Asst. CIT, Circle-1, Nashik V. Shri Jairaj Manaharsingh Jhala, Nashik

ITA 1385/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93774 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE: SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO. 1385 /PN/201 3 ASSESSMENT YEAR : 20 09 - 1 0 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK. VS. SHRI JAIRAJ MANAHARSINGH JHALA, 301-RUSHIRAJ HOUSE, COLLEGE ROAD, KULKARNI BAUGH, LANE NO.2, NASHIK 422001. (APPELLANT) (RESPONDENT) PAN NO. AAPPJ3151N REVENUE BY: SHRI B. C. MALAKAR ASSESSEE BY: SMT. DEEPA KHARE DATE OF HEARING : 11-05-2015 DATE OF PRONOUNCEMENT : 29-05-2015 ORDER PER VIKAS AWASTHY, JM:- THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 18.04 .2013 FOR THE ASSESSMENT YEAR 2009-10 IN DELETING THE PENALTY LEVIE D UNDER SECTION 271(1)(C) OF THE ACT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LAND DEVELO PMENT AND CONSTRUCTION UNDER THE NAME OF RUSHIRAJ DEVELOPERS. T HE ASSESSEE IS ALSO PARTNER IN THE FIRM OF M/S RUSHIRAJ BUILDERS, RUSHIRAJ B UILDTECH AND RUSHIRAJ BUILDERS & DEVELOPERS. THE ASSESSEE IS ALSO A DIRECTOR IN RUSHIRAJ BUILDER PVT. LTD.. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 30.09.2009 DECLARING TOT AL INCOME OF RS.11,58,420/-. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE 2 ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED INTEREST EXPENSES TO THE TUNE OF RS.36,10,225/- IN THE PROFIT & LO SS ACCOUNT. ON ENQUIRY, THE ASSESSEE EXPLAINED THAT THE BORROWED FUNDS WERE UTILIZED FOR PURCHASE OF LAND FOR PROJECT RUSHIRAJ HARMONY. THE AS SESSING OFFICER BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE O F CIT VS. BRITISH PAINTS INDIA LTD. REPORTED AS 188 ITR 44 (SC) DISALLOWED THE INTEREST AND OTHER EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER HELD THAT THE EXPENSES WHICH ARE D IRECTLY ATTRIBUTABLE TO THE PROJECT RUSHIRAJ HARMONY HAVE TO BE INCLUDED AS PART OF CLOSING WORK-IN-PROGRESS. ACCORDINGLY, THE CLAIM OF BUSINESS LOSS OF RS.38,49,180/- CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME WAS PARTLY ADJUSTED AGAINST THE INCOME OF RS.2,67,999/- FROM FIR MS AND THE BALANCE AMOUNT RS.35,26,919/- THAT WAS CARRIED FORWARD, W AS DISALLOWED. PENALTY PROCEEDINGS WERE ALSO INITIATED UNDER SE CTION 271(1)(C) OF THE ACT. 3. IN PENALTY PROCEEDINGS, THE ASSESSING OFFICER HELD THAT T HE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF THE INCOM E AND LEVIED PENALTY OF RS.13,08,340/- UNDER SECTION 271(1)(C) OF THE ACT. AGGRIEVED BY THE ORDER LEVYING PENALTY DATED 24.05.2012, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). 4. THE COMMISSIONER OF INCOME TAX (APPEALS) BY FOLLOWING THE R ATIO LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA IN THE CA SE OF CIT VS. RELIANCE PETROPRODUCTS (P.) LTD. REPORTED AS 322 ITR 158 (SC) DELETED THE PENALTY. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT , THE 3 DISALLOWANCE ON WHICH PENALTY WAS LEVIED WAS ON ACCOUNT OF REJECTION OF EXPLANATION GIVEN BY THE APPELLANT REGARDING THE CLAIM OF B USINESS LOSS. A VIEW OF THE APPELLANT THAT THE INTEREST EXPENDITURE IS P ERIOD COST AND IS TO BE ALLOWED IN THE YEAR IN WHICH IT HAS BEEN INCURRED IS A POSSIBLE VIEW. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PENALT Y IN A PARTICULAR FACTS OF THE CASE. NOW, THE REVENUE HAS COME IN APPEAL ASSAILING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 5. SHRI B. C. MALAKAR REPRESENTING THE DEPARTMENT SUBMITTE D THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE P ENALTY MERELY ON ASSUMPTIONS. THERE CANNOT BE TWO VIEWS IN G IVING TREATMENT TO THE INTEREST EXPENDITURE AS HAS BEEN WRONGLY HELD B Y THE COMMISSIONER OF INCOME TAX (APPEALS). THE BORROWED FUNDS WERE UTILIZED FOR PURCHASE OF LAND. THEREFORE, INTEREST HAD TO BE CAPITALIZED. THE LD. DEPARTMENTAL REPRESENTATIVE PRAYED FOR SETTING- ASIDE THE IMPUGNED ORDER AND RESTORE PENALTY. 6. SMT. DEEPA KHARE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF LAND DEVELOPMENT AND CONSTRUCTION. THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD. DURING THE YEAR, THE ASSESSEE BORROWED THE FUNDS AND T HE PART OF THE SAID FUNDS WERE UTILIZED TOWARDS NEWLY STARTED PROJECT RUSHIRAJ HARMONY. THE EXPENDITURE HAS NOT BEEN ATTRIBUTED TO ANY PARTICULAR PROJECT. THE ASSESSEE HAS DEBITED THE INTEREST PAID ON BORROWED FUNDS IN THE PROFIT & LOSS ACCOUNT IN THE MANNER IT HAS BEEN CON SISTENTLY DOING FOR THE PAST SEVERAL YEARS. THE ASSESSEE HAD OFFERED E XPLANATION, THAT 4 THE ASSESSEE HAS DEBITED INTEREST IN PROFIT & LOSS ACCOU NT IN LINE WITH THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. LOKHANDWALA CONSTRUCTION INDS. LTD. REPORTED AS 260 ITR 579 (BOM). THE LD. COUNSEL FOR THE ASSESSEE PRAYED FOR DISMISSING TH E APPEAL OF THE REVENUE AND CONFIRMING ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENT ATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUT HORITIES BELOW. THE PENALTY HAS BEEN LEVIED ON THE ASSESSEE ONLY FOR THE RE ASON THAT THE ASSESSEE HAS GIVEN WRONG TREATMENT TO THE INTEREST ON BORROWED FUNDS. THE ASSESSEE HAD CLAIMED THE PAYMENT OF INTEREST AS REV ENUE EXPENDITURE WHEREAS IN VIEW OF THE DEPARTMENT IT SHOULD B E CAPITALIZED. THE ASSESSEE BASED ITS CLAIM BY PLACING RELIANCE ON THE JU DGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. LOKHAND WALA CONSTRUCTION INDS. LTD. (SUPRA). 8. FROM THE PERUSAL OF THE DOCUMENTS ON RECORD, WE OBSE RVE THAT IT IS NOT A CASE OF REVENUE THAT THE ASSESSEE HAS CLAIMED INT EREST ON BORROWING WHICH ARE BOGUS OR WERE NOT GENUINE. NO INFORM ATION GIVEN IN THE RETURN OF INCOME WAS FOUND TO BE INCORRECT. UNDISPU TEDLY, THE ASSESSEE HAS BORROWED FUNDS AND HAS PAID INTEREST THEREON. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. RELIANCE PETR OPRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT WHERE THE INFORMATION GIVEN IN THE RETURN OF INCOME WAS FOUND TO BE CORRECT, MAKING OF WRONG CLAIM DOES NOT AMOUNT TO CONCEALMENT OF PARTICULARS UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKE OF CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT 5 TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. 9. IN VIEW OF THE FACTS OF THE CASE AND THE JUDGEMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. RELIANCE PETR OPRODUCTS PVT. LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE PENALTY . THE APPEAL OF THE REVENUE IS DEVOID OF MERIT AND IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED B EING DEVOID OF MERIT. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF MAY, 2015 AT PUNE. SD/- SD /- (R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH MAY, 2015 SUJEET COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, NASHIK 4 THE CIT - I , NASHIK 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, PUNE