Smt. Jasminder Kaur, Amritsar V. Assistant commissioner of Income tax, Circle-IV Amritsar

ITA 314/ASR/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0068 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-03-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 26-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NIMISH NAGPAL
• Keywords: Gift
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 314/ASR/2017 AS SESSMENT YEAR: 2005-06 JASMINDER KAUR, PROP. NARULA NETS, BATALA ROAD, AMRITSAR [PAN: ABSPK 4385K] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-IV, AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. NIMISH NAGPAL (C.A .) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 06.03.2019 DATE OF PRONOUNCEMENT: 29.03.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR (' CIT(A)' FOR SHORT) DATED 03.03.2017, CONFIRMING THE LEVY OF PENALTY IMPOSED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) FOR THE ASSES SMENT YEAR (AY) 2005-06 VIDE ORDER DATED 06.07.2012. 2. THE ASSESSEE, MANUFACTURING NETTED CLOTH (THROUG H HER PROPRIETORY CONCERN, M/S. NARULA NETS, BATALA RAOD, AMRITSAR), MADE AN I NVESTMENT IN THE PROPERTY AT C-55, FOCAL POINT, AMRITSAR DURING THE RELEVANT PRE VIOUS YEAR (I.E., FY 2004-05) AT RS.7,32,234/-, AND WHICH WAS ACCORDINGLY REFLECTED IN HER BALANCE-SHEET AS AT 31.03.2005, THE YEAR-END, AS A FIXED ASSET. THE SAL E DEED OF THE SAID PLOT OF LAND, ITA NO. 314/ASR/2017 (AY 2005-06) JASMINDER KAUR V. ASSTT. CIT 2 EXECUTED ON 12.8.2005, WAS HOWEVER IN THE NAME OF H ER SON, RAUNAQ SINGH. A GIFT DEED WAS EXECUTED BY THE ASSESSEE IN HIS FAVOUR ON 31.3.2006 AND, ACCORDINGLY, THE AMOUNT DEBITED TO THE ASSESSEES CAPITAL ACCOUNT ON THAT DATE. THE ASSESSEE WAS, IN THIS VIEW OF THE MATTER, CONSIDERED TO HAVE MISREPR ESENTED THE FACTS DURING THE RELEVANT YEAR, I.E., BY REFLECTING THE INVESTMENT A S THE FIXED ASSET OF HER BUSINESS. THE ASSESEE HAVING CLAIMED INTEREST ON BORROWED FUN DS, INTEREST ON THE SAID CAPITAL WAS DISALLOWED U/S. 36(1)(III), AT RS.87,868/-. THE ASSESSEE WAS UNSUCCESSFUL IN APPEAL UP TO THE TRIBUNAL. IN PENALTY PROCEEDINGS, COMMENCED AFTER THE ORDER BY THE TRIBUNAL, IT WAS HELD THAT THERE WAS A CLEAR AD MISSION ON THE PART OF THE ASSESSEE TO DISGUISE THE ADVANCE (TO SON) INASMUCH AS THE PA YMENT WAS MADE FOR AND ON HIS BEHALF, BY SHOWING IT AS AN ADDITION TO FIXED ASSET . IT WAS, ACCORDING TO REVENUE, A CLEAR CASE OF FURNISHING INACCURATE PARTICULAR OF I NCOME, AND THE DECISION IN CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC), RELIED UPON BY THE ASSESSEE, HAD NO APPLICATION. PENALTY WAS LEVIED IN THE SUM OF RS.27,000/-, AND CONFIRMED ON THE SAME BASIS. AGGRIEVED, THE ASSESEE IS IN SECOND APPEAL. 2. I HAVE HEARD THE PARTIES, PERUSED THE MATERIAL O N RECORD AND GIVEN A CAREFUL CONSIDERATION TO THE MATTER. THE ASSESSEES PRINCIPAL STAND BEFORE ME, AS BEFOR E THE AUTHORITIES BELOW, WAS THAT THERE HAS BEEN NO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LAND WAS INDEED ACQUIRED BY THE ASSESSEE. IT WAS, HOWEVE R, LATER REALIZED THAT IT WAS NOT POSSIBLE TO START TWO UNITS TOGETHER, AND WHEREUPON THE LAND WAS TRANSFERRED BY THE ASSESSEE TO HER SON, WHICH ALSO BECAME NECESSARY BE CAUSE OF THE TECHNICAL REASON OF THE GENERAL POWER OF ATTORNEY (GPA) BEING IN HER (ASSESSEES) FAVOUR. THE LAND IN FACT IS NOT A FREE-HOLD LAND, BUT A LEASE-HOLD L AND FROM PSIEC, WHICH IS GIVEN ON LEASE ONLY FOR SETTING UP INDUSTRIES, I.E., FOR BUS INESS PURPOSE. TOWARD THE SAME, THE LD. COUNSEL FOR THE ASSESSEE, SH. NAGPAL, WOULD FUR NISH AN AFFIDAVIT FROM THE SELLER, ITA NO. 314/ASR/2017 (AY 2005-06) JASMINDER KAUR V. ASSTT. CIT 3 SH. KANWALPREET SINGH, CONFIRMING TO BE AN ALLOTTEE OF THE SAID LAND BY PSIEC AND, FURTHER, OF HAVING EXECUTED THE GPA IN FAVOUR OF TH E ASSESSEE. THE ASSESSEES EXPLANATION, AS PER SH. NAGPAL, HAD NOT BEEN ACCEPT ED FOR NO VALID REASON. THE ASSESSEE, WHICHEVER WAY ONE MAY LOOK AT THE MA TTER, HAS NO CASE, I.E., IN PRINCIPLE. TO BEGIN WITH, AS ALSO FOUND IN THE QUAN TUM PROCEEDINGS, THE INVESTMENT IN THE FOCAL POINT PLOT IS OUT OF BORROWED FUNDS, F OR WHICH I HAVE EXAMINED THE ASSESSEES BALANCE-SHEET AS ON 31.03.2005. NOW, EVE N CONSIDERING THAT THE LAND WAS PURCHASED BONA FIDE BY THE ASSESSEE, WHO LATER FOUND IT AS NOT POSSIBL E TO RUN TWO PROJECTS, I.E., AS STATED, AND, ACCORDINGLY, TR ANSFERRED THE LAND TO ANOTHER, THE LAND WAS ADMITTEDLY PURCHASED FOR A DIFFERENT (NEW) PROJECT; THE INTEREST COST COULD, AT BEST, BE CAPITALIZED, AND NOT REGARDED AS THE EX PENDITURE OF THE ASSESSEES EXISTING (OR RUNNING) BUSINESS (REFER PROVISO TO S. 36(1)(III) AND EXPLANATION 8 TO S. 43(1)). AS REGARD BONA FIDES , IT MAY BE CLARIFIED THAT IT IS NOT A CASE OF LAND BEING ALLOTTED TO THE ASSESSEE BY PSIEC LTD., AS SOUGHT T O BE CONVEYED DURING HEARING, WHICH WOULD HAVE LEND SOME CREDENCE TO HER EXPLANAT ION AND, THUS, CASE. THIS IS AS THE ASSESSEE WOULD IN THAT CASE HAVE APPLIED FOR LA ND, WHICH IS ITSELF GENERALLY MUCH EARLIER TO THE ACTUAL ALLOTMENT, AND WAS ACCOR DINGLY BOUND TO ACCEPT THE SAME, THOUGH (PRESUMABLY) THE LATER CONDITIONS MADE IT UNVIABLE FOR HER TO UNDERTAKE TWO PROJECTS. IT IS, ON THE OTHER HAND, A CASE OF TRANSFER FROM ONE TO ANOTHER, CONSCIOUS OF THE FACT THAT A UNIT HAD TO B E SET UP ON THE SAID LEASEHOLD PLOT WITHIN A REASONABLE TIME, OR ELSE THE PLOT MAY BE R ESUMED. THE ASSESSEE HAD NEITHER THE FUNDS TO PURCHASE, BEING FINANCED BY DIVERSION OF BORROWED CAPITAL OF HER EXISTING BUSINESS, NOR THE INCLINATION AND CAPACITY TO EXECUTE AND MANAGE TWO PROJECTS (BUSINESSES) SIMULTANEOUSLY. THE ASSESSEE, ALREADY RUNNING A BUSINESS, ENGAGING HER TIME AND RESOURCES, THUS, WOULD BE AS APPREHENSIVE OF ACQUIRING THE PROPERTY ON 18.10.2004, AS IN THE FOLLOWING YEAR (1 2.8.2005), WHEN THE REGISTRATION ITA NO. 314/ASR/2017 (AY 2005-06) JASMINDER KAUR V. ASSTT. CIT 4 OF THE SALE DEED WAS DONE IN THE FAVOUR OF HER SON, SH. RAUNAQ SINGH. NO CHANGE IN THE CIRCUMSTANCES BETWEEN OCTOBER, 2004 AND AUGUST, 2005, HAS BEEN STATED. WHY, SHE DID NOT HAVE SUFFICIENT FUNDS TO BUY THE LAND, DEPLOYING BORROWED CAPITAL FOR THE PURPOSE, MUCH LESS TO SET-UP AN INDUSTRIAL UNIT ? WHY, THE DOCUMENT EXECUTED IN HER FAVOUR IN OCTOBER, 2004, I.E., THE GPA ALONG WI TH THE AFFIDAVIT, AS ADMITTED, ITSELF PREVENTED THE ASSESSEE FROM REGISTERING THE LAND IN HER NAME, A FACT OF WHICH SHE WOULD NOT BUT BE AWARE OF WHILE MAKING THE INVE STMENT, CLEARLY INDICTING THE ASSESSEES EXPLANATION. FURTHER STILL, THE ASSESSEE BEING SHORT OF FUNDS AND OTHER RESOURCES, INCLUDING TIME, YET DOES NOT TRANSFER TH E LAND TO HER SON FOR A CONSIDERATION, BUT WITHOUT IT. THE RECOUPMENT OF CO ST FROM HER SON BY THE ASSESSEE WOULD NOT HAVE ATTRACTED ANY ADDITIONAL STAMP DUTY NOR ANY GAIN IN THE ASSESSEES HANDS. THE ASPECT OF IT BEING FOR A NEW PROJECT, SO THAT THE INTEREST EXPENSE WAS NOT ADMISSIBLE, WOULD IN ANY CASE OBTAIN. THE LEVY OF P ENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME IS, IN PRINCIPLE, VALID. AT THE SAME TIME, I OBSERVE TWO MAJOR INCONSISTENC IES IN THE PENALTY AS LEVIED, ALSO POINTED OUT DURING THE HEARING. FIRSTL Y, THE INVESTMENT BY THE ASSESSEE IS IN OCTOBER, 2004, I.E., MIDWAY DURING THE CURREN T YEAR, THOUGH THE INTEREST DISALLOWED IS FOR THE FULL YEAR. THE INTEREST DISAL LOWED HAS NECESSARILY TO BE FOR THE PERIOD DURING THE RELEVANT YEAR FOR WHICH THE INVES TMENT OBTAINS. TWO, THE ASSESSEE HAS REPEATEDLY, BOTH IN THE QUANTUM AND PENALTY PRO CEEDINGS, STATED THAT THE INTEREST ALLOWED ON UNSECURED LOANS IS AT 9% PER AN NUM, WHILE THE INTEREST DISALLOWED HAS BEEN WORKED OUT @ 12% PER ANNUM. THE AO IS ACCORDINGLY DIRECTED TO, AFTER VERIFYING THE ASSESSEES CLAIM A S TO THE RATE OF INTEREST, MODIFY THE PENALTY, WORKING OUT THE SAME AT THE SAME RATE OF T AX AT WHICH IT STANDS LEVIED, I.E., AFTER MAKING ADJUSTMENT FOR THE TWO FACTORS AFORE-S TATED, I.E., PERIOD OF INVESTMENT ITA NO. 314/ASR/2017 (AY 2005-06) JASMINDER KAUR V. ASSTT. CIT 5 AND THE RATE OF INTEREST, FOR WHICH REASONABLE OPPORTU NITY OF HEARING SHALL BE ALLOWED TO THE ASSESSEE. I DECIDE ACCORDINGLY. 3. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON M ARCH 29, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 29.03.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: JASMINDER KAUR, PROP. NARULA NETS, BATALA ROAD, AMRITSAR (2) THE RESPONDENT: THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-IV, AMRITSAR (3) THE CIT(APPEALS)-2, AMRITSAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY OR DER