ITO 8(2)(4), MUMBAI V. PROLIFIC CONSULTANCY SERVICES (MUMBAI) P. LTD, MUMBAI

ITA 5314/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88439 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 10-03-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 31-07-2013
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Business income; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI VK;DJ VIHYH; VF/KDJ.K] LH U;K;IHB EQACBZ BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K ITA NO. 5314 /MUM/201 3 ASSESSMENT YEAR: - 2003 - 04 INCOME TAX OFFICER - 8(2) - 4 ROOM NO. 213/216A, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS.` M/S. PROLIFIC CONSULTANCY SERVICES PVT. LTD. WILSON HOUSE, NAGARDAS ROAD, AND HERI (E), MUMBAI 400069. APPELLANT / VIHYKFKHZ RESPONDENT / IZR;FKHZ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 3.5.2013 OF CIT(A) ARISING FROM PENALTY ORDER PASSED U/S 271(1)(C) FOR THE A.Y. 2003 - 04 . THE REVENUE HAS RAISED FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S 271 (1 )(C) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO REBUT THE PRESUMPTION IN EXPLANATION - 1 OF SECTION 271 ( 1 )(C) OF THE ACT.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY U/S 271 (1 )(C) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO PROVE THAT THE RENTAL INCOME REVENUE BY / JKTLP DH VKSJ LS SHRI PREMANAND J. ASSESSEE BY / FU/KKZFJRH FD VKSJ LS SHRI VIJYA KOTHARI DATE OF HEARING 10.03.2015 DATE OF PRONOUNCEMENT 10 .03.2015 M/S. PROLIFIC CONSULTANCY SERVICES PVT. LTD. 2 | P A G E FROM THE PR OPERTY HAD ARISEN DUE TO SYSTEMATIC ACTIVITY WHICH IS FUNDAMENTAL INGREDIENT OF BUSINESS 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S 271 (1 )(C) OF THE ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAD CLAIMED THE RENTAL INCOME UNDER THE HEAD BUSINESS WITH THE INTENTION TO SET OFF VARIOUS EXPENSES WHICH WERE NOT ALLOWABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER HAS ASSESSED THE RENT RECEIVED BY THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AS AGAINST THE BUSINESS INCOME OFFERED BY THE ASSESSEE. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED PENAL TY OF RS. 4.24.316/ - VIDE ORDER DATED 26.3.2013. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE THE CIT(A). THE CIT(A) HAS DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER BY HOLDING THAT THE CLAIM MADE BY THE ASSESSEE REGARDING THE RENT AL INCOME AS BUSINESS INCOME WHICH WAS DENIED BY THE ASSESSING OFFICER, ITSELF IS NOT SUFFICIENT TO ATTRACT THE PENALTY PROVISIONS. AS IT WAS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 3. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT THIS IS A RECURRING ISSUE AND FOR THE A.Y. 2004 - 05 TO 2006 - 07 AN IDENTICAL ISSUE OF LEVY OF PENALTY U/S 271(1)(C) WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE VIDE ORD ER DATED 18 - 7 - 2014 IN ITA NO. 2731/2733 OF 2013 IN PARA 5 AND 6 AS UNDER: - 5. HAVING CONSIDERED THE SUBMISSIONS OF THE LD. DR AS WELL AS ORDERS OF THE AUTHORITES BELOW, WE NOTE THAT THE ASSESSEE IS IN THE BUSINESS OF TAKING PROPERTY ON LEASE BASIS AND F URTHER LEASING OUT ON SUB - LEASE. THE INCOME ARISING FROM ITS ACTIVITY WAS TREATED BY ASSESSEE AS BUSINESS INCOME. THE AO NOTED THAT THE ASSESSEE HAD NO BUSINESS INCOME DURING THESE YEARS BUT THE ONLY INCOME IS THE RENTAL INCOME FROM LETTING OUT THE PROPERT IES. THERE IS NO M/S. PROLIFIC CONSULTANCY SERVICES PVT. LTD. 3 | P A G E DISPUTE THAT THE ASSESSEE HAS DISCLOSED THE SOURCE OF INCOME AND BUSINESS ACTIVITY OF THE ASSESSEE COMPANY HOWEVER, THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE REGARDING RENTAL INCOME AS BUSINESS INCOME AND ASSESSED THE SAME AS INCOME FROM HOUSE PROPERTY. IT IS NOT A CASE OF BOGUS CLAIM OF EXPENDITURE OR THE CLAIM OF RENTAL INCOME AS BUSINESS INCOME AS ABSOLUTELY IMPERMISSIBLE UNDER THE LAW. WHEN THE ASSESSEE IS IN THE BUSINESS OF TAKING THE PROPERTY ON LEASE AND FURTHER LEASING OUT THE SAME THEN TREATING THE RENTAL INCOME AS BUSINESS INCOME IS A BONAFIDE CLAIM OF THE ASSESSEE THOUGH THE SAME WAS NOT ACCEPTED BY THE AO. THE ISSUE OF TREATMENT OF RENTAL INCOME AS INCOME FROM HOUSE PROPERTY IS HIGHLY DEBATABLE ISSUE AND REJECTION OF SUCH C LAIM BY THE AO BY TAKING A DIFFERENT VIEW DOES NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME. THERE IS NO CHANGE IN QUANTUM GROSS INCOME OF THE ASSESSEE AND EXP ENDITURE CLAIMED BY THE ASSESSEE WERE DISALLOWED BY AO ONLY BECAUSE OF THE REASON OF ASSESSMENT OF RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. THEREFORE, REJECTION OF SUCH A CLAIM WOULD NOT TANTAMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WARRANTING LEVY OF PENALTY. IN THE RECENT DECISION IN THE CASE OF CIT VS. BENETT COLEMAN (215 TAXMANN 93) THE HON'BLE JURISDICTIONAL HIGH COURT HAS OBSERVED IN PARA - 3 AS UNDER : - 3. SO FAR AS QUESTION (II) IS CONCERNED, THE RESPONDENTASSESSEE HAD CLAIMED PREMIUM ON REDEMPTION OF DEBENTURES AS INCOME FROM CAPITAL GAINS. WHEREAS THE ASSESSING OFFICER HELD THAT THE REDEMPTION OF DEBENTURES IS REVENUE RECEIPT ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CIT (A) CONFIRMED THE ORDER OF ASSESSING OFFICER. THE RESPONDENT - ASSESSEE DID NOT FILE ANY FURTHER APPEAL ON THE QUANTUM PROCEEDINGS. THEREAFTER, ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE RESPONDENT - ASSESSEE. THE CIT(A) ALSO CONFIRMED THE LEVY OF PENALTY UPON THE RESPONDENT - ASSESSEE . ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE RESPONDENT - ASSESSEE HAD DISCLOSED THAT THE AMOUNT RECEIVED AS PREMIUM ON REDEMPTION OF DEBENTURES IN ITS COMPUTATION OF INCOME. FURTHER, THE TRIBUNAL RECORDS THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE RESPONDENT - ASSESSEE HAD CONCEALED ANY PARTICULAR OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME BY STATING INCORRECT FACTS. THE ASSESSIN G OFFICER CONSIDERED THE SAID PREMIUM RECEIVED ON REDEMPTION OF DEBENTURES TO BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHILE THE RESPONDENT ASSESSEE CONSIDERED THE SAME TO BE TAXABLE UNDER THE HEAD CAPITAL GAINS. IN VIEW OF THE FACT THAT THERE I S ONLY A CHANGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY FACTS THAT THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE, THE TRIBUNAL DELETED THE PENALTY IMPOSED U/S. 271(1)(C) OF THE ACT. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THAT THE FINDING OF THE TRIBUN AL IS PERVERSE. IN THESE CIRCUMSTANCES, WE SEE NO REASON TO ENTERTAIN THE PROPOSED QUESTION (II). M/S. PROLIFIC CONSULTANCY SERVICES PVT. LTD. 4 | P A G E 6. IN THE CASE IN HAND THE ASSESSEE HAS FURNISHED AND DISCLOSED ALL RELEVANT PARTICULARS REGARDING THE INCOME FROM LETTING OUT OF THE PROPERTY. THEREFORE, TH E ASSESSMENT OF INCOME UNDER A DIFFERENT HEAD BY THE AO RESULTING IN DISALLOWANCE OF EXPENDITURE WOULD NOT JUSTIFY LEVY OF PENALTY UNDER SECTION 271(1)(C) PARTICULARLY WHEN THE ASSESSEE IS IN THE BUSINESS OF TAKING THE PROPERTY ON LEASE AND THEN LETTING OU T THE SAME ON SUB - LEASE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AS WELL AS THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BENETT COLEMAN (215 TAXMANN 93) (SUPRA), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE C IT(A) IN DELETING THE PENALTY. 4. ACCORDINGLY, IN VIEW OF THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER A.Y.S, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF CIT(A) IN DELETING THE PENALTY LEVIED U/S 271(1)(C) 5 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUCNED IN THE OPEN COURT ON THIS 10 TH DAY OF MARCH 2015 VKNS'K DH ?KKS'K.KK [KQYS U;K;KY; ES FNUKAD 10 EKPZ 2015 DKS DH XBZA SD/ - SD/ - ( RAJENDRA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER / YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; ) MUMBAI DATED .03.2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI