DCIT, New Delhi V. M/s. Nalwa Sons Investments Ltd., Hisar

ITA 2337/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2872 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Keywords: Bonafide belief; Difference of opinion
• Section: 143(3); 14A

Judgement Text

PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P.SAHU, ACCOUNTANT MEMBER ITA NO. 2337/DEL/2016 (ASSESSMENT YEA R: 2008-09) DCIT, CIRCLE-17(2), NEW DELHI. VS NALWA SONS INVESTMENTS LTD., (FORMERLY JINDAL STRIPS LTD.) O.P.JINDAL MARG, HISAR-125005. PAN-AAACJ2734R (APPELLANT) (RESPONDENT) APPELLANT BY SH. S.R.SENAPATI, SR.DR RESPONDENT BY SH. ASHWANI KUMAR, ADV. DATE OF HEARING 13.03.2018 DATE OF PRONOUNCEMENT 16.03.2018 ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE HAS BEEN DIRECTED AGAINS T THE ORDER OF LD.CIT(A)-20, NEW DELHI DATED 23.02.2016 FOR AY 200 8-09, CHALLENGING THE DELETION OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE RE TURN DECLARING INCOME OF RS.6.38 CRORES WAS FILED. THE ASSESSMENT WAS COMPL ETED U/S 143(3) OF THE ACT DATED 26.11.2010 AT AN INCOME OF RS.7.49 CRORES. FO LLOWING ADDITIONS/DISALLOWANCES ARE MADE TO THE RETURN INCO ME OF THE ASSESSEE:- (I) ADDITION ON ACCOUNT OF DISALLOWANCE U/S 35D OF RS.9 0,000/-; (II) ADDITION ON ACCOUNT OF DISALLOWANCE ON ACCOUNT OF N ON-PERFORMING ASSETS OF RS.54,98,030/-; AND (III) ADDITION ON ACCOUNT OF DISALLOWANCE U/S 14A OF RS.5 4,54,000/- ITA NO. 2337/DEL/2016 PAGE | 2 3. THE ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A) W HO HAS UPHELD THE FIRST ADDITION AND PARTLY ALLOWED ON SECOND GROUND BY RES TRICTING THE ADDITION TO RS.49,07,985/- AND ON ITEM NO.3, APPEAL WAS PARTLY ALLOWED BY RESTRICTING THE ADDITION TO RS.27.35 LACS. THE AO AFTER CONSIDERIN G THE EXPLANATION OF THE ASSESSEE ON PENALTY MATTER, NOTED THAT HE WAS SATIS FIED THAT THE ASSESSEE HAS CONCEALED AS ALSO FURNISHED INACCURATE PARTICULARS OF ITS INCOME IN RESPECT OF FIRST TWO ISSUES AND HELD THAT AMOUNT OF RS.49,97,9 85/- SHALL, FOR THE PURPOSE OF SECTION 271(1)(C) OF THE ACT, BE DEEMED TO REPRE SENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN INACCURATELY FURNISHED BY THE ASSESSEE. THE AO ACCORDINGLY, LEVIED THE PENALTY ON THE AMOUNT OF RS .49,97,985/- (RS.90,000/- + RS.49,07,985/-). 4. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE LD.CIT(A). THE WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APP ELLATE ORDER IN WHICH THE ASSESSEE RELIED UPON SEVERAL DECISIONS AND SUBMITTE D THAT THE ASSESSEE DISCLOSED ALL THE FACTS BEFORE THE AUTHORITIES BELO W. LD.CIT(A) NOTED THAT THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULA RS. IT IS ANOTHER MATTER THAT IT HAS CLAIMED DEDUCTION U/S 35D OF THE ACT WH ICH THE AO DID NOT FIND IT TENABLE. MERELY, DISALLOWING THE CLAIM IS NOT SUFF ICIENT ENOUGH TO WARRANT LEVY OF PENALTY AND RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS P. LTD. 332 ITR 158 (SC), LD.CIT(A) ALSO NOTED THAT IN THIS CASE, THE ASSESSEE HAS NOT RECEIVED ANY INTERE ST INCOME BUT THE AO CALCULATED INTEREST ON LOAN ADVANCED TO SISTER CONC ERN ON ACCRUAL BASIS, THE RATE OF INTERESTS HAS BEEN CHARGED AT THE ESTIMATE BASIS ON MARKET RATE. LD.CIT(A) ON CONSIDERATION OF THE SUBMISSIONS OF TH E ASSESSEE NOTED THAT NON ITA NO. 2337/DEL/2016 PAGE | 3 INCLUSION OF INCOME ON ACCRUAL BASIS WAS ON BONAFI DE BELIEF THAT THE ASSESSEE COMPANY DID NOT ACCOUNT FOR INTERESTS IN VIEW OF TH E CONTINUITY DEFAULT IN RESPECT OF INTERESTS AND ON ACCOUNT OF UNCERTAINTY REGARDING RECOVERY OF INTERESTS AND PRINCIPAL THEREON. LD.CIT(A) ACCORDI NGLY, CANCELLED THE PENALTY. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. LD.CIT(A ) PROPERLY APPRECIATED THE FACTS OF THE FACTS AND RIGHTLY CAME TO THE CONCLUSION AND IT IS NOT A FIT CASE FOR THE LEVY OF PENALTY. THE ASSESSEE DISCLOSED ALL THE FA CTS IN THE ACCOUNTS AND TO THE REVENUE AUTHORITIES. IT IS WELL SETTLED LAW THAT M ERE MAKING A CLAIM WHICH IS NOT ALLOWABLE DEDUCTION BY ITSELF IS NOT A GROUND T O LEVY THE PENALTY. THE ASSESSEE PLEADED THAT THERE MAY BE A DIFFERENCE OF OPINION AS REGARDS CLAIM OF DEDUCTION U/S 35D OF THE ACT IN RESPECT OF THE PERI OD PRIOR TO THE COMMENCEMENT OF BUSINESS AND AFTER COMMENCEMENT OF BUSINESS. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND MADE DISALLOWANCE OUT OF EXPENDITURE, THEREFORE, MERE MAKING DISALLOWANCE IS NOT SUFFICIENT TO LEVY PENALTY. SIMILARLY, THE ASSESSEE AS REGARDS, DISAL LOWANCE OF INTEREST ON NON- PERFORMING ASSETS EXPLAINED THE REASONS FOR NON-CHA RGING INTERESTS. IT WAS EXPLAINED THAT WHEN PRINCIPAL AMOUNT OF LOAN ITSELF ARE DOUBTFUL, THERE WAS NO QUESTION OF ACCRUAL OF INTERESTS. THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND FALSE AND THE ASSESSEE HAS BONAFIDE BELIEF THAT SUC H INTEREST IS NOT TAXABLE IN THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE MAD E A BONAFIDE EXPLANATION BEFORE THE AUTHORITIES BELOW AND ADDITION IS MADE O F THE INTERESTS WHICH THE ASSESSEE DID NOT RECEIVE. THEREFORE, THE TOTALITY OF THE FACTS AND CIRCUMSTANCES SHOWS THAT LD.CIT(A) IN PROPER APPRECIATION OF FACT S HAS CORRECTLY DELETED THE ITA NO. 2337/DEL/2016 PAGE | 4 PENALTY. IT MAY ALSO BE NOTED HERE THAT THE AO IN THE PENALTY ORDER HAS MENTIONED THAT THE ASSESSEE HAS CONCEALED THE PARTI CULARS OF ITS INCOME AS ALSO FURNISHED PARTICULARS THEREOF WITHIN THE MANNER U/S 271(1)(C) OF THE ACT. THE FINDING OF THE AO ARE BAD IN LAW AS IT DID NOT SATI SFY WITHIN LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY HAVE BEEN LEVIED I.E. WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. IN SUCH MATTER, NOTICE WAS FOUND BAD IN LAW, THE DEPAR TMENTAL APPEAL IS DISMISSED BY THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS SSAS EMERALD MEADOWS [2016] 73 TAXMANN.COM 241 (KAR.) WHICH IS CONFIRMED BY THE HONBLE SUPREME COURT IN THE CASE CIT VS SSA'S EMERALD MEADOWS [2016] 73 TAXMANN.COM 248 (SC). THE DEPARTMENTAL APPEAL HAS NO MERIT, THEREFORE, THE SAME IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 16.03.2018. SD/- SD/- (L.P.SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:- 16 TH MARCH, 2018 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI