SHARMAN APPLIANCES P. LTD, MUMBAI v. ITO WD 7(2)(3),

ITA 7356/MUM/2008 | 2005-2006
Pronouncement Date: 03-12-2010 | Result: Dismissed

Appeal Details

RSA Number 735619914 RSA 2008
Assessee PAN AAACS0755K
Bench Mumbai
Appeal Number ITA 7356/MUM/2008
Duration Of Justice 1 year(s) 11 month(s) 3 day(s)
Appellant SHARMAN APPLIANCES P. LTD, MUMBAI
Respondent ITO WD 7(2)(3),
Appeal Type Income Tax Appeal
Pronouncement Date 03-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 03-12-2010
Date Of Final Hearing 25-11-2010
Next Hearing Date 25-11-2010
Assessment Year 2005-2006
Appeal Filed On 31-12-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER AND SMT. ASHA VIJAYRAGHAVAN JUDICIAL MEMBER. I.T.A. NO. 7356/MUM/2008. ASSESSMENT YEAR : 2005-06. M/S SHARMAN APPLIANCES P. LTD. THE INCOME-TAX OFFICER 68/69 KANJUR VILLAGE ROAD VS. WARD-7(2)(3) OPP. NITCO MARBLES ROYAL PARK MUMBAI. KANJURMARG (E) MUMBAI 400042. PAN AAACS0755K APPELLANT. RESPONDENT. APPELLANT BY : SHRI ANIL SATHE. RESPONDENT BY : SHRI SANJEEV JAIN. O R D E R PER J. SUDHAKAR REDDY A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE CIT(APPEALS)-VII MUMBAI DATED 01-10-2008 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN THE FIRST APPELLATE AUTHORITY CONFIRMED THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 2 2. FACTS IN BRIEF: THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BU SINESS OF FINANCING. IT FILED ITS RETURN OF INCOME ON 27-10-2005 DECLARING A TOTAL INCOME OF RS.3 56 048/-. THE ASSESSEE SHOWED OPERATING INCOME OF RS.20 71 21 6/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO F URNISH DETAILS OF OPERATING INCOME. ON A PERUSAL OF THESE DETAILS THE AO FOUND THAT THE ASSESSEE HAD RECEIVED RENTAL INCOME OF RS.7 80 000/- BY LETTING OUT ITS O FFICE PREMISES AT ELPHINSTONE ROAD AND AT MATUNGA TO M/S SUMARIA APPLIANCES PVT. LTD. AND M/S GEM STONE INVESTMENT LTD. RESPECTIVELY. THE AO FOR THE DETAIL ED REASONS GIVEN IN HIS ORDER HAS COME TO A CONCLUSION THAT THE INCOME FROM RENT FROM THESE PREMISES WHICH ARE OWNED BY THE ASSESSEE IS TO BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NOT UNDER THE HEAD INCOME FROM BUSIN ESS. THE AO LEVIED A PENALTY U/S 271(1)(C) OF THE ACT. THE FIRST APPELLA TE AUTHORITY CONFIRMED THE SAME. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE MR. ANIL SA THE SUBMITTED THAT THE ISSUE WHETHER THE INCOME IN QUESTION IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION OR UNDER THE HEAD INCOME F ROM HOUSE PROPERTY IS A DEBATABLE ISSUE AND IN SUCH CIRCUMSTANCES PENALTY U /S 271(1)(C) CANNOT BE LEVIED. HE SUBMITTED THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE INCOME IN QUESTION IS ASSESSABLE ONLY UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. HE RELIED ON THE FOLLOWING CASE LAWS : ITO VS. ROBEN INVESTMENT P. LTD. 7 SOT 181 (MUM) ITA NO. 5958/MUM/2009 A.Y. 2003-04 E-BENCH IN TH E CASE OF SUMARIA AND CO. ORDER DATED 6 TH AUGUST 2010. 3 4. THE LEARNED DR MR. SANJEEV JAIN ON THE OTHER HAND SUPPORTED THE ORDER OF THE REVENUE AUTHORITIES AND SUBMITTED THAT THE ASSE SSEE HAS MERELY LET OUT THE PROPERTY AND IT IS NOT THE CASE OF THE ASSESSEE THA T CERTAIN OTHER SERVICES OR AMENITIES ARE PROVIDED TO THE TENANTS. HE ARGUED TH AT IT IS NOT CORRECT TO SAY THAT THE ASSESSEE HAS A BONAFIDE BELIEF AS THIS IS A STRAIGH T FORWARD CASE WHERE A WRONG CLAIM WAS MADE BY THE ASSESSEE FOR SAVING TAXES. 5. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPE RS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW WE HOLD AS FOLLOWS. 6. THE ASSESSEE IS IN THE BUSINESS OF FINANCING. IT WAS OWNER OF TWO OFFICE PREMISES WHICH WERE LET OUT FOR RENT. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY SUBMITS THAT THIS IS A CASE OF A SIMPLE LET OUT OF THE PROPERTY. IT IS NOT THE CASE OF THE ASSESSEE THAT CERTAIN SERVICES OR CERTAIN AMENI TIES WERE PROVIDED TO THE TENANTS ALONG WITH LETTING OUT OF THE PREMISES. UNDER SUCH CIRCUMSTANCES THE QUESTION OF OFFERING SUCH INCOME TO TAX ALONG WITH INCOME FROM FINANCE BUSINESS UNDER THE HEAD INCOME FROM BUSINESS IS WRONG. IN OUR CONSID ERED OPINION SUCH AN ACT CANNOT BE CONSIDERED INADVERTENT. THIS IS A CASE W HERE THE ASSESSEE IN OUR OPINION HAS WRONGLY CLASSIFIED ITS INCOME UNDER TH E HEAD INCOME FROM BUSINESS DESPITE A CLEAR POSITION OF LAW. THE ISSUE IS NOT A DEBATABLE ISSUE. IT IS A STRAIGHT CASE WHERE THE ASSESSEE SHOULD HAVE OFFERED THE INC OME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN OUR HUMBLE OPINION THERE CANNOT BE TWO VIEWS POSSIBLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. THUS WE UPHOLD THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE. 4 7. COMING TO THE CASE LAWS CITED BY THE ASSESSEE IN THE CASE OF SUMARIA & CO. (SUPRA) A COMMERCIAL PREMISES WAS LET OUT ALONG WI TH ALL THE AMENITIES FURNITURE FIXTURE EQUIPMENT AND AIR-CONDITIONERS ETC. THE AS SESSEE DISCONTINUED ITS BUSINESS IN THE YEAR 2001 AND THEREAFTER LEASED OUT THE PREM ISES TO ITS SISTER CONCERN WHICH IS ALSO IN THE SIMILAR LINE OF BUSINESS. THERE WAS AN ELEMENT OF DEBATE AS THE LETTING OUT IN THAT CASE WAS ALONG WITH AMENITIES ETC. NO S UCH DEBATE IS THERE IN THIS CASE. SIMILARLY IN THE CASE OF ROBEN INVESTMENT P. LTD. THERE WAS A DIFFERENCE OF OPINION AS TO THE HEAD OF ACCOUNT UNDER WHICH THE INCOME IN QUESTION IS TO BE TAXED BASED ON THE FACTS OF THAT PARTICULAR CASE. 8. THUS IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND DISMISS THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DEC.. 2010. SD/- SD/- (ASHA VIJAYRAGHAVAN) (J. SUDHAK AR REDDY) JUDICIAL MEMBER. AC COUNTANT MEMBER MUMBAI DATED: 3 RD DEC. 2010. WAKODE 5 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR I-BENCH (TRUE COPY) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI B ENCHES M UMBAI.