SINDOORI TRADERS P. LTD,MUMBAI vs. ITO 8(3)-2, MUMBAI

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ITA 771/MUM/2009Status: DisposedITAT Mumbai18 May 2016AY 2003-20043 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that while the assessee may have erred in classifying rental income, making a claim not sustainable in law does not amount to furnishing inaccurate particulars of income, especially when appellate relief was granted on other issues. Therefore, the penalty was not justified.

What were the facts?

The assessee declared rental income as business income, but the AO assessed it under 'income from house property' and 'income from other sources', also including deemed income from vacant property and disallowing interest. This led to a significant increase in assessed income. Appellate authorities later allowed interest expenditure and deleted deemed income from vacant property.

What were the issues?

Whether the assessee furnished inaccurate particulars of income warranting penalty under Section 271(1)(c) when the difference in assessed income was primarily due to a change in the head of income and subsequent appellate relief.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “E” Bench, Mumbai

For Appellant: Shri Rakesh Milwani
For Respondent: Shri Chandrajit Singh
Hearing: 31.3.2016Pronounced: 18.5.2016

O R D E R Per B.R. Baskaran, AM :-

The appeal filed by the assessee is directed against the order dated 23.12.2008 passed by learned CIT(A)-XXIX, Mumbai confirming the penalty of Rs. 13.33 lakhs levied by the Assessing Officer u/s. 271(1)(c) of the Act.

2.

Learned counsel appearing for the assessee submitted that the assessee had declared rental income derived from letting of the properties as business income. However, the Assessing Officer assessed the same under the head “income from house property” and he also assessed a portion of rental income under the head “income from other sources”. While completing the assessment the Assessing Officer had included deemed income from vacant (unlet) property also and disallowed interest expenditure claimed by the assessee. The above said adjustments resulted in assessing a total income of Rs. 26.31 lakhs as against loss of Rs. 9.96 lakhs declared by the assessee in its return. In the appellate proceedings learned CIT(A) allowed interest expenditure and the Tribunal deleted the deemed income relating to vacant (unlet) property.

2 Sindoori Traders Private Limited Learned AR invited our attention to a working sheet furnished by him and submitted that, after giving effect to the orders of both the appellate authorities, difference between the returned income and assessed income has narrowed down to Rs. 70,704/-. Learned counsel further submitted that the assessee had furnished all particulars relating to the rental income. Learned Counsel submitted that the assessee has not concealed any particulars of income or furnished any inaccurate particulars of income. The total income has gone up only due to change in head of income and due to disallowance/addition. Learned Counsel placed reliance on the decision of Hon'ble Supreme Court rendered in the case of Reliance Petro Products Pvt. Ltd., (322 ITR 158) and submitted that making of a claim, which is sustainable in law, does not amount to furnishing of inaccurate particulars of income. Accordingly he prayed for cancellation of penalty levied by the Assessing Officer.

3.

Learned Departmental Representative, on the contrary, supported the order passed by learned CIT(A).

4.

We have heard the rival contentions and perused the record. We noticed that the Assessing Officer has levied penalty for furnishing inaccurate particulars of income. It is not the case of the Assessing Officer that the assessee has concealed any particulars of income. The total income assessed by the AO has gone up mainly due to the change effected in respect of head of income for assessing rental income and due to disallowance of interest expenditure. We noticed that the disallowance of interest expenditure claimed by the assessee and addition of deemed rental income from un-let portion of the property has since been set aside in the appellate forum. Hence there is a difference of Rs. 70,704/- only between the returned income and assessed income and the said difference has arisen due to change in head of income. The assessee may not be right in declaring rental income under the head income from business, but Hon'ble Supreme Court has held in the case of Reliance Petro Products Pvt. Ltd. (supra) that making a claim, which is not 3 Sindoori Traders Private Limited sustainable in law, would not result in furnishing inaccurate particulars of income. Accordingly we are of the view that there is merit in the contention of the assessee. Accordingly we set aside the order of learned CIT(A) and direct the Assessing Officer to delete the impugned penalty levied u/s. 271(1)(c) of the Act.

5.

In the result, appeal filed by the assessee is allowed.

Order has been pronounced in the Open Court on 18.5.2016.

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