ELECMECH CORPORATION, MUMBAI v. ITO 12(30(3), MUMBAI

ITA 896/MUM/2009 | 2003-2004
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 89619914 RSA 2009
Assessee PAN AAAFE6932F
Bench Mumbai
Appeal Number ITA 896/MUM/2009
Duration Of Justice 1 year(s) 3 month(s) 19 day(s)
Appellant ELECMECH CORPORATION, MUMBAI
Respondent ITO 12(30(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 31-05-2010
Date Of Final Hearing 12-05-2010
Next Hearing Date 12-05-2010
Assessment Year 2003-2004
Appeal Filed On 10-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI. R.S. SYAL (A.M.) AND SHRI. VIJAY PAL R AO (J.M) ITA NO.896/MUM/2009 ASSESSMENT YEAR: 2003-2004 ELECMECH CORPORATION 18 ANDHERI INDL. ESTATE OFF.VEERA DESAI RD. ANDHERI (W) MUMBAI 400 053. PAN : AAAFE6932F VS. I.T.O. 12(3)(3) AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TUSHAR KAMDAR RESPONDENT BY : DR ANIL KUMAR SINGH O R D E R PER VIJAY PAL RAO J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 08.12.2008 OF LEARNED CIT(A)-XII MUMBAI ARISING FR OM PENALTY ORDER PASSED U/S.271(1)(C) OF THE I.T. ACT FOR THE ASSESSMENT YE AR 2003-04. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APPEAL. HOWEVER THE ONLY ISSUE ARISES IS WHETHER IN THE FACTS AND CIRCU MSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN CONFIRMING THE PENALTY LEVIE D U/S.271(1)(C) OF THE ACT AMOUNTING TO RS.28 06 510/-. 3. DURING THE ASSESSMENT PROCEEDING THE ASSESSEE NO TICED THAT THE ASSESSEE HAS RECEIVED RENT INCOME OF RS.72 45 328/- FROM HONGKONG & SHANGHAI BANKING CORPORATION AND IDBI BANK. THE A SSESSEE TREATED THE RENTAL INCOME AS BUSINESS INCOME INSTEAD OF INCOME FROM HOUSE PROPERTY. ACCORDINGLY THE AO TREATED THE RENTAL INCOME AS IN COME FROM HOUSE PROPERTY. SUBSEQUENTLY PENALTY PROCEEDINGS U/S. 271(1)(C) WERE ALSO INITIATED FOR FILING THE INCORRECT PARTICULARS OF I NCOME AND CONSEQUENTLY PENALTY RS.28 06 510/- BEING 100% OF TAX EVADED WAS LEVIED VIDE PENALTY ITA NO.896/MUM/2009 A.Y.: 2003-2004 2 ORDER DATED 24.03.2008. ON APPEAL THE CIT(A) CONF IRMED THE PENALTY LEVIED BY THE AO ON THE GROUND THAT THE ASSESSEE AGREED FO R THE ADDITION THEREFORE THERE WAS NO NEED FOR THE AO TO ESTABLISH THE SAME AS CONCEALED INCOME BY RELYING ON THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF WESTERN AUTOMOBILES VS. CIT (1978) 112 ITR 1048 (BO M). 4. BEFORE US THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE LET OUT ITS PREMISES TO IDBI BANK AND HONGKONG & SH ANGHAI BANKING CORPORATION FOR THE PERIOD OF 33 MONTHS. THE ASSE SSEE TAKEN THE PREMISES FROM MIDC ON LONG LEASE AND THEREAFTER INCURRED SUB STANTIAL EXPENDITURE AMOUNTING TO RS.38 24 650/- IN ORDER TO EXPLOIT IT S COMMERCIAL PROPERTY BEFORE GIVING TO IDBI BANK. SINCE THE ASSESSEE M ADE THE PROPERTY READY FOR COMMERCIAL USE AS PER THE SPECIFICATIONS AND REQUIR EMENTS OF BANKS THEREFORE THE ASSESSEE HAD BONA-FIDE BELIEF THAT T HE RENT AND SERVICE CHARGES ON COMMERCIAL EXPLOITATION OF THE PROPERTY WAS CHAR GEABLE TO TAX U/S.28 OF THE I.T. ACT AS BUSINESS INCOME. HE HAS FURTHER S UBMITTED THAT THE ASSESSEE HAD CLEARLY DISCLOSED AND MENTIONED IN THE RETURN OF INCOME ABOUT THE NATURE OF INCOME FROM BANKS I.E. RENT AND SERVI CE CHARGES WITH THE RESPECTIVE AMOUNT IN THE SCHEDULE AND GROUPING FOR MING PART OF THE PROFIT & LOSS THE RETURN OF INCOME WHICH CLEARLY SHOWS THE N ATURE OF INCOME RECEIVED BY THE ASSESSEE FROM BANKS. THEREFORE THERE IS N O QUESTION OF FURNISHING INCORRECT PARTICULARS OF INCOME. THE LD AR HAS CON TENDED THAT THE MERE REJECTION OF THE CLAIM OF THE ASSESSEE FOR TAXABILI TY OF INCOME UNDER A PARTICULAR HEAD OF INCOME IS BY ITSELF NOT SUFFICIE NT TO WARRANT IMPOSITION OF PENALTY U/S.271(1)(C). IT IS SUBMITTED BY THE AR THAT EVEN THE ISSUE OF TREATING THE INCOME AS BUSINESS OR INCOME FROM HOUS E PROPERTY IS A COMPLEX MATTER AND THERE IS A GENUINE DIFFERENCE OF OPINION BETWEEN ASSESSEE AND THE ASSESSING OFFICER CANNOT BE REGARDED AS FURNISH ING OF INCORRECT PARTICULARS OF INCOME. HE HAS RELIED UPON THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). ITA NO.896/MUM/2009 A.Y.: 2003-2004 3 5. ON THE OTHER HAND THE LD DR HAS SUBMITTED THAT WHEN THE NATURE OF THE ASSESSEES BUSINESS IS MANUFACTURING OF ELECTRI CAL CONTROL PANELS THEN LETTING OUT OF PROPERTY AND INCOME FROM THE SAME CA NNOT BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. THE ASSESSEE HAS TREATED THE RENTAL INCOME AS BUSINESS TO REDUCE TAX LIABILITY BY DEDUC TING THE BUSINESS EXPENDITURE AGAINST THE RENTAL INCOME. HE HAS RELI ED UPON THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL CONTENTION AND RELE VANT RECORD. AS FAR AS TREATMENT OF THE RENTAL INCOME AS INCOME FROM HO USE PROPERTY IS CONCERNED THE ASSESSEE HAS ACCEPTED THE SAME AND T HERE IS NO DISPUTE ABOUT IT. THE ONLY QUESTION ARISES BEFORE US IS W HETHER THE TREATMENT OF THE RENTAL INCOME AND SERVICES CHARGES RECEIVED FROM TH E BANK ON LETTING OUT OF THE PREMISES AS BUSINESS INCOME AMOUNT TO FURNISH I NACCURATE PARTICULARS OF INCOME AND IT ATTRACTS PENALTY U/S.271(1)(C) OF THE ACT. WE NOTE THAT THE ASSESSEE DISCLOSED THE NATURE OF THE INCOME AND THE SOURCES OF INCOME IN THE RETURN OF INCOME. THE AO HAS GATHERED THE INFO RMATION ABOUT RENTAL INCOME RECEIVED BY THE ASSESSEE FROM THE ASSESSMENT RECORD AND NOT OTHERWISE. THEREFORE IT IS NOT THE CASE OF CONCE ALMENT OF FACTUAL PARTICULARS ABOUT INCOME BUT THE ASSESSEE OFFERED THE RENTAL IN COME UNDER THE HEAD INCOME FROM BUSINESS INSTEAD OF INCOME FROM HOUSE P ROPERTY. THE ISSUE IN THE ASSESSMENT WAS ONLY REGARDING THE TREATMENT OF THE INCOME RECEIVED FROM THE BANKS ON LETTING OUT OF THE PROPERTY AND N OT REGARDING SOURCES OF THE INCOME. THEREFORE ONCE THE ASSESSEE HAS DISCL OSED AND EXPLAINED THE BASIC AND PRIMARY FACTS REGARDING THE RENTAL INCOME IN ITS RETURN OF INCOME THEN TREATING THE RENTAL INCOME AS INCOME FROM HOUS E PROPERTY INSTEAD OF BUSINESS INCOME CANNOT CONSTITUTE THE CONCEALMENT O F INCOME LEADING TO ACTION U/S.271(1)(C) OF THE I.T. ACT. WHEN ALL TH E RELEVANT FACTS REGARDING THE LET OUT OF THE PREMISES AND INCOME IN THE NATUR E OF RENT AND SERVICES CHARGES RECEIVED FROM THE BANK AGAINST LETTING OUT OF THE SAID PREMISES ARE EXPLAINED AND DISCLOSED BY THE ASSESSEE THAN THE CL AIM OF THE ASSESSEE THAT THE SAID INCOME IS TAXABLE UNDER THE HEAD BUSINESS INCOME THOUGH NOT SUSTAINABLE UNDER THE LAW THE SAME CANNOT AMOUNT T O CONCEALMENT OF ITA NO.896/MUM/2009 A.Y.: 2003-2004 4 INCOME AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) WHEREIN HONBLE APE X COURT HAS HELD AS UNDER IN PARA 11. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICU LARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WOR DS IN CONJUNCTION THEY MUST MEAN THE DETAILS SUPPLIED IN T HE RETURN WHICH ARE NOT ACCURATE NOT EXACT OR CORRECT NOT ACCORD ING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT I N THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE AS SESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FAL SE. SUCH NOT BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 27(1)(C) OF THE ACT. A MERE MAKING OF T HE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOU NT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 7. ACCORDINGLY IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT SUPRA WE DELETE THE PENALTY LEVIED U/S.271(1)(C). ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON THIS 31 ST DAY OF MAY 2010. SD/- (R.S. SYAL) (ACCOUNTANT MEMBER) SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) MUMBAI DATED 31 ST MAY 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUM BAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI