Mahalaxmi Transport, Pune V. Deputy Commissioner of Income-tax, Circle - 14, Pune

ITA 1124/PUN/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0963 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 22-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Notional interest
• Section: 271(1)(c); 143(3); 274

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1124/PUN/2018 / ASSESSMENT YEAR : 2014-15 M/S. MAHALAXMI TRANSPORT, 7, KARBHARI COMPLEX, RING ROAD, KASBA, BARAMATI, PUNE 413 102. PAN : AAOFM8141J. . / APPELLANT. V/S THE DY.COMMISSIONER OF INCOME TAX , CIRCLE 14, PUNE. . / RESPONDENT ASSESSEE BY : SHRI KISHORE PHADKE. REVENUE BY : SHRI PRASHANT GADEKAR. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 7, PUNE DATED 02.04.2018 FO R THE ASSESSMENT YEAR 2014-15. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS AS A TRANSPORT CONTRACTOR. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2014- 15 ON 21.11.2014 DECLARING LOSS OF RS.1,74,84,276/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAM ED U/S 143(3) / DATE OF HEARING : 17.07.2019 / DATE OF PRONOUNCEMENT: 03.09.2019 2 OF THE ACT VIDE ORDER DT.19.12.2016 AND THE TOTAL LOSS WAS DETERMINED AT RS.1,57,89,900/- INTER-ALIA BY MAKING ADDITION OF RS.16,94,380/- ON ACCOUNT OF INTEREST PAID TO PARTNERS. ON THE AFORESAID D ISALLOWANCE OF INTEREST PAID, AO LEVIED PENALTY OF RS.5,75,920/- U/S 271(1)(C) O F THE ACT VIDE ORDER DT.30.06.2017. AGGRIEVED BY THE PENALTY ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.02.04.2018 (IN APPEAL NO.PN/CIT(A)-7/CIR-14/10045/2017-1 8) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAIS ED THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A)-7 ERRED IN LAW AND ON FACTS IN SUSTAINING, AND THE LEARNED DCIT, CIRCLE 14, PUNE ERRED IN LAW AND ON F ACTS IN LEVYING, CONCEALMENT PENALTY OF RS.5,75,920/- U/S 271(1)(C) OF THE ITA , 1961 FOR FURNISHING OF INACCURATE PARTICUL A R OF INCOME . 2. THE LEARNED CIT(A)-7 ERRED IN UPHOLDING THE LEVY OF CONCEALMENT PENALTY OF RS. 575,920 LEVIED BY THE LEARNED AO WITHOUT APP RECIATING THAT, NO ANY DISCERNIBLE SATISFACTION TRANSPIRES FROM THE SCRUTI NY ORDER . APPELLANT CONTENTS , IN ABSENCE OF ANY CONSPICUOUS SATISFACTION BEING RE ACHED, SUBSEQUENT LEVY OF PENALTY IS INCORRECT. 3. THE LEARNED I-T AUTHORITIES OUGHT TO HAVE APPREC IATED THAT THE ADDITION OF RS.16,94,380 (I.E. NOTIONAL INTEREST ON PARTNERS CLOSING DEBIT BALANCES OF RS. 80,08,228WAS FAR LESS THAN THE PARTNER S CLOSING CREDIT BALANCES OF RS. 11,10,48,608 THE LEARNED I-T AUTHORITIES OUGHT TO HAVE APPRECIATED THAT NEITHER ANY INTEREST WAS PAID NOT ANY INTEREST WAS RECOVERED, AND AS SUCH, THERE WAS NO ANY INACCURATE PARTICULARS OF IN COME FURNISHED BY THE APPELLANT. 4. THE LEARNED CIT(A)-7, PUNE ERRED IN LAW AND ON F ACTS IN UPHOLDING ACTION OF LEARNED AO IN STATING LIMB-2 (I.E . FURNISHING OF INACCURATE PARTICULARS OF INCOME) IN THE 1443(3) ORDER; AS AGA INST STATING BOTH THE LIMBS (I.E . CONCEALMENT OF PARTICULARS OF INCOME AS WELL AS FUR NISHING OF INACCURATE PARTICULARS OF INCOME) IN THE NOTICE U/S 274 . 5. THE LEARNED CIT(A)-7, PUNE AND LEARNED AO ERRED IN LAW AND ON FACTS IN LEVYING THE PENALTY WITHOUT APPRECIATING THE FAC T THAT THE APPELLANT HAS DISCLOSED ALL THE FACTS AND THAT THERE WAS NO FURNI SHING OF INACCURATE PARTICULARS OF INCOME OF WHATSOEVER NATURE . 6. THE LEARNED CIT(A)-7, PUNE - AND LEARNED AO . ERRED IN LAW AND ON FACTS IN LEVYING THE PENALTY ON THE BASIS OF THE ADDITION, W HICH WAS MADE ON NOTIONAL BASIS . 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHE R. 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERU SAL OF THE BALANCE-SHEET, AO NOTICED THAT SIX PARTNERS OF THE FIRM W ERE HAVING DEBIT BALANCES IN THEIR RESPECTIVE CAPITAL ACCOUNTS. AO NO TED THAT ON THE AFORESAID DEBIT BALANCES IN THEIR CAPITAL ACCOUNT, NO INT EREST WAS PAID BY THEM TO THE FIRM. THEREFORE, HE WORKED OUT THE IN TEREST AT 12% ON THE DEBIT BALANCE OF THE PARTNERS AT RS.16,94,380/- AS PER PARA 4.1 OF THE ORDER AND DISALLOWED THE SAME. ON THE AFORESAID DIS ALLOWANCE, PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED BY AO. BEFORE U S, LD.A.R. SUBMITTED THAT ASSESSEE DID NOT CHALLENGE THE ADDITIONS M ADE BY THE AO AS IT WAS HAVING HUGE CARRY FORWARD LOSSES. HE FURTHER S UBMITTED THAT THE ADDITION HAS BEEN MADE ON NOTIONAL BASIS ON THE INT EREST OF THE DEBIT BALANCE OF THE PARTNERS. HE SUBMITTED THAT IF THE C APITAL BALANCE OF ALL THE 14 PARTNERS ARE CONSIDERED THEN IT IS NOT THE CASE OF NEGATIVE CAPITAL BALANCE IN THE PARTNERS ACCOUNT IN AGGREGATE. IN SUPPORT OF HIS AFORESAID CONTENTIONS, HE POINTED TO PARA 3 OF THE LD.CIT(A )S ORDER WHEREIN THE CAPITAL BALANCES OF ALL THE 14 PARTNERS ARE RE PRODUCED BY LD.CIT(A). HE THEREFORE SUBMITTED THAT IN SUCH A SITUATION, NO PENALTY FOR CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INC OME IS LEVIABLE. LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDE R OF AO AND LD.CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE PENALTY HAS BEEN LEVIED ON T HE DISALLOWANCE OF NOTIONAL INTEREST ON THE DEBIT BALANCES IN THE CAPITAL ACCOUNT OF SOME OF THE PARTNERS. THE CAPITAL ACCOUNT OF ALL THE PARTNERS WHEN SEEN IN TOTALITY REVEALS THAT IT IS NOT A CASE WHE RE THE AGGREGATE CAPITAL ACCOUNT OF THE PARTNERS IS HAVING DEBIT BALANCE BU T IT IS ONLY IN 4 SOME OF THE CASES WHERE THERE IS DEBIT BALANCE. IT IS A CASE WHERE THE CAPITAL BALANCE OF SIX PARTNERS ARE HAVING DEBIT BALANCES AND THE BALANCE 12 PARTNERS HAVE CREDIT BALANCE IN THEIR ACCOUN T AND WHEN THE CAPITAL BALANCE OF ALL THE PARTNERS ARE CONSIDERED IN TOTALITY, THE PAR TNERS CAPITAL SHOWS NET CREDIT BALANCE. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT NO PENALTY IS LEVIABLE IN THE PRESENT CASE B ECAUSE IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED ITS INCOME OR FUR NISHED INACCURATE PARTICULARS OF INCOME. WE THEREFORE DIRECT THE DELETION OF PENALTY LEVIED BY AO. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 3 RD DAY OF AUGUST, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 3 RD SEPTEMBER, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-7, PUNE. PR. CIT-6, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.