B.S.N. CONSULTANTS (P)LTD.,MUMBAI vs. ITO ,WARD 8(1)(2) NOW WARD 13(1)(1), MUMBAI

सुनवाई की तायीख / Date of Hearing : 18.7.2016 घोषणा की तायीख /Date of Pronouncement :26.7.2016 आदेश / O R D E R Per RAJESH KUMAR, Accountant Member: These two appeals are filed by the assessee against the two separate orders passed by the ld.CIT(A)-16, Mumbai dated 22.12.2014 for the assessment years 2006-07 and 2007-08. Since these appeals pertain to the same single and same issue of penalty levied by the AO u/s 271(1)(c), these appeals are clubbed and heard together and are being decided by this common order for the sake of convenience.

2 /M um /20 15 and 16 40/ Mum/ 2016 2. First we shall take up the appeal for the assessment year 2006-07 3. Only issue raised in the grounds of appeal is against the penalty of Rs.81,190/-levied by the AO and confirmed by the ld.CIT(A) under section 271(1)( c) of the Act for declaring the income from letting out of the office premises with various facilities under the head “Business Income” which was declared under the head “Income from House Property” in the return filed in the re-assessment proceedings u/s 148 of the Act and assessed accordingly.

4 /M um /20 15 and 16 40/ Mum/ 2016 “3. Decision After careful perusal of the assessment order and written submissions of the A/R of the appellant it has been observed that in the return of income filed on 20.11.2006 the income was declared under the head profit and gain of business and professions. It is only when the case of the appellant company for A.Y. 2008-09 was taken up for scrutiny it was detected by the AO that the income declared is in fact rental income which should have been declared under the head income from house property and was assessee as such. No appeal has been filed against the above said order of the AO for A.Y. 2008-09. The assessment proceedings for A.Y. 2006-07 and 2007-08 was reopened and notices u/ s 148 were issued in both the assessment years. The appellant company was filed revised return of income on 17.01.2013 i.e. after the period prescribed for filing the revised return u/s 139(5). According to the AO the appellant company had the services of a qualified chartered accountant at his disposal and despite this fact the rental income from let out the property has been declared under the head profits and gains from business and professions and deduction of expenses were claimed and further the carry forward business loss was also adjusted. It has been further stated by the AO that if the reassessment proceedings had not been initiated by issue of notice u/ s 148 the appellant would have been successful in evading incidence of tax on the income earned by it during the instant assessment year. The AO has relied on the recent judgment of the Supreme Court in the case of MAK Data (P) Ltd. Vs. CIT 358 ITR 593 besides other jugments discussed supra. According to the A/R of the appellant there are two views possible in such cases because it is debatable issue that whether income from letting out of property is income from house property or business income for which he has relied on some judgments which have been discussed supra. It has been further stated by him that the original return was the correct return of income and it is only to avoid long drawn litigation the revised return was filed on the advice of tax expert by declaring rental income as income from house property. It has been further stated by him that the case laws relied upon by the AO are not applicable to the facts of the case. He has claimed certain expenses which according to him or to have been allowed and these should be allowed for the purpose of penalty.

5 /M um /20 15 and 16 40/ Mum/ 2016 The A/R of the appellant has not been able to bring on record that how in the present case the rental income earned by the appellant company could be declared as rental income in the original return of income and also the reason for claiming the expenses and adjustment of carry forward business loss because no reason has been given to make the issue debatable that whether in the case of appellant company the rental income could have been declared under the head profits and gain from business and professions. The case laws relied upon by the A/R of the appellant are distinguishable on facts and the judgment of the Hon'ble Supreme Court in the case MAK Data (P) Ltd. It has been held by the Hon'ble Supreme Court as under:- "Voluntary disclosure does not release assessee from mischief of penal proceedings under section 271(1)(c) In terms of section 271(1)(c), Assessing Officer has to satisfy whether penalty proceedings be initiated or not during course of assessment proceedings and Assessing Officer is not required to record his satisfaction in a particular manner or reduce it into writing Where offer of surrender of certain amount received as share application money was made by assessee in view of detection made by Assessing Officer in search conducted in case of assessee's sister concern, said surrender of income not being voluntary in nature, authorities below were justified in levying penalty under section 271 (l)(c)" There is not even a whisper in the written submissions of the A/R of the appellant on the above said judgment as it is squarely applicable to the facts of the case because the appellant had filed revised return only after the detection by the AO. Hence the grounds of appeal is dismissed”

5. The ld. AR vehemently submitted before us that the assessee had fully disclosed all the material facts regarding rental income earned from letting out of office premises in the return of income filed originally and thus did not conceal or file any inaccurate particulars. The ld. AR further submitted that the penalty under section 271(1)( c ) could not be imposed 6 /M um /20 15 and 16 40/ Mum/ 2016 in the case of change of Heads of Incomes as in the assessee’s case. The ld. Counsel submitted that initially the assessee showed rental income from letting out the office premises under the head “Income from Business or profession” by claiming expenses against the said income. However, later on when the notice u/s 148 issued by the AO to the assessee, the assessee changed head of income from “business” to “ house property” with same particulars of income. The ld.counsel also submitted that in the assessment year 2008-09, the income was assessed by the AO under the head “income from house property” and the assessee did not file any appeal against the decision of the AO and thus reached finality. The assessee following the same parameter returned the income under the head “Income from House Property” in the return of income filed to the response to notice u/s 148 of the Act issued by the AO in order to avoid protected litigation. In defence of his arguments, the ld. AR relied upon the following decisions: a. Mimosa Investment Co.(P) Ltd V/s ITO (2009) 28 SOT 0470 =(2010) 6 ITR 0789 (Mum); b.ITO V/s Roborant Investments (P)Ltd (2006) 7 SOT 0181 The ld. AR also submitted that withdrawal of claim of certain expenses by filing revised return or disallowance of any expenses due to difference of opinion, did not amount to concealment of income or furnishing inaccurate particulars of income. The ld. AR cited the decision of the Hon’ble Delhi 7 /M um /20 15 and 16 40/ Mum/ 2016 High Court in the case of Commissioner of Income-tax Bacardi Martini India Ltd.(2007) 288 ITR 0585 (Del) in support of his argument. Finally, the ld. AR prayed that in view of the ratio laid down in the above decision, penalty levied by the AO and confirmed by the ld.CIT(A) was against the spirit of law and be deleted by allowing the appeal of the assessee. On the contrary, the ld. DR strongly opposed the arguments of the ld.AR by stating that the assessee had willfully shown income under the head business income with the motive to reduce tax liability. Whereas, as a matter of fact, the income was of rental nature which was to be assessed under the head “income from house property”. The ld.DR strongly supported the orders of authorities below while pressing for dismissal of the assessee’s appeal.

6. We have carefully considered the rival submissions and perused the materials placed before us including the orders of authorities below and case laws relied upon by the ld AR of the assessee. We find that the assessee has shown income from rent of office premises under the head business and profession and also claimed expenses against that income calculating the income from business Rs.1,44,562/- and after adjustment of brought forward losses from assessment years 2004-05 of Rs.63,500 , the returned income came to Rs.81,062/-. The assessee’s income from rent of office premises for assessment year 2008-09 was assessed under the head income from house property by the AO and the assessee did not file 8 /M um /20 15 and 16 40/ Mum/ 2016 any appeal against the order of the AO and thus accepted the assessment as made by the AO. Now the AO on the basis of assessment year 2008- 09 reopened the assessment on 26.11.2012 by issuing notice u/s 148. The assessee itself showed and returned the income from renting of office premises under the head income from house property after claiming the deduction u/s 24 of the Act thereby showing the income of Rs.3,22,258/- . Now, the question before us, whether the assessee’s treatment of income from business in the original return amounted to filing inaccurate particulars of income and liable for penalty u/s 271(1)(c). In our opinion, the assessee has fully disclosed all the particulars of income in the return of income filed which can not be termed as inaccurate particulars by the assessee for the income. We are of the considered views that it could not be construed as filing of inaccurate particulars of income. In the case of Mimosa Investment Co.(P) Ltd (supra) it has been held as under : “The assessee has disclosed all the relevant material facts for the purpose of computation of total income and has offered explanation in this regard, which was not found false by the Assessing Officer. The explanation of assessee regarding claim of interest expenditures is bona fide. The assessee has substantiated his explanation. When the assessee has furnished all the material facts for the purpose of computation of total income the Assessing Officer is duty bound to calculate correct total income in accordance with law, which may be different than the total income calculated by the assessee. Mere fact that the Assessing Officer while discharging his duty is recalculating the total income in accordance with law which is not the same as calculated by the assessee, it cannot be held that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income or there is a deemed concealment in accordance with Explanation 1 to section 271(1). This is not a fit 9 ITA No. 1639 /M um /20 15 and 16 40/ Mum/ 2016 case, where penalty under section 271(1)(c) read with Explanation 1 can be invoked. The penalty of Rs. 9,21,803 levied by the Assessing Officer under section 271(1)(c) of the Act is cancelled”

Recalculation of income by the AO which is different from the income returned by the assessee, in that case, it cannot be said that the assessee has concealed the particulars of income or concealed particulars of income. The assessee has fully disclosed all the facts qua his income, and therefore the penalty cannot be levied.

In the case of Roborant Investments (P)Ltd (supra) held that where the full and complete discloser is made by the assessee, and if the income returned by the assessee under a particular head so assessed by the AO under another head of income, penalty is not imposable under section 271(1)( c) of the Act.