NARAYAN DEVAPPA SHETTY,MUMBAI vs. ITO (IT) 2(1), MUMBAI

The appeal filed by the assessee is directed against the order dated 07-09-2010 passed by Ld CIT(A)-II, Mumbai confirming the penalty of Rs.50,000/- levied by the assessing officer u/s 271(1)(c) of the Act for assessment year 2004-05.

None appeared on behalf of the assessee and hence we proceed to dispose of the appeal ex-parte, without the presence of the assessee.

We heard Ld D.R and perused the record. The assessee owned a hotel named Hotel Sarovar (Restaurant and Bar) at Thane. The assessee was a non-resident Indian based in Uganda. Since he was not in a Conducting agreement with Mrs. Jheevanamshi Karia Shetty for conducting the business and in compensation thereof, the assessee received a sum of Rs.30,000/- per month. The assessee declared the said receipts as Royalty income and accordingly computed the income under the head Income from Business. The AO, however, assessed the same as Income from House Property and the same has resulted in enhancement of income, on which the assessing officer levied a penalty of Rs.50,000/- u/s 271(1)(c) of the Act. The Ld CIT(A) also confirmed the same.

We notice that the assessing officer has observed that the assessee has failed to show that Mrs. Jeevanamshi Karia Shetty was having any past experience to substantiate the claim of the assessee that he had entrusted the job of conducting the restaurant to her for better management. However, in our view, what is required to be seen in the penalty proceedings is whether the assessee has furnished inaccurate particulars of income or concealed any particulars of income in the facts and circumstances of the case. In the instant case, there is no allegation that the assessee has concealed particulars of income. The assessee has computed the income under the head “Income from business”, since according to the assessee he has given the conducting right of the restaurant to Mrs. Jeevanamshi Karia Shetty on a monthly royalty of Rs.30,000/-. Thus, according to the assessee, the restaurant building was not let out. However, the assessing officer has assessed the same as income from house property. Thus, we notice that there was difference of opinion between the assessee and the assessing officer with regard to the head under which the monthly income of Rs.30,000/- is assessable. Thus, we notice that the assessee has made a claim on a reasonable basis and the same was not found to be acceptable or sustainable in law. Under 271(1)(c) of the Act is not exigible in view of the decision of Hon’ble Supreme Court rendered in the case of Reliance Petro Products P Ltd (322 ITR 158). Accordingly, we set aside the order of Ld CIT(A) and direct the assessing officer to delete the impugned penalty.