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Income Tax Appellate Tribunal, CHANDIGARH BENCH
Before: SH. SANJAY GARG
आदेश/ORDER The present appe al has been preferred by the assessee against the order dated 14.11.2019 of the Commissioner of Income Tax (Appeals), Chandigarh (hereinafter referred to as ‘CIT(A)’ ) pertaining to 2013-14 assessment year. The assessee in this appeal has taken following grounds of appeal: i) That the Ld. CIT (A)-2, Chandigarh has erred in law and on facts in confirming the Penalty u/s 271(l)(c) allegedly for furnishing of inaccurate particulars of income. The conclusion drawn is based on surmises and conjectures. Hence it is prayed that penalty imposed u/s 271(l)(c) be deleted. ii) That the Ld.CIT (A)
2. Chandigarh has erred in law and on facts in not considering the established principles laid down by the Hon' Supreme Court and other judicial pronouncements for imposing the penalty u/s 271(l)(c), thus denying the natural justice to the appellant. It is, hence
ITA-41/CHD/2020 A.Y. 2013-14 Page 2 of 6 prayed that the justice be provided to the appellant by following those principles. iii) That the Appellant reserves the right to alter, add or delete any grounds of appeal at the time of hearing.
A perusal of the above grounds of appeal reveals that the assessee in this case has agitated the levy of penalty u/s 271(1)(c)of the Income Tax Act, 1961 ( in short ‘the Act’). The brief facts of the case are that the assessee was a partnership firm that came into existence with effect from 11.04.2011.
The main object of the firm as pe r para 3 of the partnership deed was "That the nature of the business of the partnership shall be to provide, deal, offer, develop, run, sell, outsource inf ormation technology, clients need based IT Solutions and its related activities, space solution or to do such business or businesses as may be decided mutually by the parties from time to time." During FY 2011-12 the assessee had purchased one industrial plot No. C-82, Phase-7, Mohali measuring 5000 sq. yards with three storey building from M/s Spray Engineering Devices Limited through an 'Agreement to Sale' on 26.07.2011 for total consideration of Rs. 28,00,00,000/-. A portion of the said property was let out by M/s Spray Engineering Devices Ltd. to M/s Dishnet Wireless Limited vide a lease deed dated 20.07.2011 for monthly rent of Rs. 17,50,000/-. After purchase of property, the assessee started receiving rent from both M/s Spray Engineering Devices
ITA-41/CHD/2020 A.Y. 2013-14 Page 3 of 6 Limited (the previous owner) and M/s Dishnet Wireless Limited (the tenant to previous owner). The assessee had shown the rent received from the above parties as business Income in its ITR and not under the head House Property Income. The assessee was asked to explain the reasons for reporting the income under the he ad 'business income' and not under the head 'income from the house property'.
The assessee replied vide letter dated 03.11.2015 that the firm was formed on 11.04.2011. The main objects of the firm were to provide IT related solutions and to provide space solutions. So the assessee firm was providing furnished space to the parties as per their requirement along with the furniture, IT equipments, work stations, power back-ups etc.
As the firm was not providing only the vacant space on rent but providing the space with various other fixtures as per require ment of party, according the income from space rentals has been shown as income from Business and Profession.
Howeve r, the AO did not get satisfied with the above reply of the assessee and held that the business activity of the assessee was related to information technology solutions and related solutions activity. He, therefore, treated the aforesaid rental income as income from house property. The assessee carried the matter upto the level of Tribunal but could not succeed.
ITA-41/CHD/2020 A.Y. 2013-14 Page 4 of 6
In the me antime, the AO levied the impugned penalty u/s 271(1)(c)of the Act on the ground that the assessee had wrongly shown the rental income as ‘business income’ whereas it was to be offered for taxation as ‘income from house property’. He, therefore, held that the assessee had furnished inaccurate particulars of income and levied the impugned penalty @ 100% of the income tax sought to be evaded.
The CIT(A) confirmed the penalty so levied by the AO.
Therefore, the assessee has come in appeal before this Tribunal.
I have heard the rival contentions and gone through the record. The ld. counsel for the assessee has submitted that as per submissions made to the lower authorities, it was evident that the assessee was under bonafide belief that the aforesaid income of the assessee was required to be assessed as business income. That there was no concealment of income by the assessee, neither assessee furnished any inaccurate particulars of income. He has submitted that merely because the AO has assessed the income under different head, that does not invite penalty u/s 271(1)(c)of the Act. He has further pointed out that even in the preceding year, the assessee had offered the same income as business income
ITA-41/CHD/2020 A.Y. 2013-14 Page 5 of 6 which was accepted by the AO in scrutiny assessment proceedings.
I have considered the rival submissions. Admittedly the assessee has not concealed the aforesaid rental income received from two parties. The income was duly offered for taxation, however, as income from business and profession.
The assessee in this respect has relied upon its objects wherein it has been mentioned that one of the object of the assessee was to provide space solutions to its clients. The assessee taking shelter under the aforesaid object, returned the income from the space rented out by it to two parties as business income. However, the income tax authorities and even appellate authorities did not agree with the aforesaid plea of the assessee and held that the assessee was primarily in the activity of providing IT Solutions and related activities and that renting of property was not the business activity of the assessee. May it be so, one fact which is apparent on the file is that the assessee had not concealed his income and under the bonafide belief, offered the same for taxation.
However, the income tax authorities assessed it under different head. Even the pertinent fact on the file is that in the immediate preceding assessment year, the assessee had offered the same income as income from business and which was accepted by the AO under scrutiny assessment
ITA-41/CHD/2020 A.Y. 2013-14 Page 6 of 6 proceedings. Under the circumstances for the assessment year under consideration, the assessee can safely be said to be having bonafide belief for offering the same under the same he ad i.e. ‘income from business or profession’. In view of this, I do not find that it is a fit case for levy of penalty u/s 271(1)(c)of the Act. Therefore, the impugned penalty levied by the AO is ordered to be deleted. Appeal of the assessee stands allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced on 01.12.2021.