M/s. Pratham Realty Pvt.Ltd., Baroda V. The ACIT, Circle-2(1)(2), Vadodara

ITA 2845/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8660 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 08-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANKET BAKSHI
• Section: 143(3); 14A

Judgement Text

I.T.A. NO. 2 845 /AHD/201 5 ASSESSMENT Y EAR: 20 1 1 - 12 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD SMC BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM ] I.T.A. NO. 2 845 /AHD/201 5 ASSESSMENT Y EAR : 20 1 1 - 12 PRATHAM REALTY PVT. LTD., ....... ...........APPELLANT PRATHAM MAKRAND DESAI ROAD, GOTRI, BARODA - 390 007 . [PAN : A ACCP 4084 A ] VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2(1)(2), VADODARA . ............................RESPONDENT APPEARANCES BY: SANKET BAKSHI FOR THE APPELLANT KEYUR PATEL FOR THE RESPONDENT DATE OF CONCLUD ING THE HEARING : 17 . 08 .2017 DATE OF PRONOUNCING THE ORDER : 29 . 08 . 2017 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 28.08.2015 , PASSED BY THE L EARNED CIT(A) , VADODARA , IN THE M ATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER ), FOR THE ASSESSMENT YEAR 2011 - 12. 2. THOUGH THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE WHEREBY IT HAS CHALLENG ED LEVY OF PENALTY AMOUNTING TO RS.43,30,500/ - UNDER SECTION 271(1)(C) OF THE ACT. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER, 2011 DECLARING A LOSS OF RS.21,88,941/ - . A SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS PASSED ON I.T.A. NO. 2 845 /AHD/201 5 ASSESSMENT Y EAR: 20 1 1 - 12 PAGE 2 OF 4 24.01.2014. THE ASSESSING OFFICER HAS MADE TWO ADDITIONS TO THE INCOME OF THE ASSESSEE NAMELY (A) DISALLOWANCE UNDER SECTION 14A - RS.21,54,672/ - , (B) DISALLOWANCE UNDER SECTION 40(A)(IA) - RS.1,0 5,000/ - . AFTER SETTING OF THESE ADDITIONS WITH THE LOSSES DECLARED BY THE ASSESSEE IN THE RETURN , TOTAL INCOME WAS DETERMINED AT RS.70,731/ - . AGGRIEVED BY THESE ADDITIONS, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNE D CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS IT CAME TO THE NOTICE OF THE LEARNED FIRST APPELLATE AUTHORITY THAT THE ASSESSEE HAD SUBMITTED A LETTER DATED 22.01.2014 BEFORE THE ASSESSING OFFICER AND SUBMITTED THAT IT HAD INCURRED INTEREST EXPENDIT URE OF RS.1 ,30,55,413 / - BUT THE SAME WAS DEBITED TO THE ACCOUNT OF PRATHAM DOSTI REALTY FIRM BECAUSE IT WAS INCURRED FOR THE PURPOSE OF INVESTMENT IN THAT FIRM. LEARNED CIT(A) HAS ISSUED A NOTICE FOR ENHANCEMENT OF INCOME AND ULTIMATELY MADE THE ADDITION OF RS. 1, 30,36,78 3 / - . 4. LEARNED CIT(A) HAS INITIATED PENALTY PROCEEDINGS ON THE ADDITION MADE BY HIM WHILE DECIDING THE APPEAL OF THE ASSESSEE. ACCORDINGLY LEARNED CIT(A) HAS IMPOSED A PENALTY OF RS.43,30,492/ - O N THE ADDITION MADE TO THE INCOME OF THE AS SESSEE BY A SUM OF RS.1,30,36,783/ - . THE LEARNED CIT(A) WAS OF THE OPINION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF INTEREST INCOME. 5. AT THE VERY OUTSET IT WAS BROUGHT TO THE NOTICE THAT THE ADDITION OF RS.1,30,36,7 83/ - , WHICH WAS CONSIDERED FOR VISITING THE ASSESSEE P ENALTY , WAS DELETED BY THE TRIBUNAL VIDE ORDER DATED 12.07.2016 PASSED IN ITA NO.1449/AHD/2015. HE PLACED ON RECORD COPY OF TRIBUNAL S ORDER. 6. LEARNED DEPARTMENTAL REPRESENTATIVE WAS UNABLE TO CONTR OVERT THIS CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. AT THIS STAGE I DEEM IT PERTINENT TO TAKE NOTE OF THE TRIBUNAL S FINDING IN THE QUANTUM APPEAL. I.T.A. NO. 2 845 /AHD/201 5 ASSESSMENT Y EAR: 20 1 1 - 12 PAGE 3 OF 4 17. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. IN ORDER TO APPRECIATE THE CONTENTION OF THE ASSESSEE, WE DEEM IT PERTINENT TO TAKE NOTE OF THE RELEVANT AMENDMENT MADE TO THE PARTNERSHIP DEED OF M/S.PRATHAM DOSTI REALTY, WHICH AUTHORIZED THE PARTNERS TO RECEIVE INTEREST ON LOANS PROVIDED TO THE FIRM. THE RELEVA NT PART OF THIS AMENDMENT READS AS UNDER: WHEREAS THE PARTIES OF THE FIRST PART TO FIFTH PART HAVE BEEN CARRYING ON THE BUSINESS IN PARTNERSHIP UNDER THE NAME AND STYLE OF M/S. PRATHAM DOSTI REALTY VIDE DEED OF PARTNERSHIP ENTERED INTO W.E.F. 1S' APRIL, 2010 DULY AMENDED BY DEED OF ADMISSION OF A PARTNER VIDE PARTNERSHIP DEED DATED 2.3RD DECEMBER 2010. AS PER CLAUSE NO.16 OF THE ORIGINAL PARTNERSHIP DEED DATED 1S1 APRIL, 2010 AND AS PER CLAUSE NO.16 OF ADMISSION TO PARTNERSHIP DEED DATED 23RD DECEMBER 2010, THE PARTNERS SHALL BE ENTITLED TO MODIFY THE TERMS RELATING TO REMUNERATION, INTEREST ETC. PAYABLE TO THE PARTNERS BY EXECUTING A SUPPLEMENTARY DEED AND ANY SUCH DEED WHEN EXECUTED SHALL HAVE EFFECT, UNLESS OTHERWISE PROVIDED, FROM THE FIRST DAY OF T HE ACCOUNTING PERIOD IN WHICH SUCH SUPPLEMENTARY DEED IS EXECUTED AND THE SAME SHALL FORM PART OF THIS DEED OF PARTNERSHIP. WHEREAS THE PARTIES OF THE FIRST TO FIFTH PARTS NOW DECIDED TO PROVIDE FOR INTEREST ON CAPITAL OF PARTNERS SUBJECT TO CERTAIN COND ITION. NOW THIS INDENTURE WITNESSETH AND IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS: IT HAS BEEN MUTUALLY AGREED UPON BY THE PARTIES HERETO THAT FOLLOWING CLAUSE IS INSERTED IN PLACE OF CLAUSE NO. 6 OF THE ORIGINAL PARTNERSHIP DEE D DATED 1ST APRIL, 2010 AND DEED OF ADMISSION OF PARTNER DATED 23'RT DECEMBER, 2010. '6. THE CAPITAL OF THE PARTNERSHIP SHALL CONSIST OF SUCH AMOUNT AS MAY BE MUTUALLY AGREED UPON FROM TIME TO TIME AND SUCH/CAPITAL SHALL BE PROVIDED BY THE PARTNERS AS MA Y BE MUTUALLY AGREED. NO INTEREST SHALL BE PAID ON CAPITAL ACCOUNT OF THE PARTNERS. HOWEVER, IN CASE IF ANY OF THE PARTNERS, AFTER HAVING BEEN AUTHORISED BY ALL OTHER PARTNERS, HAVE BORROWED MONEY FOR MAKING INVESTMENT IN*THE FIRM AS CAPITAL, THEN TO THE E XTENT INTEREST PAID (NOT EXCEEDING @12% SIMPLE INTEREST PER ANNUM) BY SUCH PARTNER, INTEREST WOULD BE PAID BY THE FIRM ON THE CAPITAL ACCOUNT, AS IF THE AMOUNT BORROWED BY SUCH PARTNER WERE TO BE THE AMOUNT BORROWED BY THE FIRM IT IS FURTHER AGREED BY THE PARTNERS THAT BALANCE IN CAPITAL ACCOUNT OF THE FIRST AND SECOND PARTNER SHALL BE MAINTAINED IN THE PROPORTION OF THEIR PROFIT SHARING RATIO' THAT ALL THE OTHER CLAUSES OF THE DEED OF PARTNERSHIP DATED 1 ST APRIL, 2010 AS AMENDED BY THE DEED OF ADMISSION OF PARTNER DATED 23RD DECEMBER, 2010 SHALL REMAIN UNCHANGED. THAT THIS DEED OF AMENDMENT OF PARTNERSHIP SHALL BECOME A PART AND PARCEL OF THE DEED OF PARTNERSHIP DATED 1ST APRIL, 2010 AS AMENDED BY THE DEED OF ADMISSION OF PARTNER 23RD DECEMBER, 2010 AN D SHALL REMAIN IN CUSTODY OF THE I.T.A. NO. 2 845 /AHD/201 5 ASSESSMENT Y EAR: 20 1 1 - 12 PAGE 4 OF 4 PARTY OF THE FIRST PART AS PROVIDED IN THE DEED OF PARTNERSHIP DATED 1 ST APRIL, 2010. 7. SUB - CLAUSE (III) OF SECTION 271(1)(C) PROVIDES MECHANISM FOR QUANTIFICATION OF PENALTY. IT CONTEMPLATES THAT THE ASSESSEE WOULD BE DIRECTED TO PAY A SUM IN ADDITION TO TAXES, IF ANY, PAYABLE BY HI M, WHICH SHALL NOT BE LESS THAN , BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCO ME. IN OTHER WORDS, THE QUANTIFICATION OF THE PENALTY IS DEPENDED UPON THE ADDITIONS MADE TO THE INCOME OF THE ASSESSEE. IN THE PRESENT CASE THE ADDITION TO THE INCOME OF THE ASSESSEE HAS ALREADY BEEN DELETED. MEANING THEREBY, THERE IS NO FOUNDATION FOR CHARGING AN ASSESSEE IT HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME FOR WHICH IT CAN BE HELD LIABLE TO EVASION OF TAXES. THUS, NO PENALTY IS IMPOSABLE UPON THE ASSESSEE. THEREFORE, APPEAL OF THE ASSESSEE IS ALLOWED AND PENALTY IS DELETED. 8. IN THE RESULT, APPEAL IS ALLOWED. PR O NOUNCED IN THE OPEN COURT TODAY ON THE 29 TH DAY OF AUGUST 2017. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: AHMEDABAD, THE 29 TH DAY OF AUGUST , 2017. PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AH MEDABAD