MADHUSUDAN NAGU GHAVTE, PUNE v. ITO 26(2)(4), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI RAJENDRA SINGH A.M. AND SHRI V. DURGA RAO J.M. ITA NOS. 2276 & 2277/MUM/2010 ASSESSMENT YEAR: 2003-04 & 2004-05 MADHUSUDAN NAGU GHAVTE APPELLANT FLAT # 07 MONESH PARK NEAR GARDEN HOTEL THANE NAKA OLD PANVEL 410 206 (PAN AEMPG2068J) VS. INCOME TAX OFFICER 26(3)(4) RESPONDENT MUMBAI 400 002. APPELLANT BY : MR. D.Y. PANDIT RESPONDENT BY : MR. A.K. NAYAK . ORDER PER V. DURGA RAO J.M.: BOTH THESE APPEALS L FILED BY THE ASSESSEE ARE DI RECTED AGAINST THE ORDERS OF CIT(A)- XXVI MUMBAI FOR THE ASSESSME NT YEAR 2003-04 & 2004-05. SINCE IDENTICAL ISSUE IS INVOLVED IN THE SE APPEALS THE SAME WERE HEARD TOGETHER AND THEREFORE A COMMON O RDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. WE FIND THAT THERE IS A DELAY OF 252 DAYS IN FIL ING THE APPEALS BEFORE US. TO THIS EFFECT THE ASSESSEE HAS FILED A N AFFIDAVIT WHEREIN HE AFFIRMED THAT THE ASSESSEE CAME TO KNOW IN A MEETI NG CONDUCTED BY HIS UNION LEADERS BELATEDLY THAT THE PENALTY LEV IED IS NOT IN ACCORDANCE WITH LAW. THEREFORE THERE WAS A DELAY I N FILING THE APPEAL BEFORE THE ITAT. HE PRAYED THAT THE DELAY MAY BE CO NDONED AS THERE IS A REASONABLE CAUSE FOR FILING THE APPEALS LATE 252 DAYS. TA NOS. 2276 & 2277/M/10 M/S MADHUSUDAN NAGU GHAVTE 2 3. THE LEARNED DR HAS NOT OBJECTED TO CONDONE THE D ELAY AND ADMITTING THE APPEALS. IN THE INTEREST OF JUSTICE WE CONDONE THE DELAY AND ADMIT THE APPEAL. 4. A COMMON GROUND RAISED BY THE ASSESSEE IN THESE APPEALS IS PERTAINING TO LEVY OF PENALTY OF RS. 23 799/- U/S 2 71(1)(C) OF THE ACT. 5. TO DECIDE THESE APPEALS WE REFER TO THE FACTS O F THE CASE FOR AY 2003-04. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD RECEIVED LEASE RENT OF RS. 62 875/- DURING THE PREV IOUS YEAR RELEVANT TO AY UNDER CONSIDERATION WHICH WAS ADDED TO THE T OTAL INCOME OF THE ASSESSEE TREATING THE SAME INCOME FROM HOUSE PROPE RTY. THE AO NOTICED THAT THE MAINTENANCE EXPENSES OF RS. 7 812/ - WHICH WAS NOT SHOWN IN THE ORIGINAL RETURN FILED FOR THE YEAR. TH E AO WAS OF THE VIEW THAT THE ASSESSEE HAS NOT SHOWN THIS RECEIPT OF TH E AMOUNT IN ORIGINAL RETURN OF INCOME AND THE SAME IS BROUGHT T O THE TAXATION AFTER THE DETECTION BY THE DEPARTMENT U/S 148 OF TH E ACT AND AFTER CONFRONTING THE FACTS ABOUT RECEIPT OF SUCH INCOME TO THE ASSESSEE. THEREFORE THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD CONCEALED T HE PARTICULARS OF HIS INCOME. ACCORDINGLY HE LEVIED PENALTY OF RS. 7 894/- U/S 271(1)(C) OF THE ACT. THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO. 6. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE H AS CONTENDED THAT THE AO WHILE TREATING THE RENT OF RS. 62 875/- PAID BY THE EMPLOYER OF THE ASSESSEE TO ASSESSEE AS INCOME FRO M HOUSE PROPERTY FAILED TO TAKE INTO ACCOUNT THAT THE EMPLOYER HAS A LREADY CALCULATED THE AMOUNT OF RS. 19 937/-AS VALUE OF PERQUISITE OF PROVIDING RENT FREE ACCOMMODATION AS PERQUISITE U/S 17(2) OF THE ACT AN D ADDED IT AS A PART OF SALARY BY APPLYING THE PROVISION OF RULE 3( 1) OF IT RULES AND DID NOT REDUCE THE SAID VALUE OF PERQUISITE OF RS. 19 937/- FROM THE COMPUTATION OF INCOME AT THE TIME OF REASSESSMENT WHICH RESULTED IN THE DOUBLE TAXATION OF INCOME. THEREFORE THE LEARN ED COUNSEL FOR THE TA NOS. 2276 & 2277/M/10 M/S MADHUSUDAN NAGU GHAVTE 3 ASSESSEE HAS POINTED OUT THAT THE AO AS WELL AS CIT (A) OUGHT TO HAVE HELD THAT THERE WAS NO WILLFUL CONCEALMENT OF ANY I NCOME BUT THERE WAS CHANGE OF VIEW BY TAXING INCOME UNDER DIFFERENT HEAD I.E. TAXING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME FROM SALARY AND NO PENALTY SHOULD HAVE BEE N LEVIED. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAD NO WILLFUL INTENTION TO CONCEAL THE INCOME OR ANY D ELIBERATE INTENTION TO DEFRAUD THE REVENUE AS HE WAS UNDER THE BONAFIDE BELIEF THAT WHATEVER INCOME RECEIVED FROM THE EMPLOYER WAS INCL UDED IN THE SALARY BY EMPLOYER COMPANY AND SUBJECTED TO TDS. TH E LEARNED AR HAS CANVASSED THAT SIMILAR ISSUE AROSE BEFORE THE I TAT MUMBAI BENCHES IN VARIOUS CASES INCLUDING THE DECISION IN THE CASE OF SHAILESH R. PRAJAPATHI IN ITA NO. 1708/MUM/2010 VID E ORDER DATED 28 TH JANUARY 2011(WHERE JM WAS ONE OF THE PARTY) AND I N THE CASE RAVINDRA LAXMAN SATHE IN ITA NO. 2828/M/08 FOR AY 2 001-02 VIDE ITS ORDER DATED 22 ND DECEMBER 2009 WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE THE ITAT CANCELLED THE PE NALTY LEVIED U/S 271(1)(C) OF THE ACT. IN VIEW OF THE ABOVE HE PLEA DED THAT THE PENALTY MAY BE CANCELLED. 7. ON THE OTHER HAND THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE REVENUE AUTHORITIES. THE LEARNED DR HAS SUBMITT ED THAT THE ASSESSEE HAS RECEIVED ARREARS OF LEASE RENT AND MAI NTENANCE OF EXPENSES FROM THE EMPLOYER WHICH WERE NOT SHOWN IN THE ORIGINAL RETURN OF INCOME AND THE SAME WERE BROUGHT TO TAXAT ION AFTER THE DETECTION BY THE DEPARTMENT. THEREFORE HE CONTEND ED THAT THE ASSESSEE HAS WILLFULLY CONCEALED THE PARTICULARS OF HIS INCOME TO EVADE TAX AND THE REVENUE AUTHORITIES HAVE RIGHTLY INITIA TED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED PEN ALTY ACCORDINGLY. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE SUBMISSION OF THE ASSESSEE IS THAT THERE IS NO WILLFUL CONCEALMENT OF INCOME BUT ONLY CHANGE OF VI EW BY TAXING TA NOS. 2276 & 2277/M/10 M/S MADHUSUDAN NAGU GHAVTE 4 INCOME UNDER DIFFERENT HEAD NAMELY TAXING INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY INSTEAD OF INCOME FRO M SALARY. HIS EXPLANATION BEFORE THE REVENUE AUTHORITIES IS THAT HE WAS UNDER BONAFIDE BELIEF THAT WHATEVER INCOME RECEIVED FROM THE EMPLOYER WAS INCLUDED IN THE SALARY BY EMPLOYER AND SUBJECTED TO TAX. THEREFORE WE ARE OF THE VIEW THAT THE ASSESSEE HAS NO INTENTION TO CONCEAL THE INCOME OR ANY DELIBERATE INTENTION TO DEFRAUD THE R EVENUE. THE REVENUE AUTHORITIES HAVE NOT BROUGHT ANY MATERIAL O N RECORD TO ESTABLISH THAT THE ASSESSEE HAS WILLFULLY AND DELIB ERATELY CONCEALED HIS INCOME TO EVADE TAX. MOREOVER THE SIMILAR ISSU EAROSE BEFORE THE ITAT IN VARIOUS CASES (SUPRA) WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES AS RAISED IN THIS APPEAL THE ITAT CA NCELLED THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. IN VIEW OF THE FA CTS AND CIRCUMSTANCES OF THE CASE WE HEREBY SET ASIDE THE ORDERS OF THE CIT(A) AND CANCEL THE PENALTY OF RS. 7 894/- FOR AY 2003-04 AND RS. 6 375/- FOR AY 2004-05 LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 9. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE A LLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF FEBRUARY 2011. SD/- SD/- (RAJDENDRA SINGH) (V. DURGA RA O) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 25 TH FEBRUARY 2011. TA NOS. 2276 & 2277/M/10 M/S MADHUSUDAN NAGU GHAVTE 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE G BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV