SURENDRANATH J. MAKER, MUMBAI V. DCIT 2(3), MUMBAI

ITA 5578/MUM/2012

• Counselvise Citation: 557819914 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: NEELAM C JADHAV
• Keywords: Bonafide belief; Reason to believe

Judgement Text

+ E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO.5578 /MUM/2012 ( / ASSESSMENT YEAR : 2006-2007 ./ I.T.A. NO.5579 /MUM/2012 ( / ASSESSMENT YEAR : 2008-2009 SHRI SURENDRANATH J. MAKER, 13, SANGAM, 16 LITTLE GIBBS ROAD, MALABAR HILL, MUMBAI 400 006. / VS. D .C.I.T. 2 ( 3 ), ROOM NO. 555, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI. 20. ./ PAN : AADPM5242P ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A PPELLANT BY MS. NEELAM C. J A DHAV R E SPONDENT BY : SHRI PITAMBER DAS ) * / DATE OF HEARING : 06-05-2014 ) * / DATE OF PRONOUNCEMENT : 04-06-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST TWO SEPARATE ORDERS PASSED BY THE LD. CIT(A) -6, MUMBAI BOTH DATED 31-07-2012 WHEREBY HE CONFIRMED THE PENALTIES OF RS. 1,41,300/ - AND RS. 1,57,652/- IMPOSED BY THE A.O. U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR ASSESSMENT YEARS 2006-07 & 2008-09 RESPECTIVELY. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO FILED HIS RETURN OF INCOME FOR A.Y. 2006-07 ON 27-7-2006 DECLARING TOTA L INCOME OF RS. ITA 5578&5579/M/12 2 22,70,370/-. AS PER AIR INFORMATION RECEIVED BY THE A.O., THE ASSESSEE HAD RECEIVED RENT AND MAINTENANCE CHARGES OF RS. 8,37,7 87/- FROM THE STATE TRADING CORPORATION OF INDIA LIMITED, MUMBAI DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07. SINCE THIS RENTAL INCOME WAS NOT OFFERED BY THE ASSESSEE TO TAX IN THE RETURN OF INCOME FILED FOR A .Y. 2006-07, THE A.O. REQUIRED THE ASSESSEE TO OFFER HIS EXPLANATION IN T HE MATTER. IN REPLY, IT WAS EXPLAINED BY THE ASSESSEE THAT PORTION OF THE PROPE RTY BELONGING TO HIM WAS ALREADY TRANSFERRED TO HIS WIFE MRS. NIRMALA MAKER AND THEREFORE THE RENT RECEIVED FOR THE SAID PORTION WAS DULY OFFERED TO T AX IN HER HANDS. IT WAS SUBMITTED THAT THE TENANTS, HOWEVER, CONTINUED TO I SSUE THE CHEQUES FOR RENT IN THE NAME OF THE ASSESSEE AND ALSO ISSUED TDS CER TIFICATES IN ASSESSEES NAME. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUN D ACCEPTABLE BY THE A.O. ACCORDING TO HIM, THE PROPERTY WAS TRANSFERRED BY T HE ASSESSEE IN THE NAME OF HIS WIFE FOR INADEQUATE CONSIDERATION WITHIN THE ME ANING OF SECTION 27(1) OF THE ACT AND HENCE THE ASSESSEE WAS STILL THE DEEMED OWNER OF THE SAID PROPERTY. HE THEREFORE BROUGHT THE RENTAL INCOME O F RS. 5,86,451/- TO TAX IN THE HANDS OF THE ASSESSEE AFTER ALLOWING DEDUCTION @30% U/S 24 OF THE ACT. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION MA DE BY THE A.O. ON THIS ISSUE. THEREAFTER, A NOTICE WAS ISSUED BY THE A.O. REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) OF THE A CT SHOULD NOT BE IMPOSED IN RESPECT OF THE SAID ADDITION MADE TO HIS TOTAL I NCOME. IN REPLY, IT WAS EXPLAINED BY THE ASSESSEE THAT THE RENTAL INCOME IN QUESTION WAS DULY OFFERED TO TAX IN THE HANDS OF HIS WIFE MRS. NIRMALA MAKER WHO IS ALSO BEING TAXED AT HIGHER RATE. IT WAS CONTENDED BY THE ASSESSEE THAT THERE WAS THUS NO INTENTION OF AVOIDING ANY PAYMENT OF TAX AND THE RE LEVANT RENTAL INCOME WAS OFFERED TO TAX IN THE HANDS OF THE WIFE OF THE ASSE SSEE AND NOT IN THE HAND OF THE ASSESSEE UNDER THE BONAFIDE BELIEF THAT THE PRO PERTY HAVING ALREADY TRANSFERRED TO HER NAME, THE CORRESPONDING INCOME W AS CHARGEABLE TO TAX IN HER HANDS. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. AND HE IMPOSED PENALTY OF RS. 1,41,300/- U/S 2 71(1)(C) OF THE ACT BEING ITA 5578&5579/M/12 3 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE IN RESPECT OF RENTAL INCOME HOLDING THAT THE ASSESSEE WAS GUILTY OF CONC EALING PARTICULARS OF HIS INCOME TO THAT EXTENT. 3. THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD.C IT(A) AND THE SUBMISSION MADE BEFORE THE A.O. WAS REITERATED ON BEHALF OF TH E ASSESSEE BEFORE THE LD. CIT(A) IN SUPPORT OF HIS CASE THAT THE PENALTY IMPO SED BY THE A.O. U/S 271(1)(C) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE WAS NOT SUSTAINABLE. THE LD. CIT(A) DID NOT FIND MERIT IN THE SUBMISSION MADE BY THE ASSESSEE AND PROCEEDED TO CONFIRM THE PENALTY IMPOS ED BY THE A.O. U/S 271(1)(C) OF THE ACT HOLDING THAT THE RELEVANT RENT AL INCOME WAS CLEARLY TAXABLE IN THE HANDS OF THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 64(1)(IV) OF THE ACT AS THE PROPERTY WAS TRANSFERRE D BY THE ASSESSEE IN THE NAME OF HIS WIFE NOT FOR ADEQUATE CONSIDERATION. I N A.Y. 2008-09, A SIMILAR ADDITION WAS MADE TO THE TOTAL INCOME OF THE ASSESS EE ON ACCOUNT OF RENTAL INCOME OF RS. 5,86,451/- AND THE PENALTY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT IN RESPECT OF THE SAID ADDITION WAS ALSO CO NFIRMED BY THE LD. CIT(A) FOR THE SAME REASONS AS GIVEN IN HIS APPELLATE ORDER FO R A.Y. 2006-07. IN A.Y. 2008-09, THE PENALTY U/S 271(1)(C) OF THE ACT WAS A LSO IMPOSED BY THE A.O. IN RESPECT OF ADDITION OF RS. 98,304/- MADE TO THE TOT AL INCOME OF THE ASSESSEE ON ACCOUNT OF SHORT TERM CAPITAL GAIN AND ALTHOUGH THE SAME WAS ALSO CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(A), THE LD. CIT(A) DID NOT GIVE ANY SPECIFIC FINDING ON THIS AS PECT OF THE MATTER IN HIS IMPUGNED ORDER FOR A.Y. 2008-09. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A) FOR ASSESSMENT YEARS 2006-07 AND 2008-09, THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL CHALLENGING THE PENALTI ES IMPOSED U/S 271(1)(C) OF THE ACT. ITA 5578&5579/M/12 4 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE RELEVANT PORTION OF THE PROPERTY WAS TRANSFERRED BY THE ASSESSEE TO HIS WIFE MRS. NIRMALA MAKER AND THE CORRESPONDING RENT FOR THE SAID PROPE RTY WAS ACCORDINGLY OFFERED TO TAX IN HER HANDS. ALTHOUGH, THE SAID REN TAL INCOME WAS FINALLY TAXED IN THE HANDS OF THE ASSESSEE BY THE REVENUE AUTHORI TIES ON THE GROUND THAT THE TRANSFER OF PROPERTY BY THE ASSESSEE TO HIS WIF E WAS NOT FOR ADEQUATE CONSIDERATION, THE FACT REMAINS THAT THE PROPERTY W AS TRANSFERRED IN THE NAME OF HIS WIFE BY THE ASSESSEE AND THE ASSESSEE HAD A REASON TO BELIEVE THAT THE RENTAL INCOME OF THE SAID PROPERTY WAS CHARGEABLE T O TAX IN THE HANDS OF HIS WIFE. ALTHOUGH, THIS BELIEF TURNOUT TO BE WRONG BEL IEF, WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME WAS A BONAFIDE BELIEF IN THE FACTS AND CIRCUMSTANCES OF THE CASE. MOREOVER, THE WIFE OF THE ASSESSEE MRS. NIRMALA MAKER WAS ALSO BEING TAXED AT THE HIGHER RATE AND HAS RIGHTLY CONTENDED BY THE ASSESSEE BEFORE THE AUTHOR ITIES BELOW AS WELL AS BEFORE US, THERE WAS NO INTENTION ON THE PART OF TH E ASSESSEE TO AVOID PAYMENT OF ANY TAX. THIS AGAIN GOES TO SHOW THAT THE RELEVA NT RENTAL INCOME WAS OFFERED TO TAX IN THE HANDS OF THE WIFE OF THE ASSE SSEE AND NOT IN THE HANDS OF THE ASSESSEE UNDER A BONAFIDE BELIEF AND, IN OUR OP INION, IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF RENTAL INCOME WHICH WAS DULY OFFERED TO TAX IN THE HANDS OF THE WIFE OF THE ASSESSEE AT THE SAME RATE OF TAX AND THAT TOO UNDER A BONAFIDE BELIEF. SIMILARLY, ANOTHER AD DITION OF RS. 98,304/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE FOR A.Y. 2 008-09 ON ACCOUNT OF SHORT TERM CAPITAL GAIN AS A RESULT OF CALCULATION/COMPUT ATION MISTAKE MADE BY THE ASSESSEE WHILE WORKING OUT THE SHORT TERM CAPITAL G AIN AT A NEGATIVE FIGURE OF RS. 98,304/- INSTEAD OF THE POSITIVE FIGURE OF RS.9 8,304/-. WHEN THIS MISTAKE WAS NOTICED DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSEE IMMEDIATELY ADMITTED THE SAME AS AN ERROR OF OMISSI ON AND AGREED FOR THE ADDITION MADE BY THE A.O. ON ACCOUNT OF SHORT TERM CAPITAL GAIN. IN THESE ITA 5578&5579/M/12 5 FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT TH E ASSESSEE CANNOT BE TREATED AS GUILTY OF CONCEALING THE PARTICULARS OF HIS INCOME OR FURNISHING ANY IN-ACCURATE PARTICULARS OF SUCH INCOME ATTRACTING P ENALTY U/S 271(1)(C) OF THE ACT. WE THEREFORE SET ASIDE THE IMPUGNED ORDERS OF THE LD. CIT(A) CONFIRMING THE PENALTIES IMPOSED BY THE A.O. FOR BOTH THE YEAR S UNDER CONSIDERATION AND DIRECT THE A.O. TO CANCEL THE SAID PENALTIES. 5. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE, 2014. ) 0 1 04.06.2014 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 04.06.2014 [ .../ RK , SR. PS # $&' (' / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. 4 () / THE CIT(A)6 MUMBAI. 4. 4 / CIT 2 MUMBAI 5. $8 , * 8 , / DR, ITAT, MUMBAI E BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI