N G BHANUSHALI AND CO., VIKHROLI(E) V. ITO, 17(2)(4), MUMBAI

ITA 1663/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1799 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 19-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKWAD
• Keywords: Notional interest; TDS; Set aside
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC - I BENCH, MUMBAI SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 1663 /MUM/ 201 9 (ASSESSMENT YEAR 2014 - 15 ) M/S. N.G. BHANUSHALI & CO. 301, SAI ENCLAVE, C - WING HARIYALI VILLAGE, VIKROLI - E MUMBAI - 400 083. PAN : AAAFN5294K V S . ITO - 17(2)(4) MUMBAI ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI KAILASH GAIKWAD DATE OF HEARING 15 . 1 0 . 20 20 DATE OF PRONOUNCEMENT 25 .11 . 20 20 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LE ARNED COMMISSIONER OF INCOME TAX (APPEALS)[IN SHORT LEARNED CIT(A)] DATED 11.1.2019 AND PERTAINS TO ASSESSMENT YEAR 2014 - 15. 2. THE GROUNDS OF APPEAL READ AS UNDER : - GROUND I : LEVY OF PENALTY ON INTEREST ON LATE PAYMENT OF SERVICE TAX AND TAX DEDUCTED AT SOURCE (TDS) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE COMMISSIONER OF INCOME TAX (APPEALS) ['THE CIT(A)'] ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER ('THE AO') BY LEVYING PENALTY ON INTEREST ON LATE PAYMENT OF SERVICE TAX AND TDS. 2. THE APPELLANT HUMBLY PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO DELETE THE PENALTY LEVIED U/S 271 (1)(C). GROUND II : LEVY OF PENALTY ON NOTIONAL INCOME 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN LAW, THE CIT(A) ERRE D IN UPHOLDING THE ACTION OF THE AO BY LEVYING PENALTY ON NOTIONAL INTEREST ON LOAN. 2. THE APPELLANT HUMBLY PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO DELETE THE PENALTY LEVIED U/S 271(L)(C). M/S. N.G. BHANUSHALI & CO. 2 3. I N THIS CASE IN THE ASSESSMENT PROCEEDINGS THERE WERE FO LLOWING DISALLOWANCES : - I) DISALLOWANCE ON ACCOUNT OF DELAYED PAYMENT OF PF/ESIC II) DISALLOWANCE OF INTEREST ON LATE PAYMENT OF SERVICE TAX AND TDS III) DISALLOWANCE UNDER SECTION 36 ( 1 )( III ) OF THE I.T. ACT. T HE ASSESSING OFFICER ALSO LEVIED PENALTY U NDER SECTION 271 ( 1 )( C ) OF THE I.T. ACT ON ACCOUNT OF THE ABOVE. 4. UPON ASSESSEES APPEAL LEARNED CIT (A) DELETED THE PENALTY LEVIED QUA DISALLOWANCE ON ACCOUNT O F PAYMENT OF PF/ESIC . HOWEVER HE SUSTAINED THE PENALTY WITH RESPECT TO THE OTHER DISALLOWANC ES . T HE LEARNED CIT (A) HAS HELD AS UNDER : - 5.6. I FIND THAT IF WE GO BACK TO THE ORDER OF THE AO IN THE QUANTUM PROCEEDINGS IT SHALL BE SEEN THAT THE AO MADE THE FOLLOWING ADDITIONS AND BASED ON WHICH THE IMPUGNED PENALTY HAS BEEN LEVIED. THESE ADDITIONS ARE AS BELOW: - SR.NO. NATURE OF ADDITION AMOUNT (RS.) 1. DISALLOWANCE OF DELAYED PF/ESIC 2,01,155/ - 2. DISALLOWANCE OF INTEREST ON LATE PAYMENT OF SERVICE TAX 86 TDS 1,12,701/ - 3. DISALLOWANCE U/S.36( 1 )(III) 2,11,804/ - 5.7. ON PERUSAL OF THE ABOVE, IT IS SEEN THAT THERE IS NO JUSTIFICATION AT ALL FOR LEVY OF PENALTY ON THE ADDITION ON ACCOUNT OF THE DELAYED PF/ESIC, SINCE, IT IS VERY MUCH CLEAR THAT THE CLAIM MADE BY THE APPELLANT REGARDING THE DISALLOWED AMOUNT IS SU CH A CLAIM OF PF/ESIC, WHICH MIGHT HAVE BEEN AFTER THE DUE DATE AS PER THE GOVERNING RULES. HOWEVER, THE PAYMENT WAS DULY MADE BEFORE FILING OF RETURN OF INCOME FOR THE YEAR. THEREFORE, THE PENALTY WITH RESPECT TO THIS ADDITION CANNOT STAND AND IS THEREFOR E, DELETED. 5.8. HOWEVER, THE SAME CANNOT BE SAID ABOUT THE OTHER TWO ADDITIONS WHIC H HAVE BEEN ENUMERATED ABOVE I.E. THE A DDITION ON ACCOUNT OF INTEREST ON DELAYED PAYMENT OF SERVICE TAX AND TDS AND ALSO THE ADDITION U/S.36( 1 )(III). THIS IS BECAUSE AS FA R AS THE ADDITION ON DELAYED PAYMENT OF SERVICE TAX AND T DS I S CONCERNED, IT IS VERY CLEAR THAT THE APPELLANT WAS PERFORCE REQUIRED TO PAY THE INTEREST BECAUSE IN THE FIRST PLACE, THE SERVICE TAX AND TDS PAYMENT WAS MADE MUCH BEYOND THE STATUTORILY PRESCRI BED TIME LIMIT. THEREFORE, THE SAME IS MORE OR LESS AKIN TO PENALTY FOR VIOLATION PRESCRIBED TIME LIMIT. MOREOVER, IT IS ALSO CLEAR THAT THE APPELLANT CANNOT BE ALLOWED TO TAKE BENEFIT WHEN IT HAS ITSELF DELAYED THE PAYMENT. FURTHER, WHEN IT COMES TO THE P ENALTY WITH RESPECT TO ADDITION U/S.36( 1 )(III), IT IS CLEAR THAT IN THE QUANTUM PROCEEDINGS THE AO GAVE A CLEAR FINDING THAT CERTAIN PORTION OF THE BORROWING WERE DIVERTED TOWARDS GIVING INTEREST FREE LOANS TO STAFF MEMBERS. THEREFORE, IT M/S. N.G. BHANUSHALI & CO. 3 WAS A CLEAR CASE OF THE NECESSARY N EXUS AS NECESSITATED BY SEC.36(1 )(III) WAS NOT MADE OUT. RATHER, ON THE OTHER HAND THERE WAS NON - BUSINESS DIVERSION OF THE FUNDS. THEREFORE, THE PENALTY IS VERY MUCH LEVIABLE ON THE ADDITION U/S.36(1 )(III). 5.9. FURTHER, WHILE THE JUDIC IAL PRONOUNCEMENT RELIED UPON BY THE APPELLANT HAVE BEEN MOST RESPECTFULLY CONSIDERED. HOWEVER, WITH THE UTMOST AND DUE RESPECT TO THE ABOVE JUDICIAL PRONOUNCEMENTS, IT IS RESPECTFULLY OBSERVED THAT IT IS A TRITE LAW THAT EACH JUDICIAL DECISION IS RENDER ED IN THE VERY PECULIAR AND FACTUAL MATRIX OF THAT CASE AND THEREFORE IT IS NOT EITHER JUDICIALLY EXPEDIENT OR PRUDENT TO SUPERIMPOSE THE FACTS OF THE VARIOUS CASE LAWS CITED. IN THIS SENSE, EACH CASE IS UNDISPUTEDLY UNIQUE AND STANDS ON DIFFERENT PED ESTA L. 5 .10. BASED ON THE ABOVE DISCUSSION, THE PENALTY WITH RESPECT TO THE ADDITION OF RS.2,01,155/ - IS DELETED. HOWEVER, THE PENALTY WITH RESPECT TO THE ADDITION OF (RS.1,12,701/ - AND RS.2,11,804/ - I . E. TOTAL RS.3,24,505/ - ) IF HEREBY CONFIRMED. 5. A GAI NST THIS ORDER ASSESSEE HAS FILED APPEAL BEFORE THE ITAT. 6. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE RECORDS. NONE APPEARED ON BEHALF OF THE ASSESSEE . 7. U PON CAREFUL CONSIDERATION I FIND THAT WITH RESPECT TO THE DISALLOWANCE OF INTEREST ON LATE PAYMENT OF SERVICE TAX AND TDS THERE CANNOT BE ANY ISSUE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. ASSESSEE HAS SIMPLY CLAIMED THESE PAYMENT S AS ALLOWABLE. THE ASSESSING OFFICER HAS DISALLOWED IT. AS IN HI S OPINION THE SAME WAS PENAL IN THE NATURE. IN OUR OPINION THE CLAIM OF THE ASSESSEE IS NOT EX FACIE WRONG. A DENIAL OF THE ASSESSEES CLAIM BY THE ASSESSING OFFICER CANNOT IPSO FACTO RENDER THE ASSESSEE LIABLE FOR PENALTY UNDER SECTION 271 ( 1 )(C) OF THE AC T . THIS PROPOSITION IS DULY SUPPORTED BY THE DECISION OF HONOURABLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158) 8. AS REGARDS THE DISALLOWANCE OF INTEREST UNDER SECTION 36 ( 1 )( III ) OF THE ACT , THIS AGAIN IS AN ISSUE ON WHIC H ASSESSEE CANNOT BE HELD TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME OR DONE ANY CONC EALMENT. THAT INTEREST B EARING FUNDS AND BEEN DIVERTED TO INTEREST TO STAFF AND OTHERS IS NOT SOMETHING WHICH CAN BE HELD TO BE EX - FACIE NOT FOR THE PURPOSE OF B USINESS. M/S. N.G. BHANUSHALI & CO. 4 HERE AGAIN A DENIAL OF ASSESSEES CLAIM CANNOT IPSO FACTO LEAD TO LEVY OF PENALTY . 9. A CCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT IN MY CONSIDERED OPINION ASSESSEE SHOULD NOT BE VISITED WITH THE RIGOURS OF PENALTY UNDER S ECTION 271 ( 1 )( C ) OF THE ACT. A CCORDINGLY I SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE PENALTY . 10. I N THE RESULT ASSESSEES APPEAL STANDS ALLOWED ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES BY PLACING THE RESULT ON NOTICE BOARD ON 25.11.2020. SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 25 / 1 1 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI