RPG CELLULAR INVESTMENT & HOLDING P.LTD, MUMBAI V. DCIT 5(3), MUMBAI

ITA 3126/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88087 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR DR
• Assessee Lawyers: K B DESAI
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D B ENCH, MUMBAI , , , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ./ I.T.A. NO.3126/MUM/2013 ( / ASSESSMENT YEAR : 2009-10) M/S. RPG CELLULAR INVESTMENTS AND HOLDINGS PVT. LTD. (NOW KNOWN AS SWALLOW ASSOCIATES LLP AS A RESULT OF CONVERSION OF SWALLOW ASSOCIATES LTD. BEING SUCCESSORTO RPG CELLULAR INVTS. & HOLDINGS P. LTD.) 463, 7 TH FLOOR DR. ANNIE BESANT ROAD, WORLI MUMBAI-400 030. / VS. DY. COMMISSIONER OF INCOME - TAX-5(3) MUMBAI-400 020. ./ ./PAN/GIR NO. : AACCR 1550 M ( /APPELLANT ) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI K.B. DESAI - A R / RESPONDENT BY : SHRI LOVE KUMAR - DR !' # $ / DATE OF HEARING : 20 /01/2015 %&' $ / DATE OF PRONOUNCEMENT : 30 /01/2015 ( / O R D E R PER VIJAY PAL RAO, JM :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25/2/2013 OF CIT(A) ARISING FROM THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2009-10. 2 ITA NO.3126/M/13 2. THE ASSESSEE IS A NON-BANKING FINANCIAL COMPANY (NBFC) AND IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND SECURIT IES AS WELL AS LOANS AND ADVANCES. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOT ED FROM THE NOTES ON ACCOUNTS THAT THE ASSESSEE HAS NOT ACCOUNTED THE INTEREST IN COME ACCRUED AND RECEIVABLE DURING THE FINANCIAL YEAR 2008-09 DUE TO MERGED ENTITIES. ACCORDINGLY AN AMOUNT OF RS.76,22,578/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF ACCRUED INTEREST TO THE MERGED ENTITY. THE ASSESSEE DID NOT CHALLENGE THE ACTION OF THE AO WHEREBY THE SAID AMOUNT OF RS.76,22,578/- WAS ADDED AS ACCRUED INTEREST INCOME. SUBSEQUENTLY, THE AO INITIATED PROCEEDINGS UNDER SE CTION 271(1)(C) AND LEVIED THE PENALTY OF RS.23,55,377/- BEING 100% OF TAX SOUGHT TO BE AVOIDED. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) A ND CONTENDED THAT THE ASSESSEE HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FUR NISHED INACCURATE PARTICULARS OF INCOME BECAUSE THE ASSESSEE ITSELF HAD GIVEN THE EX PLANATION IN THE NOTES ON ACCOUNT REGARDING NON-INCLUSION OF THE INTEREST DUE TO THE MERGED ENTITY BECAUSE THE INTEREST ON SUCH LOANS WAS NOT ACCRUED FOR THE YEAR UNDER CONSI DERATION AS THE TERMS AND CONDITIONS AFTER THE AMALGAMATION WAS NOT FINALIZED . CIT(A) DID NOT ACCEPT THE EXPLANATION AND CONTENTION OF THE ASSESSEE AND CONF IRMED LEVY OF PENALTY. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT DURING THE YEAR UNDER CONSIDERATION FIVE ENTITIES HAVE AMALGAMATED WITH T HE ASSESSEE AND THE ASSESSEE CONTINUED NEGOTIATION WITH THE BORROWERS OF THE ERS TWHILE AMALGAMATING COMPANIES TO FINALISE THE TERMS AND CONDITIONS OF REPAYMENT IN R ESPECT OF SUCH LOAN. PENDING FINALIZATION OF TERMS AND CONDITIONS AND INTEREST T HEREON THE ASSESSEE HAS TAKEN A DECISION NOT TO RECOGNIZE THE INTEREST ON SUCH LOAN GRANTED BY ERSTWHILE AMALGAMATED COMPANIES DURING THE YEAR UNDER CONSIDERATION. THE LD. AR HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT MADE THE PROVISION FOR INTERES T EXPENDITURE ON THE LOANS TAKEN BY THE ERSTWHILE AMALGAMATED COMPANIES DUE TO PENDING NEGOTIATION WITH THEIR LENDERS FOR RESTRUCTURE AND RESCHEDULING/REPAYMENT OF LOAN OF I NTER-CORPORATE DEPOSITS INCLUDING INTEREST WAIVER AND THUS THE ASSESSEE NEITHER RECOG NIZED THE INTEREST ON THE LOANS GRANTED BY ERSTWHILE COMPANIES NOR RECOGNIZED THE E XPENDITURE IN RESPECT OF INTEREST 3 ITA NO.3126/M/13 PAYMENT ON THE LOAN TAKEN BY THE ERSTWHILE AMALGAMA TED COMPANIES DUE TO PENDING NEGOTIATION AND FINALIZATION OF TERMS AND CONDITION S AS WELL AS RESTRUCTURING OF LOANS/ICDS. THE LD. AR HAS FORCEFULLY CONTENDED THA T THE CLAIM OF THE ASSESSEE FOR NOT TAKING INTO ACCOUNT SUCH INTEREST IS BONAFIDE AS TH E SAME DID NOT ACCRUE DURING THE YEAR PENDING, FINALIZATION OF THE TERMS AND CONDITIONS WITH THE OTHER PARTIES. HE HAS FURTHER SUBMITTED THAT WHILE MAKING THE ADDITION THE AO HAS COMPLETELY IGNORED THE FACT THAT THE ASSESSEE HAS TAKEN A UNIFORM DECISION AND HAS N OT MADE ANY PROVISION FOR INTEREST EXPENDITURE PAYABLE ON THE LOANS/ICDS TAKEN BY THE ERSTWHILE AMALGAMATED COMPANIES. HE HAS REFERRED TO NOTE NO.13 TO 14 OF NOTES ON A CCOUNT AND SUBMITTED THAT THE ASSESSEE HAS FULLY DISCLOSED ALL THE DETAILS AND MA TERIAL FACTS. THEREFORE, THERE IS NO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE . IN SUPPORT OF HIS CONTENTION HE H AS RELIED UPON THE FOLLOWING JUDGMENTS:- 1) CEMENT MFG. CO. OF INDIA LTD. VS. ACIT (124 ITR 15) ; 2) CIT VS. U.P. STATE INDUSTRIAL DEVELOPMENT CORPORATI ON LTD. (225 ITR 703)(SC); 3) CIT VS. RELIANCE PETROCHEMICALS PVT. LTD. (322 ITR 158 AND AT 165)(SC) 3.1 ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT OFFERED THE DUE INCOME TO TAX AND THEREFORE, WHEN THE ASSES SEE HAS ACCEPTED THE ADDITION MADE BY AO ON ACCOUNT OF ACCRUED INTEREST IT AMOUNT S TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE HAS RELIED UPON THE ORDER S OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. DURING THE YEAR UNDER CONSIDERATION THERE WAS AN AM ALGAMATION OF VARIOUS ENTITIES WITH THE ASSESSEE. THE ASSESSEE HAS EXPLAINED THE REASON S FOR NOT RECOGNIZING THE INTEREST ON THE LOANS GRANTED BY RESPECTIVE ERSTWHILE AMALGA MATING COMPANIES IN NOTE NO.14 OF NOTES OF ACCOUNTS. SIMILARLY, THE ASSESSEE HAS ALSO GIVEN REASONS FOR NOT MAKING THE PROVISION FOR THE INTEREST ON THE LOANS TAKEN BY TH E ERSTWHILE AMALGAMATING COMPANIES IN NOTE-13 OF NOTES OF ACCOUNT. NOTE 13 AND 14 OF NOTES OF ACCOUNT ARE AS UNDER :- 4 ITA NO.3126/M/13 13. IN VIEW OF THE CONTINUED NEGOTIATION BY THE ER STWHILE AMALGAMATING COMPANIES WITH CERTAIN OF THEIR LENDERS FOR RESTRUC TURING AND/OR RESCHEDULEMENT OF LOANS/INTER CORPORATE DEPOSITS (I CDS) INCLUDING INTEREST WAIVER ETC. INTEREST IF ANY, ON SUCH LOANS/ICDS IS PRESENTLY NOT DETERMINABLE AND HENCE THE SAME HAS NOT BEEN PROVID ED FOR IN THIS ACCOUNT. 14. THE TERMS AND CONDITIONS AND REPAYMENT IN RESPE CT OF SOME OF THE LOANS GRANTED BY THE ERSTWHILE AMALGAMATING COMPANI ES ARE UNDER RENEGOTIATION PENDING FINALIZATION OF THE SAME, INT EREST THEREON HAVE NOT BEEN RECOGNIZED IN THIS ACCOUNT AND SUCH LOANS ARE CONSIDERED GOOD AND NO PROVISION FOR THE SAME ARE MADE. 4.1 IT IS UNDISPUTED FACT THAT THE MERGER TOOK PLAC E DURING THE YEAR UNDER CONSIDERATION AND CONSEQUENT TO THE EVENT OF MERGER ALL THE ASSETS AND LIABILITIES OF THE ERSTWHILE AMALGAMATING COMPANIES WERE TO BE RE-VALU ED. SINCE THE NEGOTIATIONS WERE GOING ON REGARDING THE FINALIZATION OF TERMS AND CO NDITIONS OF RE-PAYMENT OF LOANS GRANTED BY ERSTWHILE AMALGAMATING COMPANIES, THEREF ORE, THE ASSESSEE TOOK A DECISION NOT TO RECOGNIZE THE INTEREST INCOME ON SUCH LOANS PENDING FINALIZATION OF TERMS AND CONDITIONS AND RE-PAYMENT WITH OTHER PARTIES. AS IT IS CLEAR FROM THE NOTE NO.13 THAT A UNIFORM DECISION WAS TAKEN BY THE ASSESSEE WITH RES PECT TO INTEREST EXPENDITURE IN RESPECT OF CERTAIN LOANS TAKEN BY THE ERSTWHILE AMA LGAMATING COMPANIES TILL FINALIZATION OF NEGOTIATION REGARDING RESTRUCTURING/RE-SCHEDULEM ENT OF LOAN / ICD INCLUDING INTEREST WAIVER. THE AO HAS PICKED UP ONLY ONE ASPECT OF THE DECISION TAKEN BY THE ASSESSEE WHICH IS BENEFICIAL FOR THE REVENUE AND IGNORED THE ANOTHER CRUCIAL FACT REGARDING NOT CLAIMING THE INTEREST EXPENDITURE ON CERTAIN LOANS DUE TO PENDING NEGOTIATION REGARDING THE RESTRUCTURING/RESCHEDULING OF LOAN AND WAIVER O F INTEREST ETC. IT IS CLEAR THAT THE ASSESSEE HAS FOLLOWED A UNIFORM ACCOUNTING POLICY IN RESPECT OF THE INTEREST RECEIVABLE AS WELL AS INTEREST PAYABLE IN RESPECT OF THE LOAN GRANTED AS WELL AS LOAN RECEIVED BY THE ERSTWHILE AMALGAMATING COMPANIES. WHEN THE AO HAS A CCEPTED THE DECISION OF THE ASSESSEE WITH RESPECT TO THE INTEREST EXPENDITURE O N THE LOANS TAKEN BY THE ERSTWHILE AMALGAMATING COMPANIES, THEN THE UNIFORM DECISION O F THE ASSESSEE REGARDING THE INTEREST RECEIVABLE IN RESPECT OF LOAN GRANTED BY T HE ERSTWHILE AMALGAMATED COMPANIES BEING NOT RECOGNIZED DUE TO FINALISATION OF TERMS A ND CONDITIONS IS A BONAFIDE CLAIM OF THE ASSESSEE. EVEN OTHERWISE THE AO IN PARA-3 OF THE ASSESSMENT ORDER PASSED UNDER 5 ITA NO.3126/M/13 SECTION 143(3) HAS REPRODUCED THE NOTE NO.13 WHICH IS IN RELATION TO THE NON-PROVIDING OF THE INTEREST EXPENDITURE ON THE LOANS TAKEN BY T HE ERSTWHILE AMALGAMATING COMPANIES. THUS, THE AO HAS MADE THE ADDITION IN RE SPECT OF INTEREST INCOME BY REPRODUCING A WRONG NOTE NO.13 INSTEAD OF RELEVANT NOTE BEING NOTE NO.14. WHEN THE ASSESSEE HAS ADOPTED A UNIFORM POLICY AND APPROACH IN RESPECT OF INTEREST EXPENDITURE AS WELL AS INTEREST INCOME, THEN THE CLAIM OF THE A SSESSEE IN NOT RECOGNIZING THE INTEREST INCOME WOULD NOT AMOUNT TO CONCEALMENT OF PARTICULA RS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS FURNISHED THE RELEVANT EXPLANATION AS WELL AS DETAILS AND THE ADDITION WAS MADE BY THE AO ON THE BASIS OF EXPLANATION OF THE ASSESSEE IN THE NOTES OF ACCOUNTS THEREFORE, NO T ACCEPTING THE CLAIM AS WELL AS THE EXPLANATION OF THE ASSESSEE WOULD NOT IPSO FACTO LE AD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME ATTRACTING THE PENALTY PROVISIONS OF SECTION 271(1)(C). IN THE CASE IN HAND WHERE INFORMATION FURNISHED BY THE ASSESSEE WAS NOT FOUND TO BE INCORRECT THEN ONLY ON THE BASIS OF DISALLOWANCE OF CLAIM THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS FOR INVOKING PENALTY PROVISI ONS UNDER SECTION 271(1)(C) AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETROCHEMICALS LTD. (SUPRA). HENCE, IN VIEW OF THE ABOVE DISCUSSION AS WELL AS I N THE FACTS AND CIRCUMSTANCES OF THE CASE WE DELETE THE PENALTY LEVIED U/S/ 271(1)(C). 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/01 / 2015 ( %&' ! ) *' + 30/01 /2015 ,# SD/- SD/- ( SANJAY ARORA ) ( VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER !-# MUMBAI; *' DATED 30/01/2015 . ' . ./ JV, SR. PS 6 ITA NO.3126/M/13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , !' / DR, ITAT, MUMBAI 6. #$ %' / GUARD FILE. & & & & / BY ORDER, & //TRUE COPY// ' ' ' ' / &( &( &( &( ) ) ) ) (DY./ASSTT. REGISTRAR) , !' / ITAT, MUMBAI.