HIMATLAL S. BHADRA, MUMBAI V. ACIT-25(2), MUBAI

ITA 5759/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6367 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 11-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Wrong claim; Difference of opinion; Set aside
• Section: 271(1)(c); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE S HRI RAJESH KUMAR ( AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5759 /MUM/2017 ASSESSMENT Y EAR: 2012 - 13 HIMATLAL S. BHADRA, 401, BEACH APARTMENT, BALRAJ SHAHANI ROAD, JUHU (W), MUMBAI - 40 0049 PAN: AABPB7079H VS. THE ACIT - 25(2), ROOM NO. 711, 7 TH FLOOR, C - 12, PRATYAKSHARKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400051 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SASHANK DUNDU (AR) REVENUE BY : SHRI MANOJ KUMAR SING H (D R) DATE OF HEARING: 02 /01 /201 9 DATE OF PRONOUNCEMENT: 31 / 01 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.06.2017 PASSED B Y THE COMMISSIONER OF INCOME TAX (APPEALS) - 37 (FOR SHORT THE CIT (A) ) , MUMBAI, FOR THE ASSESSMENT YEAR 2012 - 13 , WHEREBY THE LD. CIT (A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE PENALTY ORDER PASSED U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. IN THE PRESENT CASE, THE ASSESSEE AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 2,69,88,947/ - ASSESSMENT WAS COMPLETED BY THE AO U/S 143 (3) OF THE A CT DETER MINING THE TO T AL INCOME AT RS. 2,83,10,650/ - AFTER MAKING ADDITION OF RS. 27,37,674/ - BY TREATING THE FACILITY CHARGES AS INCOME FROM OTHER SOURCES, MAKING DISALLOWANCE OF RS. 4,98,070/ - CLAIMED ON RECEIPTS FROM PARTNERSHIP 2 ITA NO. 5759 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 FIRMS AND FURTHER MAK ING DISALLOWANCE OF RS. 2,327/ - MADE U/S 36(1)(III) OF THE ACT. 3. ON THE BASIS OF THE AFORESAID ADDITION S , THE AO INITIATED PROCEEDINGS U/S 271 (1) (C) OF THE ACT AND IMPOSED PENALTY OF RS. 8,21,302/ - ON ACCOUNT OF THE TREATMENT OF FACILITIES CHARGES AS INCOME FROM OTHER SOURCES , RS. 4,98,070/ - ON ACCOUNT OF THE DISALLOWANCE OF EXPENSES CLAIMED ON RECEIPT FROM PARTNERSHIP FIRM AND RS. 2,327/ - ON ACCOUNT OF DISALLOWANCE MADE U/S 36(I)(III) OF THE ACT. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD.CIT (A ) . THE LD. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL AND CONFIRMED THE PENALTY . THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER PASSED BY THE LD.CIT (A). 4. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASS ED BY THE LD. CIT(A) ON THE FOLLOWING EFFECTIVE GROUNDS: PENALTY U/S 271(1) (C) RS. 4,09,000/ - 1. THE LD. CIT (A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY U/S 271 (1)(C) OF THE ACT, IN REGARDS TO CHANGE IN HEAD I.E. FACILITATI ON CHARGES OF RS. 8,21,302/ - TREATED AS INCOME FROM OTHER SOURCES INSTEAD OF RENT INCOME, WITHOUT APPRECIATING THAT THERE IS NO CONCEALMENT OF CONCEALMENT OF ANY INCOME NOR HAS THE ASSESSEE FURNISHED ANY INACCURATE PARTICULARS OF INCOME, ALL FACTS WERE DUL Y DISCLOSED IN THE RETURN AS WELL AS IN COURSE OF ASSESSMENT PROCEEDINGS, THEREFORE PENALTY OUGHT TO BE DELETED. 2. THE LD CIT (A) ERRED IN CONFIRMING PENALTY U/S 271 (1) (C) OF THE ACT ON EXPENSES OF RS. 4,98,070/ - CLAIMED ON RECEIPTS FROM PARTNERSHIP FIRM WITHOUT APPRECIATING THAT INCOME FROM INTEREST ON CAPITAL AND REMUNERATION FROM FIRMS WERE SHOWN IN INCOME & EXPENDITURE A/C AND EXPENSES HAVING DIRECT NEXUS WITH EARNING OF BUSINESS INCOME WAS CLAIMED AS DEDUCTION, THEREFORE PENALTY OUGHT TO BE DELETED. 3 ITA NO. 5759 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 3. THE LD. CIT (A) ERRED IN CONFIRMING THE PENALTY U/S 271 (1) (C) OF THE ACT ON INTEREST FREE LOAN OF RS. 19,237/ - ON WHICH RS. 2,327/ - WAS DISALLOWED BY CALCULATING INTEREST @ 12% FOR GIVING INTEREST FREE LOAN WHILE CLAIMING INTEREST PAID ON LOANS AS BUSINE SS EXPENSES WITHOUT APPRECIATING THAT LOAN GIVEN OUT OF COMMON FUND OF THE ASSESSEE, THEREFORE PENALTY OUGHT TO BE DELETED. 4. THE NOTICE ISSUED FOR LEVYING PENALTY UNDER SECTION 271 (1) (C) OF THE ACT IS BAD IN LAW AND NOT SUSTAINED IN LAW. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SO FAR AS THE FIRST GROUND OF APPEAL IS CONCERNED, THE ASSESSEE HAD DECLARED THE INCOME FROM HOUSE PROPERTY AT RS. 83,45,603/ - IN ORIGINAL RETURN INCLUDING THE FACILITATION CHARGES OF RS. 27,37,674/ - . HO WEVER, DURING THE ASSESSMENT PROCEEDINGS, REVISED COMPUTATION WAS SUBMITTED AND THE AMOUNT OF FACILITATION CHARGES WAS REDUCED FROM RENT INCOME AND SHOWN AS INCOME FROM BUSINESS , AGAINST WHICH EXPENSES OF MAINTENANCE AND BROKERAGE WERE CLAIMED IN PROFIT AN D LOSS ACCOUNT. HOWEVER , WHILE PASSING ORDER U/S 143 (3), THE LD. AO TREATED THE AMOUNT OF FACILITATION CHARGES AS INCOME FROM OTHER SOURCES AND DISALLOWED EXPENDITURE OF MAINTENANCE AND BROKERAGE EXPENSES. THE LD. COUNSEL FURTHER SUBMITTED THAT THERE IS N O CONCEALMENT OR FURNISH ING OF INACCURATE PARTICULAR OF INCOME AS THE INCOME WAS ALREADY DECLARED IN THE RETURN OFFERED FOR TAXATION. SINCE, THE AO HAS ONLY CHANGED THE HEAD OF INCOME, THE LD. C I T(A) OUGHT TO HAVE DELETED THE PENALTY LEVIED BY THE AO. 6 . ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT SINCE THE ASSESSEE HA D NOT POINTED OUT THAT THE TOTAL INCOME FROM HOUSE PROPERTY INCLUDES THE FACILITATION CHARGES IN ITS ORIGINAL RETURN, T HE ASSESSEE IS LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. HENCE, THE LD CIT(A) HAS RIGHTLY CONFIRMED THE PENALTY IMPOSED BY THE AO FOR FURNISH ING IN ACCURATE PARTICULARS OF INCOME. 4 ITA NO. 5759 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL CONTENT IONS OF THE PARTIES. WE NOTICE THAT THE ASSESSEE HAD SHOWN RENTAL INCOME OF RS. 83,45,603/ - IN COMPUTATION OF INCOME INCLUDING FACILITATION CHARGES OF RS. 27,37,674/ - . SUBSEQUENTLY, THE ASSESSEE REVISED COMPUTATION OF INCOME SHOWING RENT AT RS. 56,07,927/ - CLAIMED DEDUCTION U/S 24A @ 30% AMOUNTING TO RS. 16,82,379/ - AND OFFERED RS. 20,37,105/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE ASSESSEE FURTHER CLAIMED BROKERAGE OF RS. 9,94,613/ - AND SOCIETY MAINTENANCE CHARGES OF RS. 16,66,575/ - . THE AO TREAT IN G THE RECEIPTS OF FACILITATION CHARGES OF RS. 27,37,674/ - UNDER THE HEAD INCOME FROM OTHER SOURCES MADE ADDITION OF RS. 27,37,674/ - AND LEVIED PENALTY OF RS. 8,21,302/ - U/S 271 (1) (C) OF THE ACT FOR CLAIMING INCORRECT DEDUCTION U/S 24 OF THE ACT @ 30%. SE CTION 271(1)(C) OF THE ACT CONTEMPLATES THAT IF THE AO IS SATISFIED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME HE MAY LEVY PENALTY IN ACCORDANCE WITH THE PROVISIONS OF THE SAID SECTION. E XPLANATION 1 TO SECTION 271(1)(C) HOWEVER SAYS THAT ; WHERE IN RESPECT OF ANY FACTS MATERIAL TO COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THE ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFER AN EXPLANATION WHICH IS FOUND BY THE [ ASSESSING] OFFICER OR THE [ COMMISSIONER ( APPEALS)]..TO BE FALSE OR , T HEN , THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSE OF CLAUSE (C) OF THIS SUB - SECTION, BE DEEMED TO PRESENT T HE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 8. WE NOTICE THAT IN THE PRESENT CASE THE ASSESSEE HAS NOT CONCEALED HIS INCOME BUT CLAIMED THE FACILITATION CHARGES AS INCOME FROM HOUSE PROPERTY IN ITS ORIGINAL RETURN. HOWEVER, THE ASSES SEE SUBSEQUENTLY RECOMPUTED THE SAME AND REDUCED THE AMOUNT OF FACILITATION CHARGES FROM RENTAL INCOME AND SHOWN 5 ITA NO. 5759 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 AS INCOME FROM BUSINESS AND CLAIMED EXPENSES OF MAINTENANCE AND BROKERAGE IN PROFIT AND LOSS ACCOUNT. THE SAID FACTS WERE EXPLAINED BY THE ASSE SSEE DURING THE ASSESSMENT PROCEEDINGS. HENCE, IN OUR CONSIDERED OPINION, THERE IS NEITHER ANY CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF THE INCOME ON THE PART OF THE ASSESSEE. THE AO HAS ONLY CHANGED THE HEAD OF INCOME WHICH IS NOT SUFFICIENT TO LEVY PENALTY U/S 271 (1) (C) OF THE ACT. IN OUR CONSIDERED VIEW, THE EXPLANATION GIVEN BY THE ASSESSEE IS PLAUSIBLE, THEREFORE WE FIND SUBSTANCE IN THE ARGUMENT OF THE LD. COUNSEL. IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) , THE HONBLE SUPREME COURT HAS HELD THAT MERELY BECAUSE THE ASSESSEE HA D CLAIMED EXPENDITURE WHICH WAS NOT ACCEPTED BY THE REVENUE , THAT BY ITSELF WOULD NOT ATTRACT PENALTY U/S 271 (1) (C) OF THE ACT. HENCE, IN VIEW OF THE FACTS OF THE CASE AND THE SETTLED POSITION OF LAW, WE ARE OF THE CONSIDERED VIEW THAT THIS IS NOT A FIT CASE FOR IMPOSING PENALTY U/S 271 (1) (C) OF THE ACT. HENCE, WE SET ASIDE THE FINDINGS OF THE LD. CIT (A) AND DIRECT THE AO TO DELETE THE PENALTY LEVIED ON ACCOUNT OF THE ADDITION MADE TREATING THE FACILITY CHARGES AS INCOME FROM OTHER SOURCES. 9. VIDE GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD.CIT (A) IN CONFIRMING THE PENALTY OF RS. 4,98,070/ - LEVIED U/S 271 (1) (C) OF THE ACT ON ACCOUNT OF DISA LLOWANCE OF EXPENSES CLAIMED ON RECEIPTS FROM PARTNERSHIP FIRM. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE WAS THE PARTNER IN THE THREE FIRMS AND THE INCOME FROM INTEREST ON CAPITAL AND REMUNERATION FROM FIRMS WERE SHOWN IN INCOME AND EXPENDITURE ACCOUNT AND EXPENSES RELATED TO THE EARNINGS OF THE BUSINESS INCOME WAS CLAIMED AS DEDUCTION. THE ASSESSEE HAD CLAIMED THE EXPENSES RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAMNIK LAL KOTHARI 74 ITR 57 (SC) , IN WHICH IT WAS HELD THAT BUSINESS OF THE FIRM IS THE BUSINESS OF THE PARTNER AND THE EXPENDITURE INCURRED BY THE PARTNER IN EARNING SUCH SHARE IS ADMISSIBLE FOR DEDUCTION IN ARRIVING AT THE TOTAL INCOME. THE LD. COUNSEL FURTHER SUBMITTED THAT IN THE LIGHT 6 ITA NO. 5759 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 OF THE A FORESAID FACTS I T CANNOT BE CONCLUDED THAT THE ASSESSEE HAS C ONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME . IT HAS BEEN HELD IN THE NUMBER OF CASES THAT DIFFERENCE OF OPINION ON TAXABILITY OF INCOME OR EXPENDITURE DOES NOT AMOUNT TO FURNISHING OF INACC URATE PARTICULARS OR CONCEALMENT OF INCOME WITHIN THE MEANING OF SECTION 271 (1) (C). 10. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) RELYING ON THE ORDER PASSED BY THE LD. CIT (A) SUBMITTED THAT SINCE THE ASSESSEE HAS MADE WRONG CLAIM, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE AO. 11. WE HAVE PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVALS SUBMISSIONS AND ALSO GONE THROUGH THE CASES RELIED UPON BY THE PARTIES . AS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE HAD CLAIMED THE DEDUCTION UNDER A BONA FIDE BELIEF THAT IN THE LIGHT OF THE JUDGMENTS OF THE HONBLE SUPR E ME COURT IN THE CASE OF CIT VS. RAMNIK LAL KOTHARI (SUPRA) , THE ASSESSEE IS ENTITLED TO CLAIMED DEDUCTION IN QUESTION . HOWEVER , THE SAID CLAIM WAS REJECTED BY THE AO AND ADDITION WAS MADE . AS PER THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. RELIANCE PETROPROUCTS (SUPRA), MERELY BECAUSE THE ASSESSEES CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT B Y ITSELF WOULD NOT MAKE THE ASSESSEE LIABLE FOR PENALTY U/S 271 (1) (C) OF THE ACT FOR CONCEALMENT OF HIS INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF HIS INCOME. IN VIEW OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND THE LAW LAID DOWN BY THE H ONBLE SUPREME COURT, WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL. WE ARE , THEREFORE OF THE CONSIDERED VIEW THAT THERE IS NO SUBSTANCE IN THE CONTENTION OF THE REVENUE THAT THE CLAIM OF EXEMPTION WAS NOT BONA FIDE. THE ASSESSEE HAS NEITHER CONCEALED HIS INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, WE SET ASIDE THE FINDINGS OF THE LD. CIT (A) AND DIRECT THE AO TO DELETE THE PENALTY OF RS. 4,98,070/ - IMPOSED 7 ITA NO. 5759 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED ON RECEIPT FROM PARTN ERSHIP FIRM. 12. VIDE GROUND NO. 3, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN CONFIRMING THE PENALTY OF RS. 2,327/ - MADE ON ACCOUNT OF DISALLOWANCE MADE U/S 36(I) (III). THE LD. COUNSEL CONTENDED THAT DURING THE YEAR RELEVANT TO THE A SSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE ADVANCED INTEREST FREE LOAN OF RS. 19,238/ - ON WHICH RS. 2,327/ - WAS DISALLOWED BY CALCULATING THE INTEREST @ 12%. THE AO LEVIED PENALTY FOR GIVING INTEREST FREE LOAN AND CLAIMING INTEREST PAID ON LOANS AS B USINESS EXPENSES. THE LD. COUNSEL POINTED OUT THAT THE ACCUMULATED CAPITAL OR THE ASSESSEE WAS MORE THAN 13 CRORE , OUT OF WHICH THE LOAN IN QUESTION WAS GIVEN. THE LD. COUNSEL FURTHER POINTED OUT THAT S INCE THE DISALLOWANCE IS DEEMING DISALLOWANCE, PENALTY CANNOT BE LEVIED THERE ON . THE LD. COUNSEL FURTHER SUBMITTED THAT DIFFERENCE OF OPINION ON TAXABILITY OF INCOME OR EXPENDITURE DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME WITHIN THE MEANING OF SECTION 271 (1) (C) OF THE ACT. 13. ON THE OTHER HAND, THE LD. DR RELYING ON THE ORDER PASSED BY THE LD. CIT (A), SUBMITTED THAT SINCE THE ASSESSEE HAD NOT FURNISHED THE ACCURATE PARTICULARS OF HIS INCOME, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE PENALTY LEVIED BY THE AO. 1 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS CONTENDED BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE US THAT IT HAD SUFFICIENT SURPLUS FUNDS OUT OF WHICH THE INTEREST FREE LOAN WAS ADVANCED. HOWEVER, WE NOTICE THAT THE AUTHORITIES BELOW HAVE NOT POINTED OUT ANY EVIDENCE TO REBUT THE CONTENTION OF THE ASSESSEE. THERE IS NO EVIDENCE ON THE RECORD ON THE BASIS OF WHICH IT CAN BE CONCLUDED THAT THE ASSESSEE HAD UTILIZED THE INTEREST BEARING FUNDS FOR GIVIN G INTEREST FREE LOAN IN QUESTION. AS CONTENDED BY THE ASSESSEE, THE ASSESSEE DID NOT CHALLENGE THE ASSESSMENT 8 ITA NO. 5759 /MUM/2017 ASSESSMENT YEAR: 2012 - 13 ORDER IN ORDER TO AVOID PROTRACTED LITIGATION. MOREOVER, THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S 36(I)(III) IS AN AD - HOC DISALLOWANCE. A S PER THE SETTLED LAW , PENALTY CANNOT BE LEVIED ON THE BASIS OF ADDITION MADE ON AD - HOC BASIS. HENCE, IN OUR CONSIDERED VIEW THE LD. CIT (A) HAS WRONGLY UPHELD THE PENALTY LEVIED BY THE AO ON ACCOUNT OF DISALLOWANCE MADE U/S 36(I)(III) OF THE ACT. WE THERE FORE SET ASIDE THE FINDINGS OF THE LD. CIT (A) AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE . IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2012 - 13 IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY , 2019 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 01 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT( A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI