IN WHICH HE IS HAV ING 99% SHAREHOLDING. ASSESSEE FURTHER SUBMITTED THAT HE H AD COMPUTED ANNUAL VALUE OF HOUSE PROPERTY AT 301, LAHER CHS LTD, MALA D (W) ON THE BASIS 3 ITA 456 & 457/MUM/2016 OF MUNICIPAL VALUATION. THE HOUSE PROPERTIES USED FOR HIS OWN BUSINESS ARE OUTSIDE THE PURVIEW OF SECTION 22 OF THE I.T. A CT , THEREFORE, THE QUESTION OF COMPUTATION OF DEEMED ANNUAL LETTING VA LUE DOES NOT ARISE. THE AO, AFTER CONSIDERING RELEVANT SUBMISSIONS OF T HE ASSESSEE OBSERVED THAT THE ASSESSEE FAILED TO COMPUTE DEEMED LET OUT VALUE OF 2 PROPERTIES EVEN THOUGH THE PROPERTIES ARE OWNED IN HIS PERSONAL NAME ON THE GROUND THAT THOSE TWO PROPERTIES ARE USED FO R HIS OWN BUSINESS IGNORING THE FACT THAT THE ASSESSEE IS RUNNING THE BUSINESS IN THE NAME OF A PRIVATE LIMITED COMPANY, WHICH IS A DISTINCT S EPARATE LEGAL ENTITY AND HENCE, THE PROPERTIES OWNED IN HIS PERSONAL NAME EV EN THOUGH USED FOR HIS OWN BUSINESS, CANNOT BE CLAIMED EXEMPT FOR THE PURPOSE OF COMPUTATION OF DEEMED ANNUAL LETTING VALUE. INSOFA R AS THIRD PROPERTY, AO OBSERVED THAT EVEN THOUGH THE ASSESSEE HAS COMPU TED DEEMED LET OUT VALUE OF PROPERTY ON THE BASIS OF MUNICIPAL VAL UATION, THE VALUE ADOPTED BY THE AO FOR COMPUTATION OF ANNUAL LETTING VALUE IS NOT IN ACCORDANCE WITH PROVISIONS OF SECTION 23 AS THE SEC TION MANDATES COMPUTATION OF ANNUAL VALUE ON THE BASIS OF SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECT TO LET FROM YEAR TO YEAR . THEREFORE, REJECTED COMPUTATION OF ANNUAL LETTING VALUE OF PROPERTY BY THE ASSESSEE AND DETERMINED ANNUAL LETTING VALUE OF ALL THE THREE PR OPERTIES @8% OF INVESTMENT IN PROPERTIES AND RE-COMPUTED INCOME FRO M HOUSE PROPERTY. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED APPEAL 4 ITA 456 & 457/MUM/2016 BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE REI TERATED ITS SUBMISSIONS MADE BEFORE THE AO TO ARGUE THAT THE AO WAS ERRED IN COMPUTING ANNUAL LETTING VALUE OF TWO PROPERTIES US ED BY HIM FOR HIS OWN BUSINESS CARRIED OUT UNDER THE NAME AND STYLE OF M/ S ALLIANCE MEDIA & ENTERTAINMENT PVT LTD WHEREIN HE IS HOLDING MORE TH AN 99% SHAREHOLDING. THE ASSESSEE FURTHER SUBMITTED THAT IN RESPECT OF DEEMED LET OUT PROPERTY, THE AO HAS ADOPTED 8% OF THE VALU E OF THE PROPERTY TO DETERMINE ANNUAL LETTING VALUE OF THE PROPERTY IGNO RING THE FACT THAT THE PROVISIONS OF SECTION 23 MANDATES COMPUTATION OF AN NUAL LETTING VALUE ON THE BASIS OF SUM FOR WHICH THE PROPERTY MIGHT RE ASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR OR WHERE THE PROPERTY IS P ART OF THE PROPERTY LET OUT AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY T HE OWNER IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE SUM SO RE CEIVED OR RECEIVABLE. HE HAD COMPUTED ANNUAL LETTING VALUE OF THE PROPER TY ON THE BASIS OF MUNICIPAL VALUATION WHICH IS IN ACCORDANCE WITH THE LAW AND ALSO SUPPORTED BY THE DECISION OF JURISDICTIONAL HIGH CO URT IN THE CASE OF M.V. SONAWALA VS CIT 177 ITR 246 WHEREIN IT WAS CATEGORI CALLY HELD THAT MUNICIPAL VALUATION IS ONE OF THE BASIS FOR COMPUTA TION OF ANNUAL LETTING VALUE OF DEEMED LET OUT OF PROPERTIES. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELYI NG UPON CERTAIN JUDICIAL PRECEDENTS OBSERVED THAT AS PER THE PROVIS IONS OF SECTION 23 ANNUAL VALUE OF SUM FOR WHICH THE PROPERTY MIGHT RE ASONABLY BE 5 ITA 456 & 457/MUM/2016 EXPECTED TO LET OUT FROM YEAR TO YEAR BUT NOT ON TH E BASIS OF MUNICIPAL VALUATION. THE CIT(A) FURTHER OBSERVED THAT INCOME OFFERED ON THE BASIS OF MUNICIPAL VALUATION OF THE YEAR 2002 DOES NOT RE FLECT UPDATED AND CORRECT ANNUAL VALUE, THEREFORE, THE AO WAS RIGHT I N DETERMINING THE ANNUAL LETTING VALUE OF THE PROPERTY ON THE BASIS O F COST OF CONSTRUCTION / ACQUISITION / INVESTMENT VALUE TO DETERMINE ANNUAL LETTING VALUE OF THE PROPERTY. INSOFAR AS TWO PROPERTIES USED BY THE AS SESSEE FOR HIS OWN BUSINESS, THE CIT(A) OBSERVED THAT THE PROPERTIES A RE IN THE NAME OF THE ASSESSEE WHEREAS BUSINESS IS CARRIED OUT IN THE NAM E OF THE COMPANY AS PER SECTION 22, PORTIONS OF PROPERTY, IF OCCUPIE D FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION CARRIED OUT BY HIM IS ON LY EXEMPT. THE COMPANY IS A SEPARATE ENTITY AND HENCE, PREMISES US ED FOR RUNNING THE BUSINESS OF THE COMPANY ARE NOT OUTSIDE THE SCOPE O F SECTION 22 OF THE ACT. WITH THESE OBSERVATIONS, UPHELD THE FINDINGS OF THE AO IN COMPUTING ANNUAL VALUE OF THE PROPERTY @ 8% OF INVE STMENT VALUE OF 2 FLATS. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THE ASSESSEE HAS OWNED 4 PROPERTIES OUT OF WHICH TWO PROPERTIES ARE USED FOR HIS OWN BUSINESS RUNNING UNDER THE NAME AND STYLE OF M/S AL LIANCE MEDIA & ENTERTAINMENT PVT LTD, WHERE HE HOLDS MORE THAN 99% SHARES. ONE PROPERTY IS USED FOR HIS SELF-OCCUPATION. FOR THE FOURTH PROPERTY, THE 6 ITA 456 & 457/MUM/2016 ASSESSEE HAS COMPUTED DEEMED ANNUAL LETTING VALUE O N THE BASIS OF MUNICIPAL VALUATION OF THE PROPERTY DETERMINED IN T HE YEAR 2002. THE AO RECOMPUTED ANNUAL LETTING VALUE OF THE TWO PROPE RTIES USED BY THE ASSESSEE FOR HIS OWN BUSINESS ON THE GROUND THAT TH E ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 22 IN RESPECT OF PROPERT IES WHICH ARE USED FOR HIS OWN BUSINESS IN HIS NAME BUT NOT IN THE NAME OF THE COMPANY. IF THE BUSINESS IS CARRIED OUT IN THE NAME OF THE COMPANY, IT CANNOT BE CONSIDERED THAT THE ASSESSEE IS CARRYING OUT THE BU SINESS IN HIS OWN NAME WHICH IS COMING WITHIN THE PURVIEW OF SECTION 22 OF THE ACT. IN RESPECT OF THIRD PROPERTY, THE AO REJECTED ANNUAL L ETTING VALUE COMPUTED BY THE ASSESSEE BY HOLDING THAT THE VALUE FIXED BY THE MUNICIPAL AUTHORITIES FOR THE YEAR 2002 DOES NOT REFLECT UPDA TED AND CORRECT ANNUAL LETTING VALUE OF THE PROPERTY. ACCORDINGLY DETERMI NED ANNUAL LETTING VALUE OF THE THREE PROPERTIES @8% OF VALUE OF INVES TMENT IN PROPERTIES. 6. THE PROVISIONS OF SECTION 23 PRESCRIBE THE PROCE DURE FOR DETERMINATION OF ANNUAL VALUE OF PROPERTIES AS PER WHICH THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR OR WHERE THE PROPERTY OR PART OF THE PROPERTY IS LE T, THEN THE ANNUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THER ETO, IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RE CEIVED OR RECEIVABLE. ADMITTEDLY, IN THIS CASE, ALL THE THREE PROPERTIES ARE NOT LET OUT BY THE ASSESSEE. THE ASSESSEE CLAIMS THAT 2 PROPERTIES AR E USED FOR HIS OWN 7 ITA 456 & 457/MUM/2016 BUSINESS IN THE NAME OF M/S ALLIANCE MEDIA & ENTERT AINMENT PVT LTD. THE AO HAS NOT DISPUTED THE FACT THAT TWO PROPERTIE S ARE USED BY THE ASSESSEE FOR HIS OWN BUSINESS; HOWEVER, REJECTED TH E EXPLANATION OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE OWNED PRO PERTIES IN HIS INDIVIDUAL CAPACITY WHEREAS THE BUSINESS IS RUN IN THE NAME OF THE COMPANY WHICH IS A DISTINCT AND SEPARATE LEGAL ENTI TY. INSOFAR AS THIRD PROPERTY, THE AO HAS DISPUTED ANNUAL LETTING VALUE DETERMINED BY THE ASSESSEE ON THE BASIS OF MUNICIPAL VALUATION BY HOL DING THAT MUNICIPAL VALUE FIXED IN THE YEAR 2002 DOES NOT REFLECT CORRE CT VALUE OF THE PROPERTY. WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE AO FOR THE REASON THAT DETERMINATION OF ANNUAL LETTING VALUE O F THE PROPERTY ON THE BASIS OF VALUE OF THE PROPERTY IS NOT A CORRECT MET HOD FOR DETERMINATION OF ANNUAL LETTING VALUE AS PER THE PROVISIONS OF SECTI ON 23 OF THE INCOME-TAX ACT, 1961. AS PER THE PROVISIONS OF SECTION 23(1)( A), THE ANNUAL LETTING VALUE OF PROPERTY SHOULD BE DETERMINED ON THE BASIS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR OR WHERE THE PROPERTY OR PART OF THE PROPERTY IS LE T OUT AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN EXCESS OF TH E SUM REFERRED TO IN CLAUSE (A). IN THIS CASE, CLAUSE (B) IS NOT APPLIC ABLE BECAUSE THE PROPERTIES HAVE NOT BEEN LET OUT THROUGH OUT THE YE AR. AS PER CLAUSE (A), THE ANNUAL LETTING VALUE OF THE PROPERTY SHALL BE D ETERMINED ON THE BASIS OF THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET 8 ITA 456 & 457/MUM/2016 FROM YEAR TO YEAR WHICH MEANS THE PREVAILING MARKET RENT OF THE PROPERTY HAS TO BE CONSIDERED FOR THE PURPOSE OF DETERMINATI ON OF ANNUAL LETTING VALUE. THE HONBLE BOMBAY HIGH COURT IN THE CASE O F M.V. SONAWALA V CIT (SUPRA) OBSERVED THAT MUNICIPAL VALUATION SHOUL D BE THE BASIS OF DETERMINING ANNUAL VALUE OF THE PROPERTIES. IN YET ANOTHER CASE, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS TIP TOP TYPOGRAPHY 368 ITR 330 (BOM) OBSERVED THAT IN ORDER TO DETERMI NE ANNUAL LETTING VALUE, MUNICIPAL RATEABLE VALUE MAY NOT BE BINDING ON ASSESSING OFFICER, BUT THAT IS ONLY IN CASES WHERE HE IS CONVINCED THA T INTEREST FREE SECURITY DEPOSIT AND MONTHLY COMPENSATION DID NOT REFLECT PR EVAILING RATE. IN SUCH A CASE, THE AO CAN HIMSELF RESORT TO ENQUIRED ABOUT THE PREVAILING RATE IN THE LOCALITY. THE SUM AND SUBSTANCE OF THE RATIO OF THE HONBLE BOMBAY HIGH COURT IS THAT TO DETERMINE THE ANNUAL L ETTING VALUE OF PROPERTIES, THE AO HAS TO FIND OUT THE CORRECT FAIR RENT OF THE PROPERTY IN THE LOCALITY. IN THIS CASE, THE AO HAS FOLLOWED AD HOC METHOD OF ESTIMATION OF 8% ON TOTAL VALUE OF THE PROPERTY TO DETERMINE THE ANNUAL LETTING VALUE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ANNUAL LETTING VALUE DETERMINED BY THE AO IS NOT IN ACCORD ANCE WITH THE PROVISIONS OF SECTION 23(1)(A) AND ALSO AGAINST THE SETTLED LEGAL PROPOSITION LAID DOWN BY JURISDICTIONAL HIGH COURT. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO D ETERMINE THE ANNUAL VALUE OF THE PROPERTY ON THE BASIS OF PREVAILING RA TE IN THE LOCALITY AFTER 9 ITA 456 & 457/MUM/2016 AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. 7. INSOFAR AS DETERMINATION OF ANNUAL VALUE OF TWO PROPERTIES USED BY THE ASSESSE FOR HIS OWN BUSINESS, WE FIND THAT THE AO HAS REJECTED THE ARGUMENTS OF THE ASSESSEE THAT TWO PROPERTIES ARE U SED FOR HIS OWN BUSINESS RUN IN THE NAME & STYLE M/S ALLIANCE MEDIA & ENTERTAINMENT PVT LTD ON THE GROUND THAT COMPANY IS A SEPARATE LE GAL ENTITY AND HENCE PROPERTIES USED FOR THE BUSINESS ARE OUTSIDE THE PU RVIEW OF SECTION 22 OF THE I.T. ACT. WE DO NOT FIND ANY MERIT IN THE ARGU MENTS OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS USED PREMISES TO RUN HIS OWN BUSINESS IN THE NAME AND STYLE OF M/S ALLIANCE MEDI A & ENTERTAINMENT PVT LTD, A COMPANY IN WHICH HE IS HAVING 99% SHAREH OLDING. WHETHER THE BUSINESS IS RUN IN HIS INDIVIDUAL CAPACITY OR I N THE NAME OF A COMPANY / FIRM HENCE THE PREMISES ARE USED FOR HIS OWN BUSINESS ARE CERTAINLY OUTSIDE THE PURVIEW OF SECTION 22 OF THE INCOME-TAX ACT FOR DEEMED LET OUT. THEREFORE, WE DIRECT THE AO TO DEL ETE ADDITION MADE TOWARDS DEEMED LET OUT OF TWO PROPERTIES FOR ASSESS EES OWN BUSINESS. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED, FOR STATISTICAL PURPOSE. ITA 457/MUM/2016 9. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED RETURN OF INCOME ON 31-10-2005 DECLARING TOTAL INCOME OF RS.3 ,45,32,892. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 28-12-2007 D ETERMINING TOTAL 10 ITA 456 & 457/MUM/2016 INCOME AT RS.3,61,45,052 BY MAKING VARIOUS ADDITION S INCLUDING ADDITION TOWARDS DISALLOWANCE OF DEPRECIATION ON COMPUTER FO R RS.1,43,700. THEREAFTER AO INITIATED PENALTY PROCEEDINGS U/S 271 (1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF DEPR ECIATION CLAIMED ON COMPUTER PURCHASED AND PUT TO USE ON 31-03-2005 AND ASKED THE ASSESSEE AS TO WHY PENALTY SHALL NOT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN RESPONSE TO NOTICE ASSES SEE SUBMITTED THAT HE HAD PURCHASED COMPUTERS FROM M/S PCSS SOLUTIONS PVT LTD VIDE INVOICE NO.224 DATED 31-03-2005 AND ALSO FILED CONFIRMATION FROM THE SUPPLIER CONFIRMING THAT THE SYSTEM HAD BEEN DELIVERED AND I NSTALLED ON 3 1-03- 2005. THE ASSESSEE FURTHER SUBMITTED THAT ITS CLAI M OF DEPRECIATION ON COMPUTER IS IN ACCORDANCE WITH LAW AND HENCE, THE Q UESTION OF LEVY OF PENALTY U/S 271(1)(C) FOR DISALLOWANCE OF DEPRECIAT ION DOES NOT ARISE. THE AO, AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON CERTAIN JUDICIAL PRECEDENTS OBSER VED THAT WHEREVER THERE IS A DIFFERENCE BETWEEN THE RETURNED AND ASSE SSED INCOME, THERE IS AN INFERENCE OF CONCEALMENT AS A RULE OF LAW. T HE RESPONSIBILITY FOR REBUTTING SUCH INFERENCE IS SQUARELY ON THE TAXPAYE R. THE ASSESSEE IS EXPECTED TO OFFER THE EXPLANATION FOR THE DIFFERENC E. IF THE ASSESSEE FAILS TO OFFER ANY EXPLANATION, THEN A GENERAL PRESUMPTIO N IS DRAWN THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF I NCOME WHICH WARRANTS LEVY OF PENALTY U/S 271(1)(C); ACCORDINGLY LEVIED P ENALTY U/S 271(1)(C) IN 11 ITA 456 & 457/MUM/2016 RESPECT OF DISALLOWANCE OF DEPRECIATION ON COMPUTER S. AGGRIEVED BY THE PENALTY ORDER, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) ASSESSEE HAS REITERATED HIS SUBMISSIONS MADE BEFORE THE AO. THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT LTD 3 22 ITR 158 (SC) TO ARGUE THAT MERE DISALLOWANCE OF CERTAIN EXPENSES DO ES NOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME S O AS TO LEVY PENALTY U/S 271(1)(C) OF THE ACT. THE CIT(A), AFTER CONSIDERIN G RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON CERTAIN OTHER JUDICIAL PRECEDENTS OBSERVED THAT THE ASSESSEE HAS FAILED TO OFFER ANY EXPLANATIONS FOR CLAIMING DEPRECIATION WHICH IS OTHERWISE NOT ALLOWA BLE ON COMPUTERS PURCHASED AND INSTALLED ON 31-03-2005. THOUGH THE ASSESSEE CLAIMS TO HAVE INSTALLED COMPUTER ON 31-03-2005, FAILED TO FI LE ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM THAT COMPUTERS WERE PUT TO U SE ON 31-03-2015. THUS, THE ASSESSEES CASE CLEARLY FALLS WITHIN THE AMBIT OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT AS THE ASSESSEE HAS FA ILED TO DISCHARGE THE ONUS CAST ON HIM AND THE CLAIM IS PATENTLY WRONG AN D INADMISSIBLE, AND THEREFORE, LEVY OF PENALTY IS JUSTIFIED. AGGRIEVED , ASSESSEE IS IN APPEAL BEFORE US. 10. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) ERRED IN CONFIRMING PENALTY OF RS.48,369 LEVIED BY THE AO IN RESPECT OF CLAIM OF DEPRECIATION ON COMPUTER BY INVOKING EXPLANATION 1 OF SECTION 271(1)(C) 12 ITA 456 & 457/MUM/2016 OF THE ACT DESPITE THE ASSESSEE FURNISHED NECESSARY EVIDENCES TO PROVE THAT COMPUTER IS PURCHASED AND PUT TO USE ON 31-03- 2005. THE LD.AR FURTHER SUBMITTED THAT THE AO WAS ERRED IN LEVYING PENALTY ON DISALLOWANCE OF DEPRECIATION AS MERE DISALLOWANCE O F CERTAIN EXPENSES OR CLAIM OF DEDUCTION DOES NOT TANTAMOUNT TO FURNIS HING OF INACCURATE PARTICULARS OF INCOME SO AS TO LEVY PENALTY FOR FUR NISHING INACCURATE PARTICULARS OF INCOME. 11. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 12. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. THE AO LEVIED PENALTY U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON COMPUTER ON THE GRO UND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME. ACCORDING TO THE AO, WHEREVER THERE IS A DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME, THERE IS AN INFERENCE OF CONCEALME NT AS A RESULT OF LAW AND IT IS THE RESPONSIBILITY OF THE ASSESSEE TO REB UT SUCH INFERENCE WITH NECESSARY EVIDENCES. THOUGH THE ASSESSEE HAS FILED BILL FOR PURCHASE OF COMPUTER, FAILED TO FILE ANY EVIDENCE OF INSTALLATI ON AND PUT TO USE COMPUTER ON 31-03-2005; THEREFORE, THE AO OPINED TH AT THE ASSESSEE HAS MADE A CLAIM OF DEPRECIATION WHICH IS PATENTLY INCORRECT AND NOT ALLOWABLE UNDER THE ACT. IT IS THE CONTENTION OF T HE ASSESSEE THAT MERE DISALLOWANCE OF CERTAIN CLAIM OF EXPENDITURE OR DE DUCTION WOULD NOT 13 ITA 456 & 457/MUM/2016 TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO LEVY PENALTY U/S 271(1)(C) OF THE ACT. 13. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIAL ON RECORD WE FIND MERIT IN THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANC E PETROPRODUCTS PVT LTD (SUPRA) OBSERVED THAT MERELY BECAUSE THE AS SESSEE HAD CLAIMED THE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE P ENALTY U/S 271(1)(C) OF THE ACT. IF THE CONTENTION OF THE REVENUE WERE ACC EPTED, THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE WAS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WOULD INVITE PENALTY U/S 271(1 )(C), I.E. CLEARLY, NOT THE INTENTION OF THE LEGISLATURE. IN THIS CASE, TH E ASSESSEE HAS CLAIMED DEPRECIATION ON COMPUTER WHICH WAS PURCHASED AND PU T TO USE ON 31- 03-2005. THE ASSESSEE FURNISHED SEPARATE BILL FOR PURCHASE OF COMPUTER AND ALSO REPORT OF THE TECHNICIAN FOR INSTALLATION AND PUT TO USE COMPUTER ON 31-03-2005. THE ASSESSEE HAS FURNISHED NECESSAR Y FACTS BEFORE THE AO IN RESPECT OF COMPUTATION OF ITS INCOME. MERELY BECAUSE THE AO HAS DISALLOWED CERTAIN EXPENSES OR NOT ACCEPTED EXPLANA TION OFFERED BY THE ASSESSEE THAT BY ITSELF WOULD NOT BE A GROUND FOR L EVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THERE FORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS INCORRECT IN LEVYIN G PENALTY U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF DEPRECIATIO N ON COMPUTER. THE 14 ITA 456 & 457/MUM/2016 CIT(A), WITHOUT APPRECIATING THE FACTS HAS SIMPLY C ONFIRMED THE PENALTY LEVIED BY THE AO, HENCE WE SET ASIDE THE ORDER OF T HE CIT(A) CONFIRMING PENALTY LEVIED BY THE AO AND DIRECT THE AO TO DELET E THE PENALTY LEVIED U/S 271(1)(C). 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2018. SD/- SD/- (SAKTIJIT DEY) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 21 ST FEBRUARY, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI