MULTANMULL KISHANLAL & SONS,KOLKATA vs. ACIT, CIRCLE - 40, KOLKATA, KOLKATA

The assessee in this appeal has agitated against the confirmation of penalty of Rs.96,902/- imposed by the ld. Assessing Officer under section 270A of the Income Tax Act on account of misreporting of the income.

At the outset, ld. Counsel for the assessee has invited our attention to the assessment order dated 27.12.2019 passed by the ld. Assessing Officer under section 143(3) of the Income Tax Act. A perusal of the said assessment order reveals that the assessee is engaged in the business of housing development etc. The ld. Assessing Officer noted that the assessee had shown high Closing Stock in its Balance-sheet for the Financial Year 2016-17 relevant to Assessment Year 2017-18. A show cause notice was issued by the ld. Assessing Officer requiring the assessee to furnish explanation as to why the provision of deemed rent be not applied in the case of assessee. The assessee replied that Closing Stock as on 31.03.2017 was almost 10% of the total sale of F.Ys. 2015-16 and 2016-17 and 2 Assessment Year: 2017-2018 Multanmull Kishanlal & Sons since there was agreement of sale in respect of flats shown in the Closing Stock, therefore, the provision of deemed rent was not applicable in the case of assessee. However, the ld. Assessing Officer did not agree with the aforesaid contention and made the addition of Rs.1,40,000/- on account of deemed rent in respect of the closing stock of flats. The ld. Assessing Officer thereafter levied the impugned penalty observing that the assessee has misreported its income, which has been confirmed by the ld. CIT(Appeals).

We have heard the rival contentions and gone through the material available on record. In our view, this is not a case of misreporting of income. Since there was agreement to sale already executed by the assessee in respect of the flats shown as Closing Stock and, therefore, the assessee was of the view that the provisions relating to deemed rent were not applicable. However, the ld. Assessing Officer held otherwise. Since the addition was very small, the assessee did not carry the matter further in appeal. However, the above facts show that this was not a case of misreporting of income, rather it was a case of mere difference of opinion. The assessee was of the bonafide view that the provision of deemed rent as per provision of section 23 of the Income Tax Act was not applicable to the income of the assessee. However, the ld. Assessing Officer applied the said provision. However, in our view, it is not Assessment Year: 2017-2018 Multanmull Kishanlal & Sons a case of levy of penalty under section 270A of the Income Tax Act and the same is accordingly deleted.

In the result, the appeal of the assessee stands allowed. Order pronounced in the open Court on 05/08/2024.