ITO, CHENNAI vs. M/S. R.P. USHA ENTERPRISES, CHENNAI

This appeal is filed by the Revenue aggrieved by the order of the Ld. Commissioner of Income Tax (Appeals) in dated 30.06.2016 passed u/s. 271(1)(c) of the Act.

The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Ld. CIT(A) has erred in deleting the penalty of Rs.10,20,269/- levied u/s. 271(1)(c) of the Act by the Ld. AO for wrongly claiming the “income of house property” under the head “income from business”.

The brief facts of the case are that the assessee is a firm filed its return of income for the assessment year 2007-08 on 31.10.2007 admitting Nil income. Initially the return was processed u/s.143(1) of the Act and thereafter the case was selected for scrutiny through CASS and finally assessment was completed u/s.143(3) of the Act on 31.12.2009, wherein it was revealed that the assessee had disclosed its ‘income from house property’ being the rent received towards leasing of its factory premises for warehouse purposes as ‘business income’. It was observed by the Ld. AO that the assessee had split the total lease amount as rent for amenities and rent for lease in order to split the income under two heads of income.

On appeal, the Ld. CIT(A) after considering that the case of the appellant deleted the penalty levied by the Ld. AO by holding that the provisions of Section 271(1)(c) of the Act is not applicable since there has been no actual concealment of income or furnishing of inaccurate particulars. While deciding the issue the Ld. CIT(A) relied on the decisions of the Hon’ble Jurisdictional High Court in the case of CIT v. TM Abdul Azeez & Co in TC(A) No.1128/2006 dated 19.07.2012 (unreported case), wherein the Hon’ble High Court placing reliance on the Apex Court decision in the case of CIT v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 held that in order to expose the assessee to penalty, unless the case is strictly covered by the provision (i.e. penalty provision), the penalty provision cannot be invoked. Further that, mere making a claim, which is not sustainable in law, by itself, would not amount to furnishing inaccurate particulars regarding the income of the assessee.

Before us the Ld. DR argued by stating that the assessee had furnished inaccurate particulars of income because the assessee had claimed the rental income under the head ‘business income’ in order to avoid tax. It was therefore pleaded that the order of the Ld.AO may be reinstated. The Ld. AR on the other hand relied on the order of the Ld. CIT(A).

We have heard the rival submissions and carefully perused the materials on record. From the facts of the case it is apparent that the assessee had disclosed its entire income. Further on the bonafide belief that the income received for providing amenities could be treated as business income; the assessee had claimed it under the head “income from business”. Therefore it cannot be construed that the assessee had concealed its income or furnished inaccurate particulars of income as rightly held by the Ld. CIT(A). Considering the facts and circumstance of the case, we do not find it necessary to interfere with the order of the LD. CIT(A), who had rightly relied on the decision of the various higher judiciary and the Hon’ble Apex court cited supra.

In the result the appeal of the Revenue is dismissed.