Shri Echolac Finvest Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(1), Ahmedabad

ITA 344/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6053 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-06-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 08-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 344 /AHD/2011 (ASSESSMENT YEAR: 2004-05) ECHOLAC FINVEST PVT. LTD. A/57, NOBLES BUILDING, OPP. NEHRU BRIDGE, ASHRAM ROAD AHMEDABAD-380009 V/S THE ITO, WARD 4(1), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACE 3446R APPELLANT BY : SMT. URVASHI SODHAN,, A.R. RESPONDENT BY : SHRI B.L. YADAV , D.R. ( )/ ORDER DATE OF HEARING : 17-06-2014 DATE OF PRONOUNCEMENT : 27 -06-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)VIII, AHMEDABAD DATED 03.01.2011 FOR A.Y. 2004-05. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE HAVING INCOME FROM TRADING AND INVESTMENT IN SHARES AND SECURITIES. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 04-05 ON 29.10.2004 DECLARING TOTAL LOSS OF RS 7,10 ,720/-. THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 8 .12.2006 AND THE TOTAL ITA NO 344/AHD/2011 . A.Y. 2004-0 5 2 INCOME WAS DETERMINED AT RS 63,70,290 BY MAKING ADD ITION OF RS 12,23,969/- U/S 14A, AND DISALLOWING THE INTEREST EXPENDITURE O F RS 58,57,035/- BY HOLDING THAT THE INTEREST PAID ON OFCPN TO BE COST OF SHARE S AND WAS REQUIRED TO BE ADDED TO THE COST OF SHARES. IN APPEAL, CIT(A) SCAL ED DOWN THE ADDITION TO RS 23,517/- (U/S 14A) AND RS 9,85,000 (ON ACCOUNT OF I NTEREST). ON THE ADDITION THAT WAS CONFIRMED BY CIT(A), AO VIDE ORDER DATED 1 3.3.2009 LEVIED PENALTY OF RS 3,61,805/- U/S 271(1)(C) OF THE ACT. AGGRIEV ED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) V IDE ORDER DATED 3.1.2011 DELETED THE PENALTY ON ADDITION OF RS 23,517/- MADE U/S 14A BUT CONFIRMED THE PENALTY ON THE ADDITION OF RS 9,85,000/-. AGGRI EVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- (1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) V III, AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER ON 03.01.2011 CONFIRMING LEVY OF PENALTY U/S.271(1)(C ) OF THE IT. ACT, 1961 FOR ASST. YEAR 2004.05 (2) THE LEARNED CIT(A) HAS ERRED IN GIVING FINDING THAT PENALTY IS LEVIABLE U/S. 271(1)(C ) OF THE I.T ACT, 1961 ON DISALLOWANCE OF INTEREST AND THEREBY F URTHER ERRED IN CONFIRMING LEVY OF PENALTY OF RS. 3,61,805/- U/S.271(1)(C ) OF THE I.T. ACT. 4. BEFORE US, LD AR REITERATED THE SUBMISSIONS MADE BEFORE AO AND CIT(A). IT WAS FURTHER SUBMITTED THAT AO HAD DISALLOWED THE IN TEREST OF RS 58,57,035 WHICH WAS RESTRICTED TO RS 9,85,000/- BY CIT(A). IT WAS FURTHER SUBMITTED THAT ASSESSEE HAD MADE A LEGITIMATE CLAIM OF EXPENDITURE NAMELY PREMIUM ON OFCPN WHICH ACCORDING TO ASSESSEE WAS INTEREST BUT HOWEVER THE AO WAS OF THE VIEW THAT SINCE IT WAS UTILIZED FOR ACQUISITION OF SHARES, IT SHOULD HAVE BEEN CAPITALIZED. IT WAS FURTHER SUBMITTED THAT THE DIFFERENCE BETWEEN THE RETURNED AND ASSESSED INCOME DID NOT ARISE ON ACCOU NT OF FRAUD BUT WAS ON ACCOUNT OF DIFFERENCE OF VIEW AND WHEN THE ADDITION WAS ON ACCOUNT OF DIFFERENCE OF VIEW, IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FILED INACCURATE PARTI CULARS OF INCOME. IT WAS THEREFORE SUBMITTED THAT THE PENALTY BE DELETED. ON THE OTHER HAND ID DR RELIED ON THE ORDER OF AO AND CIT(A). ITA NO 344/AHD/2011 . A.Y. 2004-0 5 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE PRESENT CASE ADDITION ON ACCOUNT O F INTEREST WAS INITIALLY MADE AT RS 58,57,035/- WHICH WAS SCALED DOWN TO RS 9,85, 000 BY CIT(A). 6. THE PENALTY UNDER SECTION. 271(L)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. IT IS WELL SETTLED THAT ASSESSMENT PRO CEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND THE FINDI NG IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR TH E PURPOSES OF THE PENALTY PROCEEDINGS. 7. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLN. 1 TO S. 271(L)(C) ARE THAT : (I) THE PERSON FAILS TO OFFER THE EXPLANATION, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE CIT(A) OR THE CIT TO BE F ALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANT IATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACT S RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIES, THEN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPLN. 1 TO SECTION. 271(L)(C) THE AMOUNT ADDED OR DISALLOWED I N COMPUTING THE TOTAL INCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED, FOR THE PURPOSES OF CLAUSE. (C ) OF SECTION. 271(1), AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSE SSEE IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BON A FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY H IM, THEN IN THAT CASE PENALTY SHALL NOT BE IMPOSED. 8. IN THE PRESENT CASE THE ASSESSEE HAD DISCLOSED T HE MATERIAL FACTS BEFORE THE AO AND CIT(A). WHEN THE ASSESSEE HAS MADE A PARTICU LAR CLAIM IN THE RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL F ACTS RELEVANT THERETO, THE ITA NO 344/AHD/2011 . A.Y. 2004-0 5 4 DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS INCOME BY THE ASSESSEE OR FURNISHING INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BONA FIDE AND W HETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENA LTY UNDER SECTION. 271(1) (C) OF THE ACT. IN THE PRESENT CASE SINCE ALL THE N ECESSARY FACTS WERE FURNISHED AND THE FACT THAT THE ADDITION HAS BEEN SUBSTANTIAL LY REDUCED IN APPEAL BY CIT(A), WE ARE OF THE VIEW THAT THE ADDITION THAT W AS SUSTAINED DOES NOT CALL FOR LEVY OF PENALTY UNDER SECTION. 271(L)(C). WE TH US CANCEL THE PENALTY LEVIED BY THE AO. THEREFORE, THIS GROUND OF ASSESSEE IS AL LOWED. 9. IN THE RESULT THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 27 - 06 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR I TAT,AHMEDABAD