PARLE AGRO P.LTD,MUMBAI vs. ACIT 10(3)(2), MUMBAI

This appeal has been filed by the assessee against the order dated 28.06.2017 passed by the Commissioner of Income Tax (Appeals)-17 (for short ‘the CIT (A)’), Mumbai, for the assessment year 2010-11, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against the penalty order passed u/s 271 (1) (c) of the Income Tax Act, 1961 (for short the ‘Act’).

Brief facts of the case are that the assessee filed its return of income for the assessment year under consideration declaring the total income of Rs. 8,14,58,036/-. The assessment was completed u/s 143 (3) determining the total income at Rs. 9,37,66,547/- after inter alia making addition of Rs. 7,31,400/- made under the head ‘income from house property’. It was noticed that the assessee had shown rental income at Rs. 18,28,500/- in its audited account, however, it had offered the income of Rs. 10,97,100/- under the said 2 Assessment Year: 2010-11 head and offered the difference of Rs. 7,31,400/- under the head income from business. The AO added the said amount to the income of the assessee under the head house property and accordingly initiated proceeding u/s 271 (1) (c) of the Act for furnishing inaccurate particulars of income. In the first appeal, the Ld.CIT (A) confirmed the penalty of Rs. 2,00,000/- levied by the AO. The assessee is in appeal against the said order. 3. The assessee has challenged the impugned order passed by the Ld. CIT (A) by raising the following effective ground:

At the outset, the Ld. counsel for the assessee submitted that the addition of Rs. 5,11,980/- was made after reducing income under the head income from business. In the audited account, the rental income of Rs. 18,28,500/- was credited to P&L account. However, while offering the rental income an amount of Rs. 10,97,100/- was shown under the head income from house property. The AO while passing the assessment order reduced the amount of Rs. 7,31,400/- from business income and added the same under the head of income from house property. The Ld. counsel further submitted that the assessee has neither concealed its income nor has filed any inaccurate 3 Assessment Year: 2010-11 particulars of his income. Therefore, the impugned order passed by the Ld. CIT (A) is liable to be set aside. The Ld. counsel relying on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC) submitted that mere wrong claim made by the assessee does not make the assessee liable u/s 271 (1) (c) of the Act.

On the other hand, the Ld. Departmental Representative (DR) relying on the order passed by the Ld.CIT (A) submitted that since the assessee had furnished inaccurate particulars of its income, the Ld. CIT (A) has rightly confirmed the penalty levied by the AO. 6. We have heard the rival submissions and also perused the material on record. We notice that the assessee had shown rental income of Rs. 18,28,500/- in the P&L account however, in the computation of income, the assessee offered rental income of Rs. 10,97,100/- and the difference of 7,31,400/- was shown as income from the business. As explained by the Ld. counsel, the assessee claimed the amenities charged received under the head under the head income from business. The AO rejecting the claim of the assessee added the amenities charges received by the assessee under the head income from house property and initiated penalty proceedings u/s 271(1)(c) of the Act and imposed the penalty for furnishing inaccurate particulars of income. The Ld. CIT(A) confirmed the penalty without taking into considering the fact that assessee has only changed the head of income in respect of part of the income from house property to income from business without concealing its income. Under these circumstances, we find merit in the contention of the Ld. counsel that rejection of assessee’s claim of treating amenities charges as income from business does not ipso facto make the assessee liable for penalty u/s 271(1)(c) of the Act. The assessee has only changed the head of income by claiming the part of the income from house property under the head income from business that to under a bona fide belief that the amount amenities charges received is required to be claimed as business income.

As per the ratio laid down by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd (supra), mere making of a claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee within the meaning of section 271(1)(c) of the Act. In the light of the said judgment the claim of the assessee does not amount to furnishing of inaccurate particulars of income. So, the revenue has failed to establish that the assessee has furnished inaccurate particulars in respect of its income, which essential to hold the assessee liable under section 271(1)(c) of the Act. The assessee has only changed the head of income in respect of part of the income from house property by claiming the same under the head income from business. Moreover, the assessee has offered an explanation as to why the part of income from house property was claimed as business income. In our considered view, the explanation offered by the assessee is bona fide. Since, the assessee has established before the authorities below that its action was bona fide, the Ld. CIT(A) ought to have set aside the order passed by the AO. Hence, in our considered view, the impugned order is contrary to the established principles of law. We therefore, set aside the order passed by the Ld. CIT(A) and allow the sole ground of appeal of the assessee and delete the penal imposed u/s 271(1)(c) of the Act.