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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO
सुनवाई की तायीख / Date of Hearing : 22.06.2016 घोषणा की तायीख /Date of Pronouncement : 22.06.2016 आदेश / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 15.1.2015 is against the order of the CIT (A)-36, Mumbai dated 1.10.2014 for the assessment year 2010-2011. In this appeal, assessee raised the following grounds which read as under:- “1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in passing penalty order u/s 271(1)(c) of the Act.
2. The Ld CIT (A) has erred in law and on facts in levying penalty of Rs. 1,28,511/- u/s 271(1)(c) of the Act with reference to disallowance of expenses amounting to Rs. 3,78,087/-.”
2. Briefly stated relevant facts of the case are that the assessee is engaged in the manufacture of furniture & hydraulic fittings, trading in non-ferrous metals and consultancy services. There was a search action u/s 132 of the Act at the residence and premises of M/s. Fleingo / Bermaco Group. Subsequently, assessee filed the return of income declaring the total income of Rs. NIL. Accordingly notices u/s 143(2)(143(1) are served on the assessee. Assessment was completed u/s 143(3) of the Act and the assessed loss was determined at Rs. 20,45,900/- which includes couple of disallowances of Rs. 3,78,087/- and Rs. 53,100/-. During the assessment proceedings, AO noticed that the assessee owns a building and the same was let out for rent. Assessee was also using partly that property for its business operations. In the accounts, assessee debited certain expenses on account of labour charges; repairs & maintenance; municipal rents and taxes amounting to Rs. 3,78,087/-. Assessee accepted the said addition in the assessment and has obtained the finality. In connection with the said addition, AO initiated penalty proceedings u/s 271(1)(c) of the Act and levied the penalty of Rs. 1,28,511/-. During the penalty proceedings, it was submitted that the AO’s proposal was accepted by the assessee not only in view of the smallness but also in view of the repulsion against the likely protracted litigation. Otherwise, on merits, this is the submission of the assessee that the said expenditure was relatable to that portion of the property used by the assessee for the business purposes and therefore, the claim is fully allowable if contested in appeal. He also rebutted the AO’s allegation that the said expenditure amounts to double deduction in view of the standard deduction permitted to the assessee in respect of the rental income of the ALV. Otherwise, I find, there is no conclusive evidence on the allegation that the said amount constitutes a double deduction once as a part of the standard deduction, second time, as a part of debit against the business income. Assessing Officer is also failed to bring any clarity on this issue. Therefore, I find there exists debate on this issue.
After hearing both the parties, I am of the opinion that this is not a fit case for levy of penalty considering the debatability of the issue as discussed above. Accordingly, grounds raised
by the assessee are allowed.
4. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 22nd June, 2016. Sd/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 22.6.2016 व.नन.स./ OKK , Sr. PS आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : 1. अऩीराथी / The Appellant 2. प्रत्मथी / The Respondent. आमकय आमुक्त(अऩीर) / The CIT(A)- 3.