M/S Y.D.SOLUTIONS,CHANDIGARH vs. ITO WARD-4(5), CHANDIGARH

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.

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 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.

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

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.

Therefore, the assessee has come in appeal before this

Tribunal.

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.

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.

Order pronounced on 01.12.2021.

Sd/-

( संजय गग�) (SANJAY GARG ) �या�यक सद�य/ Judicial Member “Poonam” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�त/ CIT 3. आयकर आयु�त (अपील)/ The CIT(A)+ 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. 6. गाड� फाईल/ Guard File