M/s Improvement Trust, Jagadhari V. DCIT, Yamunanagar

ITA 785/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0051 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 09-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: S K MUKHI; GAGAN DEEP SINGH
• Keywords: Business income; Bonafide belief; Reasonable cause; Wrong claim; Condonation of delay
• Section: 12A; 27; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.785/CHD/2014 (ASSESSMENT YEAR : 2006-07) M/S IMPROVEMENT TRUST, VS. THE D.C.I.T., INDIRA MARKET, CIRCLE JAGADHRI. JAGADHRI. PAN: AAALI9984J (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI GAGANDEEP SINGH & S.K. MUKHI RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 21.03.2016 DATE OF PRONOUNCEMENT : 27.04.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), KARNAL DATED 3.12.2013 FOR ASSESSMENT YE AR 2006-07, PASSED UNDER SECTION 250(6) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE REGISTRY HAS INFORMED THAT THE APPEAL IS DELAYED BY 15 DAYS. AN APPLICATION FOR CONDONATION OF DELAY WAS FILED IN THIS REGARD. IT WAS STATED IN T HE APPLICATION THAT THE ASSESSEE BEING A STATUTORY BOD Y, THE 2 APPEAL WAS FORWARDED FOR THE APPROVAL OF HIGHER AUTHORITIES, WHICH TOOK SUBSTANTIAL TIME AND THEREA FTER THE COUNSEL TOOK ABOUT TWO WEEKS TIME TO PREPARE A ND SEND THE APPEAL FOR SIGNATURE OF THE AUTHORIZED SIG NATORY. AN AFFIDAVIT OF SHRI KEWAL KRISHAN JAIN, EXECUTIVE OFFICER, MUNICIPAL CORPORATION (TRUST CELL), YAMUNA NAGAR, JAGADHRI WAS FILED IN THIS REGARD. THE LEARNED D. R. DID NOT OBJECT TO THE CONDONATION OF DELAY. WE FIND TH E DELAY IN FILING THE APPEAL TO BE UNINTENTIONAL AND BECAUS E OF REASONABLE CAUSE AND HENCE, CONDONE THE SAME. 3. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMITTED THAT IT WAS NOT THE MOTIVE OF THE ASSESSE E TO CONCEAL ANY OF ITS INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. IT IS A NON PROFIT ORGANIZA TION AND BEING AN ORGAN OF THE STATE GOVERNMENT, THERE CANNO T BE ANY MALAFIDE ON ITS PART. FURTHER, IT WAS STATED T HAT ON AN ILL ADVICE OF THE ADVISORS, IT HAS NOT OBTAINED REGISTRATION UNDER SECTION 12A OF THE ACT, OTHERWIS E IT COULD HAVE AVAILED EXEMPTION UNDER SECTION 11 OF TH E ACT. THE CIT (APPEALS) REJECTED THE CONTENTION OF THE AS SESSEE AND CONFIRMED THE PENALTY UNDER SECTION 271(1)(C) O F THE ACT LEVIED BY THE ASSESSING OFFICER. 4. AGGRIEVED BY THIS, THE ASSESSEE HAS COME IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ORDER PASSED BY THE ASSESSING OF FICER 3 UNDER SECTION 271(1)(C) OF THE ACT IS BAD IN LAW AS THE ASSESSEE NEITHER CONCEALED ANY INCOME, NOR FURNISHE D ANY INACCURATE PARTICULARS OF HIS INCOME. THE ASSESSEE IS A STATUTORY AUTHORITY AND FILED ITS RETURN OF INCOME UNDER BONAFIDE BELIEF AS INCOME FROM BUSINESS OR PROFESS ION. FURTHER, IT WAS STATED THAT NO FALSE CLAIM WAS MADE BY THE ASSESSEE AND EVEN IF THE CLAIM OF EXEMPTION UNDER S ECTION 10(20) OF THE ACT HAS BEEN DENIED TO THE ASSESSEE, THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT B E IMPOSED IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158. FURTHER, IT WAS STATED THAT SI NCE THE ASSESSEE IS A LOCAL AUTHORITY, THE SUBMISSION OF IN ACCURATE PARTICULARS DOES NOT APPLY SINCE THE ASSESSEE WAS N OT TO GAIN ANY PECULIAR BENEFIT BY SUBMITTING INACCURATE PARTICULARS. FURTHER, RELIANCE WAS PLACED ON THE J UDGMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. LAKHANI FOOT WEAR LTD. (2012) 347 ITR 478. IT WAS STATED THAT IN THIS JUDGMENT, IT HAS BEEN HELD THAT THE FACT THAT CERTAIN RENTAL INCOMES WERE CLAIMED TO BE THE BUSINESS INCOMES BY THE ASSESSEE, PENALTY FOR CONCEALMENT OR FURNISHING INACCURATE PARTICULARS IS NOT EXIGIBLE ON THE SAME. 6. THE LEARNED D.R. RELIED ON THE ORDER OF THE LOW ER AUTHORITIES AND FURTHER ARGUED THAT IN FACT, THE AS SESSEE HAS MADE A WRONG CLAIM BY CLAIMING EXEMPTION UNDER SECTION 10(20) OF THE ACT AND ALSO BY CLAIMING THE RENTAL 4 INCOME TO BE ITS BUSINESS INCOME IN ORDER TO CLAIM EXPENSES OUT OF THE SAME. RELIANCE WAS PLACED ON H E JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CI T VS. SPLENDER CONSTRUCTION 352 ITR 588. AS PER THIS JUDGMENT, IT WAS STATED THAT SINCE THE ISSUES IN QU ANTUM HAVE BEEN DECIDED BY THE I.T.A.T. AGAINST THE ASSES SEE, THE ISSUES DO NOT REMAIN DEBATABLE, THEREFORE, PENA LTY HAS TO BE LEVIED ON THE SAME. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THERE ARE TWO ISSUES ON THE BASIS OF WHICH THE ADDI TIONS HAVE BEEN MADE BY THE ASSESSING OFFICER. FIRSTLY,, THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10(20) OF THE ACT AND SECONDLY, THERE ARE CERTAIN RENTAL INCOMES WHICH WERE CLAIMED BY THE ASSESSEE AS ITS BUSINESS INCOME . THE ADDITIONS HAVE BEEN SUSTAINED TILL THE STAGE OF I.T .A.T. THE EXPLANATION OF THE ASSESSEE WITH REGARD TO HIS CLAIM OF EXEMPTION UNDER SECTION 10(20) OF THE ACT IS THAT T HE SAME IS BASED ON A BONAFIDE BELIEF AND ON CERTAIN OTHER CASES OF THE ASSESSEES CARRYING ON THE SAME TYPE OF ACTIVITI ES, THESE JUDGMENTS HAVE BEEN REFERRED TO BY HIM BEFORE THE LEARNED CIT (APPEALS) ALSO. THIS IS A CASE OF A CL AIM OF EXEMPTION MADE BY THE ASSESSEE WHICH WAS ULTIMATELY DENIED TO IT. MAKING OF A CLAIM, WHICH IS NOT SUST AINED, DOES NOT AMOUNT TO LEVY OF PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT. RELIANCE PLACED BY THE ASSESSEE ON THE 5 JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF RELI ANCE PETROPRODUCTS PVT. LTD. (SUPRA) IS NOT OUT OF PLACE SINCE THIS IS NOT A CASE WHERE THE ASSESSEE HAS CONCEALED SOME PARTICULARS OF ITS INCOME OR FURNISHED ANY INACCURA TE PARTICULARS. IN FACT, ALL THE FACTS AND FIGURES HA VE BEEN TAKEN BY THE ASSESSING OFFICER FROM THE RETURN FIL ED BY THE ASSESSEE ONLY. THE ARGUMENT OF THE ASSESSEE TH AT IF IT HAD TAKEN REGISTRATION UNDER SECTION 12A OF THE ACT , THE WHOLE INCOME WOULD BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT, IS OF NO CONSEQUENCE. HOWEV ER, WE FIND THAT THE ARGUMENT OF THE ASSESSEE THAT IT IS A GOVERNMENT ORGANIZATION AND NO MALAFIDE CAN BE IMPO SED ON IT, IS A RELEVANT CONSIDERATION WHILE LEVYING PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. 8. THE NEXT ISSUE IS WITH REGARD TO THE RENTAL INCOMES SHOWN BY THE ASSESSEE UNDER THE HEAD INCOM E FROM BUSINESS OR PROFESSION. IT HAS ALL ALONG BEE N CLAIMED THAT IT IS A BONAFIDE BELIEF OF THE ASSESSE E THAT THESE RENTAL INCOMES ARE PART OF ITS BUSINESS INCOM E. THOUGH WE ARE AWARE OF THE FACT THAT THE ISSUE STAN DS AGAINST THE ASSESSEE IN QUANTUM, BUT WE CANNOT BRUS H ASIDE THE FACT THAT THE ISSUE OF CONSIDERING CERTAI N INCOMES UNDER A PARTICULAR HEAD IS A DEBATABLE AND CONTROVERSIAL ISSUE ALL ALONG. THERE ARE JUDGMENTS OF VARIOUS HIGH COURTS AS WELL AS OF VARIOUS BENCHES O F THE TRIBUNAL, WHEREBY THE DISPUTE REGARDING THE RENTAL INCOME TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPE RTY 6 OR UNDER THE HEAD BUSINESS INCOME ARE CONSIDERED. IN VIEW OF THIS, WE OBSERVE THAT IT MAY BE A CASE OF M AKING ADDITIONS OR DISALLOWANCES BUT NOT A CASE OF LEVYIN G PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN VIE W OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY LEVIED BY HIM UNDER SECTION 271(1)(C) OF TH E ACT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF APRIL, 2016. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACOUNTANT MEMBER DATED : 27 TH APRIL, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH