Bhawneshwar Kumar, Ludhiana V. ITO-Ward-2(1), Ludhiana

ITA 200/CHANDI/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6427 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 22-08-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA DHAR
• Assessee Lawyers: LALIT TAKYAR
• Keywords: Business income; Salary income; Agreed addition
• Section: 271(1)(c); 40(b)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “SMC” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “SMC”, CHANDIGARH ी व म संह यादव, लेखा सद&य BEFORE: SHRI VIKRAM SINGH YADAV, AM ITA NO. 200/Chd/ 2021 Assessment Year : 2013-14 Bhawneshwar Kumar, C/o B.K. Rope Store, Talab Bazar, Ludhiana Income Tax Officer, Ward 2(1), Rishi Nagar, Ludhiana Punjab PAN NO: ACJPK 7930N Appellant Respondent ! " Assessee by : Shri Lalit Takyar, Advocate # ! " Revenue by : Smt. Priyanka Dhar, Sr. DR $ % ! & Date of Hearing : 12/09/2022 '()* ! & Date of Pronouncement : 16/09/2022 आदेश/Order This is an appeal filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi, dated 22.06.2021 wherein the assessee has challenged the action of the ld CIT(A) in sustenance of penalty amounting to Rs.46,634/- u/s. 271(1)(c) of the Income Tax Act, 1961. 2. Briefly the facts of the case are that the assessment in this case was completed u/s 143(3) vide order dated 08.12.2015, wherein the assessed income was determined at Rs.5,76,381/- against the returned income of Rs.NIL. During the course of assessment proceedings, the Assessing Officer observed that the assessee has claimed loss from business and profession at Rs.15,25,972/- and same was adjusted against income under the head “income from house property” and salary income. In response to the notice issued to the 2 assessee, it was submitted that the said loss relates to interest paid on debit balance by the assessee to the partnership firm M/s. B.K. Rope Store where the assessee is a partner. It was also submitted that as there is a delay in filing the return of income, the assessee is voluntarily withdrawing the said claim. The submission so filed by the assessee was considered but not found acceptable. As per the Assessing Officer, salary and interest is allowable by virtue of partnership deed as well as in terms of Section 40(b) of the Act. However, as far as adjustment of loss of interest paid to partnership firm is concerned, the same is not allowable against salary income and income from house property. 3. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) upheld the findings of the Assessing Officer holding that the assessee cannot agitate the issue by filing an appeal as he has lost his right to file the appeal by agreeing to the proposed addition during the assessment proceedings. Against the decision of ld. CIT(A), the assessee has not filed any further appeal and the matter has thus attain finality as far as quantum proceedings are concerned. 4. As far as levy of penalty u/s 271(1)(c) is concerned, the same was separately initiated during the course of assessment proceedings vide show cause notice dated 8.12.2015 and thereafter, the Assessing Officer vide his order dated 13.03.2019 levied the penalty holding that the assessee has made incorrect claim of business loss in his return of income just to reduce its tax liability, which was not actually liable for setting off as the said loss cannot be treated as business loss and further, the assessee has also accepted his fault by not filing any appeal against the order of ld. CIT(A). Against the said finding and the order of the AO, the assessee went in appeal before the Ld. CIT(A), NFAC, New Delhi, and the ld CIT(A) confirmed the order of the AO and sustained the levy of penalty. As per the order of the ld CIT(A), the contention of the assessee that merely rejection of his claim of interest on debit balance paid by the assessee to the firm does not attract penalty u/s 271(1)(c) is not acceptable as the assessee has to explain his bona fide and proper reasons for making such claim at first place. It was also held by ld. CIT(A) that reasons or the basis where submitted by the assessee may not acceptable to the Assessing Officer but there has to be some basis or bona fide reasons for making such claim and in the instant case, the assessee has failed to explain his bona fide and therefore, any blatantly 3 wrong claim of deduction or expenditure definitely attracts penalty u/s 271(1)(c) and accordingly penalty of Rs.46,634/- levied u/s. 271(1)(c) of the Act was confirmed. Against the said findings and order of the ld. CIT(A), the assessee is in appeal before me. 5. During the course of hearing, the ld. AR submitted that firstly, the show cause notice dated 8.12.2015 initiating the penalty proceedings is not specific. It was submitted that it has not been specified in the said show cause notice as to whether the penalty is initiated for concealment of income or for furnishing of inaccurate particulars of income. It was further submitted that a claim has been made by the assessee in his return of income that interest paid by him to the firm on debit balance should be allowed as set off against salary income received from the partnership firm and property and interest income under other heads of income and merely because the said claim has not been accepted by the Assessing Officer, the same does not result in levy of penalty u/s 271(1)(c) of the Act. In support, reliance was placed on the Hon’ble Supreme Court decision in the case of CIT vs. Reliance Petro Products P. Ltd., 322 ITR 158 (SC) and various other decisions of Hon’ble Punjab and Haryana High Court as well as Coordinate Chandigarh and Amritsar Benches. It was submitted that during the course of assessment proceedings, a letter was submitted by the assessee stating that the loss of claim may not be allowed to be carried forward as there was delay in filing the return subject to the fact that no penalty u/s. 271(1)(c) should be levied. It was further submitted that the fact that assessee has filed an appeal against the said action on the part of the Assessing Officer and the fact that the ld. CIT(A) has acted on the said appeal shows that the assessee has not agreed for such an addition. 6. Regarding the findings of the ld CIT(A) that the assessee has failed to file any bona fide reasons for making such a claim, it was submitted by the ld AR that the same flows from the partnership deed wherein the assessee receives interest from the firm, the same is offered as business income, and where the assessee pays interest to the firm on overdrawn capital, the interest is claimed as an allowable business expense. It was submitted that similar claim was made in the subsequent assessment year 2014-15, wherein the matter went in appeal before the ld. CIT(A), NFAC and under similar facts and circumstances of the case, the penalty so levied by the Assessing Officer was deleted and in this regard, our reference was drawn to the 4 relevant findings of the order passed by ld. CIT(A), NFAC, New Delhi dated 25.07.2022 pertaining to A.Y. 2014-15, wherein the relevant findings are contained at Para-6 of the which reads as under: “6.0 I have considered the grounds of appeal, statement of facts and contents of the penalty order. I have carefully considered the written submission of the appellant. As mentioned in the penalty order, the penalty proceedings were initiated with clear noting in the assessment order for furnishing inaccurate particulars of income. Therefore, the show cause notice even if irrelevant clause was not struck off, is of no relevance and the appellant does not get any relief due to non-striking off the irrelevant reason in the penalty notice. However, on merits, the appellant has presented a bona fide case for claiming the set off of loss on account of interest paid on overdrawn capital from the firm stating that interest received from the firm is business income so interest paid to the firm is business loss and hence the said loss was set off against remuneration and house property income. Thus, the claim of the appellant in the facts and circumstances of the case, even if not acceptable does not attract penalty proceedings u/s 271(1(c) Assessment proceedings and penalty proceedings are two separate proceedings and I do not find any reason to levy penalty u/s 271(1)(c) in this case. In view of above, penalty of Rs. 52,606/- levied by the AO u/s 271(1)(c) is hereby deleted. The grounds of appeal, on merits, are hereby allowed.” 7. Per contra, the ld. Sr. DR relied on the findings of the Assessing Officer as well as ld. CIT(A) and it was submitted that it is a case of agreed addition which has been made by the Assessing Officer and which has also been confirmed by the ld. CIT(A). It was further submitted that there is a clear cut finding in the penalty order that the assessee has deliberately and consciously furnished inaccurate particulars of income and where the case of assessee was not selected for scrutiny, the claim so made would have escaped the scrutiny assessment proceeding and the assessee would not have withdrawn his incorrect claim. The ld. Sr. DR, accordingly, relied on the order of the lower authorities. 8. I have heard the rival contentions and have perused the material on record and find that the assessment and penalty proceedings are independent proceedings and the AO has to arrive at an independent finding as to why the matter calls for levy of penalty u/s 271(1)(c) of the Act. In the instant case, the matter relates to claim of interest paid by the assessee to the 5 partnership firm where the assessee is a partner and from where the assessee also draws the remuneration. Both the interest paid and remuneration received from the partnership firm has been duly reflected in the return of income and it is thus manifest that the same will falls under the head “Income from business/profession” and given that interest paid is more than salary income, the same has resulted in a business loss and which has further been set off against income under the other heads of income during the year and which has resulted in net loss. These facts are not been disputed by the Revenue and therefore, as far as furnishing of particulars of income including claim of expenditure are concerned, the same is evident from the return of income and the particulars so furnished cannot be said to be inaccurate. Given that there has been a delay in filing of the return of income, the AO is well within his right to restrict the carry forward of the net loss so claimed by the assessee, however, as far as claim of set off under the same head of income and against other heads of income during the year under consideration are concerned, the assessee is well within his rights to claim the same. Nothing has been stated in the order of the lower authorities nor brought to my notice which restricts such set off during the year under consideration. Further, I find that the issue of levy of penalty u/s 271(1)(c) in the instant appeal is pari-materia to A.Y 2014-15 wherein under identical set of facts and circumstances of the case, the penalty so levied by the AO has been deleted by the ld CIT(A), NFAC, New Delhi. In light of aforesaid discussions and in the entirety of facts and circumstances, the penalty so levied under section 271(1)(c) is hereby directed to be deleted. In the result, the appeal of the assessee is allowed. Pronounced in the Open Court on 16/09/2022. Sd/- व म संह यादव ( VIKRAM SINGH YADAV) लेखा सद&य/ ACCOUNTANT MEMBER Aks/- Date: 16/09/2022 6 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar