Rasika Motels, Kolhapur v. ITO, Kolhapur

ITA 1144/PUN/2010 | 2006-2007
Pronouncement Date: 28-09-2011 | Result: Allowed

Appeal Details

RSA Number 114424514 RSA 2010
Assessee PAN AAEFR8668M
Bench Pune
Appeal Number ITA 1144/PUN/2010
Duration Of Justice 1 year(s) 1 month(s) 11 day(s)
Appellant Rasika Motels, Kolhapur
Respondent ITO, Kolhapur
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 28-09-2011
Date Of Final Hearing 22-09-2011
Next Hearing Date 22-09-2011
Assessment Year 2006-2007
Appeal Filed On 16-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI D.KARUNAKAR RAO ACCOUNTANT MEMBER I.T.A. NOS.1139 /PN/2010: ASSESSMENT YEARS: 2001-02 I.T.A. NOS.1140 /PN/2010: ASSESSMENT YEARS: 2002-03 I.T.A. NOS.1141 /PN/2010: ASSESSMENT YEARS: 2003-04 I.T.A. NOS.1142 /PN/2010: ASSESSMENT YEARS: 2004-05 I.T.A. NOS.1143 /PN/2010: ASSESSMENT YEARS: 2005-06 I.T.A. NOS.1144 /PN/2010: ASSESSMENT YEARS: 2006-07 RASIKA MOTELS ... APPELLANT OFFICE F-1 MALATI TOWERS 223/3 TARABAI PARK KOLHAPUR-416003 PA NO.AAEFR 8668 M VS. I.T.O. WARD 2 ... RESPONDENT ICHALKARANJI KOLHAPUR APPELLANT BY: SHRI S.P.JOSHI & MS KEERTI JOSHI RESPONDENT BY: SHRI S.K.AMBARTHA DATE OF HEARING: 22- 9-2011 DATE OF PRONOUNCEMENT: 28-9-2011 ORDER PER BENCH: ALL THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE SEPARATE ORDERS OF THE CIT(A) KOLHAPUR IN THE MAT TER OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT 1961. 2. THE SHORT ISSUE WHICH REQUIRE OUR ADJUDICATION IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENA LTY UNDER SECTION 2 271(1)(C) OF THE ACT FOR ALL THE ASSESSMENT YEARS U NDER APPEAL WHEREIN ASSESSEE HAS CLAIMED RENTAL INCOME AS BUS INESS INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY. SINCE THE CO MMON ISSUE IS TAKEN IN ALL THESE APPEALS FOR THE SAKE OF BRE VITY WE DISCUSS THE FACTS FOR THE ASSESSMENT YEAR 2001-02 AND THE DECIS ION WILL BE APPLICABLE IN ALL THE OTHER ASSESSMENT YEARS. 3. FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE FIRM WAS DERIVING INCOME BY LETTING OUT PROPERTIES ON HI RE. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME A T RS.43 137 ON 31 11 2001 WHEREIN THE INCOME OUT OF LETTING OUT THE PROPERTY TO HINDUSTAN PETROLEUM CORPORATION AND M/S. TRIVENI RE SORTS AND INN WAS SHOWN UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST INCOME FROM HOUSE PROPERTY. THE AO NOTED THAT AS T HE INCOME FROM LETTING OUT THE PROPERTY IS REQUIRED TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN TERMS OF SECTION 22 OF THE ACT NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE . IN RESPONSE TO NOTICE U/S.148 THE ASSESSEE FILED THE RETURN OF IN COME SHOWING THE SAME INCOME DECLARED IN THE ORIGINAL RETURN. THE A O COMPLETED THE ASSESSMENT UNDER SECTION U/S. 143(3) R.W.S 147 TREA TING THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND ALLOWED THE DEDUCTION U/S 23(1) AND 24 COMPUTING THE TOTAL INCOME AT RS.5 23 221 INTER ALIA DISALLOWING VARIOUS EXPENSES CLAIMED BY THE A SSESSEE. 4. CONSEQUENTLY THE AO ALSO INITIATED PENALTY PROC EEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IN RESPONSE TO PENAL TY PROCEEDINGS THE ASSESSEE SUBMITTED THAT CONSIDERING THE OBJECTS OF THE FIRM THE RENTAL INCOME WAS TREATED AS BUSINESS INCOME AND IT DOES NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCO ME. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE TO TH E ASSESSING OFFICER. HE LEVIED THE PENALTY OF RS.1 88 410 UNDE R SECTION 271(1)(C) INTER ALIA OBSERVING THAT THE ASSESSEE HAS FURNI SHED INACCURATE PARTICULARS INCOME BY SHOWING INTENTIONALLY ITS REN TAL INCOME AS 3 INCOME FROM BUSINESS. AGGRIEVED THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS . 5. BEFORE US THE STAND OF THE ASSESSEE IS THAT IT W AS UNDER BONAFIDE BELIEFS THAT THE INCOME FROM THE ABOVE SAI D PROPERTY WAS BUSINESS INCOME AND ACCORDINGLY HE CLAIMED THE SA ME IN THE RETURN OF INCOME. FOR THIS PROPOSITION HE RELIED O N VARIOUS JUDICIAL PRONOUNCEMENTS AND REQUESTED FOR DELETION OF THE PE NALTY. ON THE OTHER HAND THE LEARNED D.R. SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 6. HAVING CONSIDERED THE RIVAL CONTENTIONS AND HAVI NG PERUSED THE MATERIAL ON RECORD WE FIND THAT THE ASSESSEE H AS CLAIMED IN THE RETURN OF INCOME THE RENTAL INCOME RECEIVED FROM LE TTING OUT THE PROPERTY TO HINDUSTAN PETROLEUM CORPORATION AND TRI VENI RESORTS INN AS INCOME FROM BUSINESS. THE ASSESSEE IN SO ME YEARS UNDER APPEAL HAS PREFERRED APPEAL BEFORE THE CIT(A)WHILE IN OTHER YEARS NO APPEAL WAS PREFERRED BEFORE THE CIT(A). IN SU M AND SUBSTANCE THE QUANTUM ISSUE HAS BEEN DECIDED AGAINST THE ASSE SSEE I.E INCOME HAS BEEN TREATED AS INCOME FROM PROPERTY I NSTEAD OF BUSINESS INCOME. THE STAND OF THE ASSESSEE BEFORE US IS THAT CONSIDERING THE OBJECTS OF THE FIRM THE RENTAL INC OME WAS BONAFIDELY CLAIMED AS BUSINESS INCOME AT THE RELEVANT POINT OF TIME. IT IS ALSO A SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS A RE DISTINCT FROM THE ASSESSMENT PROCEEDINGS AND BASED ON THE FINDING S IN THE ASSESSMENT ORDER PER SE PENALTY CANNOT BE IMPOSED. THE STAND OF THE REVENUE IS THAT THE RENTAL INCOME IS REQUIRED T O BE CLAIMED UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF BUSINESS INCOME AND FOR THIS REASON IT WAS INFERRED THAT T HE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 6.1 WE FIND THAT IN THE CASE OF CIT VS. HOTEL SABAR PVT.LTD. 264 ITR 381(GUJ) WHEREIN THE PENALTY WAS IMPOSED FOR WRONG CLAIM OF DEPRECIATION BY THE ASSESSEE BUT THE FACT WAS DISC LOSED BEFORE THE 4 AO IT WAS HELD THAT THERE WAS NO CONCEALMENT OF IN COME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. AC CORDINGLY THE HONBLE HIGH COURT UPHELD THE DELETION OF THE PENAL TY BY THE TRIBUNAL. IN THE CASE OF CIT VS. KRISHNAMURTY (201 1) 330 ITR 547(DEL) WHEREIN THE ASSESSEE MAIN CERTIN CLAIMS AS REVENUE EXPENDITURE THE PENALTY WAS IMPOSED AS THE EXPENDI TURE WAS HELD TO BE CAPITAL EXPENDITURE. THE CIT (A) DELETED THE PENALTY TREATING THE SAME AS DEBATABLE AND THE TRIBUNAL UPHELD THE F INDINGS OF THE CIT(A). THE SAME WAS UPHELD BY THE HONBLE HIGH CO URT. IN THE CASE OF T.ASHOK PAI VS CIT(2007) 292 ITR 11 (SC) WHEREIN THE TRIBUNAL HELD THAT BONAFIDES OF ASSESSEE HAD BEEN P ROVED BY FACTS AND CIRCUMSTANCES OF THE CASE BECAUSE; (I) MERELY BECAUSE SOME OMISSION OR SOME WRONG STAT EMENT WAS MADE IN ORIGINAL RETURN A PENALTY PROCEEDINGS FOR CONCEALMENT AS CONTEMPLATED BY SECTION 271(1)(C) MI GHT NOT BE ATTRACTED ; (II) THE REVISED RETURN HAVING BEEN ACCEPTED AND P ENALTY HAVING NOT BEEN IMPOSED WITH REFERENCE TO ORIGINAL RETURN THE ASSESSEE COULD NOT BE CONSIDERED TO BE GUILTY OF CO NCEALMENT OF INCOME AND (III) THE FAULT IF ANY WAS WITH HIS TAX COUNSEL AND EVEN THE TAX COUNSEL COULD NOT BE SAID TO HAVE ACTED IN A MALA FIDE MANNER IN PREPARING THE RETURN OF INCOME OF THE ASSESSEE. ACCORDINGLY PENALTY WAS HELD NOT TO BE JUSTIFIED I N SUCH A SITUATION BY THE HONBLE SUPREME COURT. WE ALSO FI ND THAT IN THE CASE OF CIT VS. INTERNATIONAL AUDIO VISUAL CO. (200 7) 288 ITR 570(DEL) WHEREIN FACTS DISCLOSED BUT CLAIM FOR DEDUCTION F OUND ERRONEOUS IT WAS HELD THAT PENALTY COULD NOT BE IM POSED. IT WAS HELD THAT THE ASSESSEE HAD BONAFIDE BELIEF THAT BY SELLING DUBBING RIGHTS OF HINDI FILMS TO FOREIGN COMPANY IT WAS SE LLING GOODS OR MERCHANDISE WITHIN THE MEANING OF SECTION 80 HHC SI NCE THERE WAS 5 NO CONCEALMENT OF PRIMARY FACTS AND THEREFORE PE NALTY COULD NOT BE IMPOSED. WE ALSO FIND THAT IN THE CASE OF CIT VS . INDERSONS LEATHER (P) LTD. 328 ITR 167(P&H) WHEREIN THE ASSESSEE HAD MADE CLAIM HIS INCOME AS BUSINESS INCOME WHILE THE AO HELD THE SAME TO BE INCOME FROM HOUSE PROPERTY WHICH VIEW W AS ULTIMATELY UPHELD BY THE TRIBUNAL. HOWEVER PENALTY LEVIED BY THE AO UNDER THE PROVISIONS OF SECTION 271(1)(C) FOR CLAIM BY THE ASSESSEE UNDER THE WRONG HEAD OF INCOME WHICH WAS UPHELD BY THE CI T(A). IN THE SECOND APPEAL SAME WAS DELETED BY THE TRIBUNAL ON THE GROUND THAT THE ASSESSEE WAS NOT GUILTY OF ANY CONCEALMENT OR GIVING INACCURATE PARTICULARS AND HAD RAISED A DEBATABLE I SSUE. ACCORDINGLY THE STAND OF THE TRIBUNAL WAS UPHELD BY THE HONBLE HIGH COURT THAT THE ASSESSEE HAD NOT CONCEALED INCO ME NOR FURNISHED INACCURATE PARTICULARS. IT WAS MERELY A DEBATABLE ISSUE. 6.2. IN THE CASE BEFORE US THE ASSESSEE HAS CLAIME D THE INCOME UNDER THE HEAD BUSINESS INCOME WHICH WAS NOT ACCE PTED BY THE REVENUE AUTHORITIES AND THE FACTS REMAINS THAT THE ASSESSEE HAS DISCLOSED ALL FACTS TO THE REVENUE AUTHORITIES AT THE RELEVANT POINT OF TIME. THE ASSESSEE WAS UNDER BONAFIDE IMPRESSION T HAT IT IS EXPLOITING ITS COMMERCIAL ASSETS IN THE BEST POSSIB LE MANNER BY LEASING THEM FOR BEING USED FOR BUSINESS OF RUNNING A PETROL PUMP AND HOTEL. THE STRUCTURE LEASED OUT TO HPCL WOULD SHOW THAT THE BUILDING WAS CONSTRUCTED FOR RUNNING A PETROL PUMP AND FOR NO OTHER PURPOSE. OF COURSE THE ASSESSEE COULD NOT S UBSTANTIATE THE ABOVE SAID PURPOSE BUT THE FACTS REMAINS THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME BEFORE THE REVENUE BECAUSE THE ISSUE WAS DEBATABLE AS HELD BY THE HONBLE P&H HIGH COURT IN THE CASE OF CIT VS. INDERSONS LEATHER (P) LTD. (SUPRA). CONSIDERIN G THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. ACCOR DINGLY WE DIRECT THE AO TO DELETE THE SAME IN ALL THE ASSESSMENT YEARS U NDER APPEAL. 6 7. IN THE RESULT ALL THE SIX APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2011. SD/- SD/- (D.KARUNAKAR RAO) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 2 8 TH SEPTEMBER 2011 PARIDA COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) PUNE 4. THE CIT PUNE 5. THE D.R ITAT PUNE BENCH PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL 7