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TMI Blog2019 (5) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... k 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 Pigments Private Limited v. ITO [ 2012 (10) TMI 861 - ITAT MUMBAI] - thus no penalty u/s 271(1)(c) is exigible on the assessee Income from sub-letting of the premises - income from house property or income from other sources - bonafide belief - dispute regarding taxability of head of income in respect of sub-letting is going on - HELD THAT:- 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) and we hereby order deletion of the penalty levied by the AO u/s. 271(1)(c) of the Act. - Decided in favour of assessee. - I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the assessee s major source of income declared in return of income filed with Revenue is Income from House Property of ₹ 10,98,000/- and other income of the assessee were from other sources of ₹ 39,637/- from electricity and water charges receipts. 4. The assessee had shown sum of ₹ 2,31,775/- under the head Sundry Creditors payable to M/s. Alok Textile Traders in its Balance Sheet as at 31.03.2009. The assessee was asked by the AO to file confirmation from the aforesaid party. The assessee was not able to file confirmation from the said party which led the AO to hold that the assessee could not prove genuinenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s . 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 income. In the mean time quantum addition were challenged by the assessee before the Ld. CIT(A) which appeal of the assessee stood dismissed by Ld. CIT(A) vide appellate order dated 30.10.2012 wherein learned CIT(A) held that the assessee is not eligible for deduction u/s 24(1) of the 1961 Act as the assessee is not the owner of the property. This also led to the levy of penalty u/s. 271(1)(c) for furnishing of inaccurate particulars of income and explanation furnished by the assessee stood rejected by the AO, vide penalty order dated 28.03.2014 passed by the AO u/s 271(1)(c) of the 1961 Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the said penalty notice dated 30.11.2011 issued by the AO u/s 271(1)(c) of the 1961 Act. On merit, it was submitted that there were additions made to income of the assessee on account of cessation of liability u/s. 41(1) of the 1961 Act to the tune of ₹ 2,31,775/- on the ground that the assessee could not furnish confirmation from the creditors which led AO to conclude that the aforesaid sundry creditors is not genuine. It was claimed that the assessee s appeal before learned CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 tribunal that no penalty can be levied u/s 271(1)(c) for merely change of head under which income was assessed vis-a-vis the head of income under which the income was offered to tax by the assessee. It is claimed by the assessee, thus, no penalty can be levied u/s 271(1)(c) in the case where there is merely a change of head of income in which income was brought to tax by the authorities vis-a-vis head of income in which income was offered to tax by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 the income of the assessee were made by the AO in quantum assessment on two counts, firstly u/s 41(1) of the 1961 Act towards an amount of ₹ 2,31,775/- shown to be payable by the assessee in its audited financial statements to M/s Alok Textile Traders as on 31.03.2009, on the ground that the said liability is not genuine and had ceased to exist as the assessee was not able to produce confirmation from the said party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ceased to exist, levy of penalty u/s 271(1)(c) is not automatic. The assessee is claiming the said amount is still payable and the aforesaid amount is duly reflected in its audited financial statement for year ended 31.03.2009 as payable by the assessee to said concern which is acknowledgment of debt by the assessee. Since the assessee was not able to bring conformation from the said party could be a valid re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 sources and consequentially deduction u/s. 24(1) of the 1961 Act was also denied to the assessee by the AO in quantum assessment. The Ld. CIT(A) later confirmed the decision of the AO by dismissing the appeal of the assessee on this ground and matter reached finality as no appeal was filed by the assessee against quantum additions before ITAT. It is also observed that in assessee s own cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee in bringing to tax said income to tax under the head Income from house property while filing return of income which led assessee to offer the said income under the head Income from house property despite the fact that the assessee was not owner of the said property and consequential deduction u/s. 24(1) were also claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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