THE ITO 7(2)(2), MUMBAI V. M./S, SAIDARSHAN BUSINESS CENTRE PVT LTD, MUMBAI

ITA 7060/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1468 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 10-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 28-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K AGRAWAL
• Keywords: Business income; Difference of opinion; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J BEFORE SHRI N.V. VASUDEVAN (JM) & SHRI B. RAMAKOTAI AH (AM) I.T.A.NO. 7060/MUM/2007 (ASSESSMENT YEAR : 2001-0 2) I.T.A.NO. 7061/MUM/2007 (ASSESSMENT YEAR : 2003-0 4) ITO 7(2)(2) AAYAKAR BHAVAN ROOM NO. 621A, 6 TH FLOOR M.K. ROAD MUMBAI-400 020. VS. M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD. 405-408, NAVBHARAT ESTATE B-WING, ZAKARI BUNDER ROAD SEWRI WEST MUMBAI-400 015. APPELLANT RESPONDENT PAN/GIR NO. : AAACS5801J ASSESSEE BY : SHRI SATISH MODY DEPARTMENT BY : SHRI L.K. AGRAWAL ORDER PER N.V. VASUDEVAN, JM :- ITA NO. 7060/MUM/2007 IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 27.9.2007 OF LEARNED CIT(A)-VII, MUMBAI RELATING TO A.Y. 2001-02. ITA NO. 7061/MUM/2007 IS ALSO AN APPEAL BY THE REV ENUE AGAINST THE ORDER DATED 27.9.2007 OF LEARNED CIT(A)-VII, MU MBAI RELATING TO A.Y. 2003-04. 2. IN BOTH THESE APPEALS, THE REVENUE IS AGGRIEVED BY THE ORDER OF LEARNED CIT(A) WHEREBY THE LEARNED CIT(A) CANCELLED THE ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1)(C) OF THE ACT. 3. WE SHALL FIRST TAKE UP ITA NO. 7060/MUM/2007. T HE FACTS AND CIRCUMSTANCES UNDER WHICH, PENALTY U/S. 271(1)(C) W AS IMPOSED ON THE ASSESSEE BY THE ASSESSING OFFICER ARE AS FOLLOWS :- M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD. 2 THE ASSESSEE IS A COMPANY DEALING IN SHARES AND SEC URITIES AND PROVIDING BUSINESS CENTRE SERVICES. THE ASSESSEE WA NTED TO CARRY ON BUSINESS OF STOCK BROKING THROUGH OTC EXCHANGE AND IN THIS REGARD PAID A DEPOSIT OF RS. 6.25 LAKHS TO OTC EXCHANGE. AS PER THE CONDITIONS FOR GRANT OF MEMBERSHIP, THE SAID DEPOSIT WAS LIABLE TO BE FORFEITED IN THE EVENT OF MEMBER NOT CARRYING ON ANY BUSINESS. SINCE FROM THE YEAR 1992, THE SHARE MARKET ACTIVITIES BECAME VOLATILE AND RIS KY, THE ASSESSEE DID NOT CARRY ON SHARE BROKING BUSINESS. THE ASSESSEE D ECIDED TO CREATE BUSINESS CENTRE AND LET OUT THE SAME AND DERIVE INC OME THERE FROM. THE BOARD OF DIRECTORS OF THE ASSESSEE DECIDED IN MARCH 2001 TO WRITE OFF REFUNDABLE DEPOSIT OF RS. 6.25 LAKHS GIVEN TO OTC E XCHANGE. THE SAME WAS WRITTEN OFF BY DEBITING TO PROFIT AND LOSS ACCO UNT OF THE PREVIOUS YEAR. THUS, AFORESAID AMOUNT WAS CLAIMED AS REVENUE EXPENDITURE WHILE COMPUTING INCOME FOR A.Y. 2001-02. THE ASSESSING OF FICER DID NOT ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON THE GROU ND THAT EXPENDITURE WAS CAPITAL IN NATURE. 4. THE LEARNED CIT(A) CONFIRMED THE ORDER OF THE AS SESSING OFFICER. THE HONBLE ITAT, HOWEVER, IN ITA NO. 1862/MUM/05 C ONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THE GROUND THAT T HOUGH EXPENDITURE WAS REVENUE EXPENDITURE, THE SAME COULD HAVE BEEN CLAIM ED IN THE PREVIOUS YEAR RELEVANT TO A.Y. IN WHICH DEPOSIT WAS MADE AND NOT IN A.Y. 2001-02. IT IS IN THE ABOVE BACKGROUND OF THE FACT THAT THE ASSESSING OFFICER IMPOSED PENALTY ON THE ASSESSEE HOLDING THAT THE AS SESSEE CONCEALED PARTICULARS OF INCOME. 5. ANOTHER ADDITION IN RESPECT OF WHICH, PENALTY W AS IMPOSED ON THE ASSESSEE BY THE ASSESSING OFFICER WAS THE DISALLOWA NCE MADE U/S. 14A OF THE ACT. THE ASSESSEE WAS IN RECEIPT OF DIVIDEND IN COME OF RS. 1,54,537. THE SAME WAS EXEMPT U/S. 10(33) OF THE ACT. THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE MUST HAVE INCURRED SO ME EXPENSES ON EARNING THIS DIVIDEND INCOME. THE ASSESSING OFFICER FOUND THAT M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD. 3 PERCENTAGE OF DIVIDEND INCOME TO TOTAL TURNOVER WAS 1.76%. HE THEREFORE ESTIMATED 1.76% OF THE TOTAL EXPENSES WHICH CAN BE ATTRIBUTABLE TO EARNING OF THE DIVIDEND INCOME. THUS A SUM OF RS. 1 ,35,250/- WAS DISALLOWED U/S. 14A OF THE ACT. 6. ON APPEAL BY THE ASSESSEE, THE LEARNED CIT(A) CO NFIRMED THE ADDITION ON THIS ACCOUNT TO THE EXTENT OF 10% DIVID END INCOME THEREBY RESTRICTIVE DISALLOWANCE TO ONLY RS. 15,953/-. IN R ESPECT OF THIS DISALLOWANCE ALSO, THE ASSESSING OFFICER IMPOSED PE NALTY ON THE ASSESSEE HOLDING THAT THE ASSESSEE CONCEALED PARTICULARS OF INCOME. 7. ON APPEAL BY THE ASSESSEE, LEARNED CIT(A) CANCEL LED THE PENALTY IMPOSED BY THE ASSESSING OFFICER FOR THE FOLLOWING REASONS :- THE ARGUMENT OF THE APPELLANT AND THE FACT OF THE CASE HAVE BEEN CONSIDERED. THE FIRST DISALLOWANCE IS OF RS. 6.25 L AKHS PAID TO OTC EXCHANGE AS REFUNDABLE DEPOSIT FOR CARRYING OUT THE BUSINESS OF STOCK BROKING, WHICH IS CLAIMED AS REVENUE EXPENDIT URE BY THE APPELLANT AND IS DISALLOWED BY THE ASSESSING OFFICE R AS CAPITAL EXPENDITURE. THE OTHER DISALLOWANCE IS OF RS. 15,9 53/- U/S. 14A OF THE ACT, WHICH IS 10% OF THE DIVIDEND INCOME OF RS. 1,59,537/-. THE MAIN PLEA OF THE APPELLANT IS THAT THE ISSUE IS DEBATABLE AND HENCE PENALTY FOR CONCEALMENT U/S. 271(1)(C) OF THE ACT CANNOT BE LEVIED. THERE IS FORCE IN THE ARGUMENT OF THE APPEL LANT. IT IS BECAUSE THE APPELLANT HAS POINTED OUT THAT THE DEPO SIT OF RS. 6.25 LAKHS WITH OTC EXCHANGE HAS BEEN CLAIMED AS REVENUE EXPENDITURE ON THE BASIS OF THE DECISION OF RAJASTH AN HIGH COURT JAIPUR BENCH IN THE CASE OF CIT VS. ANJANIKUMAR CO. LTD., 259 ITR 114. FURTHER IT HAS ALSO BEEN POINTED OUT THAT THE CLAIM HAS BEEN SUPPORTED BY THE DECISION OF HON'BLE DELHI HIG H COURT IN THE CASE OF NESET HOLDING PVT. LTD. VS. CIT, 151 TAXMAN 309, WHEREIN IT HAS BEEN HELD THAT ONE TIME NON-REFUNDABLE FEE F OR THE MEMBERSHIP OF OTC EXCHANGE OF INDIA IS ALLOWABLE AS REVENUE EXPENDITURE. IT CLEARLY SHOWS THAT THE ISSUE IS DEB ATABLE ONE. EVEN FOR THE DISALLOWANCE OF THE EXPENDITURE U/S. 14A OF THE ACT, THERE ARE DIFFERENCE OF OPINIONS. IT IS CLEARLY DEMONSTRA TED IN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND PART OF IT IS SUSTAINED BY THE LEARNED CIT(A). THE ASSESSING OFFI CER MADE THE DISALLOWANCE OF RS. 1,35,250/- ON THE BASIS THAT TH E PERCENTAGE OF THE DIVIDEND INCOME IS 1.76% OF THE TOTAL TURNOVER, WHEREAS THE LEARNED CIT(A) RETAINED THE DISALLOWANCE AT RS. 15, 953/- BEING 10% OF THE DIVIDEND INCOME OF RS. 1,59,537/-. AS SU CH, THE M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD. 4 DISALLOWANCES HAVE BEEN MADE ON BOTH THE ISSUES BEC AUSE THERE IS DIFFERENCE OF OPINION. MOREOVER, THE ISSUES ARE DEB ATABLE ONE. THE CASE LAW RELIED UPON BY THE ASSESSING OFFICER IS IN A DIFFERENT CONTEXT AND IS NOT APPLICABLE TO THE FACTS OF THE P RESENT CASE. IT IS NOW A WELL SETTLED PRINCIPLE OF LAW THAT IF A PARTI CULAR ISSUE WARRANTS A DEBATE, I.E. IF TWO OPINIONS ARE POSSIBL E ON AN ISSUE, AN ASSESSEE CANNOT BE PENALIZED FOR ADOPTING A POSITIO N WHICH DOES NOT FIND FAVOUR WITH THE ASSESSING OFFICER. THIS PR INCIPLE HAS BEEN LAID DOWN IN THE CASE OF CIT VS. CALCUTTA CREDIT CO RPORATION, 166 ITR 29, WHEREIN HON'BLE CALCUTTA HIGH COURT RULED T HAT PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED WHERE TWO OPINIONS ON FACTS OF THE CASE ARE POSSIBLE. THE RAJ ASTHAN HIGH COURT IN THE CASE OF HARSHVARDHAN CHEMICALS & MINER ALS LTD., 259 ITR 212 HELD THAT WHERE A CLAIM OF DEDUCTION WH ICH IS DEBATABLE IS DISALLOWED IT CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME AND HENCE, NO PENALTY CAN BE LEVIED. CONSIDE RING THE FACT THAT THERE ARE TWO VIEWS POSSIBLE ON BOTH THE ISSUE AND THE ISSUES ARE DEBATABLE IN NATURE, THE PENALTY U/S. 271(1)(C) CANNOT BE LEVIED. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO CANCEL THE PENALTY LEVIED AT RS. 2,53,497/- U/S. 271(1)(C) OF THE ACT. 8. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE RE VENUE HAS FILED PRESENT APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED DR RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K. P. MADHUSOODAN, 251 ITR 99 (SC). THE LEARNED COUNSEL FOR THE ASSESSEE R ELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE P OWER UTILITY, 322 ITR 157 (SC). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AR E OF THE VIEW THAT THE ORDER OF LEARNED CIT(A) DOES NOT CALL FOR ANY I NTERFERENCE. WITH REGARD TO DISALLOWANCE IN RESPECT OF REFUNDABLE DEPOSIT PA ID TO OTC EXCHANGE, THE FACT THAT IT IS REVENUE EXPENDITURE IS NOW ACCE PTED. THE FACT THAT IT RELATED TO DEPOSIT MADE IN 1992, WAS DULY DISCLOSED BY THE ASSESSEE. THE ASSESSEE MADE A CLAIM FOR DEDUCTION AS A REVENUE EX PENDITURE AFTER DULY DISCLOSING ALL THE ABOVE FACTS AND THEREFORE THERE CAN BE NO CHARGE OF EITHER CONCEALING PARTICULARS OF INCOME OR FURNISHI NG INACCURATE PARTICULARS OF INCOME. AS FAR AS DISALLOWANCE U/S. 14A IS CONCERNED, THE QUESTION AS TO WHAT IS THE AMOUNT TO BE DISALLOWED IS DEBATABLE ISSUE; M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD. 5 AND THEREFORE IT CANNOT BE SAID THAT THERE WAS ANY ATTEMPT TO CONCEAL PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. IN OUR VIEW, THE ASSESSEE HAS OFFERED AN EXPLANATION A ND THE SAME IS BONAFIDE. THE ASSESSEE HAS DISCLOSED ALL FACTS MATE RIAL FOR COMPUTATION OF INCOME. IN THE ABOVE CIRCUMSTANCES, WE ARE OF THE V IEW THAT EXPLANATION 1 TO SECTION 271(1)(C) AND THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K.P. MADHUSOODAN (SUPRA) WILL NOT BE OF ANY HELP TO THE PLEA OF LEARNED DR. WE ARE ALSO OF THE VIEW THAT IN THE LI GHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE POWER UTILITY (SUPRA) THE MERE FACT THAT A CLAIM HAS BEEN MADE BY THE ASSESSE E WHICH IS NOT ACCEPTED CANNOT BE THE BASIS TO IMPOSE PENALTY. FO R ALL THE ABOVE REASONS STATED, WE UPHOLD THE ORDER OF LEARNED CIT( A) AND DISMISS APPEAL BY THE REVENUE. 11. ITA NO. 7061/MUM/2007 : IN THIS ASSESSMENT YEAR, THE ASSESSING OFFICER IMPO SED PENALTY IN RESPECT OF ADDITION MADE TREATING THE INCOME RECEIV ED FROM LETTING OF THE PROPERTY AS INCOME FROM HOUSE PROPERTY AS AGAINST CLAIM OF THE ASSESSEE THAT THE SAME IS BUSINESS INCOME. THE ASSESSING OFFICER IMPOSED PENALTY HOLDING THAT THE ASSESSEE FURNISHED INACCUR ATE PARTICULARS OF INCOME BY MAKING A CLAIM THAT INCOME RECEIVED FROM LETTING OF THE PROPERTY IS INCOME FROM BUSINESS. 12. ON APPEAL BY THE ASSESSEE, LEARNED CIT(A) CANCE LLED THE PENALTY IMPOSED BY THE ASSESSING OFFICER FOR THE FOLLOWING REASONS :- THE ARGUMENT OF THE APPELLANT AND THE FACT OF THE CASE HAVE BEEN CONSIDERED. THE ONLY ISSUE IN THIS CASE IS REGARDIN G THE ASSESSMENT OF THE INCOME FROM BUSINESS CENTRE UNDER THE HEAD INCOME FROM HOUSE PROPERTY OR BUSINESS INCOME. TH E ONLY POINT ON WHICH THERE WAS A DIFFERENCE BETWEEN THE ASSESSE E AND THE ASSESSING OFFICER WAS THE HEAD OF INCOME UNDER WHIC H THE SERVICE CHARGE/RENTAL INCOME WAS TAXABLE. SIMPLY BECAUSE A LEGAL VIEW TAKEN BY THE ASSESSEE WAS NOT ACCEPTED BY THE ASSES SING OFFICER IT WOULD NOT NECESSARILY MEAN THAT THERE WAS CONCEALME NT OF INCOME ON THE PART OF THE WITHIN THE MEANING OF SECTION 27 1(1)(C) OF THE ACT. IT WAS A DEBATABLE ISSUE AS TO WHETHER THE REN TAL M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD. 6 INCOME/SERVICE CHARGE WAS ASSESSABLE AS INCOME FROM BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY. THE APPELL ANT HAS POINTED OUT THAT IT HAD SHOWN THE INCOME FROM BUSIN ESS CENTRE AS BUSINESS INCOME SINCE A.Y. 1998-99. IN FACT, FOR A. Y. 2001-02, A SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE AS TO W HY THE INCOME SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY . THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER U/S. 143(3) AND TREATED THE INCOME FROM BUSINESS. IT WAS FOR THE FI RST TIME IN A.Y. 2003-04 THAT THE INCOME FROM BUSINESS CENTRE IS ASS ESSED AS INCOME FROM HOUSE PROPERTY. HENCE, THERE IS FORCE I N THE ARGUMENT OF THE APPELLANT THAT THERE IS CHANGE OF OPINION BY THE ASSESSING OFFICER. MOREOVER, IT IS NOT THE CASE OF THE ASSESS ING OFFICER THAT ALL THE MATERIAL FACT RELATING TO THE INCOME FROM THE R ENTAL INCOME HAS NOT BEEN SHOWN BY THE APPELLANT. HENCE, THERE IS NO QUESTION OF CONCEALMENT BY THE ASSESSEE. THE FACT THAT THE VIE W CANVASSED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS NOT A CCEPTED DID NOT ITSO FACTO GIVEN RISE TO CONCEALMENT OF INCOME. PEN ALTY U/S. 271(1)(C) IS LEVIED FOR CONCEALMENT OF INCOME AND N OT FOR THE DIFFERENCE IN TAKING LEGAL VIEWS ON A GIVEN SET OF FACTS PROVIDED THE FACTS HAVE BEEN ADEQUATELY DISCLOSED. IN THE CASE O F THE APPELLANT THE DEBATABLE ISSUE IS WHETHER THE RECEIPTS SHOULD BE TAXED UNDER THE HEAD INCOME FROM BUSINESS OR INCOME FROM HOU SE PROPERTY. THE DECISION OF HON'BLE TRIBUNAL IN THE CASE OF ITO VS. ROBORANT INV. PVT. LTD., 7 SOT 181 IS EXACTLY ON THE SAME IS SUE. HENCE, THERE IS FORCE IN THE ARGUMENT OF THE APPELLANT THA T MERE REJECTION OF A LEGAL CLAIM OF THE ASSESSEE FOR TAXABILITY OF INCOME UNDER A PARTICULAR HEAD OF INCOME IS NOT BY ITSELF SUFFICIE NT TO WARRANT IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT. TH US, THE PENALTY IS NOT LEVIABLE. SINCE, THE CASE INVOLVES GENUINE DIFF ERENCE OF OPINION ON MATTERS OF LAW BETWEEN THE ASSESSEE AND THE ASSE SSING OFFICER, IT IS CLEARLY OUTSIDE THE SCOPE OF EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT. RESTED ON THE AFORESAID PARAMETERS, THE PENALTY LEVIED BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. THE A SSESSING OFFICER IS THEREFORE DIRECTED TO CANCEL THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 13. AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS RI GHTLY HELD BY LEARNED CIT(A), THERE HAS BEEN NO CONCEALMENT OF A NY FACT. THE ASSESSEE MADE A CLAIM THAT A PARTICULAR RECEIPT WAS INCOME U NDER A PARTICULAR HEAD. THE CLAIM MADE BY THE ASSESSEE WAS NOT ACCEP TED BY THE ASSESSING OFFICER. THE ASSESSEES CLAIM THAT INCOM E FROM LETTING OF THE PROPERTY WAS BUSINESS INCOME WAS BASED ON THE FACT THAT SINCE A.Y. M/S. SAIDARSHAN BUSINESS CENTRES PVT. LTD. 7 1998-99, ASSESSEE HAS BEEN SHOWING SIMILAR INCOME A S INCOME FROM BUSINESS AND SAME HAS BEEN ACCEPTED BY THE REVENUE. IN FACT, IN A.Y. 2001-02, THE ASSESSING OFFICER EXAMINED THIS ISSUE AND PASSED AN ORDER U/S. 143(3) OF THE ACT ACCEPTING THE PLEA OF THE AS SESSEE THAT INCOME FROM LETTING WAS INCOME FROM BUSINESS. IT IS FOR TH E FIRST TIME IN A.Y. 2003-04 THAT INCOME FROM BUSINESS CENTRE WAS ASSESS ED AS INCOME FROM HOUSE PROPERTY. WE ARE OF THE VIEW THAT THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE POWER UTILITY (SUPRA) WILL APPLY TO THE FACTS OF THE PRESENT CASE. THE REASONS GIVEN WHILE DECIDI NG THE EARLIER APPEAL WILL EQUALLY APPLY TO THIS APPEAL ALSO. WE THEREFO RE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE APPEAL BY THE REVENU E. 15. IN THE RESULT, BOTH THE APPEALS BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 18 TH DAY OF JUNE, 2010. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 18 TH JUNE, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS