M/s West View Hotels Pvt. Ltd., Anand V. DCIT, Anand Circle, Anand

ITA 1996/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6940 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 05-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Proportionate interest; Commercial expediency; Set aside
• Section: 271(1)(c)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 1996/AHD/2017 ( ASSESSMENT YEAR : 2002-03) M/S. WEST VIEW HOTELS PVT. LTD. 401, MILESTONE, NEAR CITY MALL, ANAND VIDYANAGAR ROAD, V. V. NAGAR, ANAND - 388120 / VS. DCIT ANAND CIRCLE, ANAND ./ ./ PAN/GIR NO. : AAACW1780E ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUNIL TALATI, A.R. / RESPONDENT BY : SHRI S. K. DEV, SR.D.R. DATE OF HEARING 02/05/2019 !'# / DATE OF PRONOUNCEMENT 03/05/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-4, VADODARA, (CIT(A) IN SHORT), DATED 1 5.06.2017 ARISING IN THE PENALTY ORDER DATED 28.03.2016 PASSE D BY THE ASSESSING OFFICER (AO) UNDER S. 271(1)(C) R.W.S. 27 4 OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2002- 03. ITA NO. 1996/AHD/17 [M/S. WEST VIEW HOTELS PVT. LTD. VS. DCIT] A.Y. 2002-03 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY ASSESSEE READ AS UNDER: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LEVYING PENALTY OF RS.12,13,525/- U/S. 271(1)(C) OF THE INC OME TAX ACT, IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, NO PENALTY IS LEVIABLE, AS THERE IS NOT ANY CONCEAL MENT OF INCOME ON THE PART OF THE ASSESSEE. THEREFORE THE P ENALTY SO LEVIED U/S 271(1)(C) OF RS.12.13,525/- BE DELETED. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN IMPOSING PENALTY U/S 271(1)(C) OF RS.12.13.525/- ON THE- ADDITION CONFIRMED BY CIT(A) OF RS. 33,99,231/- ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST EXPENSES OF RS.33,99.231/- MERELY BY NOT ACCEPTING THE EXPLANAT ION GIVEN BY THE APPELLANT DURING THE COURSE OF APPELLATE PRO CEEDINGS. IT IS SUBMITTED THAT IT IS A PURELY A MATTER OF DIFFER ENCE OF OPINION IN INTERPRETATION OF FACTS OF THE CASE & EXPLANATIO NS GIVEN. ALL THE DETAILS REGARDING CLAIM OF ABOVE EXPENSES HAS B EEN FILED ALONG WITH RETURN OF INCOME AS WELL AS DURING THE C OURSE OF APPELLATE PROCEEDINGS. THUS MERELY REJECTION OF BON AFIDE CLAIM OF EXPENSE CANNOT TANTAMOUNT TO CONCEALING OF INCOM E. IT BE SO HELD NOW AND THE PENALTY OF RS. 12,13,525/- BE CANC ELLED. 3. BRIEFLY STATED, THE ASSESSEE RETURNED LOSS OF RS . 1,90,86,487/-. IN THE SCRUTINY ASSESSMENT, AN ADDI TION OF RS.33,99,231/- WAS MADE ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST EXPENDITURE INCURRED ON BORR OWED FUNDS. IN THE COURSE OF THE SCRUTINY ASSESSMENT, THE AO INTER ALIA OBSERVED THAT ASSESSEE HAS GIVEN INTEREST FREE ADVA NCES TO CERTAIN PARTIES AGGREGATING TO RS.3,05,64,701/-. THE ASSES SEE WAS FOUND TO HAVE LENT THE ADVANCES TO THE PARTIES FREE OF IN TEREST WHILE IT HAS DEBITED INTEREST EXPENSES OF RS.80,38,492/- ON MONEY BORROWED BY HIM. THE AO THEREFORE DISALLOWED PROPO RTIONATE INTEREST EXPENSES ON THE AMOUNT ADVANCED FREE OF IN TEREST AND WORKED OUT DISALLOWANCE OF INTEREST EXPENSES ON EST IMATED BASIS. WHILE DOING SO, IT WAS ALLEGED THAT ASSESSEE COULD NOT PROVE THE COMMERCIAL EXPEDIENCY IN SUCH ADVANCES AND ACCORDIN GLY TREATED THE INTEREST EXPENSES TO THE EXTENT OF RS.33,99,231 /- TO BE FOR NON- ITA NO. 1996/AHD/17 [M/S. WEST VIEW HOTELS PVT. LTD. VS. DCIT] A.Y. 2002-03 - 3 - BUSINESS PURPOSES. THE AFORESAID ESTIMATED DISALL OWANCE ALSO INVITED PENALTY UNDER S.271(1)(C) OF THE ACT @ 100% THEREON. 4. IN THE FIRST APPEAL, THE CIT(A) ALSO CONFIRMED T HE PENALTY SO IMPOSED. 5. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE AUTHORITIES BELOW. THE CONTROVERSY IN VOLVES IMPOSITION OF PENALTY U/S.271(1)(C) OF THE ACT ON D ISALLOWANCE ON ESTIMATED INTEREST EXPENSES IN PROPORTION TO THE CO RRESPONDING INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE. WE S TRAIGHTWAY NOTE THAT IN ORDER TO ATTRACT PENALTY U/S.271(1)(C) OF T HE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASS ESSEE OF THE PARTICULARS OF HIS INCOME OR FURNISHING OF INACCURA TE PARTICULARS. THE DISALLOWANCE OF CERTAIN EXPENDITURE ON ESTIMATED BASIS ACTUALLY INCURRED ON THE GROUNDS OF LACK OF COMMERCIAL EXPED IENCY IS NEITHER CONCEALMENT OF ANY PARTICULARS OF INCOME PER SE NOR FURNISHING OF INACCURATE PARTICULARS AS SUCH. NEED LESS TO SAY, BEFORE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRC UMSTANCES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPUTE D AMOUNT REPRESENTS INCOME AND THE ASSESSEE HAS CONCEALED TH E PARTICULARS THEREOF OR FURNISHED INACCURATE PARTICULARS. THE A O IN THE INSTANT CASE HAS DISALLOWED A PORTION OF INTEREST EXPENDITU RE ON PROPORTIONATE BASIS ON THE GROUND THAT ASSESSEE HAS LENT MONEY WITHOUT CHARGING INTEREST. IT IS NOT THE CASE OF T HE AO THAT ASSESSEE HAS IN FACT NOT INCURRED ANY INTEREST EXPE NDITURE AS ITA NO. 1996/AHD/17 [M/S. WEST VIEW HOTELS PVT. LTD. VS. DCIT] A.Y. 2002-03 - 4 - CLAIMED. A CONSPECTUS OF THE EXPLANATION 1 TO SE CTION 271(1)(C) OF THE ACT MAKES IT CLEAR THAT THE STATUT E VISUALIZED THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS TO B E WHOLLY DISTINCT AND INDEPENDENT OF EACH OTHER. WHILE THE AO MAY BE JUSTIFIED IN MAKING ESTIMATED DISALLOWANCE IN QUANT UM PROCEEDINGS, SUCH DISALLOWANCE OF EXPENSES, THAT TO O ON ESTIMATED BASIS, COULD NOT AUTOMATICALLY FALL WITHIN MISCHIEF OF SECTION 271(1)(C) OF THE ACT. WHILE A CLAIM TOWARDS EXPEND ITURE MAY NOT FOUND ACCEPTABLE IN QUANTUM PROCEEDINGS, SUCH DISAL LOWANCE CANNOT INVITE BY WAY OF PENALTY. WHEN ALL MATERIAL FACTS RELEVANT TO THE SAID CLAIM WERE PLACED ON RECORD, THE PRESEN CE OR ABSENCE OF COMMERCIAL INSTINCT IN A GIVEN CASE IS A MATTER OF INFERENCE. SUCH ADVERSE INFERENCE AGAINST ASSESSEE WOULD NOT A TTRACT IMPOSITION OF PENALTY. THE CLAIM OF EXPENDITURE TO WARDS INTEREST MADE AT BEST BE TAKEN AS ERRONEOUS CLAIM BY THE ASS ESSEE. SUCH CLAIM MADE IN A BONAFIDE MANNER CANNOT LEAD IMPOSIT ION OF PENALTY. ALTHOUGH SUCH CLAIM MAY NOT BE MAINTAINAB LE FOR THE PURPOSES OF QUANTUM PROCEEDINGS HOWEVER, IN THE ABS ENCE OF ANY FALSITY PER SE IN SUCH CLAIM, MAKING AN INCORRECT CLAIM FOR DEDUCTION IS NOT AT PAR WITH CONCEALMENT OR INACCURATE PARTICULARS OF INCOME. 7. WE ALSO TAKE NOTE OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DALMIA DYECHEM IN DUSTRIES LTD. INCOME TAX APPEAL NO. 1396 OF 2013 JUDGMENT DATED 0 6.07.2015 TO SUBMIT THAT THE PENALTY CANNOT BE IMPOSED UNLESS THE ACTION OF THE ASSESSEE PER SE IS DISHONEST, MALAFIDE AND AMOUNTING TO CONCEALMENT OF FACTS. THERE, BEING NO CONCEALMENT OF FACT PER SE IMPOSITION OF PENALTY IS NOT JUSTIFIED. THE PENALT Y, IN OUR VIEW, IS ITA NO. 1996/AHD/17 [M/S. WEST VIEW HOTELS PVT. LTD. VS. DCIT] A.Y. 2002-03 - 5 - CLEARLY NOT MAINTAINABLE IN THE ABSENCE OF ANY CONT UMACIOUS OR DISHONEST CONDUCT. CONSEQUENTLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY ON D ISALLOWANCE OF ESTIMATED INTEREST EXPENDITURE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 03/05/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 03/05/201 9