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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-20, Mumbai [in short CIT(A)], in Appeal No. CIT(A)-20/ACIT-12(2)(2)/IT-447/2015-16 vide order dated ITAs No. 4462/Mum/2017 16.03.2017. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle 12(2)(2) Mumbai (in short ‘ACIT’/‘ITO’/ AO’) for the A.Y. 2012-13 vide order dated 20.01.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty by the AO under section 271(1)(c) of the Act amounting to ₹ 14,84,137/-, which was subsequently rectified by the AO and restricted the penalty in respect of claim of set off of business loss amounting to ₹ 6,62,979/- and on which penalty was levied amounting to ₹ 2,15,104/-. For this assessee has raised the following ground No. 1: -
1. (a) The learned Commissioner of Income-tax (Appeals) ICIT(A)] erred in uploading the action of the Assistant Commissioner of Income-tax 12(2)(2), Mumbai (hereinafter referred to as "the Assessing Officer") in levying penalty under section 271(1)(c) revised (after passing rectification order by the Assessing Officer vide order dated 31st January, 2018) amounting Rs.2,15.104 in respect of disallowance of claim of set off of business loss (Excluding Miscellaneous Income) during the year amounting to Rs.6,62,979/-.
(b) The CIT (A)'s has erred in not considering his own order passed under section 271(1)(c) of the Act deleting the demand on identical/ similar issue in respect of assessment year 2011-12. ITAs No. 4462/Mum/2017
(c) The CIT (A)'s has erred in not accepting additional ground in respect of penalty order passed by the Assessing Officer under section 271(l)(c) of the Act is bad in law since the show cause notice which was issued by the Assessing Officer was defective.”
At the outset, the learned Counsel for the assessee stated that the only activity of the assessee is to let out the commercial premises and the income arising out of the same has been declared income under the head of income from housing property and also claimed deduction under section 24 of the Act. The assessee has claimed interest income arising out of the Income Tax refund, which has been set off of against the business expenses and not offered separately under the head of income from other sources at ₹ 41,66,920/-. The AO disallowed the total expenditure of ₹ 6,62,979/- and also treated the interest on IT refund as income from other sources amounting to ₹ 41,66,920/-. The only dispute, as pointed out by the learned Counsel for the assessee is regarding levy of penalty under section 271(1)(c) of the Act of ₹ 2,15,104/- in respect of disallowance of claim of set off of business loss (excluding the miscellaneous income) during the year amounting to ₹ 6,62,979/-. According to the learned Counsel, the AO levied the penalty under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income for the reason that the assessee is assisted by tax professionals and cannot argue ignorance of the law. The assessee took the plea before AO during the penalty proceedings that the additions were made on account of difference of opinion taken by the Assessing Officer. Even the CIT(A) also confirmed the penalty that the assessee has made wrong claim of various expenses as business expenditure and resulting the ITAs No. 4462/Mum/2017 business loss has been set off against the current years income from house property. Aggrieved, assessee preferred the appeal before Tribunal.
Before us, the learned Counsel for the assessee stated that the business expenditure claim by assessee and set off against the income from house property are relating to the expenses incurred for maintaining its corporate existence like professional fees, miscellaneous expenses, audit fee, interest and delay in filing of service tax return, etc. According to the learned Counsel for the assessee, these expenses are necessary for complying with the obligations of the assessee and to maintain its corporate status. In this respect, the learned Counsel for the assessee relied on the decision of Hon’ble Calcutta High Court in the case of CIT vs. Ganga Properties Ltd. [1993] 199 ITR 94 (Calcutta), wherein Hon’ble Calcutta High court has stated that even if the assessee does not carry on business but it derives its income from other sources it has to maintain its establishment for complying with statutory obligations was allowable its own operation and it has to maintain its corporate status. Hon’ble Calcutta High Court observed as under: - “In our view, a limited company, even if it does not carry on business, even if it derives income from other sources, has to maintain its establishment for complying with statutory obligation so long it is in operation and its name is not struck off the register or unless the company is dissolved which means cessation of all corporate activities of the company for all practical purposes. So long as it is in operation, it has to maintain the status as a company and it ITAs No. 4462/Mum/2017 has to discharge certain legal obligations and for that purpose it is necessary to appoint clerical staff and secretary or accountant and incur incidental expenses. In this background, the conclusion of the Tribunal that the expenses incurred were wholly and exclusively for the activities to earn income is pre-eminently a reasonable conclusion. We have considered a similar case in CIT v. New Savan Sugar & Gur Refining Co. Ltd. [IT Reference No. 360 of 1979, dated 19-4-1989].”
When these facts were confronted to the learned Sr. Departmental Representative, he only relied on the penalty order of the AO and that of the CIT(A).