ITO 1(3)(2), MUMBAI v. SHAINA REAL ESTATE P. LTD, MUMBAI

ITA 40/MUM/2011 | 2005-2006
Pronouncement Date: 11-10-2013 | Result: Dismissed

Appeal Details

RSA Number 4019914 RSA 2011
Assessee PAN AAHCG7854G
Bench Mumbai
Appeal Number ITA 40/MUM/2011
Duration Of Justice 2 year(s) 9 month(s) 7 day(s)
Appellant ITO 1(3)(2), MUMBAI
Respondent SHAINA REAL ESTATE P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 11-10-2013
Date Of Final Hearing 01-10-2013
Next Hearing Date 01-10-2013
Assessment Year 2005-2006
Appeal Filed On 04-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDI CIAL MEMBER / ITA NO. 40 /MUM./ 2011 ( / ASSESSMENT YEAR : 20 0 5 06 ) INCOME TAX OFFICER WARD 1(3) 2 AAYAKAR BHAVAN 101 M.K. ROAD MUMBAI 400 020 .. / APP ELLANT V/S SHAINA REAL ESTATE PV T. LTD. 319 TULSIANI CHAMBERS 212 NARIMAN POINT MUMBAI 400 021 .... / RESPONDENT PERMANENT ACCOUNT NUMBER AAHCG7854G / ASSESSEE BY : NONE / REV ENUE BY : MRS. JOTHILAKSHMI NAYAK / DATE OF HEARING 01 . 10 .2013 / DATE OF ORDE R 11 - 10 - 2013 / ORDER / PER AMIT SHUKLA J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY T HE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 20 TH OCTOBER 2010 PASSED BY THE LEARNED COMMISSIONER (APPEALS) II MUMBAI. THE SOLE GROUND RAISED BY THE REVENUE IS THAT THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN LAW AND ON FACTS IN SHAINA REAL ESTATE PVT. LTD. 2 DELETING THE PEN ALTY OF RS. 3 84 000 LEVIED UNDER SECTION 271(1)(C) BY THE ASSESSING OFFICER. 2. NONE APPEARED ON BEHALF OF THE RESPONDENT ASSESSEE. WE HOWEVER PROCEED TO DISPOSE OFF THE REVENUES APPEAL ON MERIT S AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE . 3. F ACTS IN BRIEF : THE ASSESSEE COMPANY IS ENGAGED IN THE REAL ESTATE BUSINESS AND DEALING IN THE PROPERTY. DURING THE YEAR THE ASSESSEE HAS RECEIVED RENTAL INCOME IN RESPECT OF THE PROPERTY WHICH WAS LET OUT AT RS. 18 LAKHS. AGAINST THE SAID RENTAL INCOME THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 9 36 344 BY TREATING TREATED THIS RENTAL INCOME AS BUSINESS INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS HAS SUBMITTED AS UNDER: DURING THE YEAR THE ASSESSEE HA S RECEIVED RENTAL INCOME IN RESPECT OF PROPERTY. THE ASSESSEE HAS ALSO INCURRED EXPENDITURE LIKE PROPERTY TAX REPAIRS & MAINTENANCE RENT TELEPHONE EXP. CONVEYANCE AND TRAVELING & OTHER ROUTINE E XPENDITURE. THE ASSESSEE IS IN THE REAL ESTATE BUSINESS VARIOUS NEGOTIATIONS DISCUSSION AND MEETINGS WERE HELD DURING THE YEAR HOWEVER THERE IS NO CONCRETE BUSINESS PROPOSALS YET HENCE THE INCOME FROM PROPERTY GIVEN BE CONSIDER AS BUSINESS INCOME & NOT PROPERTY INCOME THEREFORE ALL THE BUSINESS EXPENSES INCU RRED DURING THE YEAR BE ALLOWED. THE ASSESSEES SUBMISSIONS WERE REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HIMSELF HAS USED THE WORD RENTAL INCOME IN THE PROFIT & LOSS ACCOUNT AND TDS CERTIFICATE ALSO GO TO SHOW THAT THE ASSESSE E HAS RECEIVED RENT FROM TWO CONCERNS . HE HAS ALSO NOTED THE FACT THAT IN THE ASSESSMENT YEAR 2004 05 THE ASSESSEE HAD SHOWN RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND IT WAS IN THIS YEAR THE ASSESSEE HAS CHANGED ITS STAND AND HAS SHOWN RENTAL INCOM E AS BUSINESS INCOME. AFTER DETAILED DISCUSSION HE TAXED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY. SUCH AN ORDER WAS THE SUBJECT MATTER OF THE FIRST APPEAL WHEREIN SHAINA REAL ESTATE PVT. LTD. 3 THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE HOWEVER NO FURTHER APPEAL WAS FILED AG AINST THE SAID ORDER. 4. DURING THE COURSE OF PENALTY PROCEEDINGS THE ASSESSEE SUBMITTED THAT IT WAS UNDER A BONAFIDE BELIEF THAT RENTAL INCOME FROM AN EXPLOITATION OF BUSINESS ON ASSET HAS TO BE TREATED AS BUSINESS INCOME AND IN ANY CASE SHOWING THE INCOME UNDER DIFFERENT HEAD WAS AN HONEST AND BONAFIDE MISTAKE. RELIANCE WAS ALSO PLACED ON VARIOUS DECISIONS ON THIS SCORE WHICH HAS BEEN NOTED BY THE ASSESSING OFFICER IN THE PENALTY ORDER. HOWEVER THE ASSESSEES EXPLANATION HAS BEEN REJECTED BY THE A.O. ON THE GROUND THAT NATURE AND SOURCE OF INCOME WAS KNOWN TO THE ASSESSEE AND DESPITE THAT IT HAS CLAIMED THE INCOME AS BUSINESS INCOME SO AS TO GET BENEFIT OF ALLOWABILITY OF CERTAIN EXPENSES. ACCORDINGLY AFTER DETAIL DISCUSSION HE LEVIED THE PENALTY OF RS . 3 84 000 U/S 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 5. BEFORE THE LEARNED COMMISSIONER (APPEALS) IT WAS ARGUED THAT WHETHER SUCH A RECEIPT CAN BE TAXED UNDER THE HEAD BUSINESS INCOME OR INCOME FROM HOUSE PROPERTY IS A DEBATAB LE ISSUE AND MERELY BECAUSE AN INCOME IS ASSESSED UND E R A PARTICULAR HEAD THAT DOES NOT WARRANT LEVY OF PENALTY UNDER SECTION 271(1)(C). THE LEARNED COMMISSIONER (APPEALS) ACCEPTED THE ASSESSEES EXPLANATION AND DELETED THE PENALTY AFTER OBSERVING AND HO LDING AS UNDER: 4. I HAVE PERUSED THE FACTS OF THE CASE. THE ONLY ISSUE IS TAXABILITY OF RENTAL INCOME WHETHER UNDER BUSINESS HEAD OF INCOME OR AS HOUSE PROPERTY INCOME. THIS HAS BEEN A HIGHLY CONTROVERSIAL AND DEBATED ISSUE OVER SEVERAL YEARS. THERE HAVE BEEN A VARIETY OF DECISIONS IN FAVOUR OF ASSESSEE OFFERING RENTAL INCOME AS BUSINESS INCOME. EVEN OTHERWISE IT IS MORE A QUESTION OF FACT THAN OF LAW. THERE IS NO HARD AND FAST RULE THAT EVERY RENTAL INCOME HAS TO BE OFFERED AS HOUSE PROPERTY INCOME. IT'S A DIFFERENT MATTER THAT IN APPELLANT'S CASE THE FINDING GIVEN BY THE FIRST APPELLATE COMMISSIONER HAS BEEN ACCEPTED BY THE ASSESSEE. BUT THAT DOES NOT MEAN THAT THE CASE BECOMES LIABLE TO PENALTY. ON THE DATE WHEN RETURN OF INCOME WAS FILED BY THE AS SESSEE THERE WERE CLEARLY TWO VIEWS IN EXISTENCE AS FAR SHAINA REAL ESTATE PVT. LTD. 4 AS THE LEGAL SITUATION IS CONSIDERED. IN SUCH A SITUATION ASSESSEE CLAIMING A PARTICULAR LINE WILL DEFINITELY AMOUNT TO A BONAFIDE CLAIM AND THEREFORE IN SUCH SITUATIONS IMPOSITION OF PENALTY IS NOT JUSTIFIED. THE PENALTY IMPOSED IS THEREFORE CANCELLED. 6. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE ORIGINAL FINDINGS OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HAS TRIED TO SHOW THE INCOME FROM HOUSE PROPER TY UNDER THE HEAD BUSINESS INCOME SOLELY FOR THE PURPOSE OF CLAIMING EXPENDITURE. SUCH A CHANGE OF HEAD WAS NOT A BONAFIDE MISTAKE BUT DONE PURPOSELY TO REDUCE TAXABLE INCOME AND THEREFORE THE PENALTY HAS RIGHTLY BEEN LEVIED BY THE ASSESSING OFFICER ON THIS SCORE. 7. WE HAVE CAREFULLY CONSIDER ED THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) AND ALSO THE SUBMISSIONS MADE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE . THE MAIN ISSUE IS WHETHER THE PENALTY UNDER SECTI ON 271(1)(C) CAN BE LEVIED ON THESE FACTS AND ON CHANGE OF HEAD OF INCOME. IN THE QUANTUM PROCEEDINGS THE INCOME HAS RIGHTLY BEEN ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS THE ASSESSEE HAS MERELY LET OUT ITS PROPERTY FOR THE PURPOSE OF EARNI NG RENTAL INCOME. THERE CANNOT BE ANY BUSINESS INCOME FROM LETTING OUT A PROPERTY WITHOUT ANY OTHER ATTENDANT FACTS WHICH ARE ASSOCIATED WITH CARRYING ON BUSINESS AND PROFESSION. HOWEVER FOR THE PURPOSE OF THE PENALTY PROCEEDING WHICH ARE SEPARATE AND DI STINCT FROM THE ASSESSMENT PROCEEDINGS THE SAME EXPLANATION AND THE FACTS HAVE TO BE VIEWED DIFFERENTLY FOR THE PURPOSE OF EXAMINING WHETHER THE ASSESSEE IS GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. BEING A PENAL PROVISION SUCH AN EXPLANATION HAS TO BE SEEN FROM THE ANGLE WHETHER THERE IS A PROBABLE EXPLANATION WHICH CAN BE SAID TO BE BASED ON BONAFIDE BELIEF AT THE TIME OF FILING OF RETURN OF INCOME. IF THE ASSESSEE HAD THE BELIEF THAT IT IS SYSTEMATICALLY EXPLOI TING ITS EXISTING BUSINESS ASSET FOR EARNING INCOM E AND SUCH AN INCOME CAN BE CLA S S IFIED AS BUSINESS INCOME THEN UNLESS IT IS REBUTTED THAT SUCH ON BELIEF OR EXPLANATION IS FALSE OR NOT SHAINA REAL ESTATE PVT. LTD. 5 BONAFIDE THEN ITS EXPLANATION HAS TO BE ACCEPTED AT LEAST IN THE PENA LTY PROCEEDINGS. THERE CANNOT BE A QUESTION OF FURNISHING OF INACCURATE PARTICULARS OF INCOME WHEN ALL THE DETAILS HAVE BEEN FURNISHED AT THE TIME OF FILING OF RETURN OF INCOME . T HE ONLY ISSUE IS UNDER WHICH HEAD IT SHOULD BE ASSESSED. THE ASSESSABILITY OF AN INCOME UNDER A PARTICULAR HEAD DEPENDS UPON VARIOUS FACTS AND CIRCUMSTANCES AND AT TIMES THERE ARE VERY THIN LINE DEMARCATION ON WHICH IT CAN BE ADJUDGED ABOUT THE NATURE OF INCOME AND ITS CLASSIFICATION. THIS HAS TO BE CLEARLY BROUGHT OUT ON THE BASIS OF MATERIAL AND EVIDENCE ON RECORD. ONCE THAT HAS NOT BEEN DONE THEN CLEARLY IT BECOMES A VERY DEBATABLE ISSUE AND IN THAT SITUATION THERE CANNOT BE A CASE OF ASSESSEE BEING GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME U/S.271(1)(C). IN THIS CAS E CLEARLY IT HAS NOT BEEN BROUGHT ON RECORD BY THE A.O. THAT ASSESSEES EXPLANATION IS ACTUALLY FALSE ON THE BASIS OF SOME EVIDENCE OR MATERIAL. THE PENALTY U/S.271(1)(C) CANNOT BE SUSTAINED IN SUCH A SITUATION. THUS UNDER THESE CIRCUMSTANCES WE UPHOLD THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) DELETING THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 8. 8 . IN THE RESULT REVENUES APPEAL IS TREATED AS DISMISSED. 11 - 10 - 2013 ORDER PRONOUNCED IN THE OPEN COURT ON 11 - 10 - 2013 . SD/ - SD/ - SD/ - D. KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI DATED : 11 - 10 - 2013 SHAINA REAL ESTATE PVT. LTD. 6 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE ; (2) / THE REVENUE; (3) / THE CIT(A ) ; (4) / THE CIT MUMBAI CITY CONCERNED ; (5) / THE DR ITAT M UMBAI ; (6) / GUARD FILE . / TRUE COPY / BY ORDER / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY ./ASSTT. REGISTRAR) / ITAT MUMBAI