Alliance Infrastructure Company, Surat V. The Dy.CIT, Circle-3, Surat

ITA 2754/AHD/2014

• Counselvise Citation: [2018] 111 COUNSELVISE.COM (IT) 1914 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 15-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R KAVITHA
• Assessee Lawyers: S K KABRA
• Keywords: Depreciation; Bonafide belief; Wrong claim; Difference of opinion

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . [ , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.2754/AHD/2014/SRT / ASSESSMENT YEAR: 2010-11 M/S.ALLIANCE INFRASTRUCTURE COMPANY, 702-A, TIRUPATI PLAZA, NEAR.COLLECTOR OFFICE, NANPURA, SURAT . PAN: AAMFA 8092J VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, SURAT. APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI S.K.KA B RA, CA /REVENUE BY M R S. R.KAVIT H A, SR.DR / DATE OF HEARING: 05 .0 3 .2018 /PRONOUNCEMENT DATE 14 .0 3 .2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, SURAT DATED 28.08.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE SOLE GROUND OF APPEAL RELATES TO CONFIRMATION OF PENALTY OF RS.4,25,288/- U/S.271(1)(C) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ADDITION OF RS.19,33,338/- WAS MADE ON ACCOUNT OF DISALLOWANCE OF EXCESS INTEREST U/S.24(B) OF THE ACT. THESE DISALLOWANCES WERE MADE AS IT WAS PAID ON FRESH LOAN TAKEN FOR RE-PAYMENT OF PARTNERS CAPITAL WHICH HAS BEEN UTILIZED FOR ACQUISITION OF PROPERTY GIVEN ON RENT. PAGE 2 OF 6 IN APPEAL, THE CIT(A) HAS RETAINED THE AMOUNT OF INTEREST TO THE EXTENT OF RS.13,76,344/- AS IT WAS SEEN THAT THE AMOUNT OF RE-PAYMENT OF PARTNERS CAPITAL WHICH WOULD QUALIFY TOWARDS ACQUISITION OF PROPERTY WAS ONLY RS.60 LAKHS INSTEAD OF RS.1.65 CRORES CLAIMED BY THE ASSESSE. THIS WAS BECAUSE ON THE GROUND THAT PARTNERS CAPITAL HAD RISEN FROM THE INITIAL INVESTMENT OF RS.60 LAKHS TO THE RS.1.65 CRORES ON ACCOUNT OF PROFITS EARNED AND INTEREST ON LOAN TAKEN FOR GIVING THAT THESE PROFITS TO THE PARTNERS WOULD NOT QUALIFY AS RE-PAYMENT OF BORROWED CAPITAL UTILISED TOWARDS PURCHASE OF PROPERTY. THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND LEVIED PENALTY OF RS.5,97,399/- BEING 100% OF TAX SOUGHT TO BE EVADED. THE ASSESSE AGGRIEVED THAT THE ORDER OF THE ASSESSING OFFICER HAS FILED AN APPEAL BEFORE THE CIT(A) , AFTER CONSIDERING THAT DISALLOWANCE OF INTEREST RETAINED WERE AT RS.13,76,344/- BY HIM AS AGAINST THE DISALLOWANCE OF INTEREST OF RS.19,33,338/-. ACCORDINGLY, CIT(A) HAS RESTRICTED THE PENALTY TO THE AMOUNT OF DISALLOWANCE OF RS.13,76,344/- WHICH WORKED OUT TO RS.4,25,288/-. 4. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE ASSESSE HAS FILED THIS APPEAL BEFORE US. 5. BEFORE US, IT WAS ARGUED BY THE LD.AUTHORISED REPRESENTATIVE OF THE ASSESSE THAT THE LD.CIT(A) HAS ACCEPTED THE CONTENTION OF THE ASSESSE THAT THE INTEREST PAID ON FRESH LOAN WAS UTILIZED FOR RE-PAYMENT OF PARTNERS CAPITAL WAS AN ALLOWABLE EXPENDITURE. HOWEVER, THE ALLOWABLE QUANTUM OF INTEREST WAS RE-CALCULATED IN THE LIGHT OF THE FACT THAT THE WHOLE OF THE CAPITAL THAT WAS RE-PAID WAS NOT UTILIZED FOR ACQUISITION OF THE PROPERTY. THUS, THOUGH INTEREST CLAIM AS SUCH WAS ALLOWABLE, BUT FOR THE TECHNICAL REASONS OF THE LAW, SOME OF THE PORTION WAS NOT ALLOWABLE, WHICH PAGE 3 OF 6 THE LD.CIT(A) SUSTAINED IN THE QUANTUM APPEAL. IT WAS CONTENDED THAT THE INTEREST CLAIM WAS MADE ON THE BASIS OF THE ACCOUNTING ENTRIES PASSED BY THE ACCOUNTANT IN THE BOOKS OF ACCOUNTS AND THE COMPUTATION WAS ALSO PREPARED ACCORDINGLY UNDER THE PRESUMPTION THAT THE CAPITAL WHICH WAS RE-PAID TO PARTNER WAS UTILIZED FOR THE PURCHASE OF PROPERTY AS COULD BE SEEN FROM THE BALANCE SHEET AS ON 31.03.2009 & 31.03.2010. IT WAS ONLY WHEN THE PARTNERS CAPITAL ACCOUNT WAS EXTRACTED UNDER THE DIRECTION OF THE LD.CIT(A) DURING THE QUANTUM HEARING, IT WAS FOUND THAT THE ACTUAL UTILIZATION OF FUNDS TOWARDS ACQUISITION OF PROPERTY WHICH WAS RENTED OUT. ACCORDINGLY THE QUANTUM OF ALLOWABLE INTEREST WAS RE-CALCULATED. THEREFORE, IT WAS CONTENDED THAT THE EXPENSES OF INTEREST WAS DULY INCURRED AND RECORDED IN THE BOOKS OF ACCOUNTS WAS NOT BOGUS. THE CLAIM OF EXTRA INTEREST WAS NOT A FALSE CLAIM AND MADE UNDER THE BONAFIDE BELIEF THAT THE SAME IS ALLOWABLE. THEREFORE, RELYING IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PRIVATE LTD (2010) ITR 158 SC IT WAS SUBMITTED THAT MERELY BECAUSE THE ASSESSEES CLAIM OF EXPENDITURE WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY THE REVENUE, PENALTY U/S.271(1)(C) OF THE ACT CANNOT BE ATTRACTED. THE LD.AUTHORISED REPRESENTATIVE, FURTHER, PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-IV VS. SAMBHAV MEDIA LTD. (2013) 32 TAXMANN.COM 371 (GUJARAT) WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE ASSESSE MADE A CLAIM OF STATUTORY DEDUCTION U/S.24 AS WELL AS ALSO FOR THE DEPRECIATION. AT THE TIME OF ASSESSMENT, ALL THE RELEVANT MATERIAL FACTS WAS DISCLOSED BY THE ASSESSE AND DEPRECIATION WAS ALSO CLAIMED ON ITS BUSINESS ASSETS BOTH THE ASSESSING OFFICER AND THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSE WAS DIS-ENTITLED TO CLAIM OF DOUBLE DEDUCTION OF DEPRECIATION AS WELL AS DEDUCTION U/S.24 OF THE ACT. THE TRIBUNAL RIGHTLY HELD THAT THERE WAS NO CONCEALMENT OF INCOME NOR WAS THERE ANY FILING OF INACCURATE PAGE 4 OF 6 PARTICULARS OF INCOME. THUS, ON FINDING THE CONDUCT OF THE ASSESSEE WAS BONAFIDE AND THIS BEING A MATTER OF BONAFIDE DIFFERENCE OF OPINION BETWEEN ASSESSEE AND THE DEPARTMENT REGARDING ALLOWABILITY OF THE CLAIM, IT WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED UPON THE ASSESSEE. 6. ON THE OTHER HAND, THE LD.SR.DR SUPPORTED THE ORDER OF LOWER AUTHORITIES. WE HAVE CONSIDERED THE FACTS AND PERUSED THE MATERIAL ON RECORD. THE PERUSAL OF THE ASSESSMENT ORDER AS WELL AS APPEAL ORDER IN QUANTUM APPEAL REVEALS THAT THE DISALLOWANCE OF INTEREST U/S.24B OF THE ACT WAS MADE ON THE BASIS OF FACTS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME. IT IS ALSO SEEN THAT THE CLAIM OF INTEREST WAS MADE BY THE ASSESSEE ON ACCOUNT OF ENTRIES OF INTEREST PAYMENT PASSED BY THE ACCOUNTANT IN THE BOOKS OF ACCOUNTS ON THE AMOUNT OF BORROWED CAPITAL. IT IS ALSO SEEN FROM THE ORDER OF CIT(A) THAT INTEREST ON BORROWED CAPITAL IS ADMISSIBLE AS DEDUCTION U/S.24(B) OF THE ACT PROVIDED THE PARTNERS CAPITAL HAS BEEN USED FOR ACQUISITION OF PROPERTY. THEREFORE, THE INTEREST PAID ON PARTNERS CAPITAL WAS HELD TO BE ALLOWABLE AS ADMISSIBLE DEDUCTION U/S.24(B) OF THE ACT AND CONSEQUENTLY, THE INTEREST ON LOAN TAKEN FOR RE-PAYMENT OF SUCH CAPITAL WOULD ALSO BE ADMISSIBLE AS DEDUCTION U/S.24(B) OF THE ACT. HOWEVER, THE CIT(A) NOTED THAT THE TOTAL COST OF PROPERTY IN THE BALANCE SHEET WAS AT RS.3.73 CRORES AS AGAINST WHICH LOAN OF RS.4 CRORE WAS OBTAINED FROM SBI. SINCE THIS LOAN WAS FOR RE- PAYMENT OF BORROWED CAPITAL UTILIZED FOR PURCHASE OF PROPERTY, THE INTEREST ONLY TO THE EXTENT OF COST OF PROPERTY CAN BE ADMISSIBLE. HOWEVER, IT WAS NOTICED THAT THE PARTNERS CAPITAL HAD RISEN FROM INITIAL INVESTMENT OF RS.60 LAKHS TO THE FIGURE OF 1.65 CRORE ON ACCOUNT OF PROFIT ON INTEREST ON LOAN TAKEN FOR GIVING BACK THESE PROFIT ON INTEREST ON LOAN TAKEN FOR GIVING BACK THESE PROFITS TO THE PARTNERS. THEREFORE, THE CIT(A) HAS CONSIDERED THE INADMISSIBLE INTEREST U/S.24(B) OF THE ACT PAGE 5 OF 6 ON THE GROUND THAT THE ENTIRE CAPITAL BORROWED COST OF PROPERTY APPEARING IN THE BALANCE SHEET. THEREFORE, THE PROPORTIONATE DISALLOWANCE ON INTEREST WERE MADE BY THE ASSESSING OFFICER WHICH WERE REDUCED BY THE LD.CIT(A). THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WERE ON ACCOUNT OF TECHNICAL BASIS AS SOME OF THE PORTION WAS NOT ALLOWABLE AS DEDUCTION. THEREFORE, THE DISALLOWANCE/ADDITIONS MADE BY THE LOWER AUTHORITIES ARE ON ACCOUNT OF FACTS AS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME AND COMPUTATION OF TOTAL INCOME WHICH DOES NOT MEAN THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME ARE FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS RIGHT LAW THAT PENALTY PROCEEDINGS ARE DISTINCT PROCEEDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT IS NOT THE CONCLUSIVE FOR DECIDING THE IMPOSITION OF THE PENALTY. IT ONLY HAS A PERSUASIVE VALUE ONLY. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. JUST BECAUSE THE ASSESSEE EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER, IT DOES NOT FOLLOW THAT THE ASSESSEE WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION. WE, THEREFORE OF THE CONSIDERED VIEW THAT PENALTY IS NOT SUSTAINABLE IN LAW IN THE LIGHT OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PRIVATE LTD (2010) 322 ITR 158 SC WHEREIN IT WAS HELD THAT MERELY BECAUSE OF THE CLAIM MADE BY THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER, THAT DOES NOT MEAN THAT THE FURNISHED INACCURATE PARTICULARS OF INCOME, UNLESS THE INFORMATION AS GIVEN IN RETURN OF INCOME WAS FOUND TO BE INCORRECT OR INACCURATE. SIMILARLY, THE LD.AUTHORISED REPRESENTATIVE HAS ALSO PLACED RELIANCE IN THE CASE OF CIT VS. SAMBHAV MEDIA LTD (2013) 32 TAXMANN.COM 371 GUJ (SUPRA) WHEREIN THE BONAFIDE CLAIM MADE U/S.24 AS WELL AS U/S.32 BEING DOUBLE DEDUCTION WAS MADE BY THE ASSESSEE. THE PENALTY IMPOSED THEREON U/S.271(1)(C) OF THE ACT WAS NOT TO PAGE 6 OF 6 BE HELD SUSTAINABLE AS THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE AND THIS WAS BEING MATTER OF BONAFIDE DIFFERENCE OF OPINION BETWEEN ASSESSEE AND THE DEPARTMENT REGARDING ALLOWABILITY OF CLAIM. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, THE PENALTY OF RS.4,25,288/- SUSTAINED BY THE CIT(A), IS THEREFORE DIRECTED TO BE DELETED. THUS, THIS GROUND OF APPEAL IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.03.2018 SD/- SD/- (C.M. GARG) (O.P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER / SURAT, DATED: 14 TH MARCH, 2018 COPY OF ORDER FORWARDED TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT