Shri Jignesh Jayantilal Shah, Bhavnagar V. The Dy. CIT, Circle-1, Bhavnagar

ITA 2538/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8568 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 16-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B R POPAT
• Keywords: Capital asset; Period of limitation; Wrong claim; Time period of passing order; Capital expenditure; Set aside
• Section: 271(1)(c); 274

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ITA NO. 2538/AHD/2017 ( /ASSESSMENT YEAR : 2013-14) JIGNESH JAYANTILAL SHAH 935, MUNI DAIRY SUBHASHNAGAR BHAVNAGAR-364 001 / VS. THE DCIT CIRCLE-1 BHAVNAGAR ./ ./PAN/GIR NO. : AGYPS 8575 Q ( /APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : SHRI B.R. POPAT, AR /RESPONDENT BY: SHRI RAJDEEP SINGH, SR.DR '# / DATE OF HEARING 25/10/2019 '# /DATE OF PRONOUNCEMENT 17/01/2020 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)6, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-6 /109/16-17 DATED 31/08/2017 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'TH E ACT') DATED 29/03/2016 RELEVANT TO ASSESSMENT YEAR (AY) 2013-14. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- THE LEARNED CIT(A)-6, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN ITA NO.2538/AHD/2017 JIGNESH JAYANTILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 2 - 1. CONFIRMING THE ACTION OF THE AO IN LEVYING PENALTY OF RS.3,50,025/- UNDER SECTION 271(1)(C) EVEN THOUGH THERE IS NO CON CEALMENT OR INACCURATE PARTICULARS OF INCOME. 2. CONFIRMING THE ACTION OF THE AO IN LEVYING PENALTY OF RS.3,50,025/- UNDER SECTION 271(1)(C) EVEN THOUGH THE PENALTY ORD ER IS SERVED AFTER THE LIMITATION PERIOD PRESCRIBED UNDER SECTION 275 OF THE ACT. 3. CONFIRMING THE ACTION OF THE AO IN LEVYING PENALTY OF RS.3,50,025/- UNDER SECTION 271(1)(C) BY MISINTERPRETING TRUE SEN SE OF JUDGEMENT DELIVERED BY THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, DELETE OR ALTER ONE OR MORE GROUNDS OF APPEAL. 2. THE AFORESAID APPEAL HAS BEEN FILLED BY THE AS SESSEE AGAINST THE CONFIRMATION OF PENALTY U/S 271(1)(C) BY THE LEARNE D CIT (A). 3. BRIEFLY STATED FACT IS THAT, THE ASSESSEE IS AN INDIVIDUAL AND EARNING INCOME UNDER THE HEAD SALARY & HOUSE PROPERTY. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION I.E. A.Y. 2013-14, HAS ACQ UIRED IMMOVABLE PROPERTY WHICH WAS CONVERTED INTO STOCK IN TRADE IN NEXT A.Y I.E. A.Y. 2014-15. FOR THE PURPOSE OF ACQUIRING SUCH PROPERTY THE ASSESSEE TAK EN UNSECURED LOAN AND PAID INTEREST OF RS. 11,31,987/- WHICH WAS CLAIMED AS DEDUCTION U/S 57 OF THE ACT. SUBSEQUENTLY THE AO DISALLOWED THE SAME BY HOL DING THE IMPUGNED INTEREST EXPENDITURE AS CAPITAL IN NATURE. ACCORDIN GLY, THE AO INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ON ACCO UNT OF SUCH ADDITION AND FURTHER ISSUED NOTICE UNDER SECTION 274 R.W.S 271(1 )(C) DATED 29-03-2016 AND SUBSEQUENT & FINAL NOTICE DATED 08-08-2016 WAS ISSU ED UPON THE ASSESSEE. BUT THE ASSESSEE FAILED TO OFFER ANY EXPLANATION OR SUBMISSION. 3.1. THEREFORE, THE AO IN ABSENCE OF ANY REPLY F ROM ASSESSEE, HELD THAT IF ANY PARTICULAR OF THE RETURN FOUND TO BE INACCURATE OR FALSE WHICH HAS AN IMPACT ON THE TOTAL INCOME IS SUBJECT TO PENALTY U/ S 271(1)(C) OF THE ACT. IN ITA NO.2538/AHD/2017 JIGNESH JAYANTILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 3 - THIS REGARD THE AO RELIED UPON VARIOUS CASE LAWS, T HE AO ESPECIALLY EMPHASIZE ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF DHARMENDRA TEXTILES PROCESSORS 306 ITR 277 WHERE IT WAS HELD T HAT PENALTY U/S 271(1)(C) IS CIVIL LIABILITY AND MEANS ERA NEE D NOT TO BE PROVED FOR THE LEVY OF PENALTY. MERE ESTABLISHING OF INACCURACY IN PART ICULARS OF INCOME WOULD BE ADEQUATE FOR ATTRACTING CIVIL LIABILITY OF PENALT Y. 3.2 THE AO FURTHER OBSERVED THAT THE BOOKS OF ACCOU NTS OF THE ASSESSEE WERE SUBJECT TO REGULAR AUDIT. HENCE IT IS NOT POSSIBLE THAT THAT THE AUDITOR HAS NOT BROUGHT THE FACT TO THE NOTICE OF THE ASSESSEE. BUT STILL ASSESSEE TAKES A CHANCE TO CLAIM A CAPITAL EXPENDITURE AS REVENUE EX PENDITURE U/S 57 OF THE ACT. 3.3. THE AO ALSO OBSERVED THAT ASSESSEE DID NOT FIL E ANY APPEAL AGAINST THE ASSESSMENT ORDER AND ALSO NOT FURNISHED ANY EXPLANA TION WITH RESPECT TO PROCEEDINGS U/S 271(1)(C) OF THE ACT. ACCORDINGLY T HE AO LEVIED PENALTY OF RS. 3,50,025/- BEING 100% OF TAX EVADED ON RS. 11,3 31,9 87/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME. BEING AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE LEARNED CIT (A). 4. THE ASSESSEE BEFORE LEARNED CIT(A) SUBMITTED T HAT THE PROVISION OF SECTION 271(1)(C) HAS TWO LIMB I.E. CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULAR OF INCOME. BUT THE AO AT THE TIME OF ISSUING NOTICE FOR INITIATING PENALTY PROCEEDING HAS NOT MENTIONED ANY SPECIFIC REASON/LIMB. THEREFORE IN ABSENCE OF ANY SPECIFIC REASON THE PRO CEEDING U/S 271(1)(C) IS ITA NO.2538/AHD/2017 JIGNESH JAYANTILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 4 - BAD IN LAW. THE ASSESSEE IN HIS SUPPORT RELIED ON T HE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN CASE OF MANJUNATHA COTTON A ND GINNING FACTORY 359 ITR 565. 4.1. THE ASSESSEE ALSO SUBMITTED THAT THE PENALT Y ORDER WAS SERVED BEYOND THE TIME LIMIT PRESCRIBED UNDER THE PROVISION OF SE CTION 275 OF THE ACT. 4.2. THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS FAILED TO UNDERSTAND THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEED INGS ARE DIFFERENT AND FINDING OF ASSESSMENT PROCEEDING IS IRRELEVANT UNLE SS OTHER CORROBORATIVE EVIDENCE BROUGHT IN ORDER TO PROVE CONCEALMENT OF I NCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE IN T HIS REGARD RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS . RELIANCE PETROPRODUCTS (2010) 189 TAXMAN 322. 4.3. HOWEVER, THE LEARNED CIT (A) AFTER CONSIDERIN G THE SUBMISSION OF THE ASSESSEE AND THE AO FINDING OBSERVED AS UNDER: (I) FROM THE SUBMISSION OF THE ASSESSEE BEFORE THE AO D URING ASSESSMENT PROCEEDING, IT CLEAR THAT THE HE WAS KNO WN TO THE WRONG CLAIM MADE IN THE RETURN AND ON QUESTION FROM AUTHORITY HE SHIFTED THE BURDEN OF WRONG CLAIM ON CONSULTANT. (II) THE ASSESSEE DID NOT SUBMIT ANY DOCUMENTARY EVIDENC E IN SUPPORT OF HIS CLAIM THAT THE NOTICE OF PENALTY PROCEEDING ISSUED WITHOUT ANY SPECIFICATION. HOWEVER THE AO IN PENALTY ORDER CLEARLY MENTIONED THAT THE PENALTY HAS BEEN LEVIED FOR FURN ISHING INACCURATE PARTICULAR OF INCOME. (III) THE ASSESSEE HAS DELIBERATELY ATTEMPT TO CLAIM CAPI TAL EXPENDITURE AS REVENUE. IT IS VERY MUCH IN THE KNOWLEDGE OF THE ASSESSEE THAT INTEREST EXPENSES INCURRED WITH RESPECT TO ACQUIRIN G CAPITAL ASSET IS CAPITAL IN NATURE. ITA NO.2538/AHD/2017 JIGNESH JAYANTILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 5 - (IV) THE ASSESSEE DID NOT MAKE ANY EXPLANATION BEFORE AO AS REQUIRED UNDER EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT . THEREFORE FOR IN ABSENCE OF ANY EXPLANATION THE AO HAS RIGHTLY LE VIED PENALTY. 4.4. IN VIEW OF THE ABOVE, THE LEARNED CIT(A) C ONFIRMED THE PENALTY ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR BEFORE US FILED A PAPER BOOK R UNNING FROM PAGES 1 TO 15 AND SUBMITTED THE ASSESSEE HAS NOT FURNISHED ANY IN ACCURATE PARTICULARS OF INCOME. THEREFORE, THERE CANNOT BE LEVIED ANY PENAL TY UNDER SECTION 271(1) OF THE ACT. 6. ON THE OTHER HAND, THE LEARNED DR BEFORE US V EHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRE SENT CASE RELATES TO THE PENALTY IMPOSED BY THE AO UNDER SECTION 271(1)(C) O F THE ACT WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LEARNED CIT (A) ON AC COUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE IN H IS RETURN OF INCOME HAS MADE A CLAIM FOR THE INTEREST PAID ON THE MONEY BOR ROWED WHICH WAS UTILIZED FOR THE PURCHASE OF THE PROPERTY. AS SUCH THE PROPE RTY AGAINST WHICH THE LOAN WAS TAKEN WAS CLASSIFIED IN BALANCE SHEET AS CAPITA L ASSETS. THEREFORE, THE AMOUNT OF CORRESPONDING INTEREST WAS INELIGIBLE. HO WEVER THE ASSESSEE CLAIMED THE INTEREST EXPENSES IN THE PROFIT AND LOS S ACCOUNT. ACCORDINGLY, THE ITA NO.2538/AHD/2017 JIGNESH JAYANTILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 6 - AO HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME BY CLAIMING THE IMPUGNED EXPENSES IN THE PROFIT AND LO SS ACCOUNT. THUS THE AO LEVIED THE PENALTY AMOUNTING TO RS. 3,50,025/- BEIN G 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED. THE PENALTY WAS SUBSEQUENT LY CONFIRMED BY THE LEARNED CIT (A). 7.1. ADMITTEDLY, THE ASSESSEE HAS MADE DISCLOSUR E OF ALL THE PARTICULARS OF INTEREST EXPENSES CHARGED AGAINST THE INCOME IN THE PROFIT AND LOSS ACCOUNT. NOW THE QUESTION ARISES BEFORE US TO ADJUDICATE WHE THER THE WRONG CLAIM OF INTEREST EXPENSE AMOUNTS TO CONCEALMENT OR FURNISHI NG INACCURATE PARTICULARS OF INCOME IN THE GIVEN FACTS AND CIRCUMSTANCES. 7.2. IN THIS REGARD, WE NOTE THAT THE ASSESSEE I NSTEAD OF CAPITALIZING THE INTEREST EXPENSE, HAS CLAIMED DEDUCTION AS REVENUE EXPENSE. THUS, IN OUR CONSIDERED VIEW, THE CLAIM WAS MADE UNDER THE WRONG HEAD OF INCOME WHICH WAS NOT FALSE. ACCORDINGLY, WE CONCLUDE THAT THE AS SESSEE HAS MADE A WRONG CLAIM, BUT THAT DOES NOT MEAN THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN THIS REGARD, WE FIND SUPP ORT AND GUIDANCE FROM THE JUDGMENT OF RELIANCE PETRO PRODUCT PVT. LTD. (SUPRA) WHEREIN, IT WAS HELD AS UNDER: THE WORD 'PARTICULARS' MUST MEAN THE DETAILS SUPPL IED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TR UTH OR ERRONEOUS. IN THE INSTANT CASE, THERE WAS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. S UCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)( C ). A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY IT SELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. ITA NO.2538/AHD/2017 JIGNESH JAYANTILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 7 - 7.3. WE ALSO FIND SUPPORT AND GUIDANCE FROM THE DECISION OF COORDINATE BENCH OF THIS ITAT IN CASE OF DHOLU CONSTRUCTION & PROJECTS LTD. REPORTED IN 17 TAXMANN.COM 176. WHERE IT WAS HELD AS UNDER; MERELY BECAUSE THE CLAIM MADE BY THE ASSESSEE IS N OT FOUND ACCEPTABLE CANNOT LEAD TO THE INTERFERENCE THAT CLAIM WAS RATHER FALSE OR PARTICU LARS FURNISHED IN SUPPORT OF THE CLAIM WERE INACCURATE. NON-ACCEPTANCE OF THE CLAIM IS DIFFEREN T FROM FALSE CLAIM OR INACCURATE PARTICULARS HAVING BEEN FILED IN SUPPORT OF THE CLA IM. THE CASE OF THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS) DOES NOT FALL IN THE MAI N PROVISO OF SECTION 271(1)( C ) AS THERE IS NO EVIDENCE TO THIS EFFECT. WHATEVER FINDING IS GIV EN ABOUT FURNISHING INACCURATE PARTICULARS IS NOT IN ACCORDANCE WITH THE LAW. [PARA 9] 7.4. FROM THE ABOVE, IT IS TRANSPIRED THAT A WRO NG CLAIM BY THE ASSESSEE CANNOT BE EQUATED WITH INACCURATE PARTICULAR OF INC OME. AS SUCH THE ASSESSEE HAS ACTUALLY INCURRED THE AMOUNT OF INTEREST EXPENS ES FOR THE PURCHASE OF THE LAND /PROPERTY WHICH WAS TO BE CAPITALIZED BUT HE W RONGLY CLAIMED THE DEDUCTION UNDER SECTION 57 OF THE ACT. IT IS ALSO P ERTINENT TO NOTE THAT THE ASSESSEE HAS CLAIMED TOTAL INTEREST EXPENSES AMOUNT ING TO 13,65,484/- AGAINST THE INCOME UNDER THE HEAD OTHER SOURCES. AS SUCH THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE AO FOR AN AMOUNT OF RS . 2,33,497/- OUT OF THE TOTAL CLAIM OF RS. 1365484/- ONLY. ACCORDINGLY THE BALANCE AMOUNT OF 11,31,987 WAS DISALLOWED BY THE AO. THIS FACT CAN BE VERIFIED FROM THE STATEMENT OF INCOME FILED BY THE ASSESSEE AND THE R ELEVANT EXTRACT IS REPRODUCED AS UNDER: INCOME FROM OTHER SOURCES 28524 BANK INTEREST 17982 OTHER INCOME 35229 INTEREST ON BANK FDR 233497 INTEREST FROM OTHER PARTIES -1365484 -1131987 LESS: EXPENSES TOTAL -1050252 7.5. THUS, FROM THE ABOVE, WE NOTE THAT PART OF T HE CLAIM OF THE ASSESSEE WAS ADMITTED BY THE REVENUE AND PART OF THE CLAIM O F THE ASSESSEE WAS DENIED BY THE REVENUE AS DISCUSSED ABOVE. ACCORDING LY, WE HOLD THAT PART OF ITA NO.2538/AHD/2017 JIGNESH JAYANTILAL SHAH VS. DCIT ASST .YEAR - 2013-14 - 8 - THE EXPENSES DISALLOWED BY THE AO REPRESENTS THE IN ACCURATE CLAIM BY THE ASSESSEE WHICH CANNOT BE EQUATED WITH THE INACCURAT E PARTICULARS OF INCOME. ACCORDINGLY, WE ARE OF THE VIEW THAT THERE CANNOT B E ANY PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT IN THE G IVEN FACTS AND CIRCUMSTANCES. HENCE, THE ORDER OF THE LEARNED CIT (A) IS SET ASIDE AND WE FURTHER DIRECT THE AO TO DELETE THE ADDITION MADE B Y HIM. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 1 7 / 01 /20 20 SD/- SD/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 17/01/2020 &# . . , . . . / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' ' (' / CONCERNED CIT 4. (' ( ) / THE CIT(A)-6 5. )*+ ' ' , # ' , / DR, ITAT, AHMEDABAD 6. +. / GUARD FILE. / BY ORDER, )' ' //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD