M/S GITANJALI FINVEST PVT. LTD.,,NEW DELHI vs. ITO, NEW DELHI

Briefly stated, the facts of the case are that the assessee is engaged in letting out of Multiplex at Gwalior and earning rental income therefrom. No other business activity was carried on during the year. On a perusal of Note 3.2 to Profit & Loss Account, the AO noticed that the assessee earned rental income to the tune of Rs.1,00,76,400/- from its let out multiplex at Gwalior and there was no other business income except interest received on income-tax refund. On going through the Computation of income, it was observed that the assessee had set off business loss of Rs.25,75,427/- against house property income of Rs.14,67,716/- and had also carried forward remaining business loss of Rs.11,07,711/-. Since the assessee did not carry on any business, the AO held that no expenditure was allowable.

After considering the rival submissions and perusing the relevant material on record, I find that the assessee set off the business loss against the house property income and also carried forward the remaining business loss in the computation of income, a copy of which is on record. The loss was incurred due to certain expenses, including a major chunk towards interest expenditure and other establishment expenses. The ld. AR contended that instead of claiming deduction for full amount of interest against the rental income, the assessee inadvertently took some part of interest paid to its computation under the head ‘Profit and gains of business or profession.’ This contention has not been controverted by the ld. DR. It, therefore, becomes clear that such amount of interest expenditure should have been otherwise also allowable to the assessee in the computation of income under the head ‘Income from house property.’ Apart from that, there are certain expenses which were incurred by the assessee to maintain its corporate structure. The mere fact that the assessee agreed for not claiming benefit of loss computed under the head ‘Profit and gains of business or profession’ in the assessment proceedings cannot per se be a reason to impose penalty u/s 271(1)(c) of the Act. Parameters for making an addition in quantum proceedings are not similar to the parameters required for bringing a case within the four corners of section 271(1)(c). It is true that the findings given in the quantum proceedings on a particular point are relevant in penalty proceedings, but, are not decisive. When I advert to the facts of the instant case, it clearly emerges that the assessee did not have any intention of concealing the income or furnishing inaccurate particulars of income and the AO changed the structure of income and disallowed business loss on the basis of computation made by the assessee in its return of income. The Hon’ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) has held that simply for the reason that the AO did not find the claim of the assessee to be sustainable in law up to a certain extent, cannot justify penalty u/s 271(1)(c), more so, when particulars furnished by the assessee were not found to be inaccurate. Under the given circumstances, I am of the considered opinion that the authorities below were not justified in imposing and confirming the penalty u/s 271(1)(c) of the Act, which is hereby ordered to be deleted.