Shri Dilip B.Doshi, Baroda V. The ACIT.,Circle-2(1), Baroda

ITA 196/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73124 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-03-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 25-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., ! '# '# '# '# SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ! ) & ! ) & ! ) & ! ) ITA NO. 196/AHD/2011 ASSESSMENT YEAR :2004-05 SHRI DILIP B. DOSHI 803/B, BHADRALOK APPARTMENT, OLD PADRA ROAD, BARODA-390020 V/S . THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), 2 ND FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. PAN NO. A BOPD1846J (APPELLANT) .. (RESPONDENT) *+ , - & / BY APPELLANT NONE (WRITTEN SUBMISSION) ./*+ , - & /BY RESPONDENT SHRI J. P. JHANGID, SR. D.R. 0 , 1% ' /DATE OF HEARING 25.03.2014 234 , 1%' /DATE OF PRONOUNCEMENT 27.03.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIT(A)-II, BARODA, ORDER DATED 03.09.2010 FOR A.Y. 2004-2005. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE IT ACT OF RS. 38,200/- BY THE CIT(A). 2. THE A.O. FOUND DURING THE COURSE OF ASSESSMENT P ROCEEDING THAT ASSESSEE HAD SHOWN INTEREST INCOME OF RS.1,84,448/- AND CLAIMED DEDUCTION OF RS.2,13,996/- FROM IT ON THE BASIS OF INTEREST P AID ON BORROWED FUNDS TO EARN INTEREST INCOME. THE ASSESSEE WAS ASKED TO PROVE T HE NEXUS BETWEEN THE INTEREST EARNED AND EXPENDITURE INCURRED FOR EARNIN G THE INTEREST. HOWEVER, ITA NO. 453/AHD/2011 DCIT VS. HORN OK PLESAE TRANSP ORT LTD. A.Y. 2006-2007 PAGE 2 THE ASSESSEE HAD NOT PRODUCED ANY DETAIL TO PROVE T HE NEXUS. THEREFORE, A.O. DISALLOWED THE CLAIM OF INTEREST OF RS.2,13,99 6/- AGAINST INTEREST INCOME AND INITIATED PENALTY PROCEEDING U/S. 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. BEFORE IMPOSING PENALTY U/S . 271(1)(C), THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD, BUT ASSESSEE S REPLY WAS NOT FOUND CONVINCING TO THE A.O. AND HE WAS SATISFIED THAT IN THIS CASE, ASSESSEE HAD FURNISHED INACCURATE PARTICULARS AND CONCEALED HIS INCOME TO THE EXTENT OF RS.2,14,673/- ON WHICH 100% PENALTY AT RS.80,000/- WHICH IS TAXED SOUGHT TO BE EVADED WAS IMPOSED U/S. 271(1)(C) OF THE IT ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD OBSERVED AS UNDER: 2.3 HAVING CONSIDERED THE FACTS OF THE CASE, I FIN D THAT THE APPELLANT HAD MADE INCORRECT CLAIM ABOUT INTEREST INCOME WHIC H WAS TAXED AS OTHER INCOME. THERE CANNOT BE TWO VIEWS POSSIBLE IN THE GIVEN CIRCUMSTANCES OF THE APPELLANTS CASE THAT INTEREST INCOME WAS NO T A BUSINESS INCOME AND THEREFORE SETTING OFF THE SAME AGAINST THE BUSI NESS INCOME WAS A DELIBERATED ACT AND AMOUNTED TO FILING OF INACCURAT E PARTICULARS. NO SATISFACTORY EXPLANATION HAS BEEN OFFERED AS TO WHY INACCURATE CLAIM WAS MADE DELIBERATELY. ON PRINCIPLE, THE ASSESSING OFF ICER IS JUSTIFIED IN LEVYING THE PENALTY. THE GROUND OF APPEAL IS REJEC TED TO THAT EXTENT. THE APPELLANT HAS ALSO CHALLENGED THE WORKING OF P ENALTY. ACCORDING TO IT MINIMUM PENALTY WOULD COME TO RS.38 ,200/- AS AGAINST RS.64,200/- WORKED OUT BY THE ASSESSING OFFICER. T HE ASSESSING OFFICER IS DIRECTED TO VERIFY AND LEVY MINIMUM PENALTY AS P ER LAW. THE LD. CIT(A) HAD CONFIRMED THE PENALTY PARTIALLY ON THE BASIS OF WORKING PROVIDED BY THE ASSESSEE AND A.O. WAS DIRECTED TO V ERIFY AND LEVY MINIMUM PENALTY AS PER LAW. ITA NO. 453/AHD/2011 DCIT VS. HORN OK PLESAE TRANSP ORT LTD. A.Y. 2006-2007 PAGE 3 4. NOW THE ASSESSEE IS BEFORE US. NONE APPEARED ON BEHALF OF ASSESSEE BUT WRITTEN REPLY HAS BEEN FILED WHICH IS BEING CON SIDERED FOR DISPOSAL OF THIS APPEAL. IT WAS SUBMITTED THAT INTEREST WAS PAID BY THE ASSESSEE ON BORROWED FUND WERE GENUINE EXPENSES AND THE SAME WERE ALLOWA BLE. THE FUNDS WERE BORROWED IN THE CAPACITY OF INDIVIDUAL WHICH WERE T RANSFERRED TO PROPRIETARY CONCERN, NAMELY, APURVA INDUSTRIES AS A CAPITAL CON TRIBUTION AND PARTLY IN CREST POLYMERS PVT. LTD. SUCH FUNDS WERE USED FOR B USINESS PURPOSES IN PROPRIETARY CONCERN AND INTEREST WAS PAID ON AMOUNT BORROWED FOR THE BUSINESS PURPOSES, WHICH IS ALLOWABLE UNDER THE INC OME TAX LAW. THE ASSESSEE EARNED INTEREST ON LOAN TRANSFERRED TO M/S . CREST POLYMERS PVT. LTD., WHICH AHS BEEN SHOWN AS INCOME IN THE RETURN. THE TOTAL INTEREST WAS PAYABLE ON LOAN WAS RS.2,13,996/- ON WHICH TAX WAS DEDUCTED . THE ASSESSEE HAD FILED THE CONFIRMATION AT THE TIME OF LOAN TAKEN FR OM THE OUTSIDER PARTIES AND INTEREST PAID THEREON TO THEM. THUS, THE CLAIM OF INTEREST WAS GENUINE AND WAS FOR BUSINESS PURPOSES. THE LD. A.O. HAD NOT AS KED TO PROVE THE NEXUS BETWEEN THE INTEREST AND THE EXPENDITURE INCURRED F OR EARNING INTEREST AT ANY TIME DURING THE COURSE OF ASSESSMENT PROCEEDING. H E FURTHER RELIED IN CASE OF BALAJI VEGETABLE PRODUCTS (P) LTD. VS. CIT (2007) 2 90 ITR 172 (KAR.) & CIT VS. INDEN BISLERS (2001) 118 TAXMAN 766 (MAD.), FOR INTENTION TO CONCEAL THE INCOME. THUS, HE PRAYED TO DELETE THE PENALTY CONF IRMED BY THE CIT(A). AT THE OUTSET, LD. SR. D.R. SUPPORTED THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. A.O. HAD NOT BROUGHT ON RECORD ANY EVIDENCE THAT ASSESSEE HAD CONCEALED INCOME AND FURNISHED INACCURATE PARTI CULARS OF INCOME. ITA NO. 453/AHD/2011 DCIT VS. HORN OK PLESAE TRANSP ORT LTD. A.Y. 2006-2007 PAGE 4 APPARENTLY, THE ASSESSEE USED THE LOANS FOR BUSINES S PURPOSES AND INTEREST HAD BEEN PAID ON IT AFTER MAKING TDS. THE GENUINEN ESS OF THE LOAN HAS NOT BEEN DOUBTED BY THE A.O. THEREFORE, EXPLANATION FU RNISHED BY THE ASSESSEE IS NOT FALSE AS PER EXPLANATION 1 OF SECTION 271(1) (C). ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT(A). 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 27.03.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &5 &5 &5 &5 , ,, , .16 .16 .16 .16 7&641 7&641 7&641 7&641 / COPY OF ORDER FORWARDED TO:- 1. *+ / APPELLANT 2. ./*+ / RESPONDENT 3. ## 1 ; / CONCERNED CIT 4. ;- / CIT (A) 5. 6? .1 , , / DR, ITAT, AHMEDABAD 6. A BC / GUARD FILE. BY ORDER/ &5 &, / # , )