DISCOVERY ESTATES PRIVATE LIMITED,NEW DELHI vs. DCIT CENTRAL CIRCLE-2, NEW DELHI

amounting to Rs.1,23,40,462/- on account of disallowance of

ITA No.2131/Del/2023

depreciation on let out of property, which assessee had offered the

rental income under the head ‘income from business and profession’

instead of ‘income from house property’.

commercial building named as City Square Mall with intention to

sale. However, later on, same was let out by the assessee on rental

income, which was offered to tax under the head ‘income from

business and profession’. The assessee has treated the rental

income as business income to utilize the unsold assets for efficient

management till the assessee get prospective buyer of the property.

However, the Assessing Officer noted that the assessee has not sold

the property and was instead let out which continue to be let out

year after year. Thus, income from the said property is chargeable to

tax under the head ‘income from house property’. Therefore, the

assessee was not eligible to claim depreciation on said property.

Tribunal, wherein, the Tribunal has also upheld that rental income

received by the assessee is assessable under the head ‘income from

house property’. Now, the penalty has been levied on such

disallowance of depreciation on the ground that the assessee rental

income is not assessable as business income but as ‘income from

house property’. The Tribunal, in quantum proceedings had followed

ITA No.2131/Del/2023

the judgment of Hon’ble Delhi High Court in the case of CIT vs Ansal

Housing Finance and Leasing Company Limited. Against this order

of the Hon’ble Delhi High Court, SLP has been admitted by the

Hon’ble Supreme Court. Based on this quantum order, penalty has

levied by the AO and has been confirmed by the Ld. CIT (A).

order and material on record, we find that only reason for levy of

penalty is that the assessee had shown the rental income as

business income, whereas, in the quantum proceeding it has been

held to be chargeable to tax under the head ‘income from house

property’. Before us, it has been stated that in the earlier years, the

rental income was accepted as business income, however, later on

the same was treated as income from house property. The penalty

has been levied for furnishing of inaccurate particular of income by

claiming depreciation on stock in trade and shown as fixed assets of

the company. Here, the assessee had duly explained the reason as

to why it was showing the rental income from commercial complex

i.e. City Square Mall, which was constructed with intention to sell

the shops/ units. Since, the assessee has let out these shops and

has treated them to be ‘business income’ but does not lead to

inference of any furnishing of inaccurate particulars. It is only that

later on view was taken based on a decision that such income

should be chargeable to tax under the head ‘income from house 3

ITA No.2131/Del/2023

property’ and not from ‘business income’. Under these facts, it cannot be said that the assessee has furnished any inaccurate particulars of income. Merely because income has been offered under one head and later it has been held to be assessable in another head, that does not mean that the assessee is liable for penalty for furnishing of inaccurate particulars of income, especially when this was a highly debatable issue in the Assessment Year 2008-09 when, in the earlier years, the same income was even treated as business income. Accordingly, the penalty levied by the Assessing Officer and confirmed by the learned CIT (A) is deleted.

Order pronounced in the open court on 04th March, 2024

Sd/- Sd/- [M. BALAGANESH] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 04.03.2024 f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ