ITO, New Delhi V. M/s Indian Oil Panipat Power Consortium Ltd., New Delhi

ITA 3366/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9570 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2001-2002
• Appeal Filed On: 28-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: H P AGGARWAL
• Keywords: Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NOS.3366/DEL/2009 & 3367/DEL/2009 ASSESSMENT YEARS : 2001-02 & 2002-03 INCOME TAX OFFICER, WARD-11(4), NEW DELHI. VS. M/S INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED, H-1/204, SECOND FLOOR, VIKRAMADITYA TOWER, ALAKNANDA SHOPPING COMPLEX, NEW DELHI 110 019. PAN NO.AAACI6741B. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURENDER PAL, SR.DR. RESPONDENT BY : SHRI H.P.AGGARWAL, CA. ORDER PER R.C.SHARMA, AM : THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 5.5.2009 FOR AY 2001-02 & 2002-03 IN THE MATT ER OF IMPOSITION OF PENALTY U/S 271(1)(C) BY THE AO. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT IN THE RETURN OF INCOME, AMOUNT OF INTEREST RE CEIVED ON FIXED DEPOSITS PERTAINING TO FUNDS WHICH COULD NOT BE DEPLOYED OWI NG TO LITIGATION OF LAND ACQUISITION AND IN THE EVENT THE ASSESSEE COULD NOT COMMENCE ITS OPERATIONS BY ANY TIME DURING THE YEAR UNDER APPEAL, WERE NOT OFFERED FOR TAXATION. BY RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BO KARO STEEL LTD. 236 ITR 316 AND KARNAL COOPERATIVE SUGAR MILLS LTD. 242 ITR 2 , THE ASSESSEE COMPANY SET OF SUCH INTEREST INCOME AGAINST THE PRE OPERATIVE EXPE NSES. THE AO DID NOT ALLOW THE ITA-3366 & 3367/D/2009 2 ASSESSEES CLAIM BY FOLLOWING THE DECISION OF TUTIC ORIN ALKALI CHEMICALS AND FERTILIZERS LIMITED 227 ITR 172. WITH REFERENCE TO THE ADDITION OF INTEREST INCOME, AO ALSO LEVIED PENALTY U/S 271(1)(C). IN T HE QUANTUM APPEAL, CIT(A) ALLOWED THE ASSESSEES CLAIM AND IN AN APPEAL FILED BY THE REVENUE, THE TRIBUNAL REVERSED THE ORDER OF THE CIT(A). AGGRIEVED BY THE SAME, THE ASSESSEE WAS IN FURTHER APPEAL AND THE HON'BLE DELHI HIGH COURT IN ITS ORDER DATED 26.2.2009 (ITA NO.1156/2007 AND 1157/2007) HAS ALLOWED THE ASSESSE ES APPEAL, OPERATIVE PART OF THE ORDER READS AS UNDER:- IN VIEW OF THE DISCUSSION ABOVE, IN OUR OPINION TH E TRIBUNAL MISDIRECTED ITSELF IN APPLYING THE DECISION OF THE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS (SUPRA) IN THE FACTS OF THE PRESENT CASE. IN OUR OPINION ON ACCOUNT OF THE FINDING OF FACT RE TURNED BY THE CIT(A) THAT THE FUNDS INFUSED IN THE ASSESSEE BY TH E JOINT VENTURE PARTNER WERE INEXTRICABLY LINKED WITH THE SETTING U P OF THE PLANT, THE INTEREST EARNED BY THE ASSESSEE COULD NOT BE TREATE D AS INCOME FROM OTHER SOURCES. IN THE RESULT WE ANSWER THE QUESTIO N AS FRAMED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. TH ESE APPEALS ARE ALLOWED AND THE IMPUGNED JUDGMENT IS SET ASIDE. 3. BY THE IMPUGNED ORDER, THE CIT(A) HAD DELETED TH E PENALTY IN BOTH THE YEARS AGAINST WHICH REVENUE IS IN FURTHER APPEAL BE FORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, IN VIE W OF THE DECISION OF HON'BLE DELHI HIGH COURT, WHEN THE QUANTUM ITSELF S TANDS DELETED, THE IMPOSITION OF PENALTY U/S 271(1)(C) HAS NO LEGS TO STAND. ACC ORDINGLY, WE CONFIRM THE ACTION OF CIT(A) FOR DELETING THE SAME. FURTHERMORE, WE F OUND THAT THE ASSESSEE HAD MADE FULL DISCLOSURE AS REGARDS NON TAXABILITY OF T HE AMOUNT OF INTEREST BY WAY OF A NOTE TO THE ACCOUNTS. RECORDS SHOW THAT THE AUDITO RS IN THEIR REPORT DATED 27-9- 2002 BROUGHT TO THE NOTICE OF THE MEMBERS OF THE AP PELLANT THE FACT OF NETTING OFF OF INTEREST INCOME OF RS.3,30,98,477/- AGAINST THE PRE OPERATIVE EXPENSES PENDING ALLOCATION. THE ACCOUNTS ITSELF FOR THE YEAR UNDER APPEAL SHOW IN SCHEDULE-3 THEREOF THE FACT OF THE ADJUSTMENT OF INTEREST INCO ME AGAINST PRE OPERATIVE ITA-3366 & 3367/D/2009 3 EXPENSES. CLAUSE 3 OF THE ASSESSEES SIGNIFICANT A CCOUNTING POLICY (SCHEDULE 6 OF THE ACCOUNTS) CLARIFIES THAT IN VIEW OF NO COMMENCE MENT OF COMMERCIAL PRODUCTION BY 31.03.02 A STATEMENT OF PRE OPERATIVE EXPENSES (PENDING ALLOCATION) HAS BEEN PREPARED AND EXPENSES INCURRED UP TO 31.03 .02 (NET OF INCOME EARNED) HAVE BEEN SHOWN UNDER SCHEDULE 3 OF THE ACCOUNTS. THAT THE BALANCE WILL BE ALLOCATED APPROPRIATELY AT THE TIME OF COMMENCEMENT OF COMMERCIAL PRODUCTION/OPERATIONS. ACCORDINGLY, IT WAS NOT A F IT CASE OF IMPOSITION OF PENALTY IN ANY WAY. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON CONCLUSION OF HEARING ON 29 TH SEPTEMBER, 2009. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29.09.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR