M/s. Motrik Investment Pvt.Ltd., Baroda V. The ACIT.,Circle-4, Baroda

ITA 1174/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2367 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-01-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 16-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY RAI
• Assessee Lawyers: S N SOPARKAR
• Keywords: Proportionate interest; Question of law; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI T.K.SHARMA T.K.SHARMA T.K.SHARMA T.K.SHARMA, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER AND AND AND AND SHRI N.S. SAINI, ACCOUNTANT MEMBER SHRI N.S. SAINI, ACCOUNTANT MEMBER SHRI N.S. SAINI, ACCOUNTANT MEMBER SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING: DRAFTED ON: ITA NO S . 1174 TO 1176 /AHD/ 201 ASSTT.YEARS:2000-01,2003-04 & 2004-05 MOTRIK INVESTMENT PRIVATE LIMITED, B-3, CHANDAN METAL COMPOUND, NEAR GIDC GORWA ROAD, GORWA, BARODA. VS. ASSTT. CIT, CIR - 4, BARODA. PAN/GIR NO. : AABCM 4266E (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.N. SOPARKAR, SR.ADV. RESPON DENT BY: SHRI SANJAY RAI, SR.D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST S EPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III, B ARODA, ALL DATED 12.11.2009. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE ASSESSEE IN ALL THE APPEALS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN CONFIRMING PENALTY OF `2,56,884/- IN ASSESSMENT YEA R 2000-01,`4,04,750/- 2003-04 & `3,95,113/- IN ASSESSMENT YEAR 2004-05. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS GIVEN LOAN OF ` 63,09,6 03/- TO M/S CHANDAN METAL PRODUCTS (P) LTD. ON WHICH NO INTEREST HAS BE EN CHARGED ALTHOUGH THE INTEREST WAS CHARGED IN THE EARLIER YEARS I.E. UPTO ASSESSMENT YEAR 1999- 2000. THE ASSESSEE HAS PAID INTEREST TO THE DEPOSIT ORS. THE LEARNED ASSESSING OFFICER ISSUED SHOW CAUSE VIDE LETTER DAT ED 4.5.2006 AND ASKED THE ASSESEE WHY INTEREST AT NORMAL BANKS LENDING R ATE ON LOAN OF `65,09,603/- GIVEN TO M/S CHANDAN METAL PRODUCTS (P ) LTD. SHOULD NOT BE - 2 - CHARGED AND BROUGHT TO TAX, CONSIDERING THE MERCANT ILE SYSTEM OF ACCOUNTING REGULARLY FOLLOWED BY IT. ALTERNATIVELY, IT WAS ASKED WHY THE PROPORTIONATE INTEREST EXPENSES SHOULD BE DISALLOWE D AS THE INTEREST BEARING FUNDS WERE DIVERTED IN ADVANCING THE INTERE ST FREE LOANS. THE ASSESSEE SUBMITTED THAT AS PER THE ACCOUNT OF CHAND AN METAL LOAN FROM FY 1995-96 TO 2002-03 FILED IT WOULD BE CLEARLY EVIDEN T THAT THE SAID PARTY NEVER REPAID ANY AMOUNT OF PRINCIPAL DUE OR INTERES T DUE TO FINANCIAL CONSTRAINTS AND, THEREFORE, THE ASSESSEE WAS FORCED TO DISCONTINUE PROVIDING INTEREST ON SAID LOAN FROM FY 1999-2000 AND IT WOUL D BE UNJUSTIFIED TO CHARGE INTEREST ON NOTIONAL BASIS. IT WAS FURTHER S UBMITTED THAT THE ASSESSEE COMPANY HAS NOT CREDITED INTEREST ON SUCH DOUBTFUL LOAN OWING TO THE SIGNIFICANT UNCERTAINTY IN COLLECTION THEREOF AND A LSO BECAUSE SUCH TREATMENT IS INCONSISTENT WITH ACCRUAL SYSTEM OF AC COUNTING. 4. THE LEARNED ASSESSING OFFICER THEREFORE, COMPUTE D INTEREST @ 11% ON THE LOAN OF `65,09,603/- AND ADDED `7,16,056/- IN A SSESSMENT YEAR 2000- 01, ` 11,01,363/- IN EACH OF THE ASSESSMENT YEARS 2 003-04 & 2004-05 BY OBSERVING THAT ON PERUSAL OF THE ACCOUNTS OF THE AS SESSEE ACCOMPANYING THE RETURN IT IS NOTED THAT THE PAID UP SHARE CAPIT AL IS ` 10,800/- AND RESERVES AND SURPLUS IS ` 24.56 LACS WHEREAS THE UN SECURED LOAN IS ` 96.53 LACS AS ON 31.3.2000. AS AGAINST THIS, ASSESSEE COM PANY HAS MADE INVESTMENT IN SHARES (LONG TERM) OF ` 43.07 LACS (W HICH INCLUDES THE INVESTMENT OF `34.02 LACS IN THE EQUITY SHARES OF C HANDAN METAL PRODUCTS (P) LTD. AND GIVEN LOANS AND DEPOSITS OF `75.85 LAC S (WHICH INCLUDES THE LOAN OF `65.10 LACS GIVEN TO M/S CHANDAN METAL PRODUCTS (P) LTD. IT IS ALSO NOTED THAT ASSESSEE COMPANY HAS PAID INTEREST @ 11% TO TH E DEPOSITORS (ON UNSECURED LOANS) AND THE TOTAL SUCH INTEREST PAID D URING THE YEAR COMES TO `9,95,261/-. 5. IN APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ADDITION. 6. IN THE APPEAL FILED BY THE REVENUE, THE TRIBUNAL REVERSED THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) AND RESTORED THE ORDER OF THE LEARNED ASSESSING OFFICER BY OBSERVING THAT THERE IS NO - 3 - EVIDENCE ON RECORD THAT THE PRINCIPAL AMOUNT WAS DO UBTFUL OF RECOVERY AND, THEREFORE, THE INTEREST HAS ACCRUED DURING THE YEAR IN ACCORDANCE WITH THE MERCANTILE SYSTEM OF ACCOUNTING. 7. THEREAFTER THE LEARNED ASSESSING OFFICER INITIAT ED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND LEVIED PENAL TY IN ALL THE THREE YEARS UNDER CONSIDERATION FOR FURNISHING INACCURATE PARTI CULARS OF INCOME AND CONCEALING THE INCOME. 8. IN APPEAL, LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) CONFIRMED THE PENALTY BY OBSERVING AS UNDER :- 3.5 I HAVE EXAMINED THE FACT OF THE CASE AND THE S UBMISSIONS MADE. THE FACTS OF THE CASE HAVE BEEN NOTED ABOVE IN PARA 3.1 . THE ARGUMENTS OF THE LD. COUNSEL AS NOTED HEREIN ABOVE IS MAINLY ON THE GROUNDS THAT THERE WAS NO REAL INCOME AND ONLY NOTIONAL INCOME WAS BROUGHT TO TAX AND NO PENALTY CAN BE LEVIED ON SUCH NOTIONAL INCOME. THE APPELLAN T HAS ALSO CHALLENGED THE ORDER ON THE GROUND THAT NO PROPER OPPORTUNITY WAS GRANTED TO IT BEFORE LEVY OF PENALTY AND ALSO THAT NO CONCEALMENT IS INV OLVED AS ALL THE MATERIALS WERE DISCLOSED IN THE RETURN IN THE FORM OF A NOTE. REGARDING THE ISSUE OF PROPER OPPORTUNITY, THE CLAIM IS FACTUALLY INCORREC T. THE FIRST NOTICE WAS ISSUED ON 10.08.2006. THE NOTICE WAS AGAIN TAKEN UP ON 19.06.2009. ON APPELLANTS REQUEST THE PROCEEDING WAS ADJOURNED TO 22.06.2009. THE MATTER WAS AGAIN ADJOURNED TO 25.06.2009 ON WHICH D ATE WRITTEN SUBMISSION WAS MADE. THUS FROM THE RECORD IT IS APP ARENT THAT MORE THAN ADEQUATE OPPORTUNITY WAS GRANTED. IT IS NOT THE CAS E OF THE APPELLANT THAT IT HAD TO BRING ANY NEW FACTUAL EVIDENCE FOR WHICH IT NEEDED TIME. ALL ALONG BEFORE ALL THE AUTHORITIES IT HAD MADE ONLY LEGAL S UBMISSION. THE SAME ARGUMENT THAT INCOME WAS ONLY NOTIONAL AND NOT REAL HAS BEEN REITERATED AGAIN AND AGAIN. THE OPPORTUNITY PROVIDED, THEREFOR E WAS ADEQUATE AND PROPER. 3.6. THE MAIN PLANK OF DEFENCE IS HOWEVER, THAT THE RE WAS NO REAL INCOME AND ONLY NOTIONAL INCOME WAS BROUGHT TO TAX AND PRO VISION OF SECTION 271(1)(C) OF THE ACT CANNOT BE APPLIED TO SUCH ADDI TIONS TO INCOME. THUS, THE QUESTION WHICH SHOULD BE ANSWERED BEFORE THE QU ESTION OF LEVY OF PENALTY IS DECIDED IS WHETHER INCOME WHICH WAS ADDE D WAS ONLY A NOTIONAL INCOME OR REAL INCOME? THE ARGUMENT OF THE APPELLAN T IS THAT LOAN GIVEN TO M/S CHANDAN METAL PRODUCTS (P) LTD. WAS A STICKY LO AN AND SINCE THERE WAS NO HOPE OF RECOVERY, INTEREST WAS NOT PROVIDED THIS YEAR. THE APPELLANT RELIED ON CERTAIN CASE LAWS TO THE EFFECT THAT EVEN UNDER MERCANTILE SYSTEM, INTEREST MAY NOT ACCRUE ON STICKY LOANS. THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE ARGUMENT OF THE A PPELLANT. THE HON. ITAT, HOWEVER, FOUND THE ARGUMENT OF THE APPELLANT AS SPACIOUS AND UNTENABLE IN LAW OR FACTS. THE APPELLANT HAS SOUGHT TO DISMISS THE FINDINGS OF THE ITAT BY REITERATING THE ARGUMENT THAT THERE WAS NO REAL INCOME. IT IS - 4 - CORRECT THAT ADDITIONS CAN BE CONFIRMED ON MANY GRO UNDS, BUT IT WILL BE TOTALLY MISPLACED ARGUMENT TO SAY THAT CONFIRMATION OF AN ADDITION HAS NO BEARING ON LEVY OF PENALTY. IN FACT ADDITIONS MADE ARE SINE QUA NON FOR LEVY OF PENALTY AND ARE GOOD EVIDENCE 123 ITR 457 (SC). IT IS THEREFORE IMPERATIVE THAT REASONS GIVEN BY THE HON. ITAT FOR CONFIRMING THE ADDITION MADE BY LEARNED ASSESSING OFFICER IS LOOKED INTO FO R GUIDANCE. 3.7 THE ITAT HAS MADE THE FOLLOWING OBSERVATIONS: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS ADVANCED THE LOAN TO CHANDAN METAL PRODUCTS (P) LTD. ON INTEREST. THE INTEREST HAS BEE N DULY CREDITED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT FROM ASSESSMEN T YEAR 1996-97 UPTO ASSESSMENT YEAR 1999-2000. THE DETAILS OF LOAN S AND ADVANCES AND INTEREST ACCRUED ARE GIVEN AS UNDER :- FY IN WHICH LOAN GIVEN AMOUNT INTEREST CHARGED TOTAL AMOUNT OUTSTANDING AT THE END OF THE FY 1995 - 96 5,00,000 986 5,00,986 1996 - 9 7 16,25,000 2,41,492 23,92,478 1997 - 98 23,25,000 4,19,196 51,36,674 1998 - 99 3,75,000 6,47,929 61,59,603 1999 - 2000 3,50,000 65,09,603 THE LD.AR WAS FAIR ENOUGH TO CONCEDE THAT THE LOAN HAS BEEN RETURNED BY CHANDAN METAL PRODUCTS (P) LTD. SUBSEQUENTLY BUT THE INTEREST WAS NOT RECOVERED. THE ASSESSEE WAS FOLLOWING MERCANTIL E SYSTEM OF ACCOUNT. THE ASSESSEE HAS ADVANCED THE LOAN ON INTE REST. THERE IS NO EVIDENCE OR MATERIAL ON RECORD THAT SUBSEQUENT TO A SSESSMENT YEAR 1999-2000 THE ASSESSEE HAS ADVANCED FURTHER LOAN TO CHANDAN METAL PRODUCTS (P) LTD. WITHOUT INTEREST. EVEN THERE IS N O EVIDENCE WHICH MAY PROVE THAT THE TERMS AND CONDITIONS ABOUT CHARG ING OF INTEREST HAVE BEEN AMENDED SUBSEQUENTLY. THE CONTENTION OF T HE ASSESSEE IS THAT THE INTEREST HAS NOT ACCRUED TO THE ASSESSEE A S THE AMOUNT ITSELF WAS DOUBTFUL OF RECOVERY. IN OUR OPINION, NO PRUDEN T MAN WILL ADVANCE FURTHER LOAN TO A PARTY IF HE FEELS THAT THE LOAN C OULD NOT BE RECOVERED. IN THIS CASE IT HAS BEEN ADMITTED BY THE LD.AR THAT ULTIMATELY CHANDAN METAL PRODUCTS (P) LTD. HAS REPAID THE LOAN DURING ASSESSMENT YEAR 2008-09 BUT NO INTEREST WAS RECEIVED. IN OUR OPINIO N, THE LOAN ADVANCED BY THE ASSESSEE WAS NOT STICKY. 3.8 FURTHER, AFTER DISCUSSING VARIOUS CASE LAWS REL IED UPON BY THE APPELLANT, THE ITAT MADE THE FOLLOWING OBSERVATIONS : IN THE CASE BEFORE US THERE IS NO EVIDENCE ON REC ORD THAT THE ACCRUAL OF INTEREST WAS DISPUTABLE OR THERE WAS DISPUTE BET WEEN THE ASSESSEE AND THE PARTY TO WHOM THE LOAN WAS ADVANCED. THE AS SESSEE FURTHER - 5 - ADVANCED THE MONEY WHICH ALSO PROVES THAT THE LOAN HAS NOT BECOME STICKY. 3.9 IN PARA 9 OF ITS ORDER IT WAS AGAIN REITERATED BY THE HON. ITAT THAT IN THE CASE OF THE APPELLANT INTEREST HAD ACTUALLY BEE N ACCRUED. 3.10 THE ABOVE OBSERVATION OF THE ITAT MAKES IT CLE AR THAT THE MAIN PLANK OF THE APPELLANT THAT THERE WAS NO REAL ACCRUAL OF INCOME WAS FOUND MISLEADING. THE IMPORT OF HONORABLE ITATS FINDING IS THAT THERE WAS A REAL ACCRUAL OF INCOME WHICH WAS NOT OFFERED TO TAX. THE FACT THAT ON THE ONE HAND THE APPELLANT ADVANCED LOAN DURING THE YEAR AN D ON THE OTHER HAND CLAIMED THAT ALREADY EXISTING LOAN WAS A DOUBTFUL A ND STICKY LOAN IS OF CRUCIAL IMPORTANCE AS NOTED BY THE HON. ITAT THIS M UTUALLY CONTRADICTORY STAND CLEARLY IMPACTS ADVERSELY THE BONA FIDE OF TH E APPELLANTS CLAIM. THERE IS YET ANOTHER ISSUE. THE APPELLANT HAS RECEIVED BA CK MONEY FROM M/S CHANDAN METAL PRODUCTS (P) LTD. BUT HAS CHOSEN TO S QUARE OFF THE PRINCIPAL RATHER THAN TO ADJUST IT AGAINST THE ACCRUED INTERE ST. THIS CLEARLY SHOWS THE INTENTION ON THE PART OF THE APPELLANT NOT TO OFFER ACCRUED INTEREST ON THE UNTENABLE GROUND THAT LOAN WAS STICKY AND THEN ADJU ST THE MONEY RECEIVED AGAINST THE PRINCIPAL RATHER THAN AGAINST THE INTER EST FIRST WHICH IS THE GENERAL PRACTICE. 3.11 FROM THE ABOVE DISCUSSION IT IS ALSO CLEAR THA T THE APPELLANT HAD FILED INACCURATE PARTICULAR BY NOT OFFERING THE INTEREST INCOME TO TAX. CLAIMING THE LOAN TO BE STICKY, WHEN IT WAS A GOOD LOAN AMOUNTS TO FILING OF INACCURATE PARTICULARS. MERELY GIVING A NOTE IN THE RETURN WOU LD NOT THROW A PROTECTIVE ARMOUR AGAINST THE ASSESSEE INSULATING IT AGAINST ANY ACTION UNDER SECTION 271(1)(C) OF THE ACT. [CIT VS SMT. VILASBEN HASMUKH LAL SHAH 194 ITR 214 (GUJ)]. 9. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT AGAINST THE CONFIRMATION OF ADDITION ON ACCOUN T OF INTEREST BY THE TRIBUNAL THE ASSESSEE HAS FILED APPEAL BEFORE THE H ON. HIGH COURT WHICH HAS BEEN ADMITTED FOR ALL THE THREE YEARS UNDER CONSID ERATION AND ALSO QUESTION OF LAW HAS BEEN FRAMED. HE PLACED COPIES OF THE ORD ER OF THE HON. GUJARAT HIGH COURT FOR ALL THE THREE YEARS UNDER CONSIDERAT ION DATED 7.9.2010 IN T.A. NO.871, 872 & 873 OF 2009. HE, THEREFORE, SUBMITTED THAT THE VERY QUESTION OF ADDITION OF INTEREST WAS SO DEBATABLE THAT THE L EARNED ASSESSING OFFICER MADE THE ADDITION AND THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE SAME WHICH WAS CONFIRMED IN REVENUES A PPEAL BY THE TRIBUNAL AND ON WHICH THE HON. HIGH COURT HAS ADMITTED THE A PPEAL AND FRAMED SUBSTANTIAL QUESTION OF LAW, THEREFORE, NO PENALTY IS EXIGIBLE TO THE - 6 - ASSESSEE. HE SUBMITTED THAT A SIMILAR VIEW HAS BEEN TAKEN IN THE DECISION OF THE THIRD MEMBER OF AHMEDABAD BENCH OF THE TRIBUNAL BUT HE COULD NOT FILE COPY OF THE ORDER OF THE TRIBUNAL OR GIVE THE NAME OF THE CASE OR EVEN THE CITATION WHERE IT IS REPORTED. HE FURTHER SUBMITTED THAT THE VERY FACT THAT INTEREST ON THE LOAN HAS NOT BEEN ACCOUNTED FOR BY THE ASSESSEE HAS BEEN MENTIONED IN THE NOTES TO ACCOUNTS OF THE ASSESSEE FOR WHICH HE REFERRED TO PARA 2 OF THE ASSESSMENT ORDER WHERE THE LEARNED AS SESSING OFFICER HAS NOTED THIS FACT. HE, THEREFORE, CONTENDED THAT AS F ULL FACTS WERE DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME, THEREFORE, TH E ASSESSEE WAS NOT LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND P LACED RELIANCE ON THE DECISION OF HON. SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) WHERE IT WAS HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE H AS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(1) (C) WOULD EMBR ACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF F URNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PEN ALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LI ABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THE RE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO F URNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. - 7 - 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE TRIBUNAL CONFIRMED THE ADDITION ON ACCOUNT OF INTEREST OBSER VING THAT THERE WAS NO EVIDENCE ON RECORD TO SHOW THAT PRINCIPAL AMOUNT OF LOAN WAS DOUBTFUL OF RECOVERY AND THAT INTEREST HAS ACCRUED DURING THE Y EAR ACCORDING TO THE MERCANTILE OF ACCOUNTING. NO MATERIAL WAS BROUGHT O N RECORD BY THE REVENUE TO SHOW THAT ACTUAL INTEREST INCOME WAS RECEIVED BY TH E ASSESSEE OR EARNING OF INTEREST INCOME. IN ABSENCE OF THIS IT CANNOT BE HE LD THAT ASSESSEE CONCEALED ANY PARTICULARS OF INCOME IS FURNISHED ANY INACCURA TE PARTICULARS OF INCOME. FURTHER AS OBSERVED FROM THE ASSESSMENT ORDER AT PA GE 2 THE LEARNED ASSESSING OFFICER HAS STATED THAT IT WAS SUBMITTED BY THE ASSESSEE THAT ALONG WITH THE RETURN OF INCOME ANNUAL ACCOUNTS OF THE CO MPANY WERE FURNISHED WHEREIN THE FACT NOT CHARGING OF INTEREST ON LOAN G IVEN TO M/S CHANDAN METAL PRODUCTS (P) LTD. WAS STATED TOGETHER WITH REASONS. THEREFORE IT CANNOT BE HELD THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF ITS INCOME OR CONCEALED THE PARTICULARS OF ITS INCOME IN ORDER TO EVADE PAYMENT OF TAX THEREON. STILL FURTHER THE ADDITION ON THE BASIS OF WHICH PENALTY IS LEVIE D AND SUSTAINED BY THE TRIBUNAL HAS BEEN APPEALED AGAINST BY THE ASSESSEE BEFORE THE HONBLE GUJARAT HIGH COURT AND THE HONBLE GUJARAT HIGH COURT VIDE ITS ORDER DATED 07/09/2010 FOR ALL THE THREE YEARS EXCEPT FOR DIFFERENCE IN FI GURES ADMITTED THE AFORESAID APPEALS AND FRAMED THE FOLLOWING AS SUBSTANTIAL QUE STIONS OF LAW ARISING OUT OF THE ORDER OF THE TRIBUNAL:- (1) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN C ONFIRMING THE ADDITION OF THE NOTIONAL INTEREST INCOME OF `.11,01,363/-? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE FINDING ARRIVED AT BY THE INCOME TAX APPELLATE TRIB UNAL THAT THERE WAS NO EVIDENCE ON RECORD THAT THE PRINCIPAL AMOUNT WAS DO UBTFUL OF RECOVERY, IS PERVERSE? THEREFORE, CONSIDERING THE ENTIRE FACTS AND CIRCUMS TANCES OF THE CASE, IN OUR CONSIDERED OPINION NO PENALTY CAN BE LEVIED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE ACT FOR NOT CHARGING INTEREST ON T HE AMOUNT OF LOAN ADVANCED - 8 - TO M/S CHANDAN METAL PRODUCTS (P) LTD. WE, THEREFOR E, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE LEVY OF PENALT Y UNDER SECTION 271(1)(C) OF THE ACT OF `.2,56,884/- IN ASSESSMENT YEAR 2000-01. `. 4,04,750/- IN ASSESSMENT YEAR 2003-04 & `.3,95,113/- IN ASSESSMEN T YEAR 2004-05 AND ALLOW THE APPEALS OF THE ASSESSEE FOR ALL THE YEARS. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 25 TH DAY OF JANUARY, 2011. SD/- SD/- ( T.K. SHARMA ) ( T.K. SHARMA ) ( T.K. SHARMA ) ( T.K. SHARMA ) ( N.S. SAINI ) ( N.S. SAINI ) ( N.S. SAINI ) ( N.S. SAINI ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATED: AHMEDABAD, 25 TH DAY OF JANUARY, 2011. COMPILED AND COMPARED BY : PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III, BARODA. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 21.1.11 ---------------- --- 2. DRAFT PLACED BEFORE AUTHORITY 24.1.11 ------- ------------ 3. DRAFT PROPOSED & PLACED 24.1.11. ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 24.1.11. ----------- -------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 25.1.11. --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 25.1.11. ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 25.1.11. ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- A.R. 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------