VENKATESHWARAN KRISHNAN, MUMBAI V. ASST CIT CIR 11(3), MUMBAI

ITA 5768/MUM/2012

• Counselvise Citation: 576819914 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI PRAKASH
• Assessee Lawyers: DEEPAK N KAN ABAR
• Keywords: Bonafide belief; Wrong claim
• Section: 263; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , , , BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEM BER . / ITA NO. 5768 /MUM./ 2012 ( / ASSESSMENT YEAR : 20 06 07 ) MR. VENKATESHWARAN KRISHNAN BANGALOW NO.6+, DIVYA SWAPNA DR. C.G. GIDWANI ROAD, CHEMBUR MUMBAI 400 074 .. / APP ELLANT V/S A SSTT . COMMISSIONER OF INCOME TAX RANGE 11 (3 ), MUMBAI .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AA DPK8513F / ASSESSEE BY: MR. DEEPAK N. KANA BAR / REVENUE BY : MR. RAVI PRAKASH / DATE OF HEARING 2 2 .0 1 .201 4 / DATE OF ORDE R 24.01.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HA S BEEN PREFERRED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER 27 TH JULY 2012 , PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX I I, MUMBAI, FOR THE ASSESSMENT YEAR 2006 07, IN THE MATTER OF PENALTY LEVIED UNDER SECTION 271(1)(C) FOR ` MR. VENKATESHWARAN KRISHNAN 2 2,63,944 B Y THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS). 2 . FACTS IN BRIEF : THE ASSESSEE IS AN INDIVIDUAL, WHO HAD FILED HIS RETURN OF INCOME ON 31 ST JULY 2007, AT AN INCOME OF ` 83,91,080. THEREAFTER, THE SAID RETURN OF INCOME WAS SUBJE CTED TO SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 14 TH NOVEMBER 2008, AT AN INCOME OF ` 85,51,160. THEREAFTER, THE SAID ASSESSMENT ORDER WAS SET ASIDE BY THE COMMISSIONER UNDER REVISIONARY JURISDICTION UNDER SECTION 26 3 VIDE ORDER DATED 29 TH SEPTEMBER 2009. I N PURSUANCE THEREOF, FRESH ASSESSMENT WAS MADE VIDE ORDER DATED 25 TH AUGUST 2010, UNDER SECTION 143(3) R/W SECTION 263. IN THE SAID ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE OWNS A SELF OCCUPIED PROP ERTY JOINTLY WITH HIS WIFE, HOWEVER, WHILE COMPUTING THE INCOME UNDER THE HEAD HOUSE PROPERTY , THE ASSESSEE HAS CLAIMED THE ENTIRE DEDUCTION OF ` 1.50 LAKHS UNDER SECTION 24(B) AND COMPUTED IT AT LOSS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS ONLY ELIGIBLE FOR CLAIMING INTEREST OF ` 7 5,000 ONLY AS HE HOLDS ONLY 50% OF THE SHARE. THUS, A SUM OF ` 75,000 WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. HE NOTED THAT THE ASSESSEE HAS PAID INTEREST OF ` 3,52,118 ON LOAN TAKEN FOR SELF OCCUPIED PROPE RTY AND CLAIMED BALANCE INTEREST SOME OF ` 2,02,118 AS DEDUCTION UNDER SECTION 24(B) BY CLUBBING THIS INTEREST WITH THE INTEREST PAID ON LOAN TAKEN FOR OTHER LET OUT PROPERTIES. BESIDES THIS, THE ASSESSEE HAS ALSO CLAIMED INTEREST PAID ON LOAN TAKEN FOR L ET OUT PROPERTY AS DEDUCTION AMOUNTING TO ` 5,05,815. THE ASSESSING OFFICER DISALLOWED THE SAID CLAIM AS THE ASSESSEE WA S NOT ABLE TO CO RELATE THE PAYMENT OF INTEREST WITH THE LOAN TAKEN FOR THE TWO DIFFERENT HOUSE PROPERTIES . ACCORDINGLY, FOLLOWING ADDIT IONS WERE MADE: MR. VENKATESHWARAN KRISHNAN 3 INCOME AS PER ORDER U/S 143(3) DTD. 14.11.2008 (INCLUDES SHORT TERM CAPITAL GAIN OF ` 11,23,255 ` 85,51,160 ADD: EXPENSES DISALLOWED A ) ON ACCOUNT OF WRONG CLAIM OF INTEREST FOR SOP B ) ON ACCOUNT OF WRONG CLAIM OF INTEREST FOR LET OUT PROP ERTY, BEING INTEREST PAID PERTAINING TO SOP C ) ON ACCOUNT OF WRONG CLAIM OF INTEREST FOR LET OUT PROPERTY D ) SHARE EXPENSES ` 75,000 ` 2,02,118 ` 5,05,815 ` 900 TOTAL TAXABLE INCOME ` 93,34,993 ROUNDED OFF TO ` 93,34,990 3 . IN THE PENALTY PROCEEDINGS, IN RE SPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE INTEREST AGGREGATING TO ` 7,07,933 WAS CLAIMED AS DEDUCTION AS PER THE ADVISE OF TAX CONSULTANTS AS ALL THE LOANS WERE TAKEN FOR ACQUIRING THE HOUSE PROPERTIES. THE ASSESSEE HAS NOT FURNISHED ANY INCORRECT PARTICULARS AS ALL THE PARTICULARS OF INTEREST WERE DULY DISCLOSED IN THE RETURN OF INCOME. FURTHER, SUCH A DISALLOWANCE HAS BEEN ACCEPTED BY THE ASSESSEE ONLY FOR THE REASON THAT THE INTEREST ON THE LOANS COULD NOT BE TIED PROPERLY. THE ASS ESSING OFFICER DID NOT ACCEPT THE ASSESSEES EXPLANATION ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THAT THE DEDUCTION CLAIMED BY THE ASSESSEE WA S BONAFIDE. THEREFORE, IT AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS. ACCORDINGLY, HE LEVIED PENALTY OF ` 2,63,944. 4 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE ASSESSEE HAS TAKEN LOAN AGAINST SELF OCCUPIED PROPERTY IN THE COMPUTATION OF INCOME AND HAS CLAIMED THE INTEREST OF ` 1.50 LAKHS. BESIDES THIS, THE ASSESSEE HAD THREE LET OUT PROPERTY FROM WHERE HE HAS EARNED RENTAL INCOME OF ` 14,55,650. AGAINST THIS RENTAL INCOME, THE MR. VENKATESHWARAN KRISHNAN 4 ASSESSEE HAS CLAIMED OVERALL INTEREST EXPENDITURE OF SUMS AGGREGATING TO ` 7,07,933. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ACTUAL LINK OF INTERES T PAYMENT ON THE AMOUNT BORROWED FOR LET OUT PROPERTIES AND SELF OCCUPIED PROPERTY COULD NOT BE GIVEN, THEREFORE, THE SAID DISALLOWANCE WAS ACCEPTED BY THE ASSESSEE. THE LEARNED COMMISSIONER (APPEALS) CONFIRMED THE SAID PENALTY AFTER OBSERVING AND HOLDING AS UNDER: 2.3 AFTER CAREFULLY EXAMINING THE FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY ORDER AND THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT, I FIND THAT APPELLANT HAS TRIED TO CLAIM INTEREST INCOME OF RS. 7,07,933/ - TOWARDS INTE REST PAYMENT OF HIS 3 LET OUT OFFICES, RENTAL INCOME OF WHICH WAS SHOWN AT RS. 14,55,650/ - AND FINALLY INCOME FROM LET OUT PROPERTY WAS SHOWN AT RS. 1,87,697/ - . THESE INTEREST EXPENSES WERE CLAIMED WITHOUT ANY BASIS AND IT WAS INITIALLY SUBMITTED THAT OUT OF THE BA N K INTEREST OF RS. 3,52,118/ - ON THE LOAN TAKEN FOR SO P, OUT OF THIS II SU M O F RS, 2,02,118/ - HAS BEEN PAID FOR LET OUT PROPERTY WHICH WAS A PRIMA FACIE A WRONG EXPLANATION. SIMILARLY, ASSESSEE HAS CLA IMED RS. 900/ - TOWARDS SHARE EXPENSES WHICH W ERE DEDUCTED FROM PROFESSIONAL INCOME. AS SUCH, THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME IN HIS. ORIGINAL RETURN WHICH WAS SET ASIDE U/S. 263 BECAUSE IT WAS PREJUDI C I AL TO THE INTEREST OF THE REVENUE. WHEN THE ASSESSMENT WAS COMPLET ED AGAIN BY THE ASSESSING OFFICER MAKING THE ADDITION OF RS. 7,88,833 DUE TO WRONG CLAIM OF INTEREST UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THE APPELLANT HAS CHOSEN NOT TO FILE AN APPEAL. I AM OF THE VIEW THAT THE APPELLANT HAD TRIED TO REDUCE HIS TAX ABLE INCOME BY MAKING WRONG CLAIMS OF INTEREST AND CLAIMING THE SAME AS A DEDUCTION U/S 24(B) OF THE INCOME TAX ACT WITH AN INTENTION TO REDUCE HIS CORRECT TOTAL INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. CONSEQUENTLY, PENALTY U/S 271(1)(C) REA D WITH EXPLANATION 1 OF THE INCOME TAX ACT IS CLEARLY LEVIABLE IN THIS CASE. I DO NOT FIND ANY REASON TO CANCEL OR REDUCE THE QUANTUM OF PENALTY. THEREFORE, PENALTY IMPOSED BY THE ASSESSING OFFICER IN THIS CASE IS CONFIRMED. 5 . BEFORE US, THE LEARNED COUNSE L SUBMITTED THAT T HE ASSESSEE HAS DISCLOSED THE ENTIRE DETAILS OF THE INTEREST IN THE COMPUTATION OF INCOME. HOWEVER, DUE TO ADVISE OF THE TAX CONSULTANT, THE ASSESSEE HAD DEDUCTED THE ENTIRE INTEREST OF ` 7,07,933 WHICH ALSO INCLUDED INTEREST ON LOAN FOR SELF OCCUPIED PROPERTY . T HE BIFURCATION OF INTEREST ON LOAN TAKEN FOR SELF OCCUPIED PROPERTY AND RENTAL PROPERTY COULD NOT BE GIVEN. THIS DOES NOT MEAN THAT THE ASSESSEE HAS FURNISHED ANY INACCURATE MR. VENKATESHWARAN KRISHNAN 5 PARTICULARS. RELYING ON THE DECISION OF THE HON'BLE SUPRE ME COURT IN CIT V/S RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC), HE SUBMITTED THAT NO PENALTY CAN BE LEVIED FOR FURNISHING OF INACCURATE PARTICULARS IN THIS CASE. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY, RELIED UP ON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND SUBMITTED THAT THE ASSESSEE HAS WRONGLY CLAIMED THE DEDUCTION OF THE ENTIRE INTEREST WHILE CALCULATING THE INCOME FROM HOUSE PROPERTY. WRONG CLAIM OF DEDUCTION AMOUNTS TO FURNISHING OF INACCURATE PART ICULARS WITHIN THE AMBIT OF SECTION 271(1)(C). HENCE, THE PENALTY CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) IS WHOLLY JUSTIFIED. 7 . WE HAVE HEARD THE RIVAL CONTENTION, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS, AS DISCUSSED IN THE ASSESSMENT ORDER AS WELL AS FROM THE PENALTY ORDER, IT IS SEEN THAT THE ASSESSEE HAS TAKEN LOAN FOR PURCHASE OF SELF OCCUPIED PROPERTY AND ALSO HAS TAKEN LOAN FOR PURCHASING THE OTHER PROPERTIES WHICH HAS BEEN L ET OUT , THE INCOME OF WHICH IS BEING DISCLOSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . FORM THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME, IT IS SEEN THAT FIRSTLY, THE ASSESSEE HAS CLAIMED DEDUCTION ON INTEREST PAID ON HOUSING LOAN F OR THE SPECIFIED LIMIT OF ` 1.50 LAKHS. THEREAFTER, THE ASSESSEE HAS COMPUTED THE RENTAL INCOME FROM THE PROPERTY WHICH HAS BEEN LET OUT AND HAS CLAIMED DEDUCTION OF ` 7,07,933. THIS INTEREST ALSO INCLUDED INTEREST ON LOAN TAKEN FOR SELF OCCUPIED PROPERTY. HENCE, TO THIS EXTENT, PART OF THE INTEREST WAS WRONGLY CLAIMED. THE PENALTY HAS BEEN LEVIED ON THE DISALLOWANCE OF INTEREST , FIRSTLY , ON ` 75,000 BY TREATING THAT THE ASSESSEE IS ONLY A 50% OWNER AND, THEREFORE, ENTITLED FOR 50% OF THE INTEREST. THE SECO ND PART OF THE INTEREST AGGREGATING TO ` 7,07,933 HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON ACCOUNT OF MR. VENKATESHWARAN KRISHNAN 6 WRONG CLAIM. AS REGARDS THE DISALLOWANCE OF ` 75,000, IT IS SEEN FROM THE RECORD THAT THE ASSESSEE HAS SUBMITTED THAT THE ENTIRE PURCHASE CONSIDERA TION HAS BEEN PAID BY THE ASSESSEE AND NOT BY HIS WIFE. IN SUCH CIRCUMSTANCES, THE CLAIM OF INTEREST OF ` 1.50 LAKHS ON THE LOAN TAKEN FOR SELF OCCUPIED PROPERTY APPEARS TO BE JUSTIFIED AS THE ASSESSEE WAS IN A BONAFIDE BELIEF THAT ONCE THE INVESTMENT HAS BEEN MADE BY HIM, THEN THE BENEFIT OF DEDUCTION OF INTEREST CAN ONLY BE CLAIMED BY HIM. THEREFORE, NO PENALTY CAN BE LEVIED ON SUCH A DISALLOWANCE. 8 . NOW COMING TO THE DISALLOWANCE OF ` 7,07,933, THE ASSESSEES ENTIRE CLAIM, AS DISCUSSED ABOVE, IS NOT PROPE R, HOWEVER, IT CANNOT LEAD TO AN INFERENCE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS. ON THE FACTS OF THE ASSESSEES CASE, AT THE MOST, IT CAN BE SAID THAT THE ASSESSEE HAS MADE INCORRECT CLAIM BY NOT BIFURCATING THE INTEREST ON LOANS TAKEN FO R THE SELF OCCUPIED PROPERTY AND FOR HE LET OUT PROPERTY . IF THE ASSESSEE ON WRONG LEGAL ADVICE HAS CLAIMED THE BALANCE INTEREST PAID ON LOAN FOR SELF OCCUPIED PROPERTY, WHILE COMPUTING THE RENTAL INCOME OF THE OTHER HOUSE PROPERTY, THEN SO FAR AS THE ASSE SSEE IS CONCERNED, IT CANNOT BE SAID THAT THERE IS NO BONAFIDE OF THE ASSESSEE. AT BEST, IT IS A CLAIM, WHICH CANNOT BE ALLOWED. IF THE ENTIRE PARTICULARS OF INTEREST HAS BEEN GIVEN AND MERELY BECAUSE SOME NON PERMISSIBLE CLAIM HAS BEEN MADE, THEN S UCH AN INCORRECT CLAIM CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME , AS EXPLAINED BY THE HON'BLE SUPREME COURT IN RELIANCE PETROPROUCTS PVT. LTD. (SUPRA) WHEREIN THEIR LORD S HIPS OBSERVED AND HELD AS UNDER: A GLANCE AT THE PROVISIONS OF S ECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEA NING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE MR. VENKATESHWARAN KRISHNAN 7 THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERR ONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CL AIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 9 . THUS, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT NO PENALTY CAN BE LEVIED. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIO NER AND ALLOW THE GROUND RAISED BY THE ASSESSEE. THUS, THE PENALTY CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) STANDS DELETED. 10 . 10. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED. 24 TH JANUARY 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY 2014 SD/ - . . R.C. SHARMA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 24 TH JANUARY 2014 MR. VENKATESHWARAN KRISHNAN 8 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI