DCIT 9(1), MUMBAI V. DOSSAL ESTAE DEVELOPMENT P. LTD, MUMBAI

ITA 7379/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62418 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 28-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINAY DEVI
• Keywords: Business income; Wrong claim; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI J SUDHAKAR REDDY, AM & SHRI VIJAY PAL R AO, JM ITA NO. 7379/MUM/2010 (ASSESSMENT YEAR 2003-04) THE DY COMMR OF INCOME TAX 9(1), MUMBAI VS DOSSAL ESTATE DEVELOPMENT P LTD A1 DOSSAL - GR FLOOR 50 PALI ROAD, BANDRA (W) MUMBAI 64 (APPELLANT ) (RESPONDENT) PAN NO. AAACD4146M ASSESSEE BY SH VINAY DEVI REVENUE BY SH C G K NAIR DT.OF HEARING 8 TH MAY 2012 DT OF PRONOUNCEMENT 16 TH , MAY 2012 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 24.8.2010 OF THE CIT(A) ARISING FROM THE PENALTY ORDER PASSED U/S 271(1)( C ) OF THE I T ACT FOR THE AY 2003-04. 2 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN T HIS APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CANCELLING THE PENALTY OF RS. 3,32,186/- I MPOSED BY THE ASSESSING OFFICER U/S 271(1)( C) OF THE I T ACT, 1961 DESPITE THE FACT THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE EXPLANTING OFFERED B Y IT FOR THE VARIATION BETWEEN THE RETURNED AND ASSESSED INCOME, VIS--VIS THE PENALTY IMPOSED WAS BONAFIDE. 3 THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS AS BUILDER AND DEVELOPER. THE ASSESSEE HAS SUBLEASED ITS GROUN D FLOOR OF THE PROPERTY FOR RENT OF RS. 16,20,000/- BESIDES RS. 12 LACS RECEIVED TOW ARDS MAINTENANCE CHARGES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT TREATED THE SUB-LEASED RENT AS DOSSAL ESTATE DEVELOPMENT P LTD ITA NO. 7379/MUM/2010 2 INCOME FROM HOUSE PROPERTY AND MAINTENANCE CHARGES AS INCOME FROM OTHER SOURCES THEREBY DENIED VARIOUS EXPENSES AS CLAIMED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER DETERMINED THE TAXABLE INCOM E AT RS. 19,06,417/- AGAINST THE RENTAL INCOME OF RS. 10,02,510/-. PENALTY PROCEEDI NGS WERE ALSO INITIATED U/S 271(1)( C) AND A PENALTY OF RS. 3,32,186/- WAS IMPOSED VIDE ORDER DATED 29.2.2008. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFORE THE CIT(A), WHO HAS DELETED THE PENALTY ON THE GROUND THAT THE ADDITION IS ONLY BE CAUSE OF DIFFERENCE IN INTERPRETATIONS OF LAW REGARDING TAXATION OF RENTAL INCOME. 4 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD DR HAS RELI ED UPON THE ORDER OF THE ASSESSING OFFICER PASSED U/S 271(1)( C) AND SUBMITTED THAT WH EN IT IS SETTLED PROPORTION OF LAW THAT THE RENTAL INCOME EVEN RECEIVED ON SUBLEASING OF THE PROPERTY IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY AND THE MAINTENANCE CHAR GES RECEIVED BY THE ASSESSEE CANNOT BE TREATED AS INCOME FROM BUSINESS, THEN THE CLAIM OF THE ASSESSEE IS TOTALLY WRONG AND BOGUS AND THEREFORE, PENALTY I S JUSTIFIED. 4.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS DISCLOSE D ALL THE RELEVANT FACTS AND PARTICULARS WITH RESPECT TO THE RENTAL INCOME AN D MAINTENANCE CHARGES. THE ASSESSEE HAS ADMITTED THE RENTAL INCOME AS WELL AS MAINTENANCE CHARGES AS INCOME FROM BUSINESS WHICH WAS TREATED BY THE ASSES SING OFFICER AS INCOME FROM HOUSE PROPERTY AND THE INCOME FROM OTHER SOURCES RE SPECTIVELY. THUS, THE LD AR HAS SUBMITTED THAT IT IS A GENUINE DIFFERENT OF INTERP RETATION OF LAW REGARDING THE HEAD OF THE INCOME UNDER WHICH THE SUB LEASE RENTAL INCOME AND MAINTENANCE CHARGES ARE ASSESSABLE TO TAX. HE HAS RELIED UPON THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE COMMISSIONER OF INCOME-TAX V. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED DOSSAL ESTATE DEVELOPMENT P LTD ITA NO. 7379/MUM/2010 3 IN 322 ITR 158(SC). HE HAS ALSO RELIED UPON THE ORD ER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS PARLE PET PVT LTD IN ITA NO391/MUM/2010 DATED 20.7.2011 AND SUBMITTED THAT WHEN THE ASSESSEE HAS DISCLOSED ALL THE FACTS RELATING TO THE COMPUTATION OF INCOME BEFORE THE ASSESSING O FFICER , THE EXPLANATION I TO SEC 271(1)( C) IS NOT APPLICABLE . 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE RECEIVED THE RENTAL INCOME AS WELL AS MAINTENANCE CHARGES ON SUBLETTING OF THE PROPERTY I N QUESTION WHICH WAS OFFERED BY THE ASSESSEE AS BUSINESS INCOME. THE ASSESSING OFFICER TREATED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND MAINTENANC E CHARGES AS INCOME FROM OTHER SOURCES. BECAUSE OF THE ASSESSMENT OF THE REN TAL INCOME AND MAINTENANCE CHARGES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND OTHER SOURCES INSTEAD OF BUSINESS INCOME, THE ASSESSING OFFICER DISALLOWED CERTAIN EXPENSES WHICH WERE CLAIMED BY THE ASSESSEE AND RESULTANT INCREASE IN T HE TAXABLE INCOME OF THE ASSESSEE AS ASSESSED BY THE ASSESSING OFFICER. THE RE IS NO DISPUTE ON THE POINT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE AND THE REFORE, THE EXPENSES DISALLOWANCE BY THE ASSESSING OFFICER WERE NOT BE CAUSE OF BOGUS CLAIM OR ABSOLUTELY WRONG CLAIM BUT BECAUSE OF ASSESSMENT OF THE INCOME UNDER DIFFERENT HEADS AND THEREBY WOULD NOT BE ALLOWED AS PER THE P ROVISIONS OF IN T ACT. 5.1 THUS, IT IS NOT A CASE OF CLAIM OF BOGUS EXPEND ITURE OR INHERITANTLY IMPOSSIBLE CLAIM MADE BY THE ASSESSEE FOR ADMITTING THE INCOME FROM SUB LETTING OUT THE PROPERTY AS WELL AS MAINTENANCE CHARGES AS INCOME F ROM BUSINESS. THE ASSESSEE DISCLOSED AND EXPLAINED ALL THE RELEVANT AND PRIMAR Y FACTS AND MATERIAL; THOUGH, THE ASSESSING OFFICER DID NOT AGREED WITH THE CLAIM OF THE ASSESSEE AND TREATED THE INCOME FROM SUB-LETTING OUT OF THE PROPERTY AND MAI NTENANCE CHARGES UNDER THE DOSSAL ESTATE DEVELOPMENT P LTD ITA NO. 7379/MUM/2010 4 HEAD INCOME FROM HOUSE PROPERTY AND FROM OTHER S OURCES RESPECTIVELY INSTEAD OF INCOME FROM BUSINESS. 5.2 IT IS NOT A CASE OF THE REVENUE THAT THE EXPEND ITURE CLAIMED BY THE ASSESSEE WAS NOT ACTUALLY INCURRED BY THE ASSESSEE BUT THE C LAIM OF EXPENDITURE WAS DISALLOWED BECAUSE THE INCOME WAS ASSESSED BY THE A SSESSING OFFICER UNDER DIFFERENT HEAD. THEREFORE, IT CANNOT BE SAID THAT T HE ASSESSEE HAS CONCEALED THE INCOME ASSESSABLE TO TAX OR FURNISHED INACCURATE PA RTICULARS OF INCOME WHEN ALL THE RELEVANT PARTICULARS AND DETAILS WERE DISCLOSED AND AVAILABLE BEFORE THE ASSESSING OFFICER. 5.3 IN THESE CIRCUMSTANCES, THE PENALTY CANNOT BE L EVIED MERELY BECAUSE THE CLAIM OF THE ASSESSEE UNDER THE HEAD BUSINESS INCO ME WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER AND IT WAS ASSESSED UNDER THE HEA D INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES RESULTING DISALLOWA NCE OF CERTAIN EXPENSES. THE ASSESSMENT OF INCOME UNDER DIFFERENT HEADS IS DUE T O DIFFERENCE OF OPINION AND THEREFORE, IT DOES NOT IPSO FACTO WARRANT LEVY OF P ENALTY, EVEN IF THE SAID TREATMENT OF INCOME BY THE ASSESSING OFFICER RESULTING AN ADDITI ONAL TAX LIABILITY TO THE ASSESSEE. UNLESS THE ADDITION IS DUE TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE PENALTY IS NOT LEVIED AU TOMATICALLY. THEREFORE, THE DISALLOWANCE OF EXPENDITURE DUE TO CHANGE OF HEAD O F INCOME WOULD NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THE ASSES SEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WARRA NTS PENALTY. THUS, THE DISALLOWANCE OF BOGUS CLAIM CANNOT RESULT IN LEVY O F PENALTY IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANC E PETROPRODUCTS PVT. LTD (SUPRA) DOSSAL ESTATE DEVELOPMENT P LTD ITA NO. 7379/MUM/2010 5 6 IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN DELETING THE PENALTY LEV IED BY THE ASSESSING OFFICER . 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 16 TH , DAY OF MAY 2012 SD/ SD/- ( J SUDHAKAR REDDY ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 16 TH , MAY 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI