2019 (8) TMI 925 - AT - Income Tax

Penalty u/s 271(1)(c) read with Section 274 - claim for set off as set out of business expenses and depreciation against Income from House Property - as alleged no business being conducted by the assessee during the previous year relevant to impugned assessment year, still the assessee sought to set off business losses and depreciation against income from house property by invoking provisions of Section 71 - HELD THAT - The assessee in statement of fact filed with tribunal has taken a feeble plea that letting out of this commercial office is business of the assessee wherein by which the assessee is itself contradicting its own stand of offering said income under the head Income from House Properties . The assessee owned only one property during the previous year under consideration as described above in this order situated at Laxmi Tower at BKC, Mumbai which was let out for 10 months from June 2009 to March 2010. There is no other activity of the assessee apart from letting out this commercial premises. The tribunal in quantum has also decided that the assessee has not done any business during the year under consideration and the said finding of fact has attained finality. Decision of Hon ble Supreme Court in the case of Raj Dadarkar Associates v. ACIT 2017 (5) TMI 586 - SUPREME COURT which elaborately discussed the chargeability of income to tax under the head Income from House Property also rebut the aforesaid contention of the assessee that letting out of the commercial office is business of the assessee. The assessee was fully aware that there was no business conducted by it during the entire previous year and its expenses as well deprecation on assets can neither be allowed as business deduction nor it can be allowed as set off against other incomes. the claim for set off as set out by assessee by setting off business expenses and depreciation against Income from House Property was non-genuine act of the assessee which lacked bonafide which was undertaken to reduce tax-liability and was rightly held against assessee in quantum by all the three authorities upto ITAT , concurrently. Under these circumstances and factual matrix of the case , we are not inclined to interfere with the well reasoned appellate order passed by learned CIT(A), which we uphold/confirm. Thus, in nut-shell we confirm and uphold the penalty levied by the AO u/s 271(1)(c) of the 1961 Act which was later confirmed by learned CIT(A). The assessee fails in this appeal.

Summary

Issues Involved:
1. Justification of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Validity of the assessee's claims for set-off of business losses and unabsorbed depreciation against income from house property.
3. Adherence to principles of natural justice in the appellate proceedings.

Issue-wise Detailed Analysis:

1. Justification of Penalty under Section 271(1)(c):
The primary issue was whether the penalty imposed under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars was justified. The assessee contended that the CIT(A) erred in justifying the penalty without any evidence of concealment or inaccurate particulars. The CIT(A) relied on precedents such as *Commissioner of Income-tax v. Harparshad and Company Ltd.* and *CIT v. Escorts Finance Ltd.*, asserting that penalty under Section 271(1)(c) is a civil liability for loss of revenue, even if the claim is not proven false but is ex facie bogus. The Tribunal upheld the penalty, noting that the assessee's claim lacked bona fide and was a non-genuine act to reduce tax liability.

2. Validity of Assessee's Claims for Set-off:
The assessee had set off business losses and unabsorbed depreciation against income from house property, which the AO disallowed as there was no business activity during the year. The Tribunal previously upheld this disallowance, confirming that the assessee did not carry on any business during the year. The Tribunal reiterated that the assessee’s claim for set-off was untenable and lacked bona fide, as the only income was from house property, and no business activity was conducted. The Tribunal cited the Supreme Court decision in *Raj Dadarkar & Associates v. ACIT*, which clarified that income from letting out commercial property is chargeable under 'Income from House Property' and not 'Business Income'.

3. Adherence to Principles of Natural Justice:
The assessee failed to appear for multiple hearings, despite being duly served notices. The Tribunal noted that the assessee must be vigilant about its rights and duties while pursuing disputes in court. The repeated non-appearance indicated a lack of diligence on the assessee's part. The Tribunal proceeded to adjudicate the appeal on merits in the absence of the assessee, ensuring adherence to the principles of natural justice by providing ample opportunities for the assessee to present its case.

Conclusion:
The Tribunal confirmed the penalty under Section 271(1)(c), emphasizing that the assessee's claim for set-off was non-genuine and lacked bona fide. The appeal was dismissed, and the penalty upheld, affirming the CIT(A)'s order and the AO's findings. The Tribunal's decision underscored the importance of genuine claims and the consequences of non-compliance with procedural requirements in tax litigation.