M/S Teri Oat Estate Pvt. Ltd, Chandigarh V. Deputy Commissioner of Income Tax, Chandigarh

ITA 85/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9947 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 09-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Depreciation; Business expenditure; Difference of opinion
• Section: 27

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.85/CHD/2016 (ASSESSMENT YEAR : 2006-07) M/S TERI OAT ESTATE PVT. LTD., VS. THE D.C.I.T., SCO 126-127, SECTOR 34-A, CIRCLE 4(1), CHANDIGARH. CHANDIGARH. PAN: AAACT5619H APPELLANT BY : SHRI HARRY RIKHY RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 18.04.2016 DATE OF PRONOUNCEMENT : 27.05.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH DATED 2.12.2015, RELATING T O ASSESSMENT YEAR 2006-07. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION DECLAR ED RECEIPTS OF RS.26,58,169/- OUT OF WHICH A SUM OF RS.23,19,630/- WAS SHOWN AS INCOME FROM HOUSE PROPE RTY. AGAINST THE INCOME FROM BUSINESS, THE ASSESSEE DECL ARED A 2 BUSINESS LOSS OF RS.20,56,573/-. THE ASSESSEE HAD SHOWN RENTAL INCOME OF SHOWROOM SCO 126-127, SECTOR 34A, CHANDIGARH AS PER THE LIST OF TENANTS INCORPORATED UNDER PARA 5 AT PAGE 4 OF THE ASSESSMENT ORDER. THE VIEW OF THE ASSESSING OFFICER WAS THAT THE TOTAL RECEIPTS OF TH E ASSESSEE ARE ON ACCOUNT OF RENTAL INCOME AND, HENCE SHOULD BE INCLUDED AS INCOME FROM HOUSE PROPERTY. THE CLAIM OF THE ASSESSEE WAS THAT THE GROSS RECEIPTS O F RS.26,58,169/- COMPRISED OF TWO COMPONENTS I.E. REC EIPTS FROM COMMUNICATION CENTRE AND FINANCIAL CHARGES OF RS.3,47,888/- AND RENTAL INCOME OF RS.23,10,281/-. AS PER THE ASSESSEE, THE COMMUNICATION CHARGES HAD BEE N TREATED AS BUSINESS INCOME AND RESULTANT LOSS OF RS.20,56,573/- CLAIMED AND RECEIPTS OF RS.23,10,281 /- HAVE BEEN TREATED AS RENTAL INCOME AND TAXABLE INCO ME UNDER THE HEAD INCOME FROM PROPERTY HAS BEEN SHOW N AT RS.16,23,741/-. THE ASSESSING OFFICER TREATED THE TOTAL RECEIPTS AS INCOME FROM HOUSE PROPERTY AND THE BUSI NESS EXPENSES AS WELL AS DEPRECIATION WAS DISALLOWED. T HE FINDINGS OF THE ASSESSING OFFICER WERE CONFIRMED BY THE CIT (APPEALS) AND THE APPEAL OF THE ASSESSEE BEFORE THE I.T.A.T. WAS PARTLY ALLOWED IN FAVOUR OF THE ASSESS EE. THE ASSESSING OFFICER MEANWHILE LEVIED PENALTY UNDER SE CTION 271(1)(C) OF THE ACT OF RS.7,00,000/-. 3. BEFORE THE LEARNED CIT (APPEALS), THE ASSESSEE SUBMITTED THAT THE COMPOSITE RENT ON ACCOUNT OF RENT FOR 3 THE PROPERTY AND SERVICE CHARGES FOR VARIOUS FACILI TIES PROVIDED LIKE LIFT, GAS, WATER, ELECTRICITY, ETC. A ND, HENCE COMPOSITE RENTAL INCOME HAS BEEN SHOWN AND CLAIMED AS BUSINESS EXPENSES AGAINST SERVICE CHARGES INCLUDED IN THE COMPOSITE RENT. RELIANCE WAS PLACED ON THE JUDGMEN T OF VARIOUS COURTS INCLUDING THAT OF HON'BLE SUPREME CO URT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PRIVATE LIMITED , 36 DTR 449 (SC) AND IT WAS SUBMITTED THAT THERE WAS NEITHER ANY CONCEALMENT OF INCOME, NOR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME AS THE ADDITION IS MERELY A DISALLOWANCE DUE TO DIFFERENCE OF OPINION. THE L EARNED CIT (APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE RELYING ON THE JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. (2010) 327 ITR 510 (DEL). 4. AGGRIEVED BY THIS, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US, RAISING FOLLOWING GROUNDS OF APPE AL : 1. THAT THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS), CHANDIGARH IS DEFECTIVE BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH IS UNJUSTIFIED IN UPHO LDING THE PENALTY LEVIED OF RS.7,00,000/- U/S 271(L)(C) OF THE I.T. ACT,1961 AS THE APPELLANT HAD DULY DISCLOSED AL L THE FACTS IN ITS BOOKS OF ACCOUNTS AND IT IS A CASE OF MERE DISALLOWANCE DUE TO DIFFERENT OF OPINION. THIS PENALTY IS UNCALLED FOR AND DESERVES TO BE DELETED AS THERE IS NEITHER ANY CONCEALMENT OF 4 INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. THAT ANY OTHER GROUND MAY KINDLY BE ALLOWED TO BE TAKEN AT THE TIME OF APPEAL WITH DUE PERMISSION. 5. DURING THE COURSE OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND S TATED THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHIN G OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF DIFFERENCE OF OPINION BETWEEN THE ASSESSING OFFICER AND THE ASSES SEE. FURTHER PARTIAL RELIEF HAS BEEN GIVEN BY THE I.T.A. T. ALSO. MERE DISALLOWANCE MADE IN THE QUANTUM PROCEEDINGS D OES NOT AUTOMATICALLY LEAD TO IMPOSITION OF PENALTY UND ER SECTION 271(1)(C) OF THE ACT. FOR THIS, RELIANCE W AS PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CAS E OF RELIANCE PETRO PRODUCTS PRIVATE LIMITED (SUPRA) AND THAT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PREM DAS (2001) 248 ITR 234 (P&H) FOR THE PROPOSITION THAT ADDITIONS AND DISALLOWANCES HAVING BEEN MADE ON ESTIMATE BASIS, NO PENALTY CAN BE LEVIED UN DER SECTION 271(1)(C) OF THE ACT. FURTHER FOR THE PROP OSITION THAT ADDITIONS OR DISALLOWANCES MADE ON ACCOUNT OF DIFFERENCE OF OPINION, THE PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT IS NOT SUSTAINABLE. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT PUNJA B & HARYANA IN THE CASE OF CIT VS. HARYANA WAREHOUSING (2009) 314 ITR 215 (P&H). 5 6. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND PLACED RELIANCE ON THE JUDGME NT OF DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. (SUPRA). FURTHER, HE STATED THAT THE I.T.A.T. IN THE QUANTUM PROCEEDINGS HAS HELD THAT THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE TO PROVE ITS CLAIM A S STATED IN THE ORDER OF THE ASSESSING OFFICER. THEREFORE, IN SUCH CIRCUMSTANCES, THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD BE SUSTAINED. 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. THE ONLY ISSUE ON THE BASIS OF WHICH THE ADDITION T O THE RETURNED INCOME OF THE ASSESSEE WAS MADE WAS THAT O N CERTAIN RENTAL INCOME, WHICH WAS TREATED BY THE ASS ESSEE AS ITS BUSINESS INCOME, THE ASSESSING OFFICER TREAT ED THE SAME AS INCOME FROM HOUSE PROPERTY AND IN CONSEQUEN CE, THE BUSINESS EXPENDITURE CLAIMED BY THE ASSESSEE INCLUDING DEPRECIATION WERE DISALLOWED TO HIM. IN SUCH A SCENARIO, PENALTY WAS LEVIED UNDER SECTION 271(1)(C ) OF THE ACT. ON THE PERUSAL OF THE ORDER OF THE I.T.A.T. I N QUANTUM PROCEEDINGS VIDE ORDER IN ITA NO.214/CHD/20 10 DATED 28.2.2011, WE SEE THAT A PART RELIEF HAS BEEN GIVEN TO THE ASSESSEE. IN THE ORDER, THE I.T.A.T. THOUGH CONFIRMED IN PRINCIPLE THAT FINANCIAL AND COMMUNICA TION CHARGES, WHICH WERE TREATED BY THE ASSESSEE AS ITS BUSINESS INCOME SHOULD BE TAXED UNDER THE HEAD INC OME 6 FROM OTHER SOURCES, HOWEVER, LOOKING INTO THE FACT THAT THE ASSESSEE IS A COMPANY AND THE EXPENSES CLAIMED BY IT RELATES TO ITS DAY-TO-DAY EXISTENCE ARE TO BE ALLOW ED AS AN EXPENDITURE, THE HON'BLE I.T.A.T. DIRECTED THE ASSE SSING OFFICER TO LOOK INTO THE CLAIM OF THE ASSESSEE IN T HIS REGARD AND DETERMINE THE BUSINESS LOSS ACCORDINGLY, WHICH SHALL BE SET OFF AGAINST THE INCOME FROM HOUSE PROP ERTY. IN VIEW OF THESE DEVELOPMENTS, WE ARE OF THE VIEW T HAT WHATEVER ADDITION OR DISALLOWANCE SUSTAINED UPON TH E ASSESSEE AS AN OUTCOME OF LITIGATION IN QUANTUM TO THE LEVEL OF THE I.T.A.T., THE SAME ARE ON ACCOUNT OF D IFFERENCE OF OPINION BETWEEN THE AUTHORITIES AND THE ASSESSEE AS TO THE HEAD OF INCOME, UNDER WHICH THE IMPUGNED AMOUNT HAS TO BE TAXED. THE ASSESSEE CLAIMED THE RECEIPTS TO BE AS BUSINESS INCOME WHILE THE I.T.A.T. CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN TREATING THE SAME AS TA XABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN SU CH A SCENARIO, WE DO NOT FIND THAT THE ASSESSEE HAS CONC EALED ANY INCOME OR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. IT WAS ASSESSEES VIEW THAT THE IMPUGNED A MOUNT RELATES TO ITS BUSINESS, WHILE THE ASSESSING OFFICE R HELD THE SAME TO BE INCOME FROM HOUSE PROPERTY. IN THE CONSEQUENCE, THE EXPENSES CLAIMED BY THE ASSESSEE G OT DISALLOWED. THE CASE ALSO GETS STRENGTHENED BY THE FINDINGS GIVEN BY THE I.T.A.T. THAT THE ASSESSEE BE ING A COMPANY, CERTAIN BUSINESS EXPENSES ARE TO BE ALLOWE D TO IT EVEN IF NO BUSINESS HAS BEEN CARRIED OUT DURING THE YEAR. THIS FURTHER CORROBORATES THE FACT THAT AT LEAST TO THE 7 EXTENT SUCH EXPENSES BEING ALLOWED TO THE ASSESSEE, THERE WAS NO MALAFIDE ON THE PART OF THE ASSESSEE. THE R ELIANCE PLACED BY THE LEARNED CIT (APPEALS) ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETR O PRODUCTS PRIVATE LIMITED (SUPRA) IS NOT OUT OF PLAC E, WHEREBY IT HAS BEEN VERY CLEARLY HELD THAT IN CASES WHERE DISALLOWANCES AND ADDITIONS HAVE BEEN MADE ON ACCOU NT OF DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE REVENUE AUTHORITIES, NO PENALTY CAN BE LEVIED. TH E JUDGMENT OF JURISDICTIONAL PUNJAB & HARYANA HIGH CO URT IN THE CASE OF HARYANA WAREHOUSING (SUPRA) IS ALSO APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN V IEW OF THE ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE TH E PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF MAY, 2016. SD/- SD/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH MAY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 8