9911796707
TMI Blog2011 (2) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 143(3) of the Act; 1.3 That the CIT (Appeals) erred on facts and in law in not appreciating that the assessing officer has initiated proceedings under section 271(1)(c) of the Act for alleged 'furnishing of inaccurate particulars of income' but levied penalty on the alleged ground that the appellant has 'concealed' its particulars of income; 1.4 That the CIT (Appeals) erred on facts and in law in observing that penalty is leviable as no appeal has been filed by the appellant against the assessment order passed under section 143(3) of the Act; 1.5 That the CIT (Appeals) erred on facts and in law in holding that the penalty under section 271(1)(c) of the Act is a civil liability and has to be paid like any other civil liability; 1.6 That the CIT (Appeals) erred on facts and in law in not appreciating that the penalty under section 271(1)(c) of the Act was not leviable qua the impugned addition made in the assessment order considering that (i) the addition was made in the quantum proceedings, simply on account of bona fide difference of opinion; (ii) the claim made by the appellant was properly explained and the explanation furnished was bona fide; and (iii) all facts ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 1 to section 271(1)(c) of the Act it was the duty of the assessee to explain his case regarding not furnishing true and correct particulars of its income. He relied on the decision of Hon'ble Supreme Court in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99/118 Taxman 324 for the proposition that if the assessee does not prove that his failure to return its correct income was not due to fraud or neglect, he shall be deem to have concealed the particulars of its income or furnished inaccurate particulars thereof. Therefore, the assessee was liable to penalty under section 271(1)(c) of the Act. He accordingly imposed penalty of Rs.17, 82,078/- being hundred per cent of tax sought to be evaded. 5. Before the ld. CIT (Appeals) it was submitted that the assessing officer had levied the penalty without appreciating the facts of the case judiciously. He submitted that the assessee had duly offered rental income in the return of income actually received from letting out of the property to M/s. Punjab National Bank. The agreement of the lease of the said property was placed on record before the assessing officer in the course of assessment proceedings. Therefore, there was no fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order had attained finality. The ld. CIT (A) also placed reliance in the case of CIT v. Escorts Finance Ltd. [2009] 183 Taxman 453 (Delhi) wherein penalty was held to be levible when deduction under section 35-D was claimed was not admissible. It was not a bona fide error. He also placed reliance on the decision of Hon'ble Supreme Court in Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277/174 Taxman 571 (SC) wherein it has been held that the object behind enactment of section 271(1)(c) read with Explanations indicate that the section has been enacted to provide for a loss of remedy. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability, as is the case in the matter of provision under section 276C. In the case of CIT v. RMP Plasto (P.) Ltd. [2009] 313 ITR 397/184 Taxman 372 Hon'ble Supreme Court held that where positive income reduced to NIL by setting off of carried forward losses for earlier years penalty for concealment was leviable. He also placed reliance on the decision of Hon'ble Supreme Court in the case of CIT v. Atul Mohan Bindal [2009] 183 Taxman 444 wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis. It has been further submitted that the assessee's case is covered by Hon'ble Delhi High Court in the case of CIT v. Zoom Communication (P.) Ltd. [2010] 327 ITR 510/191 Taxman 179 wherein it has been held that so long as the assessee has not concealed any material facts or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, even if the claim made by him is un-sustainable in law provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated is found to be bonafide. If the explanation is neither substantiated nor shown to be bonafide, the Explanation 1 to section 271(1)(c) would come into play and the assessee will be liable to penalty. 9. We have heard both the parties and gone through the material available on record. We have also gone through the lease agreement. The assessee had entered into an agreement to lease out the property to Punjab National Bank Ltd. on a sum of Rs.1,00,000/- per annum. The total area of constructed building leased out by the assessee is given in second schedule to the lease agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonably be accepted to let out from year to year is in excess, the amount received or receivable shall be the annual value of the property. The word "reasonably" appearing in clause (a) is very important. What the landlord might reasonably expect to get from a hypothetical tenant, if the building were let from year to year, affords the statutory yardstick for determining the annual value. The actual rent payable by a tenant to the landlord would, in normal circumstances, afford reliable evidence of what the landlord might reasonably expect to get from a hypothetical tenant, unless the rent is inflated or depressed by reason of extraneous consideration such as relationship, expectation of some other benefit etc. There would be ordinarily be in a free market close approximation between actual rent received by the landlord and the rent which he might reasonably expect to get from a hypothetical tenant. In the case before us the assessee had received interest free deposits of Rs 67 crores because which the rent received was low. The annual rent of Rs 1,00,000/- of the property having area of 1,23,490 sq.ft. let out to a bank cannot be treated as reasonable to which property could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproved valuer (Rs 61.25/sq.ft./annum) and rent received (Rs.0.80/sq.ft./annum) is too large to believe that the assessee was under bonafide belief that market rent was Rs.0.80 per square feet. From these facts it evident that the assessee had planned its affairs in such a way that minimum tax would be payable. 12.1 In Zoom Communication (P.) Ltd. (supra) it has been held that so long as the assessee has not concealed any material facts or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, even if the claim made by him is un-sustainable in law provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated is found to be bonafide. If the explanation is neither substantiated nor shown to be bonafide, Explanation (1) to section 271(1)(c) would come into play and the assessee will be liable to penalty. 12.2 In the case before us the assessee has not been able to substantiate as to why the rent for which the property was reasonably expected to be let from year to year was not admitted in the return of income. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
