M/s. C.U. Built Engineers, Pune V. Assistant Commissioner of Income-tax,

ITA 2006/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89025 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SUNITA RAO
• Keywords: Difference of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2006/PN/2013 (ASSESSMENT YEAR : 2009-10) M/S C. U. BUILT ENGINEERS, 513/2J BLOCK, MIDC BHOSARI, PUNE 411 026. PAN : AAAFC7483M . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 8, PUNE. . RESPONDENT ASSESSEE BY : MR. KISHOR PHADKE DEPARTMENT BY : MRS. SUNITA RAO DATE OF HEARING : 20-01-2015 DATE OF PRONOUNCEMENT : 18-03-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DA TED 16.08.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29.06.2012 PASSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2009-10. 2. IN THIS APPEAL, THE ONLY GRIEVANCE OF THE ASSESS EE IS AGAINST THE ACTION OF THE LOWER-AUTHORITIES IN LEVYING PENALTY OF RS.5 ,70,358/- U/S 271(1)(C) OF THE ACT. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMAT IC WELDING MACHINE/ROTATORS AND MATERIAL HANDLING SYSTEMS. FO R THE ASSESSMENT YEAR UNDER CONSIDERATION, THE RETURN OF INCOME WAS FILED DECLARING A TOTAL INCOME OF RS.6,49,49,564/- WHICH WAS SUBJECT TO A SCRUTINY AS SESSMENT U/S 143(3) OF THE ACT DATED 29.12.2011 AND THE TOTAL INCOME WAS ASSES SED AT RS.6,70,18,820/-. ITA NO.2006/PN/2013 THE FINALLY ASSESSED INCOME WAS HIGHER THAN THE RET URNED INCOME AND ACCORDINGLY THE ASSESSING OFFICER PROCEEDED TO HOLD ASSESSEE GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT QUA AN AMOUNT OF RS.16,78,018/ -. IN AN ORDER DATED 29.06.2012 PASSED U/S 271(1)(C) OF THE ACT, THE ASS ESSING OFFICER HAS LEVIED A PENALTY OF RS.5,70,358/- ON THE ABOVE INCOME FOR WH ICH ASSESSEE WAS STATED TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME FILED. THE PENALTY SO IMPOSED BY THE ASSESSING OFFICER HAS ALSO BEEN AFFIRMED BY THE CIT(A) AND ASSESSEE IS PRESENTLY IN APPEAL BEFO RE US AGAINST THE ORDERS OF THE LOWER AUTHORITIES. 4. THE PENALTY HAS BEEN LEVIED WITH RESPECT OF TWO ADDITIONS MADE IN THE QUANTUM ASSESSMENT PROCEEDINGS, NAMELY, RS.16,31,66 8/- REPRESENTING INTEREST PAID TO THE PARTNERS DISALLOWED; AND, RS.4 6,350/- REPRESENTING UNSUBSTANTIATED PURCHASES. IN SO FAR AS THE FIRST ADDITION IS CONCERNED, THE ASSESSING OFFICER FOUND THAT THE DEDUCTION CLAIMED BY THE ASSESSEE ON PAYMENT OF INTEREST TO THE PARTNERS WAS WRONGLY CAL CULATED. THE ASSESSEE FIRM HAD CLAIMED DEDUCTION FOR INTEREST PAID TO PARTNERS AT RS.85,42,337/- WHEREAS AS PER THE ASSESSING OFFICER ONLY A SUM OF RS.69,10 ,669/- WAS ALLOWABLE THEREBY RESULTING IN A DISALLOWANCE OF RS.16,31,668 /-. THE ASSESSEE HAD PAID INTEREST TO THE PARTNERS @ 12% AS PER THE PARTNERSH IP DEED ON WHICH THERE IS NO DISPUTE. HOWEVER, WHILE CALCULATING INTEREST PA YABLE, ASSESSEE COMPUTED INTEREST @ 12% ON THE OPENING BALANCE STANDING TO T HE CREDIT OF THE PARTNERS AS ON 01.04.2008 I.E. AT THE BEGINNING OF THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSING OFFICER COMPUTED THE INTEREST PAYABLE TO THE PARTNERS ON TH E BASIS OF WORKING OF INTEREST ON DAY-TO-DAY BASIS WHICH RESULTED IN A DI SALLOWANCE OF RS.16,31,668/-. THE AFORESAID ACTION OF THE ASSESS ING OFFICER IN THE QUANTUM PROCEEDINGS HAS SINCE BECOME FINAL. AS PER THE REV ENUE, THE DIFFERENCE IN THE AMOUNT OF INTEREST CALCULATED BY THE ASSESSEE A ND THAT ALLOWED BY THE ITA NO.2006/PN/2013 ASSESSING OFFICER CONSTITUTES FURNISHING OF INACCUR ATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. 5. ON THIS ASPECT, THE LD. REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THERE WAS ONLY A DIFFERENCE OF OPINION BETWEEN ASSE SSEE AND THE ASSESSING OFFICER AND THAT IN-EFFECT THERE WAS NO ATTEMPT TO CONCEAL ANY INCOME BECAUSE THE INCOME OF THE ASSESSEE FIRM AS WELL AS THE INDI VIDUAL PARTNERS WAS TAXABLE @ 30%. THEREFORE, THE EXCESS DEDUCTION ON ACCOUNT OF INTEREST CLAIMED IN THE HANDS OF THE ASSESSEE FIRM HAS RESULTED IN CORRESPO NDING HIGHER ASSESSED INCOME IN THE HANDS OF THE INDIVIDUAL PARTNERS AND SINCE THE RATE OF TAXATION WAS SAME BEING 30%, THERE WAS NO ATTEMPT TO SAVE AN Y TAXES. AT THE TIME OF HEARING, IT WAS ALSO SUBMITTED THAT THE METHODOLOGY ADOPTED BY THE ASSESSEE TO COMPUTE INTEREST WAS SAME AS WAS DONE IN EARLIER YEARS AND THAT THE DISPUTE REPRESENTED A BONA-FIDE DIFFERENCE OF OPINI ON BETWEEN ASSESSEE AND THE REVENUE. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE APPEARING FOR THE REVENUE HAS RELIED UPON THE ORDERS OF THE AUTHO RITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE AND IN-PARTICULAR IT IS SUB MITTED THAT THE ERROR IN QUESTION WAS A FACTUAL ERROR WHICH CANNOT BE HELD T O BE A BONA-FIDE MISTAKE. ACCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE, A SSESSEE HAS INFLATED INTEREST AMOUNT PAYABLE TO THE PARTNERS BY CALCULAT ING INTEREST ON THE BASIS OF OPENING BALANCE OF THE CAPITAL ACCOUNT AND IT WAS A DELIBERATE ACTION TO CLAIM HIGHER DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE . 7. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS. OSTENSIBLY, THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF INTEREST PAYABLE T O THE PARTNERS IS IN-PRINCIPLE IN CONFORMITY WITH THE PROVISIONS OF 40(B) OF THE A CT. THE PAYMENT OF INTEREST TO THE PARTNERS IS AUTHORIZED BY THE PARTNERSHIP DE ED AND SUCH INTEREST IS PAYABLE @ 12%, WHICH IS ALSO IN CONFORMITY WITH THE REQUIREMENTS OF SECTION ITA NO.2006/PN/2013 40(B)(IV) OF THE ACT. NO DOUBT, THE MANNER OF CALC ULATION OF INTEREST PAYABLE TO THE PARTNERS ADOPTED BY THE ASSESSEE HAS BEEN FOUND TO BE UNACCEPTABLE BY THE ASSESSING OFFICER. SO HOWEVER, WHETHER THE MET HODOLOGY ADOPTED BY THE ASSESSEE TO COMPUTE THE INTEREST PAYABLE TO THE PAR TNERS IS EFFICACIOUS OR NOT, IS NOT THE ISSUE PRESENTLY BEFORE US. THE ASSESSIN G OFFICER WORKED OUT THE INTEREST PAYABLE TO THE PARTNERS ON THE BASIS OF TH E DAY-WISE BALANCE APPEARING IN THE CAPITAL ACCOUNT OF THE PARTNERS. NO DOUBT, THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER IS MORE AMENABLE T O PRUDENCE RATHER THAN THE METHODOLOGY ADOPTED BY THE ASSESSEE BUT THERE I S NOTHING TO SUGGEST THAT METHODOLOGY ADOPTED BY THE ASSESSEE WAS A DELIBERAT E ATTEMPT TO CLAIM HIGHER DEDUCTION ON ACCOUNT OF INTEREST. OSTENSIBL Y, IF IN THE HANDS OF THE ASSESSEE FIRM HIGHER DEDUCTION FOR INTEREST OUTGO T O PARTNERS WAS CLAIMED, THE CORRESPONDING AMOUNT WAS ALSO ASSESSABLE IN THE HAN DS OF THE INDIVIDUAL PARTNERS; AND, IT HAS BEEN ASSERTED BEFORE US THAT THE RATE OF TAXATION IN THE HANDS OF THE ASSESSEE FIRM AS WELL AS THE INDIVIDUA L PARTNERS IS 30%, WHICH WOULD SHOW THAT THERE IS NO ATTEMPT TO EVADE TAXES. MOREOVER, IT HAS ALSO BEEN POINTED OUT BY THE LD. REPRESENTATIVE FOR THE ASSESSEE BEFORE US THAT EVEN IN THE EARLIER YEARS ASSESSEE FIRM HAD CALCULA TED THE INTEREST PAYABLE TO THE PARTNERS IN THE SIMILAR MANNER AS DONE IN THIS ASSESSMENT YEAR, WITH NO ADVERSE COMMENT FROM THE ASSESSING OFFICER. THIS A SPECT OF THE MATTER HAS NOT BEEN NEGATED BY THE REVENUE BEFORE US. MOREOVE R, THE CHARGE MADE AGAINST THE ASSESSEE THAT THE METHODOLOGY ADOPTED B Y IT TO CALCULATE INTEREST WOULD RESULT IN A HIGHER CLAIM OF DEDUCTION WOULD O NLY BE TRUE IN SITUATIONS WHERE THE BALANCE IN THE CAPITAL ACCOUNT OF THE PAR TNERS DECREASE VIS--VIS THE BALANCE STANDING ON THE OPENING DAY OF THE RELEVANT YEAR. WHEREAS, IN SITUATION WHEN THERE IS A INCREASE IN THE CAPITAL A CCOUNT OF THE PARTNERS VIS-- VIS THE OPENING BALANCE AT THE BEGINNING OF THE YEA R, THEN THE METHODOLOGY ADOPTED BY THE ASSESSEE TO CALCULATE INTEREST WOULD ACTUALLY RESULT IN LOWER DEDUCTION ON ACCOUNT OF THE INTEREST. THEREFORE, I T CANNOT BE SAID THAT THE CLAIM MADE BY THE ASSESSEE IN THE RETURN OF INCOME WAS LACKING IN BONA-FIDES ITA NO.2006/PN/2013 OR THAT IT WAS A DELIBERATE ATTEMPT TO CLAIM HIGHER DEDUCTION ON ACCOUNT OF INTEREST. WE THEREFORE HOLD THAT THE SAID ADDITION WOULD NOT CONSTITUTE FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH IN THE MEANING OF SECTION 271(1)(C) OF THE ACT. 8. THE OTHER DISALLOWANCE SUBJECTED TO PENALTY IS A SUM OF RS.46,350/- WITH RESPECT TO THE PURCHASE OF 20 NOKIA HANDSETS. THE ASSESSEE COULD NOT SUBSTANTIATE THE SAID PURCHASE EXCEPT FURNISHING TH E INVOICES OF THE SUPPLIER. ON THIS COUNT ALSO, WE FIND IT IS A CASE WHERE THE CLAIM WAS FOUND TO BE UNSUBSTANTIATED AND IT IS NOT A CASE WHERE THE CLAI M WAS FOUND TO BE FALSE OR BOGUS AND THEREFORE ON THIS ASPECT ALSO PENALTY U/S 271(1)(C) OF THE ACT IS NOT IMPOSABLE. THUS, WE SET-ASIDE THE ORDER OF THE CIT (A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY OF RS.5,70, 358/-. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 18 TH MARCH, 2015. SD/- SD /- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 18 TH MARCH, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE