VYANJAN HOTEL P. LTD., MUMBAI V. ACIT - 2(3)(1), MUMBAI

CO 6/MUM/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8537 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJIV GU BGOBRA
• Keywords: Capital asset; Business income; Business expenditure
• Section: 271(1)(c); 154; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN , HON'BLE ACCOUNTANT MEMBER ITA NO. 5257 /MUM/201 6 (A.Y: 2012 - 13) ACIT 2(3)(1) ROOM NO. 552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M/S. VYANJAN HOTEL PVT LTD., B - 202, NEELAM CENTRE, HIND I CYCLE ROAD, OPP. DOORDARSHAN, WORLI MUMBAI 400 030 PAN: AABCV 7944 C (APPELLANT) (RESPONDENT) CO. NO. 6/ MUM / 2018 [ARISING OUT OF ITA NO.5257/MUM/2016 (A.Y: 2012 - 13)] M/S. VYANJAN HOTEL PVT LTD., B - 202, NEELAM CENTRE, HINDI CYCLE ROAD, OPP. DOORDARSHAN, WORLI MUMBAI 400 030 PAN: AABCV 7944 C V. ACIT 2(3)(1) ROOM NO. 552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJAN VORA DEPARTMENT BY : SHRI RAJIV GU BGOBRA DATE OF HEARING : 22 .10.2018 DATE OF PRONOUNCEMENT : 31 .12 .2018 2 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., O R D E R PER C. N. PRASAD (JM) 1. REVENUE IN ITS APPEAL IS CHALLENGING THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 6, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 06.05.2016 FOR THE ASSESSMENT YEAR 2012 - 13 IN DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 2. BRIEFLY STATED THE FACTS ARE THAT, ASSESSEE ENGAGED IN THE BUSINESS OF TRADING SERVICES . ASSESSEE FILE D RETURN OF INCOME ON 29.03.2014 FOR THE ASSESSMENT YEAR 2012 - 13 DECLARING LOSS OF .1,34,94,930/ - , THIS RETURN IS A BELATED RETURN. LOSS INCURRED BY THE ASSESSEE WAS NOT ELIGIBLE TO CARRY FORWARD TO SUBSEQUENT YEAR AND ASSESSEE DID NOT CLAIM CARRYFOR WARD OF LOSS TO SUBSEQUENT YEAR. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION ASSESSEE PURCHASED THREE FLATS AND WERE SHOWN AS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS. ASSESSEE CLAI MED INTEREST EXPENSES OF .1,33,56,280/ - ON THE LOAN UTILIZED TOWARDS PURCHASE OF THESE FLATS , AS BUSINESS EXPENSES IN THE BOOKS OF ACCOUNTS AND IN THE RETURN OF INCOME. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION ASSESSEE DECLARED NIL INCOME FROM OPER ATIONS THEREBY INCURRING LOSS OF .1,34,94,930/ - INCLUDING THE INTEREST EXPENSES OF .1,33,56,280/ - . HOWEVER , THE ASSESSEE FILED BELATED RETURN OF INCOME AND THEREBY IT DID NOT CARRYFORWARD THE LOSS INCURRED DURIN G THE YEAR UNDER CONSIDERATION FOR THE SUB SEQUENT YEARS. 3 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., 3. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 25.03.2015 DETERMINING THE INCOME OF THE ASSESSEE AT .1,33,56,280/ - . IN THE COURSE OF THE ASSESSMENT P ROCEEDINGS THE ASSESSING OFFICER DISALLOWED TH E INTEREST EXPENSES U/S. 36(1)(III ) OF THE ACT HOLDING THAT THE ASSESSEE HAD NOT PUT TO USE THE SAID PREMISES FOR BU SINESS PURPOSES AND T HEREFORE CLAIM FOR INTEREST EXPENSES ON ACCOUNT OF PURCHASE OF THE PROPERTIES IS NOT ALLOWABLE. ASSESSEE THOUGH NOT FILED ANY APPEAL AGAINST T HE ORDER OF THE ASSESSING OFFICER WHICH WAS PASSED U/S. 143(3) OF THE ACT, HOWEVER , FILED A RECTIFICATION APPLICATION U/S. 154 OF THE ACT REQUESTING THE ASSESSING OFFICER TO RECTIFY THE MISTAKE IN THE COMPUTATION OF INCOME AS HE HAS TAKEN BUSINESS INCOME AS NIL AS AG AINST LOSS OF .1,34,94,924/ - AS A STARTING POINT FOR COMPUTING THE TOTAL INCOME OF THE ASSESSEE. ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS FOR THE DISALLOWANCE MADE IN THE ASSESSMENT ORDER I.E. INTEREST U/S. 36(1)(III) OF THE ACT. ASSESSING OFFICER HELD THAT THERE WAS ENOUGH MATERIAL APPEARED ON RECORD TO PROVE THAT THE ASSESSEE HAD MADE A CONSCIOUS ATTEMPT TO EVADE THE TAX BY FURNISHING INACCURATE PARTICULARS OF THE INCOME. ACCORDINGLY, HE LEVIED PENALTY AT 150% OF THE AMOUNT SOUG HT TO BE EVADED. 4. THE LD.CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT ASSESSEE ACCEPTED THE ADDITION MADE BY THE ASSESSING OFFICER AND HAD NOT CONTESTED THE SAME AND FURTHER MERE MAKING OF A CLAIM WHICH IS 4 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., NOT MAINTAINABLE IN LAW , BY ITSELF , WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME , B Y FOLLOWING THE DECISION OF THE APEX COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS (P.) LTD. [322 ITR 158]. AGGRIEVED BY THE LD.CIT(A) ORDER THE RE VENUE IS IN APPEAL BEFORE US. 5. LD. DR VEHEMENTLY SUPPORTED THE OR DERS OF THE ASSESSING OFFICER. 6. LEARNED COUNSEL FOR THE ASSESSEE SHRI RANJAN VORA SUBMITTED THAT ASSESSING OFFICER WHIL E PASSING THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT MADE DISALLOWANCE U/S. 36(1)(III) OF THE ACT STATING THAT INTEREST EXPENDITURE WAS INCURRED TOWARDS PURCHASE OF THE FLATS AND THE SAID FLATS WERE NOT PUT TO USE FOR BUSINESS PURPOSES AND T HEREFORE INTEREST IS NOT ALLOWABLE . LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE PROVISIONS OF SECTION 36(1)(III) OF TH E ACT SUBMITTED THAT , WHERE INTEREST IS PAID , IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF THE BUSINESS WHICH INCLUDES PURCHASE OF INVENTORIES THE SAME SHALL BE ALLOWED U/S. 36(1)(III) OF THE ACT . IT IS SUBMITTED THAT THE BORROWINGS HAVE BEEN USED FO R PURCHASING INVENTORIES AS THESE PROPERTIES ARE STOCK IN TRADE FOR ASSESSEE . LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT EVEN AMENDMENT TO SECTION 36(1)(III) OF THE ACT WOULD NOT MAKE DIFFERENCE AS THE CAPITAL IS BORROWED FOR THE PURPOSE OF BUSIN ESS I.E. PURCHASING OF INVENTORY BUT NOT FOR THE ACQUISITION OF ANY CAPITAL ASSET. HE PLACED RELIANCE ON THE DECISION 5 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SRISHTI ENTERPRISE PVT. LTD., [ 321 ITR 498] AND THE DECISION OF THE JAIPUR BENCH OF ITAT IN THE CASE OF ADITYA PROPCON PVT. LTD., IN ITA.NO. 762/JP/2012 DATED 31.01.2014. 7. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT DURING THE YEAR ASSESSEE HAS FILED A BELATED RETURN OF INCOME , ASSESSEE WAS AWARE THAT NO CARRYFORWARD OF LOSS IS PERMISSIB LE IN BELATED RETURN OF INCOME AND HENCE IT HAD F ILED A LOSS RETURN WITHOUT CARRYING FORWARD THE LOSS TO THE SUBSEQUENT YEARS. THEREFORE, IT IS SUBMITTED THAT THERE IS NO TAX ES OUGHT TO BE EVADED BY THE ASSESSEE AS THE ASSESSEE HAS NOT CARRIED FORWARD LOS S TO THE SUBSEQUENT YEARS. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT , SINCE NO LOSS IS BEING CARRIED FORWARD BY THE ASSESSEE THE BENEFIT OF LOSSES OF THE CURRENT YEAR WILL NOT BE AVAILABLE IN THE SUBSEQUENT YEARS TO THE ASSESSEE , AND ACCORDINGLY THERE IS NO LOSS TO THE REVENUE. HE PLACED RELIANCE ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF FIRST DATA (INDIA) PVT. LTD [384 ITR 260] . REFERRING TO THE SAID DECISION THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS DECISION IS DIRECTLY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE WHEREIN THE HON'BLE HIGH COURT SETTING ASIDE THE PENALTY ORDER U/S. 271(1)(C) OF THE ACT HELD THAT , THE ASSESSEE FILED E - RETURN WHEREIN CERTAIN LOSS DECLARED AS BUSINESS LOSS SUOMOTO WAS REFLECTED AS CARRYFORWARD LOSS , ALSO ASSESSEE IN THE 6 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., SUBSEQUENT ASSESSMENT YEAR NOT C LAIMED CARRYFORWARD LOSS, T HEREFORE THERE WAS NO INTENT OF THE ASSESSEE TO FURNISH INACCURATE PARTICULARS OF INCOME. 8. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THERE SHALL NOT BE ANY PENALTY WHERE THERE IS A FULL DISCLOSURE OF FACTS. IT IS SUBMITTED THAT ASSESSEE HAS SHOWN THE INTEREST EXPENSES ON FACE OF ITS PROFIT AND LOSS ACCOUNT AND THERE WAS FULL DISCLOSURE BY THE ASSESSEE WITH REGARD TO THE SAID EXPENSES. FURTHER ASSESSEE HAS ALSO MADE SUBMISSION DATED 16.02.2015 BEFORE THE ASSESSING OFFICER WITH REGARD TO THE LOAN TAKEN AND THE INTEREST PAID ON THE SAME, T HEREFORE IT IS SUBMITTED THAT SINCE THE FACTS PERTAINING TO THE SAID INTEREST EXPENSES WERE DISCLOSE D IN THE ACCOUNTS AS WELL AS IN THE RETURN OF INCOME , NO PENALTY SHOULD BE LEVIED. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT LTD [322 ITR 158]. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE , ASSESSEE FILED RETURN OF INCOME BELATEDLY AND THE LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF DEBITING THE INTEREST EXPENSES TO THE PROFIT AND LOSS ACCOUNT , IS NOT ALLOWABLE TO CARRY FORWARD. IN THE AS SESSMENT P ROCEEDINGS THE ASSESSING OFFICER HELD THAT INTEREST EXPENSES CANNOT BE ALLOWED AS DEDUCTION. THE ASSESSING OFFICER 7 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., DISALLOWED THE INTEREST EXPENSES AND COMPUTED THE INCOME AT .1,33,56,280/ - . HE INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY AT 150% ON THE DISALLOWANCE OF INTEREST MADE IN THE ASSESSMENT ORDER. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS MADE COMPLETE DISCLOSURE OF INTEREST EXPENSES IN THE BOOKS OF ACCOUNTS AS WELL AS IN THE RETURN OF INCOME. THE RETURN WAS FILED BELATEDLY AND NO LOSS COULD BE CARRIED FORWARD TO THE SUBSEQUENT ASSESSMENT YEAR . THE ASSESSEE DID NOT CARRY FORWARD THE LOSS TO THE SUBSEQUENT ASSESSMENT YEAR. 10. THE CLAIM OF THE ASSESSEE I.E. INTEREST WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT ON BORROWED FUNDS WHICH WAS UTILIZED FOR PURCHASE OF THREE FLATS , WHICH WERE TREATED AS STOCK IN TRADE IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE , WAS DENIED BY THE ASSESSING OFFICER. MERE REJECTION OF CLAIM WILL NOT AUTOMATICALLY LEAD TO CONCEALMENT OF INCOME , WHEN THERE IS COMPLETE DISCLOSURE OF THE DETAILS OF THE TRANSACTIONS. THIS ASPECT OF THE MATTER HAS BEEN CONSIDERED BY THE LD.CIT(A) AND DELETED THE DISALLOWANCE FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. , (SUPRA) OBSERVING AS UNDER: - 5 . I HAVE CAREFULLY CONSIDERED THE FACTS OF THE 'CASE AND THE SUBMISSIONS OF THE LD. AR. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER U/S. 143(3) AND THE PENALTY ORDER U/S.271(1)(C) PASSED BY THE AO. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY THE AO AND LD. AR. THE AO HAS LEVIED PENALTY ON THE GROUND THAT THE FLAT PURCHASED BY THE AS SESSEE HAD NOT BEEN PUT TO USE FOR BUSINESS PURPOSE FOR THE ENTIRE PREVIOUS YEAR RELEVANT TO THE SUBJECT ASSESSMENT 8 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., YEAR. HOWE VER, IT HAD CLAIMED INTEREST EXPENSE TOWARDS PURCHASE OF THE SAID FLAT. THUS, IT HAD NOT ONLY CONCEALED THE PARTICULARS OF ITS INCOME BUT HAD ALSO FURNISHED INACCUR ATE PARTICULARS OF INCOME. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT APPELLANT HAS DI SCLOSED COMPLETE DETAILS IN RESPECT OF THE SAID INTEREST EXPENSES OF RS.1,33,56,280 / - DEBITED TO THE PROFIT AND LOSS ACCOUNT. HENCE, CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME DOES NOT ARISE. IT HAS RELIED ON THE DECISIONS IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. (SUPRA), NOKIA INDIA PVT. LTD. (SUPRA) AND OTHER DECISIONS REPRODUCED ABOVE. 5.1 LET US NOW DISCUSS THE SCOPE OF SECTION 271(1)(C) OF THE ACT. PENALTY IS LEVIED OVER AND ABOVE ANY TAX OR INTEREST PAYABLE BY THE APPELLANT. IT IS THUS DISTINCT AND SEPARATE FROM THE TAX PAYABLE. PENALTY PROCEEDINGS ARE ALSO DISTINCT AND SEPARATE FROM ASSE SSMENT PROCEEDINGS [CIT VS. DHARAM CHAND L. SHAH, 204 ITR 462 (BOM), KANBAY SOFTWARE INDIA PVT. LTD. (2009) 31 SOT 153 (PUNE)]. IT IS WELL SETTLED THAT THE PROVISIONS DEALING WITH PENALTY SHOULD BE STRICTLY CONSTRUED. IT IS TO BE CONSTRUED WITHIN THE TERMS AND LANGUAGE OF THE PARTICULAR SECTION. FINDINGS IN THE ASSESSMENT PROCEEDINGS FOR DETERMINING OR COMPUTING TAX CANNOT BE SAID TO BE CONCLUSIVE FOR THE PURPOSE OF LEVY OF PENALTY. PENALTY U/S.271(1)(C) IS LEVIED @ 100 PER CENT TO 300 PER CENT OF TAX SOUGH T TO BE EVADED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF. SECTION 271(1)(C) NEEDS TO BE READ ALONG WITH THE EXPLANATIONS PROVIDED THEREIN. SECTION 271(1)(C) AND EXPLANATION - 1 OF SEC.271(1)(C) READ AS UNDER : - '27 1. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME ETC. (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY - (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLAUSE (D), IN ADDITION TO TAX, IF ANY, PAY ABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF FAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFITS OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS. EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS 9 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., RELATING TO THE SAME AND MATER IAL TO COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB - SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. 5.2 LET US NOW EXAMINE THE ABOVE FACTS IN THE LIGHT OF THE VARIOUS DECISIONS INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA). THE HON' BLE COURT HAS CONSIDERED THE - NATURE OF DEFAULT WHICH WOULD CONSTITUTE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, IN THE CONTEXT OF THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. AFTER ANALYZING ITS OWN DECISIONS IN THE C ASE OF DILIP N. SHROFF V. JCIT (291 ITR 519), UNION OF INDIA V. DHARMENDRA TEXTILES (306 ITR 277), UNION OF INDIA V. RAJASTHAN SPINNING AND WEAVING MILLS (224 CTR 1) AND CIT V. ATUL MOHAN JINDAL (317 ITR 1), THE HON'BLE COURT STATED AS UNDER: - 'THE BASIC R EASONS WHY DECISION IN DILIP N. SHROFF V. JOINT CIT WAS OVERRULED BY THIS COURT IN UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS, WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 276C OF THE ACT WAS LOST SIGHT ON IN THE CASE OF DILIP N. SHROFF V. JOINT CIT. HOWEVER, IT MUST BE POINTED OUT THAT IN UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS, NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFF V. JOINT CIT, WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMATE INFERENCE IN DILIP N. SHROFF V. JOINT CIT TO THE EFFECT THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY U/S.271(1)(C) THAT THE DECISION IN DILIP N. SHROFF V. JOINT CIT WAS OVERRULED.' THE DEPARTMENT IN THE RELIANCE PETRO PRODUCTS (SUPRA) HAD ARGUED THAT SINCE THE APPELLANT HAD CLAIMED EXCESSIVE DEDUCTION KNOWING THAT THEY ARE INCORRECT; IT AMOUNTED TO CONCEALMENT OF INCOME. THE HON'BLE COURT DID NOT F IND SUBSTANCE IN SUCH ARGUMENT AND NOTED THAT THE ABOVE, BY ITSELF, TO BE INSUFFICIENT TO ATTRACT PENALTY. IT HELD AS UNDER: 'A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGAR DING THE INCOME OF THE ASSESSEE.......AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PA RT. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PEN ALTY U/S.271(1)(C ) . IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTE NDMENT OF THE LEGISLATURE.' 5.3 THE RATIO OF THE ABOVE CASE IS APPLICABLE TO THE FACTS OF THE APPELLANT. THE APPELLANT HAD CLAIMED INTEREST EXPENDITURE WHICH WAS DISALLOWED BY THE AO. THE 10 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., SAID EXPENSES WERE CLAIMED BY THE APPELLANT IN THE PROFIT AND LOSS ACCOUNT ON THE BASIS OF WHICH THE RETURN OF INCOME WAS FILED. THE AO HAS MADE THE ADDITION WHICH IS NOT CONTESTED BY THE APPELLANT. HOWEVER, MERE MAKING OF A CLAIM, WHICH IS NOT MAINTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTI CULARS OF INCOME. HENCE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS (SUPRA), THE PENALTY LEVIED U/S.271(1)(C) IS DELETED AND THE GROUND IS ALLOWED. 11. ON A CAREFUL CONSIDERATION OF THE OBSERVATION OF THE LD .CIT(A) , WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT AS THE ASSESSEE HAS MADE COMPLETE DISCLOSURE OF DETAILS WITH REGARD TO THE CLAIM FOR DEDUCTION U/S. 36(1)(III ) OF THE ACT ON THE INTEREST EXPENSES IN RESPECT OF THE FLATS PURCHASED AND SHOWN IN THE BOOKS OF ACCOUNTS AS WELL AS IN THE RETURN OF INCOME. FURTHER THE LOSS ARISING OUT OF SUCH CLAIM COULD ALSO BE NOT CARRIED FORWARD AS THE ASSESSEE FILE D BELATED RETURN OF INCOME AND T HEREFORE THERE IS NO LOSS TO THE REVENUE. FURTHER, WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 36(1)(III) OF THE ACT ON THE INTEREST EXPENSES ON BORROWED FUNDS UTILIZED FOR PURCHASE OF INVENTORIES / STOCK IN TRADE IS A DEBATABLE ISSUE. THUS, WE HOLD THAT THERE IS NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE IN RESPECT OF ITS CLAIM FOR INTEREST EXPENSES. HENCE NO PENALTY IS LEVIABLE U/S. 271(1)(C) OF THE ACT . IN THE CIRCUMSTANCES WE DO NOT SEE ANY VALID REASON TO INTERFERE WITH THE JUDGEMENT OF THE LD.CIT(A) IN DELETING THE PENALTY. HENCE THE ORDER OF THE LD.CIT(A) IS SUSTAINED. AS WE HAVE DELETED THE PENALTY ON THIS GROUND THE OTHER LEGAL CONTENTIONS ARE NOT GONE INTO. 11 ITA NO.5257/MUM/2016 (A.Y: 2012 - 13) CO. NO. 6/MUM/2018 M/S. VYANJAN HOTEL PVT LTD., 12. SINCE , WE HAVE SUSTAIN ED THE ORDER OF THE LD.CIT(A) IN DELETING THE PENALTY, THE CROSS OBJECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. HENCE THE SAME IS DISMISSED AS INFRUCTUOUS. 13. IN THE RESULT, APPEAL OF THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31 ST DECEMBER , 2018 SD/ - SD/ - ( N.K. PRADHAN ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 31 / 12 / 2018 GIRIDHAR , SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM