Rajesh Prasad, Delhi V. ITO, New Delhi

ITA 110/DEL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6715 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: S K GOYAL
• Keywords: Difference of opinion; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , DELHI BENCH SMC, NEW DELHI BEFORE SHRI BHAVNSH SAINI, JUDICIAL MEMBER ITA NO. 110/DEL./2018 ASSESSMENT YEAR : 2012-13 RAJESH PRASAD C-7/116, KESHAV PURAM, NEW DELHI, PIN- 110035 PAN : ALHPP5132E VS ITO, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S.K.GOYAL, CA REVENUE BY : SH. S.L.ANURAGI, SR. DR DATE OF HEARING :09.07.2018 DATE OF PRONOUNCEMENT : 09 .07.2018 ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAI NST THE ORDER OF LD. CIT(A)12, NEW DELHI DATED 13 TH OCTOBER, 2017 FOR ASSESSMENT YEAR 2012-13, CHALLENGING THE LEVY OF PENALTY U/S 271(1)(C) OF TH E IT ACT. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. ITA NO.110/DEL/2018 2 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E WAS RUNNING TWO PROPRIETORY CONCERNS NAMELY M/S. HOTI LAL CHUNI LAL AND M/S. VI MAL TRADERS WHICH WERE INVOLVED IN TRADING IN FOOD GRAINS AND COMMISSION AGENT. THE ASSESSEE HAS SHOWN UNSECURED LOAN OF RS. 39,41,156/- WHICH WERE RECEI VED FROM HIS FAMILY MEMBERS AND RELATIVES ON WHICH HE HAS ALLOWED INTEREST OF R S. 4,26,840/-. ON THE OTHER HAND THE ASSESSEE HAS SHOWN DEBTOR OF RS. 3.40 CRORES IN THE NAME OF M/S. GANGA RAM HAR PRASAD WHICH IS PROPRIETOR CONCERN OF HIS WIFE AND LEFT UNRECOVERED SUCH HEAVY DEBTORS AND NO INTEREST CHARGE BY ASSESSEE FOR DELA Y PAYMENTS. THE AO, THEREFORE, NOTED THAT ON THE ONE HAND ASSESSEE HAS PAID INTERE ST TO FAMILY MEMBERS AND RELATIVES AND ON THE OTHER HAND HEAVY AMOUNT OF RS. 3.40 CROR E IS STILL OUTSTANDING ON CLOSE OF THE FINANCIAL YEAR BUT NO INTEREST HAVE BEEN CHARGE D. SHOW CAUSE NOTICE WAS ISSUED AS TO WHY THE INTEREST MAY NOT BE DISALLOWED. THE A SSESSEE AGREED FOR THE DISALLOWANCE, THE AO ACCORDINGLY DISALLOWED RS. 4,2 6,840/- BY CONSIDERING THE FACT THAT IF SIMPLY INTEREST OF 12% IS CHARGED ON THE IN TEREST FREE DEBTORS THE ADDITION WOULD COME TO THE ABOVE AMOUNT. THE AO VIDE SEPARAT E ORDER LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT ON THE AFORESAID ADDITION. 4. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT(A). THE APPEAL OF ASSESSEE WAS DECIDED VIDE ORDER DATED 26 TH OCTOBER, 2016, THE TRIBUNAL, HOWEVER, RESTORED THE MATTER THAT THE FILE OF CIT(A) TO DECI DE THE APPEAL AFRESH. THE WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APP ELLATE ORDER IN WHICH THE ASSESSEE ITA NO.110/DEL/2018 3 BRIEFLY EXPLAINED THE ASSESSEE HAS NOT CONCEALED AN Y INCOME. THE ASSESSEE DID NOT FILE APPEAL AGAINST THE QUANTUM ADDITION JUST TO BU Y PEACE OF MIND, TO AVOID LITIGATION AND TO SAVE LITIGATION COST. THE ASSESSEE IS IN A T RADING BUSINESS LIKE FOOD GRAIN AND THERE ARE ALWAYS HEAVY CREDITOR AND DEBTORS. THE BA LANCE SHEET OF THE ASSESSEE WOULD DISCLOSE THAT THERE WERE SUNDRY DEBTORS OF RS. 5.58 CRORES AND SUNDRY CREDITORS WERE OF RS. 5.17 CRORE. THE ADDITION MADE IS INTANGIBLE AND IS NOT REAL. THEREFORE, ON DIFFERENCE OF OPINION NO PENALTY BE LEVIED AGAINST THE ASSESSEE. THE ASSESSEE RELIED UPON SEVERAL CASE LAWS IN SUPPORT OF THE ABOVE CON TENTION. THE LD. CIT(A) HOWEVER DISMISSED THE APPEAL OF ASSESSEE BECAUSE ASSESSEE DID NOT CHARGE INTEREST ON THE DELAYED PAYMENTS AND HAS NOT EXPLAINED THE ISSUE BE FORE THE AUTHORITIES BELOW. APPEAL OF THE ASSESSEE HAS BEEN DISMISSED. 5. THE LD. COUNSEL FOR THE ASSESEE REITERATED THE S UBMISSION MADE BEFORE THE AUTHORITIES BELOW. HE HAS REFERRED TO PB 57 WHICH I S TRADING AND PROFIT AND LOSS ACCOUNT TO SHOW THAT NO INTERESTS IS PAID TO THE C REDITORS AND NO INTEREST IS CHARGED FROM THE DEBTORS. ONLY INTEREST HAVE BEEN DISALLOW ED WITHOUT ANY REASONS, THEREFORE, IT IS NOT A FIT CASE OF LEVY OF THE PENALTY. ON TH E OTHER HAND LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS. THE AO IN THE ASSESSMENT ORDER NOTED THAT THE ASSESSMENT PROCEEDINGS HAD BEEN ATTENDED B Y THE ASSESSEE AND FILED NECESSARY DETAILS. THE ASSESSEE ALSO PRODUCED BOOK S OF ACCOUNTS WHICH WERE BASIS ITA NO.110/DEL/2018 4 CHECKED. THE ASSESSEE AS PER PROFIT AND LOSS ACCOUN T CLAIMED DEDUCTION OF INTEREST OF RS. 4,26,840/-. THE AO NOTED THAT ASSESSEE HAS SHOW N UNSECURED LOAN OF RS. 39,41,156/- WHICH WERE RECEIVED FROM HIS FAMILY MEM BERS AND RELATIVES ON WHICH THE ABOVE INTERESTS HAVE BEEN PAID. THE ASSESSEE HA S SHOWN DEBTORS OF RS. 3.40 CRORES IN THE NAME OF THE CONCERN WHICH BELONG TO W IFE OF THE ASSESSEE. THE ASSESSEE DID NOT CHARGE INTEREST ON THE UNRECOVERED SUNDRY DEBTORS FOR DELAYED PAYMENT. THE AO, THEREFORE, DIRECTED IF INTEREST BE CHARGED ON T HE DELAYED PAYMENT AT THE RATE OF 12% P.A. THEN THE AMOUNT OF INTEREST WILL COMES MOR E THAN INTEREST PAID OF RS. 4,46,840/-. THE ASSESSEE AGREED TO THE ADDITION BEF ORE THE AO. THESE FACTS CLEARLY DISCLOSED THAT AO PROPOSED TO CHARGE INTEREST ON T HE DEBIT BALANCE OF RS. 3.40 CRORES WHICH AMOUNT IS NOT RECOVERED TILL THE CLO SE OF THE FINANCIAL YEAR. THE AO, HOWEVER, DID NOT BRING ANY AGREEMENT ON RECORD WHIC H MAY AUTHORIZE THE ASSESSEE TO CHARGE INTEREST ON THE DEBIT BALANCE FOR DELAYED PA YMENT. NO MATERIAL IS ALSO PRODUCED ON RECORD TO JUSTIFY THE ADDITION ON ACCOU NT OF NOTIONAL INTEREST SO CHARGED BY THE AO. HONBLE GAUHATI HIGH COURT IN THE CASE OF B AND A PLANTATION AND INDUSTRIES 242 ITR 22 HELD THAT THERE IS NO PROVISI ON IN INCOME TAX ACT, EMPOWERING THE ITO TO INCLUDE IN THE INCOME OF ASSE SSEE, INTEREST WHICH WERE NOT DUE OR COLLECTED. HONBLE SUPREME COURT IN THE CASE OF A.RAMAN AND COMPANY 67 ITR 11 HELD THAT LAW DOES NOT OBLIGE A TRADER TO MA KE MAXIMIZE PROFIT. IN THE FACTS OF THE CASE, IT IS CLEAR THAT THE ASSESSEE DID NOT CHARGE ANY INTEREST ON DELAYED ITA NO.110/DEL/2018 5 PAYMENT FROM THE DEBTOR FOR WHICH NO MATERIAL HAVE BEEN PRODUCED AS TO UNDER WHAT CIRCUMSTANCES, SUCH INTEREST COULD BE CHARGED ON TH E BUSINESS TRANSACTIONS. THE ASSESSEE BEING A TRADER IS NOT UNDER COMPULSION TO DO THE BUSINESS AT THE DICTATE OF THE AO. THE ASSESSEE ALSO EXPLAINED THAT THE NATURE OF BUSINESS OF THE ASSESSEE WOULD SO THAT THERE ARE ALWAYS HUGE SUNDRY DEBTOR A ND SUNDRY CREDITORS WHICH FACT HAVE NOT BEEN DISPUTED BY THE AUTHORITIES BELOW. TH EREFORE, IT IS A CASE OF MERE DISALLOWANCE OF INTEREST WITHOUT ANY JUSTIFICATION, WHICH WOULD NOT DISCLOSE ANY CONCEALMENT OF PARTICULARS OF INCOME OR FILING INAC CURATE PARTICULARS OF INCOME ON BEHALF OF THE ASSESSEE. MAY BE THE ASSESSEE DID NOT CHALLENGE THE SMALL ADDITION IN APPEAL WOULD NOT DISENTITLE THE ASSESSEE TO CONTEST THE LEVY OF PENALTY. IT IS WELL SETTLED LAW THAT QUANTUM AND PENALTY MATTERS ARE DI STINCT AND DIFFERENT. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW IT IS NOT A FIT CASE OF LEVY OF THE PENALTY. I ACCORDINGLY SET ASID E THE ORDERS OF AUTHORITIES BELOW AND CANCEL THE PENALTY U/S 271(1)(C) OF THE IT ACT. I MAY NOTE THAT FINDINGS IN THIS ORDER ARE RELEVANT TO THE PENALTY MATTER AND SHALL HAVE NO BEARING ON THE QUANTUM ADDITION AGREED BY THE ASSESSEE. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT.) SD/- (BHAVNESH SAINI) JUDICIAL MEMBER ITA NO.110/DEL/2018 6 DATED: 09 /07/2018 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE OF DICTATION 09 .0 7 .2018 D ATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 0 9 .0 7 .2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 09 .0 7 .2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 09 .0 7 .2018 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 09 .0 7 .2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 09 .0 7 .2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE O N WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER **