DCIT, CHENNAI vs. M/S. INDO INTERNATIONAL LTD., CHENNAI

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.

submitted that the Assessing Officer levied penalty under Section

2 I.T.A. No.58/Mds/11

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.

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

3 I.T.A. No.58/Mds/11

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.

4 I.T.A. No.58/Mds/11

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

5 I.T.A. No.58/Mds/11

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.

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

6 I.T.A. No.58/Mds/11

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

7 I.T.A. No.58/Mds/11

assessee has furnished any inaccurate particulars of income or the assessee has concealed any part of income.

Order pronounced on 12th May, 2016 at Chennai.

sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 12th May, 2016. Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-III, Chennai 4. आयकर आयु�त/CIT, Chennai-I, Chennai 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.