DCIT, CHENNAI V. M/s. Indo International Ltd., CHENNAI

ITA 58/CHNY/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9307 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Business income; Depreciation; Bonafide belief
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.58/MDS/2011 ( )( / ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(3), CHENNAI - 600 034. V. M/S INDO INTERNATIONAL LTD., NO.18, 1 ST FLOOR, SUNKURAMA STREET, CHENNAI - 600 001. PAN : AAACI 2408 R (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : DR. B. NISCHAL, JCIT -.+, / 0 / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE 1 / 2% / DATE OF HEARING : 15.03.2016 3') / 2% / DATE OF PRONOUNCEMENT : 12.05.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 3, CHENN AI, DATED 21.10.2010 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. DR. B. NISCHAL, THE LD. DEPARTMENTAL REPRESENTAT IVE, SUBMITTED THAT THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 2 I.T.A. NO.58/MDS/11 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'T HE ACT') ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PARTI CULARS OF INCOME. ACCORDING TO THE LD. D.R., THE ASSESSEE SO LD BOTH THE PROPERTIES, WHICH WERE USED AS OFFICE PREMISES, FOR A TOTAL CONSIDERATION OF ` 1,35,00,000/- AND OFFERED A SUM OF ` 1,08,17,062/- UNDER THE HEAD OTHER INCOME. SINCE THE ASSESSE E HAS SOLD THE DEPRECIABLE ASSET BEING AN OFFICE BUILDING, THE CAP ITAL GAIN ARISING ON SALE OF DEPRECIABLE ASSET HAS TO BE COMPUTED ONL Y UNDER SECTION 50 OF THE ACT. ACCORDING TO THE LD. D.R., CAPITAL GAIN ON SALE OF DEPRECIABLE ASSET HAS TO BE ASSESSED AS SHORT-TERM CAPITAL ASSET. THE ASSESSEE HAS ALSO LET OUT A BUILDING AND RECEIV ED RENTAL INCOME TO THE EXTENT OF ` 37,38,500/- AND DECLARED IT AS BUSINESS INCOME. ACCORDING TO THE LD. D.R., RENTAL INCOME ON LETTING OUT A PROPERTY HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. A CCORDING TO THE LD. D.R., THE ASSESSEE WAS DELIBERATELY OFFERING TH E INCOME FROM HOUSE PROPERTY AS INCOME FROM BUSINESS, THEREFORE, THE INTENTION OF THE ASSESSEE WAS TO CONCEAL THE INCOME. 3. REFERRING TO SECTION 56(1) OF THE ACT, THE LD. D .R. POINTED OUT THAT THE INCOME HAS TO BE CLASSIFIED UNDER INCOME FROM OTHER SOURCES, IN CASE THE SAME DOES NOT FALL IN ANY OF THE OTHER FOUR 3 I.T.A. NO.58/MDS/11 SPECIFIC HEADS PROVIDED IN THE INCOME-TAX ACT. EVE N THOUGH THE INCOME FROM SALE OF DEPRECIABLE ASSET IS CHARGEABLE AS SHORT-TERM CAPITAL GAIN AND THE RENTAL INCOME HAS TO BE ASSESS ED AS INCOME FROM HOUSE PROPERTY, THE ASSESSEE DELIBERATELY OFF ERED THE SAME UNDER DIFFERENT HEADS WITH THE INTENTION TO EVADE T AX LIABILITY. THEREFORE, THE ASSESSING OFFICER FOUND THAT IT IS N OT AN INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE. THEREFORE, TH E ASSESSEE HAS FURNISHED INACCURATE PARTICULARS AND ACCORDINGLY TH E ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF T HE ACT. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) DELETED THE SAME ON THE GROUND THAT THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS / INFORMATION AND THE PARTICULARS FURNISHED BY THE A SSESSEE HAVE NOT BEEN FOUND TO BE INACCURATE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE HEAD OF INCOME UNDER WHICH IT WAS OFFE RED. HOWEVER, THE INCOME OFFERED BY THE ASSESSEE WAS ACCEPTED UND ER DIFFERENT HEADS THAT ITSELF WOULD ATTRACT PENALTY. HENCE, A CCORDING TO THE LD. D.R., WHEN THE CAPITAL GAIN HAS TO BE ASSESSED AS S HORT-TERM CAPITAL GAIN AND THE ASSESSEE HAS OFFERED THE SAME AS LONG- TERM CAPITAL GAIN, THIS AMOUNTS TO FURNISHING OF INACCURATE PART ICULARS OF INCOME. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALL OWING THE CLAIM OF THE ASSESSEE. 4 I.T.A. NO.58/MDS/11 4. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE SOLD THE OFFI CE PREMISES AND DECLARED THE INCOME ARISING OUT OF SUCH SALE AS LON G-TERM CAPITAL GAIN. SIMILARLY, THE RENTAL INCOME WAS DISCLOSED U NDER THE HEAD INCOME FROM BUSINESS. IT IS NOBODYS CASE THAT T HE ASSESSEE HAS FAILED TO DISCLOSE THE CORRECT INCOME TO THE ASSESS ING OFFICER. IN FACT, THE RENTAL INCOME AND CAPITAL GAIN WERE DISCL OSED TO THE ASSESSING OFFICER AND THE ASSESSEE WAS CLAIMING THE HEAD OF THE INCOME ON A BONAFIDE BELIEF THAT THE INCOME ON SALE OF PROPERTY AS LONG-TERM CAPITAL GAIN AND THE RENTAL INCOME AS BUS INESS INCOME. THIS IS THE UNDERSTANDING OF THE STATUTORY PROVISIO N OF LAW BY THE ASSESSEE. WHEN THE ASSESSEE OFFERED THE ENTIRE INF ORMATION AND MATERIAL AND CLAIMED THE INCOME TO ASSESS UNDER A P ARTICULAR HEAD, MERELY BECAUSE THE ASSESSING OFFICER CHANGED THE HE AD OF INCOME FOR THE PURPOSE OF ASSESSMENT WITHOUT MAKING ANY AD JUSTMENT IN THE TOTAL INCOME, ACCORDING TO THE LD. COUNSEL, THAT CA NNOT BE CONSTRUED AS PROVIDING OF INACCURATE PARTICULARS OF INCOME. THE LD. COUNSEL HAS PLACED HIS RELIANCE ON THE JUDGEMENT OF APEX CO URT IN RELIANCE PETROPRODUCTS PVT. LTD (2010) 322 ITR 158. THE LD . COUNSEL HAS ALSO PLACED HIS RELIANCE ON THE UNREPORTED JUDGEMEN T OF MADRAS 5 I.T.A. NO.58/MDS/11 HIGH COURT IN CIT V. M/S BALAHA CHEMICALS AGENCIES IN TAX CASE (APPEAL) NOS.906 TO 908 OF 2013 DATED 16.12.2015. THE LD. COUNSEL HAS FILED A COPY OF THE SAID JUDGEMENT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS SOLD OFFICE PREMISES AND DECLARED THE GAIN ARISING OUT OF SUCH SALE AS LONG-TERM CAPITAL GAIN. SINCE THE ASSESSEE CLAIMED DEPRECIATION ON THE BUSINESS PREMI SES, THE GAIN ARISING OUT OF DEPRECIABLE ASSET HAS TO BE NECESSAR ILY CLASSIFIED AS SHORT-TERM CAPITAL GAIN. SIMILARLY, THE RENTAL INC OME CLAIMED BY THE ASSESSEE UNDER NORMAL CIRCUMSTANCES, HAS TO BE CLAS SIFIED AS INCOME FROM HOUSE PROPERTY. HOWEVER, IF AN ASSESSE E WAS EXPLOITING THE BUSINESS ASSET, THE RENTAL INCOME HA S TO BE CLASSIFIED AS BUSINESS INCOME. HOWEVER, IT WOULD DEPEND UPON FACTS OF EACH CASE. IN THE CASE BEFORE US, THE ASSESSEE HAS FURN ISHED THE MATERIAL FACTS RELATING TO TRANSFER OF PROPERTY AND ALSO RENTAL INCOME RECEIVED BY THE ASSESSEE. THE ASSESSEE, ACCORDING TO ITS UNDERSTANDING OF THE INCOME-TAX ACT, CLASSIFIED THE CAPITAL GAIN UNDER LONG-TERM CAPITAL GAIN AND RENTAL INCOME UN DER INCOME FROM HOUSE PROPERTY. HOWEVER, THE ASSESSING OFFIC ER REJECTED THE 6 I.T.A. NO.58/MDS/11 CLASSIFICATION MADE BY THE ASSESSEE AND TREATED THE CAPITAL GAIN AS SHORT-TERM CAPITAL GAIN AND RENTAL INCOME AS INCOM E FROM HOUSE PROPERTY. THE QUESTION ARISES FOR CONSIDERATION I S WHEN THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS OF INCOM E AND CLAIMED CLASSIFICATION UNDER A PARTICULAR HEAD, WHETHER SUC H CLAIM MADE BY THE ASSESSEE WOULD AMOUNT TO FURNISHING OF INACCURA TE PARTICULARS OF INCOME OR CONCEALING ANY PART OF INCOME? AN IDENTI CAL SITUATION WAS CONSIDERED BY THE APEX COURT IN RELIANCE PETROP RODUCTS PVT. LTD. (SUPRA). THE APEX COURT FOUND THAT AFTER FURN ISHING THE ENTIRE PARTICULARS OF INCOME, THE STATUTORY CLAIM MADE BY THE ASSESSEE CANNOT BE CONSTRUED AS FURNISHING OF INACCURATE PAR TICULARS OF INCOME OR CONCEALING ANY PART OF INCOME. THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE CLAIMS TH AT THE INCOME GENERATED ON SALE OF PROPERTY AND RENTAL INCOME HAS TO BE ASSESSED IN A PARTICULAR HEAD THAT DOES MEAN THAT THE ASSESS EE HAS FURNISHED ALL THE PARTICULARS OF INCOME. INCOME-TAX ACT, BEI NG A SPECIAL ENACTMENT FOR ASSESSMENT OF INCOME, THE ASSESSEE IS ENTITLED TO MAKE A CLAIM UNDER A PARTICULAR HEAD AS PER ITS UND ERSTANDING. MERELY BECAUSE THE UNDERSTANDING OF THE ASSESSEE RE GARDING CLASSIFICATION OF INCOME WAS FOUND NOT TO BE CORREC T BY THE ASSESSING OFFICER THAT CANNOT BE A REASON TO CONCLU DE THAT THE 7 I.T.A. NO.58/MDS/11 ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS O F INCOME OR THE ASSESSEE HAS CONCEALED ANY PART OF INCOME. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY DELETED T HE PENALTY LEVIED BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 12 TH MAY, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 12 TH MAY, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-III, CHENNAI 4. 1 92 /CIT, CHENNAI-I, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.