GIFT HOLDING P. LTD,MUMBAI vs. ITO 8(1)(4), MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) confirming levy of penalty u/s 271(1)(c) of the Act, in respect of assessee’s income under different head i.e. Income from house property instead of business income declared by the assessee. For this assessee has raised following three grounds: -

On the facts and in the circumstance of the case and in law, the imposition of the penalty u/s 271(1)(c) of the Act is unwarranted and unjustified.” 3. Briefly stated facts are that during the course of assessment proceedings, the AO noticed that the assessee has credited the income of Rs.11,12,311/- being Business Service Center charges as service charges and declare the same under the head income from business. The nature of business is not accepted by the AO that of providing business center facilities, the AO treated the income earned by the assessee from letting out of premises as income under the head house property. The assessment was confirmed up to Tribunal and resulting addition of Rs.3,58,387/- under the head of income from house property was confirmed. The AO initiated the penalty proceedings and finally levied the penalty u/s 271(1)(c) for furnishing of inaccurate particular of such income within the meaning of section 271(1)(c) of the Act and levied minimum penalty at the rate of 100% on tax sought to be evaded at Rs.1,10,516/-. Aggrieved, preferred appeal before CIT(A), who also confirmed the action of the AO. Aggrieved, now assessee is in second appeal before Tribunal.

We have gone through the facts and circumstance of the case. At the outset, learned Counsel for the assessee stated that following are the details of assessment in assessee’s own case since incorporation on 06-03-1986.

Learned counsel for the assessee further, drew our attention to the assessee’s paper book, wherein copies of assessment order passed u/s 143 (3) for A.Y. 1996-97 to 1993-94 are enclosed. The service charges declared by assessee were assessed as business income all along in these years. Learned Counsel for the assessee stated that in many of the years the income from service charges is accepted as business income under scrutiny assessment. Accordingly, he argued that this is the highly debatable issue and hence assessee’s company was under bonafide belief that income declared by assessee under the head business is to be accepted in this year also. In view of the previous assessment, with its contentions that the income from the service charges is taxable under the head business income will ultimately be upheld and such income will not be taxed under the head income from house property. Accordingly, the assessee declared the income under the head income from business under bonafide belief and hence the assessee is not liable for penalty for concealment of income or furnishing of inaccurate particulars of income u/s 271 (1) (c) of the Act. On the other hand, the learned Sr. DR supported the order of lower authorities.

We have heard rival contentions and gone through the facts and circumstances of the case. In view of the given facts that the assessee has declared the income being Business Service Center charges as service charges and declare the same under the head income from business. The AO assessed the same as income from house property. This is a highly debatable issue and it is settled legal position that the provisions of 271 (1) (c) of the Act are not applicable to a case where a bonafide claim is made by the assessee and all the facts relating thereto and material to the computation of the assessee's income had been disclosed by the assessee. Whether the claim made by the assessee company in respect of various expenses disallowed on assessment was justified in the facts and in the circumstances of the case and in law is a debatable question of law where two views are possible. The claim made by the assessee company has been accepted by the Department in the earlier years and was supported by Assessment Orders for earlier years as well as various decisions of various high courts. The fact that the view canvassed by the assessee company was not accepted and the disallowance was made does not ispo facto give rise to concealment of income. Penalty under Section 271(1)(c) of the Act is leviable for concealment of income and not for the difference in taking legal view on a given set off facts. Mere