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TMI Blog2010 (5) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... has shown income from Sales Service(Net) at negative figure of ₹ 33,62,022/-. The assessee has also shown other income of ₹ 53,49,255/- which includes rental income of ₹ 50,40,000/-. He further observed that vide point No.7(1) to the Notes to Account it is apparent that during the year under consideration actual production is Nil. Then how employees emoluments expenses are shown on higher side. If these expenses are not allowed then there must be positive income under the head Income from House Property. The AO after considering the assessee's reply that the company has taken the property on lease from Mr. Jayant D. Sanghvi as per agreement and to generate extra income, the management has thought it fit to sublet the extra space available in the factory to M/s. Boston Education and Software Technologies Private Limited (BEST) as per the Agreement dated 28.01.1999 and hence, the income earned on account of the same is rightly taken as Business Income and not as Income from House Property and examining the rent agreements was of the view that it is a case of sub-letting out of a property and accordingly he assessed the rental income of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated penalty proceeding u/s.271(1)(c) of the Act. Accordingly the AO issued notice to show cause as to why penalty u/s.271(1)(c) may not be imposed. In response, it was interalia submitted by the assessee that there was no fresh letting out of the property by Shri Jayant Sanghvi, with a malafide intention. In fact, the said property was already under assessee's occupation as the tenant, since the year 1981, which is much before the year in which Shri Jayant Sanghvi became the owner thereof. The assessee further submitted that the reliance to the case of McDowell and company is totally without any basis and misplaced and further the AO has not made substantive assessment, hence, there is not concealment in respect of rental income of the property on the part of the assessee. With regard to the disallowance of claim of loss of opening stock of ink of ₹ 45,27,400/- that the ld. CIT(A) has rejected the entire suspicion theory of the AO . It is only in his view that the assessee has not been able to provide the details/proof for the zero value of the stock of ink, the ld. CIT(A) restricted the disallowance at 50% which cannot be held to be liable to penalty for concealment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17/Mum/2005 for the Assessment Year 2001-02(along with other appeals) in paras-14, 23 and 34 of the order dated 26.2.2009. The reliance was also placed on the decision in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158(SC). He therefore, submits that the order passed by the ld. CIT(A) in deleting the penalty be upheld. 7. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that the assessee has shown rental income of ₹ 50,40,000/- received from BEST as part of the income from business. The AO assessed the same on protective basis under the head income from other sources and in the case of Jayant D. Sanghvi he assessed the same on substantive basis. The ld. CIT(A) confirmed the action of the Assessing Officer. However, the Tribunal vide its finding recorded in para-23 of its consolidated order dated 26.2.2009 (supra), has held that ... The assessment of rents received by SSRPL (Sanghvi Swiss Refills (P) Ltd.) from BEST has to be made on substantive basis in the hands of the SSRPL and this issue is decided accordingly. 8. In ITO vs. Roborant Investment (I) Ltd.(200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that the entire ink cannot be said to have become unusable especially when the assessee is not in a position to lead any conclusive evidence in this regard. But at the same time it also cannot be said that the ink which was available with the assessee since 1.4.1996 was in a good condition and was usable even in the A.Y. 2001-02. We do not find any infirmity in the aforesaid observation of the CIT(A). Normally over a lapse of time the quality of ink deteriorates and slowly becomes unusable. Therefore, in the absence of any further evidence before him and considering the time factor the stock was lying with the assessee, the CIT(A), in our opinion, was justified in giving part relief to the assessee. Therefore, we do not find any infirmity in the order of the CIT(A) restricting such disallowance to 50% of the stock written off. The assessee could have got the full benefit of writing off of the stock in normal course provided he would have led adequate supporting evidence as to how the stock was found to be unusable and the manner of disposal of the unusable stock. Since the assessee did not produce any evidence either before the Assessing Officer or before the CIT(A) or even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO noted that it has offered the amount of ₹ 93,000/- as additional income and applying Explanation 1(B) to sec 271 imposed a penalty on the assessee. The Appellate Tribunal cancelled the penalty, interalia, for the reason that in the notice initiating penalty proceedings the assessee was not intimated about the proposed action under Explanation 1(B) to section 271(1)(c); but the Hon ble High Court on reference held that the imposition of penalty was valid. On appeal, the Hon ble Supreme Court held, affirming the decision of the Hon ble High Court that the penalty was validly levied further held that no express invocation of the Explanation to Sec. 271 in the notice u/s.271 is necessary before the provisions of the Explanation are applied. However, it is not the case of the assessee that the penalty is not leviable as notice initiating penalty proceeding the assessee was not intimated about the proposed action under Explanation 1(B) to sec.271(1)(c). Therefore, the decision relied on by the ld. DR is not applicable to the facts of the present case. 16. Recently Their Lordships in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) after considering various dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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