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2019 (5) TMI 421

ted and it was cited as one of the reasons by the assessee for not getting confirmation from the said party - HELD THAT:- The assessee has offered an explanation which is a bonafide explanation as to existence of its liability to said concern as on 31.03.2009 which is also reflected to be payable in its books of accounts. The assessee did discharge its burden as is laid on it under penalty provisions as is contained in Section 271(1)(c). Now it is for the Revenue to rebut the same with cogent incriminating material that explanation offered by the assessee in penalty provisions are false. The Revenue did not bring any incriminating material to prove that the said liability ceased to exist and the assessee had obtained any benefit as is contemplated u/s 41(1) - AO did not made any enquiry with the aforesaid party as no notices u/s. 133(6) or summons u/s 131 were issued by the AO to Alok Textile Traders ( Now Alok Textiles Limited) to unravel truth. AO has not brought any cogent incriminating material to prove that the assessee has obtained any benefit as is contemplated u/s. 41(1). The assessee has rightly relied on the decision of ITAT, Mumbai benches in the case of Shiva Pigm .....

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d in law. 2. On the facts and in the circumstances of the case the penalty proceedings initiated by the learned AO without serving a valid notice were illegal and invalid. The following alternative grounds of appeal are without prejudice to preliminary grounds of appeal: 3. On the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) - 18, Mumbai (hereinafter referred to as "the learned CIT(A)"), erred in passing the order under appeal dated 1st November, 2016 which was dispatched for serving upon appellant on 23rd December, 2016 with the intent to defeat Appellant's declaration filed on 7Ih November, 2016 under section 204 of the Finance Act, 2016 under Direct Tax Dispute Resolution Scheme, 2016. He ought not to have done so. 4. The learned CIT(A) erred in confirming the levy of penalty of ₹ 1,75,000/- on the grounds of addition of ₹ 2,31,775/- under section 41(1) of the Act and upon merely change of head of income in respect of ₹ 10,98,000/-. He ought not to have done so. Your appellants crave leave to add, alter or modify any or all of the foregoing ground of appeal, if required. 3. The brief facts of the case are t .....

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floor and open space of 4800 square feet on ground adjoining to the building situated at 36, Marol Co-operative Industrial Estate, Mr Vasanji Road, Andheri East, Mumbai-400059, while the said asset is not appearing on the Balance Sheet of the assessee company. The assessee submitted that the said property is taken on leave and license basis from Shri Viresh B. Ghatlia, who is Director of the assessee. Thus, the AO observed that the income derived from transaction is only income from subletting of the aforesaid premises, which was brought to tax by the AO as income under the head Income from other sources . The AO observed that the assessee has declared aforesaid compensation/rent received of ₹ 10,98,000/- under the head Income from House Property on which deduction u/s. 24(1) was also claimed by the assessee. The AO brought the said income to tax as income chargeable to tax under the head Income from other sources and deduction u/s 24(1) was also denied to the assessee, vide assessment order dated 30.11.2011 passed by the AO u/s 143(3) of the 1961 Act. This led to the invocation of penalty proceeding u/s. 271(1)(c) of the 1961 Act for furnishing of inaccurate particulars of i .....

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ng Liability and wrongly claim of deduction. Accordingly, I uphold the penalty of ₹ 1,75,000/- and dismiss the appeal of the appellant. 6. Now the matter is before the tribunal at the behest of the assessee. The Ld. Counsel for the assessee stated that these are appeals against penalty levied by the AO u/s. 271(1)(c) of the Act which penalty was later confirmed by learned CIT(A). It was submitted that penalty proceedings were invoked by the AO u/s 271(1)(c) on ground that the assessee has furnished inaccurate particulars of income on both the issues which is found mentioned in the assessment order dated 30.11.2011 passed by the AO u/s. 143(3) of the 1961 Act at para 5. It was submitted that penalty proceeding were initiated for furnishing inaccurate particulars of income and penalty was later levied on both the issues also on the furnishing of inaccurate particulars of income. Our attention was drawn to page 5/paper book filed by the assessee with tribunal, wherein notice dated 30.11.2011 issued by the AO u/s 271(1)(c) read with Section 274 of the 1961 Act is placed. It was submitted that the relevant column /limb under which penalty proceedings were invoked is not struck off .....

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d issue on which penalty was levied u/s 271(1)(c) of the 1961 Act, It was submitted by learned counsel for the assessee that the assessee declared income from rent of ₹ 10,98,000/- under the head Income from house property and statutory deduction u/s. 24(1) were also claimed. The said deduction u/s 24(1) were denied to the assessee as the income from rent was assessed to tax by the AO under the head Income from other Sources . It was submitted that there was merely a change of head of income from Income from House Property under which income was offered to tax by the assessee, to other head of income Income from Other Sources under which the AO assessed the said income to tax, which as per learned counsel for the assessee will not entail levy of penalty u/s. 271(1)(c) of the Act. Our attention was brought to the order of the ITAT in assessee s own case in ITA no. 1213/Mum/2011 for AY 2003-04, vide appellate order dated 09.02.2015 wherein the rental income was held to be chargeable to tax under the head Income from House Property as against offered to tax by the assessee under the head Profits and Gains of Business or Profession by the authorities below and it was held by trib .....

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om). On merits it was submitted that no balance confirmation was submitted by the assessee from M/s Alok Textile Traders and hence additions were made u/s. 41(1) of the 1961 on the ground that this creditor is not genuine. On second issue. It was submitted by learned DR that assessee has wrongly declared rent received from property taken on leave & licence basis under the head income and house property while the said income is required to be brought to tax under the head Income from other sources . It was submitted that the deduction u/s. 24(1) was wrongly claimed by the assessee. It was also submitted that for earlier year in assessee s own case the tribunal has deleted the penalty for AY 2003-04 in ITA no. 1213/Mum/2011 vide order dated 09.02.2015 on the grounds that mere change of head of income under which income is chargeable to tax will not entail penalty u/s 271(1)(c) of the 1961 Act but it was submitted by learned DR that the tribunal had not dealt with issue of wrong claim of deduction u/s. 24(1) of the 1961 Act in the said order. 8. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the additions to .....

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was filed against quantum assessment by the assessee with tribunal. This led to the levy of penalty u/s 271(1)(c) by the AO against the assessee for furnishing of inaccurate particulars of income which was later confirmed by Ld. CIT(A) vide its appellate order. In our considered view keeping in view factual matrix of the case, penalty is not leviable on this ground because assessee had made acknowledgment of the debt in its audited financial statement for the year under consideration and consistently claim is made that the said liability has not ceased to exist and the assessee is liable to pay said sum to M/s ALok Textile Traders( Now Alok Textiles Limited). The assessee also made complete disclosure in the return of income filed with the Revenue as to the aforesaid liability payable by the assessee and said sum stood reflected as payable by the assessee in its audited books of accounts. The auditors have also not made any adverse comments as to the subsistence of this liability. Merely because the contentions of the assessee stood dismissed by the Revenue in quantum assessment wherein additions to income were made u/s 41(1) of the 1961 Act on the grounds that said liability has c .....

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lding situated at 36, Marol Co-operative Industrial Estate, Mr Vasanji Road, Andheri East, Mumbai-400059 was declared under the head Income from House Property of which the assessee was not owner while the same ought to have been declared under the head Income from Other Sources and the assessee has also wrongly claimed the statutory deduction u/s 24(1) of the 1961 Act. We have observed that the assessee has taken premises on leave & licence basis from its Director which was further sublet by the assessee. The income from sub-letting of the said premises was offered for taxation by the assessee under the head Income from House Property and as a consequence thereto statutory deduction of 30% on account of Repair and Maintenance was also claimed by the assessee u/s. 24(1) of the 1961 Act. The AO while framing quantum assessment observed that the assessee is not owner of the premises which is a statutory condition u/s. 22 of the Act to bring the rental income to tax under the head Income from House Property . This led the AO to bring the said income from sub-letting of the aforesaid property taken by the assessee on leave and license basis to tax under the head Income from other s .....

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e penalty levied by lower authorities is therefore ordered to be deleted. 5. In the result, the appeal of the assessee is hereby allowed. Thus, tribunal in assessee s own case for AY 2003-04 was pleased to delete penalty u/s 271(1)(c) by holding that there was no furnishing of inaccurate particulars of income nor there was concealment of income when the head of income to assess income was changed from business income to Income from House Property. We have also observed that the AO while framing assessment for AY 2002-03, 2004-05 to 2006-07 vide separate assessment orders for all these years all dated 29.10.2009 passed u/s. 143(3) r.w.s. 147 of the 1961 Act, has assessed the said income under the head income from house property and statutory deduction u/s 24(1) towards Repairs and Maintenance was also allowed by the AO although the same was declared to be business income by the assessee in return of income filed for all these years ( refer page 75-82/pb). The assessee for impugned assessment year also declared the said rental income from sub-letting as income from house property and claimed deduction u/s 24(1) of the 1961 Act, so there was a bonafide belief on the part of the assess .....

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eeing for earlier years for the said income to be assessed as income from house property during reassessment proceedings to avoid any further litigation with Revenue. Thus, obviously with a view to avoid litigation for the year under consideration, the assessee filed return of income on 26.09.2009 declaring rental income from sub-letting as income from house property despite the fact that the assessee being not owner of the said property. The explanation put forward by the assessee is bonafide which takes it out from the clutches of penalty provisions as are contained in Section 271(1)(c) of the 1961 Act, and we hereby order deletion of the penalty levied by the AO u/s. 271(1)(c) of the Act. Thus, on both the counts on merits penalty as levied by the AO u/s 271(1)(c) which was later confirmed by learned CIT(A) stood deleted. Since, we have already deleted the penalty levied by the AO u/s 271(1)(c) of the 1961 Act which was later confirmed by learned CIT(A) on both the counts on merits, the other grounds raised by the assessee in its appeal has become academic and we are not inclined to decide the same. We order accordingly. 10. The appeal of the assessee in ITA No. 1290/Mum/2017 fo .....

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