M/S. LAKHANI RUBBER UDYOG (PVT) LTD.,NEW DELHI vs. ACIT, FARIDABAD

Facts in brief are that the assessee is a company deriving income from the manufacture of footwear. During the scrutiny of the return of income for the years 2008-09 & 2009-10 AO made certain additions. Insofar as these two appeals are concerned, it is recorded by the Ld. AO that during these years the assessee being the owner of the house property, received rental income, however, claimed depreciation in respect of the same. AO treated 1 & 5270/Del/2016 the receipt as income from house property, disallowed the depreciation and added it back to the total income of the assessee. AO also made certain other additions. AO initiated penalty proceedings and levied penalty. In appeal, Ld. CIT (A) while deleting the other additions sustained the addition made by the AO on account of this particular addition made while disallowing the depreciation. However, Ld. CIT (A) restricted the penalty to the net disallowance. Challenging the same, the assessee is in this appeal.

None appeared on behalf of the assessee, whereas it is the argument of the Ld. DR that in as much as the assessee claimed depreciation in respect of the rental income, the assessee furnished inaccurate particulars, as such, the penalty is sustainable.

We have gone through the record. Record reveals that insofar as the facts and figures are concerned, it is not the case of the Revenue that the assessee had concealed any income or furnished any inaccurate particulars. The entire matter revolves around the question as to under what head the receipt falls – whether it is business income or income from House property, i.e, in respect of treatment to be given to the income from the building. According to the assessee, it is income from business, as such, they claimed depreciation thereon, whereas according to the Revenue it is the income from house property, as such, the assessee is entitled to the deductions relevant to the house property, but not to the business income. This is a question of application of law to the facts but not a question of fact as to the assessee concealing any income or furnishing any inaccurate 2 particulars thereof. We are of the considered opinion that unless the Revenue makes out a case that the assessee either concealed any income or furnished any inaccurate particulars thereof, the penalty cannot be sustained. With this view, we, therefore, allow the appeals and direct the AO to delete the penalty in respect of these two years.

In the result, both the appeals of the assessee are allowed.