EUROLINK TRADING P. LTD, MUMBAI v. ITO 9(1)(3), MUMBAI

ITA 2925/MUM/2010 | 2004-2005
Pronouncement Date: 27-07-2011 | Result: Allowed

Appeal Details

RSA Number 292519914 RSA 2010
Assessee PAN AAACE6012F
Bench Mumbai
Appeal Number ITA 2925/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 13 day(s)
Appellant EUROLINK TRADING P. LTD, MUMBAI
Respondent ITO 9(1)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted J
Tribunal Order Date 27-07-2011
Date Of Final Hearing 20-07-2011
Next Hearing Date 20-07-2011
Assessment Year 2004-2005
Appeal Filed On 13-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 2925/MUM/2010 (ASSESSMENT YEAR: 2004-05) M/S. EUROLINK TRADING P. LTD. INCOME TAX OFFICER - 9(1)(3) 1 JER MANSION V.P. VARDE MARG AAYAKAR BHAVAN M.K. ROAD BANDRA (W) MUMBAI 400020 VS. MUMBAI 400020 PAN - AAACE 6012 F APPELLANT RESPONDENT APPELLANT BY: SHRI KESHAV B. BHUJLE RESPONDENT BY: SHRI SANJAY GHADGAY O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XIX MUMBAI DATED 09.02.2010 AGAINST PENALTY UNDER SECTI ON 271(1)(C) OF ` 2 48 901/-. 2. BRIEFLY STATED ASSESSEE FILED RETURN FOR THE ASSES SMENT YEAR DECLARING LOSS OF ` 3 53 990/- . THE A.O. NOTICED THAT ASSESSEE HAD DIS CONTINUED THE BUSINESS OF TRADING IN COMPUTER SOFTWARE AND HARDWA RE BUT HAS SHOWN RECEIPTS OF ` 3 75 000/- UNDER THE HEAD SERVICE CHARGES. HE NOTIC ED THAT THIS AMOUNT WAS RECEIVED AS RENT IN RESPECT OF OFFICE PR EMISES LET OUT AT ` 75 000/- PER MONTH. INVOKING THE PRINCIPLES ESTABLI SHED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SHAMBU INVESTM ENT PVT. LTD. 267 ITR 143 THE A.O. BROUGHT TO TAX THE RENTAL INCOME RECEI VED UNDER THE HEAD HOUSE PROPERTY WHICH RESULTED IN CONVERTING THE LOS S RETURN INTO A POSITIVE INCOME RETURN. THE COMPANY DID NOT PREFER ANY APPEA L AS THE SAID PROPERTY WAS SUBSEQUENTLY SOLD AND LITIGATION WOULD RESULT I N LOT OF DISPUTES/ EXPENDITURE. THE A.O. HOWEVER DECIDED TO LEVY PEN ALTY UNDER SECTION 271(1)(C) ON THE REASON THAT ASSESSEE HAS FILED INA CCURATE PARTICULARS OF INCOME AND THEREBY CONCEALING INCOME. ASSESSEE SUBM ITTED BEFORE THE CIT(A) THAT THE PROPERTY WAS BUSINESS PREMISES AND BECAUSE ASSESSEE HAS ITA NO. 2925/MUM/2010 M/S. EUROLINK TRADING P. LTD. 2 DISCONTINUED THE BUSINESS THE OFFICE PREMISES WAS LET OUT FOR A SHORT PERIOD BEFORE THE SAME WAS SOLD AND SINCE ASSESSEE WAS REQ UIRED TO PAY SOCIETY CHARGES AND MAINTENANCE CHARGES TO THE CO-OPERATIVE SOCIETY THESE ARE GIVEN TO THE THIRD PARTY FOR LEASE TEMPORARILY AND THE RECEIPTS WERE SHOWN AS SERVICE CHARGES AND THERE IS NO INTENTION TO FURNIS H ANY INACCURATE PARTICULARS. IT WAS FURTHER CONTENDED THAT THE PROP ERTY WAS BUSINESS PREMISES AND WHETHER THE INCOME WAS ASSESSABLE UNDE R THE HEAD BUSINESS OR HOUSE PROPERTY IS A DEBATABLE ISSUE THEREFORE P ENALTY IS NOT LEVIABLE. THE CIT(A) HOWEVER DID NOT AGREE ON THE REASON THAT T HE HON'BLE SUPREME COURT HAS ALREADY PRONOUNCED THE JUDGMENT ON 26.01. 2003 AND THEREFORE ON THE DATE OF FILING THE RETURN ASSESSEE WAS VERY WELL AWARE THAT THE PROPERTY WAS TO BE ASSESSED UNDER THE HEAD HOUSE P ROPERTY. THEREFORE IT IS A CASE FOR LEVY OF PENALTY. THE PENALTY WAS ACCORD INGLY CONFIRMED. ASSESSEE IS AGGRIEVED. 3. THE LEARNED COUNSEL SUBMITTED THAT THERE NEITHER AN INTENTION OF CONCEALMENT OF INCOME NOR THERE WAS ANY SCOPE FOR F URNISHING INACCURATE PARTICULARS AS THE ASSESSEE OCCUPIED THE PREMISES F OR THE PURPOSE OF BUSINESS AND UNDER SECTION 22 OF THE I.T. ACT THE I NCOME FROM PREMISES OCCUPIED FOR BUSINESS CANNOT BE CONSIDERED UNDER TH E HEAD HOUSE PROPERTY. MOREOVER IT WAS SUBMITTED THAT ASSESSEE HAS SOLD T HE PROPERTY IN THE NEXT YEAR AND ONLY THE LEASED FOR A PART OF THE YEAR FRO M NOVEMBER 2003. THEREFORE ONLY FIVE MONTHS RENT WAS RECEIVED DURING THE YEAR AND FOR MOST PART OF THE YEAR THE PREMISES WAS OCCUPIED BY THE A SSESSEE FOR THE PURPOSE OF BUSINESS. THEREFORE THE SERVICE CHARGES RECEIVED FROM THE TENANTS WERE SHOWN AS SERVICE CHARGE RECEIVED IN THE P & L ACCOU NT. IT WAS FURTHER SUBMITTED THAT THE PROPERTY WAS ULTIMATELY SOLD IN THE NEXT YEAR AND SINCE THE ISSUES IS ONLY OF HEAD OF INCOME RELYING OF THE PRINCIPLES LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AW AITA PROPERTIES P. LTD. ITA NO. 731 OF 2009 IT WAS SUBMITTED THAT THERE C ANNOT BE ANY PENALTY UNDER SECTION 271(1)(C) CONSEQUENT TO ASSESSEES FA ILURE TO OFFER THE INCOME UNDER THE CORRECT HEAD OF INCOME. HE ALSO RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CAS E OF RELIANCE PETROPRODUCTS LTD 322 ITR 158 ON THE REASON THAT TH E CLAIM WHICH IS NOT ITA NO. 2925/MUM/2010 M/S. EUROLINK TRADING P. LTD. 3 ACCEPTED DOES NOT LEAD TO PENALTY AND FURTHER THE S PECIFIC DECISION OF THE HON'BLE P&H HIGH COURT IN THE CASE OF CIT VS. INDER SONS LEATHER P. LTD. 328 ITR 167 TO SUBMIT THAT THERE CANNOT BE ANY PENALTY WHEN THE A.O. TREATS RENTAL RECEIPT UNDER A DIFFERENT HEAD. 4. THE LEARNED D.R. HOWEVER RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A) TO SUBMIT THAT THE INCOME WAS CORRECTLY ASSE SSABLE UNDER THE HEAD HOUSE PROPERTY AND THEREFORE THE ASSESSEE HAS FURNI SHED A LOSS RETURN INSTEAD OF PROFIT RETURN. 5. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE ASSE SSMENT ORDER ASSESSEE ENTERED INTO A BUSINESS SERVICE AGREEMENT W.E.F. 11 TH DAY OF NOVEMBER 2003 WITH M/S. TVB MARKETING INDIA PVT. LTD. FOR GR ANTING CERTAIN FACILITIES TO THE BUSINESS CENTRE AT NO. 1 JER MANSION BANDRA. THE A.O. ON EXAMINATION OF THE AGREEMENT BETWEEN THE PARTIES AGREED THAT AS SESSEE HAS LET OUT FLAT NO. 1 ALONGWITH FURNITURE & FIXTURES FITTINGS ETC. A ND THE SAID SPACE AND FACILITIES WERE GRANTED TO THE CLIENT TO BE USED AS OFFICE FOR COMPENSATION OF ` 75 000/- PER MONTH. THIS INDICATE THAT WHAT WAS LET OUT BY A SSESSEE WAS THE OFFICE PREMISES UNDER ITS OCCUPATION AND THE SERVICE CHARG ES RECEIVED WERE FOR A PERIOD OF FIVE MONTHS ONLY DURING THE YEAR. FOR BAL ANCE OF THE PERIOD THE PREMISES WAS UNDER THE OCCUPATION OF ASSESSEE AS A BUSINESS PREMISES THE FACT OF WHICH WAS NOT DISPUTED. THE A.O. ALSO HAS N OT ESTIMATED THE ANNUAL LETTING VALUE BUT SIMPLY TAKEN THE SERVICE CHARGES RECEIVED UNDER THE HEAD HOUSE PROPERTY WITHOUT CONSIDERING THE DEDUCTION OF INTEREST WHICH THE ASSESSEE SEEMS TO HAVE BEEN PAID. THERE IS NO DISCU SSION ABOUT THE SERVICE CHARGES RECEIVABLE ON FURNITURE & FIXTURES WHICH DO ES NOT FALL UNDER THE HEAD HOUSE PROPERTY. THIS INDICATES THAT THE A.O. SIMPLY SHIFTED THE INCOME OFFERED UNDER THE HEAD BUSINESS TO THE HEAD HOUSE PROPER TY WITHOUT EXAMINING THE OTHER FACTS AND LAW. IN THESE CIRCUMSTANCES IT CAN NOT BE STATED THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OR MADE A MALA FIDE CLAIM. ASSESSEE MAY BE UNDER THE IMPRESSION THAT SINCE IT IS A BUSINESS PREMISES IN A BUSINESS CENTRE AND LEASED AS SUCH ALONG WITH FIXTURES AND F URNITURE WHEN ITS OWN BUSINESS WAS DISCONTINUED THE INCOME CAN BE BUSINE SS INCOME. IN VIEW OF THIS WE ARE OF THE OPINION THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE ITA NO. 2925/MUM/2010 M/S. EUROLINK TRADING P. LTD. 4 AND THE FACTUAL ASPECT OF THE CASE DO INDICATE THAT IT IS ONLY THE SHIFTING OF HEAD OF INCOME WHICH RESULTED IN POSITIVE INCOME AS AGA INST LOSS CLAIM MADE BY THE ASSESSEE WHICH INCLUDE OTHER EXPENDITURE FOR MAINT AINING CORPORATE STRUCTURE. WE ARE OF THE OPINION THAT THERE IS NO CASE FOR LEV Y OF PENALTY EITHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS AS NO CASE WAS MADE OUT BY THE A.O. ON EITHER OF THE ASPECTS. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AWAITA PROPERTIES PVT. LTD. IN ITA NO. 731 OF 2009 UPHELD THE ITATS FINDINGS THAT THERE IS NO CONCEALMENT ON THE PART OF ASSESSEE CONSEQUENT TO THE FAILURE TO OFFER THE INCOME UNDER THE CORRECT HEAD OF INCOME. THE HON'BLE SUPREME COURT ALSO IN THE CASE OF RELIA NCE PETROPRODUCTS LTD (SUPRA) UPHELD THE PRINCIPLES THAT THERE CANNOT BE ANY CONCEALMENT OF INCOME AND LEVY OF PENALTY WHEN ASSESSEE MAKES A BONAFIDE CLAIM WHICH WAS NOT ACCEPTED BY THE REVENUE. IN VIEW OF THIS WE ARE OF THE OPINION THAT THERE IS NO SCOPE FOR PENALTY. 6. THE CIT(A) HAS TRIED TO JUSTIFY THAT ASSESSEE WAS A WARE ABOUT THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF SHAMBU INVESTMENT PVT. LTD. AND THE ASSESSEE SHOULD HAVE O FFERED THE INCOME UNDER HOUSE PROPERTY. IT IS NOT POSSIBLE TO APPLY THE PRI NCIPLES TO EVERY SITUATION AS MADE OUT BY THE CIT(A) WHILE CONFIRMING THE PENALTY IN THIS CASE. THERE CAN BE GENUINE DIFFERENCE OF OPINION IN APPRECIATING TH E PRINCIPLES OF LAW BUT IT DOES NOT MEAN THAT ASSESSEE DELIBERATELY TRIED TO C ONCEAL THE INCOME. UNDER THE FACTS OF THE PRESENT CASE THERE IS NO SCOPE FOR CONSIDERING THAT THERE IS CONCEALMENT OF INCOME. IN THE SAME WAY THERE IS NO CASE FOR FURNISHING INACCURATE PARTICULARS AS ALL THE DETAILS INCLUDING THE AGREEMENT WERE PLACED ON RECORD. THEREFORE WE HAVE NO HESITATION IN CANC ELLING THE PENALTY. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 27 TH JULY 2011 ITA NO. 2925/MUM/2010 M/S. EUROLINK TRADING P. LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XIX MUMBAI 4. THE CIT IX MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.