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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – 3, Chennai, dated 21.10.2010 and pertains to assessment year 2006-07.
Dr. B. Nischal, the Ld. Departmental Representative, submitted that the Assessing Officer levied penalty under Section 271(1)(c) of the Income-tax Act, 1961 (in short "the Act") on the ground that the assessee furnished inaccurate particulars of income. According to the Ld. D.R., the assessee sold both the properties, which were used as office premises, for a total consideration of `1,35,00,000/- and offered a sum of `1,08,17,062/- under the head “Other income”. Since the assessee has sold the depreciable asset being an office building, the capital gain arising on sale of depreciable asset has to be computed only under Section 50 of the Act. According to the Ld. D.R., capital gain on sale of depreciable asset has to be assessed as short-term capital asset.
The assessee has also let out a building and received rental income to the extent of `37,38,500/- and declared it as business income.
According to the Ld. D.R., rental income on letting out a property has to be treated as income from house property. According to the Ld. D.R., the assessee was deliberately offering the income from house property as income from business, therefore, the intention of the assessee was to conceal the income.
Referring to Section 56(1) of the Act, the Ld. D.R. pointed out that the income has to be classified under “income from other sources”, in case the same does not fall in any of the other four specific heads provided in the Income-tax Act. Even though the income from sale of depreciable asset is chargeable as short-term capital gain and the rental income has to be assessed as “income from house property”, the assessee deliberately offered the same under different heads with the intention to evade tax liability.
Therefore, the Assessing Officer found that it is not an inadvertent mistake on the part of the assessee. Therefore, the assessee has furnished inaccurate particulars and accordingly the Assessing Officer levied penalty under Section 271(1)(c) of the Act. However, on appeal by the assessee, the CIT(Appeals) deleted the same on the ground that the assessee has furnished all the particulars / information and the particulars furnished by the assessee have not been found to be inaccurate. The Assessing Officer has not accepted the head of income under which it was offered. However, the income offered by the assessee was accepted under different heads that itself would attract penalty. Hence, according to the Ld. D.R., when the capital gain has to be assessed as short-term capital gain and the assessee has offered the same as long-term capital gain, this amounts to furnishing of inaccurate particulars of income.
Therefore, the CIT(Appeals) is not justified in allowing the claim of the assessee.
On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee sold the office premises and declared the income arising out of such sale as long-term capital gain. Similarly, the rental income was disclosed under the head “income from business”. It is nobody’s case that the assessee has failed to disclose the correct income to the Assessing Officer. In fact, the rental income and capital gain were disclosed to the Assessing Officer and the assessee was claiming the head of the income on a bonafide belief that the income on sale of property as long-term capital gain and the rental income as business income.
This is the understanding of the statutory provision of law by the assessee. When the assessee offered the entire information and material and claimed the income to assess under a particular head, merely because the Assessing Officer changed the head of income for the purpose of assessment without making any adjustment in the total income, according to the Ld. counsel, that cannot be construed as providing of inaccurate particulars of income. The Ld. counsel has placed his reliance on the judgement of Apex Court in Reliance Petroproducts Pvt. Ltd (2010) 322 ITR 158. The Ld. counsel has also placed his reliance on the unreported judgement of Madras High Court in CIT v. M/s Balaha Chemicals Agencies in Tax Case (Appeal) Nos.906 to 908 of 2013 dated 16.12.2015. The Ld. counsel has filed a copy of the said judgement.
We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee has sold office premises and declared the gain arising out of such sale as long-term capital gain. Since the assessee claimed depreciation on the business premises, the gain arising out of depreciable asset has to be necessarily classified as short-term capital gain. Similarly, the rental income claimed by the assessee under normal circumstances, has to be classified as income from house property. However, if an assessee was exploiting the business asset, the rental income has to be classified as business income. However, it would depend upon facts of each case. In the case before us, the assessee has furnished the material facts relating to transfer of property and also rental income received by the assessee. The assessee, according to its understanding of the Income-tax Act, classified the capital gain under “long-term capital gain” and rental income under “income from house property”. However, the Assessing Officer rejected the classification made by the assessee and treated the capital gain as short-term capital gain and rental income as “income from house property”. The question arises for consideration is when the assessee has furnished all the particulars of income and claimed classification under a particular head, whether such claim made by the assessee would amount to furnishing of inaccurate particulars of income or concealing any part of income? An identical situation was considered by the Apex Court in Reliance Petroproducts Pvt. Ltd. (supra). The Apex Court found that after furnishing the entire particulars of income, the statutory claim made by the assessee cannot be construed as furnishing of inaccurate particulars of income or concealing any part of income. This Tribunal is of the considered opinion that when the assessee claims that the income generated on sale of property and rental income has to be assessed in a particular head that does mean that the assessee has furnished all the particulars of income. Income-tax Act, being a special enactment for assessment of income, the assessee is entitled to make a claim under a particular head as per its understanding.
Merely because the understanding of the assessee regarding classification of income was found not to be correct by the Assessing Officer that cannot be a reason to conclude that the assessee has furnished any inaccurate particulars of income or the assessee has concealed any part of income.
In view of the above, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the penalty levied by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on 12th May, 2016 at Chennai.