2011 (7) TMI 1175

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....f trading in computer software and hardware but has shown receipts of `3,75,000/- under the head service charges. He noticed that this amount was received as rent in respect of office premises let out at `75,000/- per month. Invoking the principles established by the Hon'ble Supreme Court in the case of CIT vs. Shambu Investment Pvt. Ltd. 267 ITR 143 the A.O. brought to tax the rental income received under the head house property which resulted in converting the loss return into a positive income return. The company did not prefer any appeal as the said property was subsequently sold and litigation would result in lot of disputes/ expenditure. The A.O., however, decided to levy penalty under section 271(1)(c) on the reason that assessee....

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..... Moreover, it was submitted that assessee has sold the property in the next year and only the leased for a part of the year from November 2003. Therefore only five months rent was received during the year and for most part of the year the premises was occupied by the assessee for the purpose of business. Therefore the service charges received from the tenants were shown as service charge received in the P & L Account. It was further submitted that the property was ultimately sold in the next year and since the issues is only of head of income relying of the principles laid down by the Hon'ble Bombay High Court in the case of CIT vs. Awaita Properties P. Ltd. ITA No. 731 of 2009 , it was submitted that there cannot be any penalty under ....

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....hs only during the year. For balance of the period the premises was under the occupation of assessee as a business premises, the fact of which was not disputed. The A.O. also has not estimated the annual letting value, but simply taken the service charges received under the head house property without considering the deduction of interest, which the assessee seems to have been paid. There is no discussion about the service charges receivable on furniture & fixtures which does not fall under the head house property. This indicates that the A.O. simply shifted the income offered under the head 'business' to the head 'house property' without examining the other facts and law. In these circumstances, it cannot be stated that assessee has furnis....