Davinder Arora, Shahabad V. ITO, Kurukshetra

ITA 1009/CHANDI/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51586 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 20-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHISHEK CHHABRA
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL:SMD BENCH: C HANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITA NO. 1009/CHD/2011 ASSESSMENT YEAR: 2005-06 SHRI DAVINDER ARORA, V ITO, WARD-2, PROP. M/S HARI OM TRADERS, KURUKSHETRA. MAIN BAZAR, SHAHABAD. PAN: AAUPA-5225B APPELLANT BY: SHRI ABHISHEK CHHABRA RESPONDENT BY: AKHILESH GUPTA DATE OF HEARING : 28.11.2011 DATE OF PRONOUNCEMENT : 30.11.2011 ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 02.08.201 1 ON THE FOLLOWING GROUNDS: 1. ORDERS PASSED BY LD. ITO AND CIT(A) ARE ILLEGAL , ARBITRARY AND BAD IN LAW. 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE LD. I TO AND CIT(A) WERE NOT JUSTIFIED IN IMPOSING AND CONFIRMIN G THE PENALTY OF RS.28677/- U/S 271(1)(C) OF THE IT ACT O N THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTERES T OF RS.1,04,175/- ON INTEREST FREE ADVANCES. 3. ON FACTS AND IN CIRCUMSTANCES OF THE CASE LD. I TO AND CIT(A) WERE NOT JUSTIFIED IN HOLDING THAT THE ASSES SEE HAS MADE CONCEALMENT OF HIS INCOME DELIBERATELY KNOWING LY AND CONSCIOUSLY. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSMENT WAS ORIGINALLY COMPLETED ASSESSING THE TOTAL INCOME AT RS.1,09,600/- AS AGAINST THE RETURNED INCOME OF RS.88,440/-. THE AS SESSEE HAD CLAIMED DEDUCTION FOR A SUM OF RS.5,23,539/- BEING INTEREST PAID BY HIM IN RESPECT OF THE FUNDS BORROWED FROM THE BANK. THE A SSESSEE HAD ALSO GIVEN INTEREST FREE LOANS AGGREGATING TO RS.8,68,13 0/- TO HIS FAMILY MEMBERS. THESE FACTS WERE DULY PLACED BEFORE THE A O COMPLETING THE ORIGINAL ASSESSMENT. THE AO, HOWEVER, DID NOT DISA LLOW ANY PART OF THE INTEREST WHILE COMPLETING THE ORIGINAL ASSESSMENT. HOWEVER, THE ASSESSMENT ORDER WAS SUBSEQUENTLY CANCELLED BY THE CIT U/S 263 OF THE INCOME-TAX ACT, VIDE HIS ORDER DATED 09.03.2009 BY WHICH THE AO WAS DIRECTED TO PASS AFRESH ASSESSMENT ORDER. IN THE A SSESSMENT ORDER PASSED, PURSUANT TO THE DIRECTIONS GIVEN BY THE LD. COMMISSIONER, THE AO HAS DISALLOWED INTEREST AMOUNTING TO RS.1,04,176/- ON THE GROUND THAT BORROWED FUNDS WERE NOT USED FOR THE PURPOSE OF BUS INESS BUT WERE ITA 1009/CHD/2011 SHRI DAVINDER ARORA, SHAHABAD 2 DIVERTED FOR GIVING INTEREST FREE LOANS TO THE FAMI LY MEMBERS. THE DISALLOWANCE SO MADE BY THE AO WAS NOT APPEALED AGA INST BY THE ASSESSEE. THE IMPUGNED PENALTY HAS BEEN REVEALED W ITH REFERENCE TO THE AMOUNT OF INTEREST DISALLOWED BY THE AO IN HIS ASSESSMENT ORDER PASSED PURSUANT TO THE DIRECTIONS GIVEN BY THE LD. COMMISSIONER. ON APPEAL, LD. COMMISSIONER HAS CONFIRMED THE PENALTY AMOUNTING TO RS.28,677/- LEVIED BY THE AO U/S 271(1)(C) OF THE A CT. 3. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A) CONF IRMING THE PENALTY LEVIED BY THE AO, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF THE APPEAL, IT WAS SUBMITTED THAT THE ASSESSEE HAD MADE FULL AND TRUE DISPOSAL OF ALL FACTS MATERIAL TO THE COMPUTATION OF INCOME. IT WAS ALSO SUBMITTED THAT THE INTEREST CLAIMED BY THE ASSESSEE WAS ALLOWED BY THE AO IN THE ORIGINAL ASSESSMENT BUT WA S DISALLOWED BY THE AO IN THE ASSESSMENT ORDER PASSED PURSUANT TO THE D IRECTIONS GIVEN BY THE LD. COMMISSIONER U/S 263. IT WAS FURTHER SUBMI TTED THAT THE ISSUE REGARDING DISALLOWANCE OF INTEREST ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE WAS HIGHLY DEBATABLE AND THERE FORE, IMPUGNED PENALTY WAS NOT LEVIABLE. 4. ON CAREFUL CONSIDERATION OF THE MATERIAL PLACED BEFORE US, WE FIND THAT THE ASSESSEE HAD MADE TRUE AND FULL DISCLOSURE OF ALL THE FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME. THE A MOUNT OF INTEREST CLAIMED BY THE ASSESSEE WAS ALLOWED IN THE ORIGINAL ASSESSMENT ORDER. MERE DISALLOWANCE OF INTEREST IN THE ASSESSMENT ORD ER PASSED IN PURSUANCE OF THE DIRECTIONS GIVEN BY THE LD. COMMIS SIONER U/S 263 IS NOT, IN OUR OPINION, SUFFICIENT FOR LEVY OF PENALTY. IN THIS VIEW OF THE MATTER, PENALTY LEVIED BY THE AO AND CONFIRMED BY THE CIT(A ) IS CANCELLED. 5. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 30 TH NOV.,2011. SD/- SD/- (SUSHMA CHOWLA) (D K SRI VASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH NOV.,2011 POONAM COPY TO: 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH