ITO 18(2)(1), MUMBAI V. DHANANJAY V. GUPTA, MUMBAI

ITA 5733/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3697 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-05-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 11-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEVENDRA A MEHTA
• Keywords: Business income; Salary income; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI .. , ! '#$ % % % % &. '.'.. %( ) '#$ '* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM './ I.T.A. NO.5733 /MUM/2011 ( )( , %-, )( , %-, )( , %-, )( , %-, / / / / ASSESSMENT YEAR : 2006-07) INCOME TAX OFFICER - 18(2)(1), ROOM NO. 110, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. ( ( ( ( / VS. SHRI DHANANJAY V. GUPTA, E/502, GURUKRUPA CO- OP. HSG. SOC., OPP. PLAZA THEATRE, N.C. KELKAR ROAD, DADAR WEST, MUMBAI 400 028 $. ! './ PAN : AGEPG6884E ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ' / APPELLANT BY : SHRI RAJENDRA KUMAR 01./ 2 3 ' / RESPONDENT BY : SHRI DEVENDRA A. MEHTA '(% 2 ! / // / DATE OF HEARING : 02-05-2013 45- 2 ! / DATE OF PRONOUNCEMENT : 08-05-2013 # 6 / O R D E R PER P.M. JAGTAP, A.M . : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) -29, MUMBAI DATED 13-6-2011 FOR A.Y. 2006-07 WHEREBY HE CANCELLED THE PENALTY OF RS. 6,12,272/- IMPOSED BY THE A.O. U /S 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). ITA 3719/MUM/2011 2 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30-10-20 06 DECLARING TOTAL INCOME OF RS. 4,33,480/-. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE AMOUNT OF RS. 18,1 8,995/- RECEIVED BY THE ASSESSEE FROM HIS EMPLOYER M/S ANNUNAY FAB LIMITED ON ACCOUNT OF CONSULTANCY/COMMISSION ETC. WAS SHOWN UNDER THE HEA D PROFITS AND GAINS OF BUSINESS OR PROFESSION AFTER DEDUCTING VARIOUS EXP ENSES CLAIMED TO BE INCURRED FOR EARNING THE SAID INCOME. ACCORDING TO THE A.O., THE SAID INCOME WAS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AS SALARY INCOME KEEPING IN VIEW THE EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN M/S ANNUNAY FAB LIMITED AND THE ASSESSEE AND WHEN THIS POSITION WAS CONFRONTED BY THE A.O. TO THE ASSESSEE, THE LATER ACCEPTED THE SAME AND FI LED REVISED COMPUTATION OF TOTAL INCOME OFFERING THE INCOME FROM CONSULTANCY/C OMMISSION ETC. RECEIVED FROM THE EMPLOYER AS THE SALARY INCOME. ACCORDINGL Y, THE ASSESSMENT WAS MADE BY THE A.O. ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS. 18,84,420/- AND PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT WERE ALSO INITIATED IN RESPECT OF THE ADDITION MADE TO THE TO TAL INCOME OF THE ASSESSEE AS A RESULT OF CHANGE OF HEAD OF INCOME FROM BUSINESS TO SALARY. IN REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE A.O. DURING THE COU RSE OF PENALTY PROCEEDING, THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESS EE VIDE LETTER DTD. 1-6-2009:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I HAV E REALIZED THAT I HAVE MADE MISTAKE OF SHOWING COMMISSION OF RS. 17,9 0,283/- RECEIVED FROM EMPLOYER AS BUSINESS INCOME WHICH AS PER THE I T ACT IS FALLING ITA 3719/MUM/2011 3 UNDER THE HEAD SALARY INCOME. FURTHER, I HAVE RECEI VED INTEREST FREE HOUSING LOAN OF RS. 15,50,000/- FROM MY EMPLOYER. T HE SAID INTEREST IS ALSO IN THE NATURE OF PERQUISITE FALLING UNDER THE HEAD INCOME FROM SALARY. I ADMIT THAT I HAVE MADE A SERIOUS MISTAKE WHILE FI LING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR INDICATED ABOVE. THE REFORE, I HAVE FILED A REVISED COMPUTATION OF MY INCOME DURING THE ASSES SMENT AND THE ASSESSMENT ORDER HAS BEEN PASSED ON THE BASIS OF RE VISED COMPUTATION. THE ABOVE MISTAKE HAS OCCURRED DUE TO MY IGNORANCE OF LAW AND THERE WAS NO INTENTION TO CONCEAL ANY INCOME OR WILLFULLY SUBMIT INACCURATE PARTICULARS OF INCOME. ACCORDING TO THE REVISED COMPUTATION OF INCOME, I H AVE TO PAY A SUM OF RS. 6,66,303/- 1 HAVE ALREADY MADE THE FULL PAYMENT OF TAXES BEFORE 31-3-2009. THE RELEVANT TAX PAYMENT CHALLANS ARE EN CLOSED FOR READY REFERENCE. THUS THE WHOLE TAX LIABILITY HAS BEEN DI SCHARGED. IN VIEW OF THE ABOVE, I REQUEST YOU TO DROP THE PEN ALTY CHARGES SINCE I NEVER HAD MALAFIDE INTENTION TO CIRCUMVENT INCOME T AX LIABILITY IN ANY MANNER WHATSOEVER. I HOPE YOU WILL CONSIDER MY REQU EST. THE EXPLANATION OFFERED BY THE ASSESSEE AS ABOVE WA S NOT FOUND SATISFACTORY BY THE A.O. AND REJECTING THE SAME, HE IMPOSED PENA LTY OF RS 6,12,272/- U/S 271(1)(C) OF THE ACT BEING 100% OF THE TAX SOUGHT T O BE EVADED BY THE ASSESSEE BY OFFERING INCOME FROM COMMISSION/CONSULTANCY ETC. AS BUSINESS INCOME INSTEAD OF SALARY INCOME HOLDING THAT THE ASSESSEE WAS GUILTY OF FURNISHING INACCURATE PARTICULARS OF HIS INCOME. 3. THE PENALTY IMPOSED BY THE A.O. WAS CHALLENGED B Y THE ASSESSEE IN AN APPEAL FILED BEFORE THE LD. CIT(A) AND AFTER CONSID ERING THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS THE MATERIAL A VAILABLE ON RECORD BEFORE HIM, THE LD. CIT(A) CANCELLED THE PENALTY IMPOSED B Y THE A.O. FOR THE FOLLOWING REASONS GIVEN IN PARA NO. 5 OF HIS IMPUGNED ORDER:- ITA 3719/MUM/2011 4 1) THERE WAS FULL DISCLOSURE BY THE APPELLANT REGARDIN G THE NATURE OF INCOME. THE INCOME FROM SALARY AMOUNTED TO RS. 2,40,000/- ONLY. THE TDS CERTIFICATE ISSUED FOR THE COMMISSION INCOM E STATES THAT THE NATURE OF PAYMENT IS CONSULTANCY AND DALALI. 2) THERE ARE GENUINE EXPENDITURE INCURRED FOR EARNI NG COMMISSION INCOME WHICH HAVE BEEN ALSO DISCLOSED IN THE RETURN OF INCOME. THE EXPENSES ARE NOT DOUBTED. THE APPELLANT MAINTAINS A SEPARATE ESTABLISHMENT FOR HIS COMMISSION BUSINESS BY AN ANN UAL PAYMENT OF RENT FOR OFFICE PREMISES AMOUNTING TO RS. 1,20,000/ -. 3) THE APPELLANT IS NOT A RELATED PERSON OF THE COM PANY AND IS AN INDEPENDENT EMPLOYEE. THEREFORE THERE IS NO PRESUM PTION OF SPLITTING SALARY INCOME INTO SALARY AND COMMISSION. 4) THERE IS ONLY A CHANGE OF HEAD OF INCOME WHICH H AS BEEN ACCEPTED BY THE APPELLANT. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A), THE REVE NUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSER VED THAT ONE OF THE REASONS GIVEN BY THE LD. CIT(A) FOR CANCELING THE PENALTY I MPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT IS THAT THE CORRESPONDING ADDI TION MADE TO THE TOTAL INCOME OF THE ASSESSEE WAS MERELY AS A RESULT OF CH ANGE OF HEAD OF INCOME. IN THIS REGARD, THE LD. D.R. HAS CONTENDED BEFORE US THAT BY OFFERING THE INCOME FROM COMMISSION/CONSULTANCY ETC. RECEIVED FROM HIS EMPLOYER AS BUSINESS INCOME INSTEAD OF SALARY INCOME, THE ASSESSEE CLEAR LY FOUND TO BE GUILTY OF FURNISHING INACCURATE PARTICULARS OF HIS INCOME AND PENALTY WAS RIGHTLY IMPOSED BY THE A.O. U/S 271(1)(C) OF THE ACT. IN T HE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN (2010) 322 ITR 158 (SC), A SIMILAR ITA 3719/MUM/2011 5 CONTENTION WAS RAISED ON BEHALF OF THE REVENUE BY S UBMITTING THAT BY MAKING INCORRECT CLAIM OF EXPENDITURE ON INTEREST, THE ASS ESSEE HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE HONBLE SUPREME COURT, HOWEVER, DID NOT ACCEPT THE SAID CONTENTION HOLDING THAT MAK ING AN INCORRECT CLAIM IN LAW COULD NOT TANTAMOUNT TO FURNISHING OF INACCURAT E PARTICULARS. IT WAS HELD THAT MERELY MAKING A CLAIM, WHICH IS NOT SUSTAINABL E IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGA RDING THE INCOME OF THE ASSESSEE. IT WAS HELD THAT WHEN THE ASSESSEE HAD F URNISHED ALL THE DETAILS OF THE EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WH ICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART, PENALTY U/S 271(1)(C) OF THE AC T WAS NOT ATTRACTED. IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAD MADE A CL AIM WHICH WAS NOT ACCEPTED OR ACCEPTABLE TO THE REVENUE, THAT BY ITSE LF COULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. AS NOTED BY THE L D. CIT(A) IN HIS IMPUGNED ORDERS IN THIS REGARD, FULL DISCLOSURE WAS MADE BY THE ASSESSEE REGARDING THE NATURE OF HIS INCOME WHICH WAS ALSO REFLECTED IN TH E CERTIFICATE ISSUED BY THE EMPLOYER. EVEN THE GENUINENESS OF THE EXPENDITURE CLAIMED TO BE INCURRED BY THE ASSESSEE FOR EARNING COMMISSION INCOME ETC. WAS NOT DOUBTED BY THE A.O. THE ASSESSEE THUS CANNOT BE SAID TO BE GUILTY OF FU RNISHING INACCURATE PARTICULARS OF HIS INCOME AS HELD BY THE HONBLE SU PREME COURT IN THE CASE OF RELIANE PETROPRODUCTS PVT. LTD. (SUPRA) AND THE COR RESPONDING ADDITION MADE TO HIS TOTAL INCOME BEING MERELY THE RESULT OF CHAN GE OF HEAD OF INCOME, WE FIND OURSELVES IN AGREEMENT WITH THE LD. CIT(A) THA T IT WAS NOT A FIT CASE TO ITA 3719/MUM/2011 6 IMPOSE PENALTY U/S 271(1)(C) OF THE ACT. WE THEREF ORE UPHOLD THE ORDER OF THE LD. CIT(A) CANCELING THE PENALTY IMPOSED BY THE A.O . U/S 271(1)(C) OF THE ACT. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 7 8 $% 2 !7 2 9: ORDER PRONOUNCED IN THE OPEN COURT ON 08-05-2013. . # 6 2 45- ! ;#(8 08-05-2013 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) '#$ JUDICIAL MEMBER ! '#$ / ACCOUNTANT MEMBER MUMBAI ; ;#( DATED 8-5-2013 %.)(.'./ RK , SR. PS # 6 2 0)<= > =- # 6 2 0)<= > =- # 6 2 0)<= > =- # 6 2 0)<= > =-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ? () / THE CIT(A)29, MUMBAI. 4. ? / CIT 18, MUMBAI 5. =%B 0))( , , / DR, ITAT, MUMBAI H BENCH 6. , C / GUARD FILE. # 6(' # 6(' # 6(' # 6(' / BY ORDER, '1= 0) //TRUE COPY// D D D D/ // /'9 '9 '9 '9 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI