The ACIT,(OSD)Circle-8, Ahmedabad V. M/s. Schutz Dishman Biotech Pvt.Ltd., Ahmedabad

ITA 2783/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2001 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJA RAM SAH
• Keywords: Proportionate interest; Capital expenditure
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.2783/AHD/2010 [ASSTT. YEAR : 2005-2006] ACIT (OSD) CIR.8, AHMEDABAD. VS. SCHUTZ DISHMAN BIOTECH LTD. BHARDWAJ CHAMBERS, SWASTIK CROSS ROAD AHMEDABAD. PAN : AACCS 0988 C (APPELLANT) (RESPONDENT) REVENUE BY : DR. RAJA RAM SAH ASSESSEE BY : SHRI TUSHAR HEMANI O R D E R PER BENCH: THIS APPEAL IS AT THE BEHEST OF THE REVENUE, WHICH HAS EMANATED FROM THE ORDER OF THE CIT(A)-XIV, AHMEDABA D DATED 02.07.2010. THE REVENUE HAS CHALLENGED DELETION OF PENALTY OF R S.3,62,002/- LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING PENALTY ORDER PASSED UNDER SECTION 271(1)(C) DATED 24.06.2009 AND CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 26-12-2000 WERE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND TRADING CHEMICALS AND OTHER MATERIALS. THERE WAS A DISALLO WANCE UNDER SECTION 36(1)(III) OF RS.9,89,280/-. IT WAS NOTED THAT ON T HE CONFIRMATION OF THE SAID DISALLOWANCE BY THE LEARNED CIT(A), THE PENALTY PRO CEEDINGS WERE FINALISED. WHILE DISALLOWING THE INTEREST, IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.54,86,859/- ON ACCOUNT OF T ERM LOAN AND ACQUIRED CERTAIN FIXED ASSETS. IT HAS ALSO BEEN NOTED THAT THE ASSESSEE HAS ACCOUNTED ITA NO.2783/AHD/2010 -2- WORK-IN-PROGRESS OF RS.54,59,752/- FOR WHICH ALSO A VAILED THE TERM LOAN. BECAUSE OF THOSE REASONS, THE AO HAS DISALLOWED THE PROPORTIONATE INTEREST ATTRIBUTABLE TO CAPITAL WORK-IN-PROGRESS. THE SA ID DISALLOWANCE WAS BY INVOKING THE PROVISIONS OF SECTION 36(1)(III) THAT THE BORROWINGS HAVE BEEN USED FOR THE EXPANSION OF THE BUSINESS. BEFORE THE AO, IT WAS VEHEMENTLY CONTESTED THAT ALL THE PARTICULARS WERE PART OF THE RECORD TH EREFORE NO PENALTY SHOULD HAVE BEEN IMPOSED. HOWEVER, THE AO WAS NOT CONVINCED AN D HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME, WIT H THE RESULT THE IMPUGNED PENALTY WAS IMPOSED. THE SAID ACTION OF THE AO WAS CHALLENGED. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, AFTER DETAILED DISCUSSION, THE LEARNED CIT(A) HAS HELD TH AT THE IMPUGNED DISALLOWANCE DID NOT TANTAMOUNT TO FURNISHING OF IN ACCURATE PARTICULARS OF INCOME AND PLACED RELIANCE ON THE DECISION OF THE R ELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 158, AND FINALLY REVERSED THE ACTION OF THE AO. 4. HAVING HEARD THE SUBMISSION TO BOTH THE SIDES, W E ARE OF THE VIEW THAT SINCE THE SUBJECT MATTER OF LEVY OF PENALTY WAS DIS ALLOWANCE OF INTEREST FOR WHICH ALL THE RELEVANT FACTS AND PARTICULARS WERE A LSO ON RECORD, THEREFORE IT WAS UNJUST ON THE PART OF THE A.O. TO ALLEGE THAT THE A SSESSEE HAS CONCEALED THE FACTS OF THE CASE OR FURNISHED INACCURATE PARTICULARS HO WEVER, THE AO WAS NOT CONVINCED AND TAKEN A VIEW THAT THE BORROWING WERE USED FOR CAPITAL EXPENDITURE HENCE THE PROPORTIONATE INTEREST ATTRIB UTABLE TO THE CAPITAL EXPENDITURE WAS DISALLOWED. FROM THE SIDE OF THE A SSESSEE, THE EXPLANATION WAS OFFERED THAT THE BORROWINGS WERE GIVEN FOR THE PURP OSE OF BUSINESS OF THE ASSESSEE AND THAT THE EXPLANATION WAS NOT FOUND TO BE FALSE. THEREFORE, CONCLUSION CAN BE DRAWN THAT THERE WAS NO DELIBERAT E ATTEMPT OR CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE SO AS TO HOLD T HAT THE PARTICULARS OF INCOME HAVE BEEN CONCEALED BY THE ASSESSEE. FOLLOWING THE DECISION OF THE HONBLE ITA NO.2783/AHD/2010 -3- APEX COURT AS REFERRED HEREINABOVE, WE HEREBY CONFI RM THE FINDINGS OF THE LEARNED CIT(A) AND DISMISS THE GROUND OF THE REVENU E. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 TH FEBRUARY, 2011. SD/- SD/- (G.D. AGARWAL) VICE-PRESIDENT (MUKUL KR. SHRAWAT) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 11-02-2011 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD