KISHORI P. TENDOLKAR, MUMBAI V. ITO 26(1)(2), MUMBAI

ITA 5998/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0942 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 12-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Keywords: Bonafide belief; Set aside
• Section: 271(1)(c); 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI R.V. EASWAR (PRESIDENT) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) I.T.A. NO. 5998/MUM/2009 (ASSESSMENT YEAR : 2004-05) SMT. KISHORI P. TENDOLKAR A-602, BLDG. NO. 1, RAJASHRI SHAHU MAHARAJ CHS LTD., 90 FEET ROAD, MULUND (EAST), MUMBAI-400 081 PAN:AAEPT1882H VS. INCOME TAX OFFICER 26(2)(2) SMT. K.G.MITTAL HOSPITAL BLDG. 6 TH FLOOR, CHARNI ROAD (WEST), MUMBAI-400 002 APPELLANT RESPONDENT APPELLANT BY : SHRI RAJKUMAR SINGH RESPONDENT BY : SHRI JITENDRA YADAV ORDER DATE OF HEARING: 07.07.2010 DATE OF ORDER: 30.07.2010 PER R.K.PANDA, AM , THE ABOVE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21 ST AUGUST, 2009 OF THE CIT(A)-XXVI, MUMBAI RELATING T O ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE IN HER GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE CIT(A) IN CONFIRMING THE LEVY OF PENALTY OF RS.12,7 13 BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT). 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN EMPLOYEE OF BHARAT PETROLEUM CORPORATION LTD. (BPCL) AND FILED HER RET URN OF INCOME ON 10 TH AUGUST, 2004 DECLARING THE TOTAL INCOME AT RS.4,52,261. TH E ASSESSEE CLAIMED INTEREST PAID ON BORROWED CAPITAL AS LOSS FROM HOUSE PROPERTY. O N THE BASIS OF THE INFORMATION CALLED FROM BPCL THE ASSESSING OFFICER NOTED THAT T HE ASSESSEE HAS NOT SHOWN RECEIPT OF LEASE RENT AND MAINTENANCE CHARGES OF RS .78,120 AND RS.20,736/- RESPECTIVELY. THEREFORE, THE ASSESSING OFFICER AFT ER RECORDING REASONS IN THE ORDER SHEET, ISSUED NOTICE U/S. 148 OF THE ACT. THE ASSE SSEE FILED RETURN IN RESPONSE TO THE ITA NOS. 5998/MUM/2009 SMR. KISHORI P. TENDOLKAR =================== 2 NOTICE U/S. 148 ON 3.12.2007 DECLARING TOTAL INCOME OF RS.5,42,938AS AGAINST THE ORIGINAL RETURN FILED DISCLOSING THE TOTAL INCOME A T RS.4,52,261. THE ASSESSING OFFICER IN THE ORDER PASSED U/S. 143(3)/147 COMPLETED THE A SSESSMENT AT A TOTAL INCOME OF RS.5,42,938. SUBSEQUENTLY, THE ASSESSING OFFICER I NITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. IT WAS EXPLAINED BY THE ASSES SEE DURING THE PENALTY PROCEEDINGS THAT SHE WAS PAYING TAX REGULARLY AND FILING THE RE TURN OF INCOME REGULARLY OVER YEARS. IT WAS SUBMITTED THAT THE ASSESSEE HAS PAID TAX @ 1 6.5% ON THE LEASE RENT AS AGAINST TAX @ 30%. SHE HAS ACCEPTED THE ERROR AND PAID THE BALANCE TAX. THIS BEING THE FIRST TIME MISTAKE COMMITTED BY HER, SHE REQUESTED THE ASSESSING OFFICER TO WAIVE THE PENALTY. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE BY OBSERVING AS UNDER: A) THE ASSESSEE IS AN EDUCATED PERSON AND EMPLOYEE OF THE REPUTED COMPANY M/S. BPCL. B) THE ASSESSEE ENTERED INTO A LEASE AGREEMENT WITH THE EMPLOYER AND WAS WELL AWARE OF THE SCHEME INTRODUCE D BY THE EMPLOYER OF M/S. BPCL ABOUT TAKING ASSESSEES OWN F LAT ON LEASE RENT BY THE EMPLOYER AND GIVING THE RENT TO THE ASSESSEE AND RENT FREE ACCOMMODATION. THE ASSESSEE, THEREFORE, WAS FULLY AWARE ABOUT THE RECEIPTS OF THE LEASE RENT WHICH HELPED HIM TO REPA Y HIS LOAN TAKEN FOR THE ACQUISITION OF HIS PROPERTY. C) THE ASSESSEE CLAIMED THE INTEREST ON BORROWED CA PITAL UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND CLAIMING OF THE REFUND SHOWED THAT THE ASSESSEE HAS WITH DELIBERATE INTENT ION TO DEFRAUD THE REVENUE BY NOT ONLY SHOWING LEASE RENT RECEIVED BUT ALSO CLAIMING THE REFUND. THE ASSESSEE VERIFIED THE CLAIM OF REFUND IN HIS RETURN OF INCOME. D) THE ASSESSEE REGULARLY RECEIVED THE MAINTENANCE CHARGES AFTER SUBMITTING THE REQUIRED DETAILS TO THE EMPLOY ER. THE ASSESSEE FULLY AWARE OF THE RECEIPT OF REIMBURSEMENT OF MAIN TENANCE EXPENDITURE. HOWEVER, HE HAS NOT INCLUDED THE SAME IN HIS RETURN OF HIS INCOME. 5. HE ACCORDINGLY LEVIED PENALTY OF RS.16,481 U/S. 271(1)(C) OF THE ACT BY HOLDING THAT THE ASSESSEE HAS CONCEALED HER INCOME TO THE EXTENT OF RS.53,861. 6. IN APPEAL, THE LEARNED CIT(A) UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF ADDITION OF LEASE RENT. AGGR IEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US., 7. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF MAKARAND C. JOSHI VS. ITO A ND THE TRIBUNAL VIDE I.T.A. NO. ITA NOS. 5998/MUM/2009 SMR. KISHORI P. TENDOLKAR =================== 3 3522/ MUM/2008 ORDER DATED 17 TH SEPTEMBER, 2009 FOR THE A.Y. 2001-02 HAD DELETED THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT BY HOL DING AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ). THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING FIL ED A LETTER ADDRESSED BY THE HONBLE MINISTER OF STATE FOR FINANCE ADDRESSED TO THIR U TAPAN SEN, MEMBER OF PARLIAMENT ON THIS ISSUE, THE CONTENTS OF WHICH REA DS AS UNDER: DEAR THIRU TAPAN SEN, THIS IS IN REFERENCE TO YOUR LETTER DATED 24 TH OCTOBER, 2008 REGARDING REQUEST FOR WAIVER OF PENALTY CHARGED ON THE EMPLOYEES OF B HARAT PETROLEUM CORPORATION LTD. (BPCL) WHO HAD NOT DISCLOSED THE LEAS E RENTS AND THE MAINTENANCE CHARGES RECEIVED BY THEM IN THEIR INCOME- TAX RETURNS FOR THE RESPECTIVE ASSESSMENT YEAR. I HAVE GOT THE MATTER EXAMINED. THIS IS TO INFORM YOU THAT THE BPCL HAD INTRODUCED A SCHEME ON SELF LEASING COVERING THE EMPLOY EES OF BPCL, WHO HAD RECEIVED LOAN FROM B PCL ITSELF OR COULD TAKE LOAN FROM BANKS TO ACQUIRE HOUSE PROPERTIES. THE PROPERTIES SO ACQUIRED WERE LEAS ED OUT TO BPCL FOR AN AMOUNT OF LEASE RENT AND MAINTENANCE CHARGES AS LAID DOW N IN THE LEASE AGREEMENTS. THESE PROPERTIES IN TURN WERE GIVEN BACK TO THE SAME EMPLOYEES AS RENT FREE ACCOMMODATION BY BPCL, TREATING IT AS A PERQUISITE IN THE HANDS OF THE EMPLOYEES BEING FURNISHED A RENT FREE ACCOMMODATION . IN MOST OF SUCH CASES, IT WAS DETECTED BY THE ASSESSING OFFICER THAT SUCH LEASE RENTALS AND INCOME ON ACCOUNT OF MAINTENANCE CHARGE S WERE NOT DISCLOSED BY THE EMPLOYEES OF BPCL AND THEREFORE, PRO CEEDINGS U/S. 148 WERE INITIATED AGAINST SUCH EMPLOYEES. I MAY ALSO INFORM YOU THAT NO ADDITIONS WERE MADE IN THOSE CASES, WHO HAD DECLARED THEIR INCOME CORRECTLY. HOWEVER, IN THOSE C ASES IN WHICH THE EMPLOYEES OF BPCL HAD NOT DECLARED THEIR INCOME ON ACCO UNT OF RECEIPT OF LEASE RENTAL AND MAINTENANCE CHARGES, ADDITIONS WERE M ADE DURING ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS WERE ALSO INITIATED. IN THOSE CASES WHERE PENALTY PROCEEDINGS WERE INITIATED, NO PEN ALTIES WERE LEVIED IN 20% OF THE CASES AFTER TAKING INTO CONSIDERATION OF TH E SUBMISSION OF THE EMPLOYEES. UNDER THE INCOME TAX TWO ALTERNATIVE REMEDIES ARE A VAILABLE TO SUCH EMPLOYEES. THE ASSESSEES COULD FILE APPEALS AGAINST THE O RDER OF THE AO BEFORE APPELLATE COMMISSIONERS. HOWEVER, EVEN MORE EFF ECTIVE REMEDY WOULD BE THAT EACH EMPLOYEE OF BPCL CAN ALSO APPROACH THE ADMINISTRATIVE COMMISSIONER CONCERNED FOR WAIVER OF INTEREST AND PENALT Y U/S. 273A. SINCE THESE ARE NOT THE CASES FALLING IN THE CATEGORY OF P RE-PLANNED TAX EVASION AND RATHER APPEAR TO BE CASES OF UNINTENDED DEFAULT, TH E COMMISSIONER WOULD NATURALLY CONSIDER SUCH PETITIONS FOR WAIVER SYMPATHET ICALLY. WITH REGARDS, YOURS SINCERELY, SD/- (S. PALANIMANIKKAM) 8. FROM THE ABOVE IT IS SEEN THAT THE HONBLE MINIS TER OF STATE FOR FINANCE HAS OBSERVED THAT THE CASES ARE NOT FALLIN G IN THE CATEGORY OF PRE-PLANNED TAX EVASION AND APPEARS TO BE A CASE OF UNINTENDED DEFAULT. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN VIEW OF ITA NOS. 5998/MUM/2009 SMR. KISHORI P. TENDOLKAR =================== 4 THE OBSERVATION OF THE HONBLE MINISTER OF STATE FO R FINANCE AND FINDING SOME MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF IN NOT OFFERING THE LEASE RENT TO TAX, WE ARE OF THE OPINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. ACCORDINGLY, T HE ORDER OF THE CIT(A) IS SET ASIDE AND THE PENALTY LEVIED BY THE ASSESSING O FFICER IS CANCELLED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8. SIMILARLY, WE FIND THE TRIBUNAL IN THE CASE OF R AVINDRA LAXMAN SATHE VS. ITO VIDE I.T.A. NO. 2828/MUM/2008 ORDER DATED 22 ND DECEMBER, 2009 FOR THE A.Y. 2001- 02 HAS ALSO CANCELLED THE PENALTY LEVIED U/S. 271(1 )(C) OF THE ACT UNDER IDENTICAL FACTS AND CIRCUMSTANCES. RESPECTFULLY FOLLOWING THE ABOV E DECISION OF THE TRIBUNAL CANCELLING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IN THE CASE OF EMPLOYEES OF BPCL UNDER IDENTICAL FACTS AND CIRCUMSTANCES AND IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROUGHT BEFORE US BY THE LEARNED DR, WE CA NCEL THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. THE ORDER OF THE CIT(A) IS A CCORDINGLY SET ASIDE AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2010 SD/- (R.V. EASWAR) PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 30 TH JULY, 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-XXVI, MUMBAI 4. THE CIT-26, MUMBAI 5. THE DR D BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES, MUMBAI TPRAO