VIDYASAGAR B. WAHI, MUMBAI V. ASST CIT CIR 13(2), MUMBAI

ITA 3721/MUM/2011

• Counselvise Citation: 372119914 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-07-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: HARESH SHAH
• Keywords: Proportionate interest

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , !' !' !' !' , # # # # $ $ $ $ BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 3721/MUM./2011 ( #% & '& / ASSESSMENT YEAR : 200102 ) MR. VIDYASAGAR B. WAHI 100/104, KAZI SYED STREET GARODIA HOUSE MUMBAI 400 003 .. () / APPELLANT % V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE13(2), MUMBAI .... *+() / RESPONDENT ( . / PERMANENT ACCOUNT NUMBER NO. AAAPW1576H #% &, - . / ASSESSEE BY : MR. HARESH SHAH / - . / REVENUE BY : MR. M. RAJAN % - / DATE OF HEARING 09.07.2012 ! 01' - / DATE OF ORDER 25.07.2012 ! ! ! ! / ORDER PER AMIT SHUKLA, J.M. THE PRESENT APPEAL PREFERRED BY THE ASSESSEE, IS D IRECTED AGAINST THE IMPUGNED ORDER DATED 21 ST MARCH 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XXIV, MUMBAI, FOR ASSESSMENT YEAR 200102 . THE SOLE GROUND RAISED BY THE ASSESSEE IS WHETHER OR NOT THE LEARNE D COMMISSIONER (APPEALS) MR. VIDYASAGAR B. WAHI 2 WAS JUSTIFIED IN CONFIRMING THE PENALTY OF ` 2,18,313, IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT, 1961 (FOR SHORT THE ACT ) ON ACCOUNT OF DISALLOWANCE OF INTEREST OF ` 5,30,500. 2. BRIEF FACTS OF THE CASE ARE THAT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON VERIFICATION OF BALANCE SHEET, FOUND THAT THE ASSESSEE HAS INVESTED AN AMOUNT OF ` 52,50,000, IN RELIEF BONDS AND INTEREST EARNED ON THESE BONDS IS EXEMPT FROM TAX. IT WAS FURTHER NOTICED BY HIM THAT THE ASSESSEE HAS DEBITED INTEREST EXPENSES OF ` 25,12,887, IN THE PROFIT & LOSS ACCOUNT DURING THE YEAR. IN RESPONSE TO SHOW CAUSE NOTICE AS TO WHY PROPORTIONATE INTEREST EXPENSES RELATABLE TO FU NDS INVESTED IN RELIEF BONDS SHOULD NOT BE DISALLOWED, THE ASSESSEE SUBMIT TED THAT THESE INVESTMENTS HAD NOT BEEN MADE OUT OF BORROWED FUNDS WHICH IS EVIDENT FROM THE FACT THAT INVESTMENT HAD BEEN MADE FROM ASSESSM ENT YEAR 19992000 ONWARDS WHEREAS NO SUMS HAVE BEEN BORROWED AFTER TH E ASSESSMENT YEAR 199495. FURTHER, THE INVESTMENT HAS BEEN MADE OUT OF MONEY RECEIVED FROM PARTIES TO WHOM INTEREST IS PAID AND IS PURELY OUT OF NONINTEREST BEARING FUNDS. IT WAS ALSO SUBMITTED THAT THE ASSES SEE HAD A HUGE INCOME BY WAY OF NET PROFIT FROM BUSINESS, DIVIDEND INCOME AND MATURITY OF BANK INTEREST AND UTI. THE AVAILABILITY OF FUNDS, BOTH I NTEREST BEARING AND NON INTEREST BEARING AND FUNDS UTILISED FOR THE BUSINES S WAS FURNISHED. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES EXP LANATION AND WORKED OUT THE DISALLOWANCE OF ` 5,30,500, AFTER DETAILED DISCUSSIONS FROM PARAS9. 4 TO 9.11 OF HIS ORDER. 3. THIS DISALLOWANCE STOOD CONFIRMED NOT ONLY FROM THE STAGE OF LEARNED COMMISSIONER (APPEALS) BUT ALSO BY THE TRIBUNAL, VI DE ORDER DATED 3 RD NOVEMBER 2008, IN ITA NO.3919/MUM./2005. 4. BEFORE THE QUANTUM COULD BE FINALISED FROM THE STAG E OF TRIBUNAL, THE ASSESSING OFFICER HAS LEVIED PENALTY ON SUCH DISALL OWANCE. MR. VIDYASAGAR B. WAHI 3 5. THE LEARNED COMMISSIONER (APPEALS), BASED ON THE FA CT THAT THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE, HAS CONFIR MED THE PENALTY WITHOUT GIVING ANY REASONS. 6. BEFORE US, THE LEARNED COUNSEL, ON BEHALF OF THE AS SESSEE, SUBMITTED THAT THE ASSESSEES EXPLANATION REGARDING AVAILABIL ITY OF FUNDS HAVE NOT BEEN FOUND TO BE FALSE AND ITS ENTIRE CLAIM OF INTEREST WAS FOR BUSINESS PURPOSE, AS WAS EXPLAINED DURING THE COURSE OF QUANTUM PROCEEDI NGS. ALTERNATIVELY, HE SUBMITTED THAT MERELY BECAUSE THE CLAIM OF INTEREST IS DISALLOWED, PENALTY UNDER SECTION 271(1)(C) FOR CONCEALMENT OF INCOME O R FURNISHING OF INACCURATE PARTICULARS OF INCOME CANNOT BE IMPOSED. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT ONCE DISALLOWANCE OF INTEREST HAS BE EN CONFIRMED BY THE TRIBUNAL ON A VERY COGENT GROUNDS, LEVY OF PENALTY UNDER SECTION 271(1)(C) IS WHOLLY JUSTIFIED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF FUNDS GIVEN I N THE ASSESSMENT ORDER, IT IS SEEN THAT DISALLOWANCE HAS BEEN MADE ON THE GROU ND THAT SOME OF THE AMOUNTS INVESTED IS OUT OF BUSINESS MONEY COLLECTED FROM SUNDRY DEBTORS AND INTEREST HAS BEEN PAID TO SUNDRY CREDITORS. THE TRIBUNAL, IN THE QUANTUM PROCEEDINGS, HAS HELD THAT THE ASSESSEE HAS MAXIMUM FUNDS AND POOL OF INTEREST BEARING FUNDS AND NONINTEREST BEARING FUN DS AND IN SUCH A SITUATION, PART OF THE INTEREST EXPENDITURE CAN BE SAID TO BE RELATABLE TO FOR THE PURPOSE OF MAKING INVESTMENTS IN TAX FREE RELIE F BONDS. NOWHERE FROM THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS TH E TRIBUNAL IT CAN BE INFERRED THAT ASSESSEES EXPLANATION HAS BEEN FOUND TO BE FA LSE OR MALAFIDE. IT IS A SETTLED PROPOSITION OF LAW THAT THE FINDINGS IN THE QUANTUM PROCEEDINGS ARE NOT FINAL IN THE PENALTY PROCEEDINGS UPON PLEAS WHI CH CAN BE TAKEN AT THE PENALTY STAGE AND HOW SO RELEVANT AND GOOD THE FIND INGS MAY BE IN THE QUANTUM PROCEEDINGS, THEY ARE NOT CONCLUSIVE INSOFA R AS PENALTY PROCEEDINGS ARE CONCERNED. THE MATTER NEEDS TO BE EXAMINED AFRE SH AND THE ASSESSING MR. VIDYASAGAR B. WAHI 4 OFFICER CANNOT BE SOLELY GUIDED BY THE FINDINGS GIV EN ON THE QUANTUM SIDE. THE ASSESSEE EVEN THOUGH DID NOT FURNISH ANY ADDITI ONAL EVIDENCE OR NEW MATERIAL, HE STILL MAY RELY UPON THE EXISTING MATER IAL OR EXPLANATION TO PROVE THAT HE IS NOT GUILTY OF CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE PRESENT CASE, THE ASS ESSING OFFICER WAS UNABLE TO FIND THE ASSESSEES EXPLANATION TO BE FALSE INSO FAR AS THE CLAIM OF INTEREST FOR THE BUSINESS PURPOSE. HE HAS ONLY GONE BY THE F ACT THAT SOME OF THE INTEREST MAY BE ATTRIBUTABLE TO FUNDS INVESTED FOR TAX RELIEF BOND. THUS, ON THESE FACTS, WE DO NOT FIND THAT THIS IS A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C). MOVEROVER, ON THE FACTS OF THE C ASE, THE JUDGMENT OF HON'BLE SUPREME COURT IN CIT V/S RELIANCE PETROPROD UCTS PVT. LTD. [2010] 322 ITR 158 (SC), IS SQUARELY APPLICABLE WHEREIN TH EIR LORDSHIPS HAVE OBSERVED AND HELD AS FOLLOWS: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' U SED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT P ENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EX ACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS O R FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. DILIP N. SHROFF V. JOINT CIT [2007] 291 ITR 519 (SC ) AND SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 23 VST 24 9 (SC) RELIED ON. MR. VIDYASAGAR B. WAHI 5 9. THUS, ON THE FACTS OF THE CASE, WE HOLD THAT PENALT Y IMPOSED BY THE ASSESSING OFFICER ON THE DISALLOWANCE OF INTEREST O F ` 5,30,500, IS NOT SUSTAINABLE AND IS HEREBY DELETED. 10. , 2 #% &, - 3 - / 45 6 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ! - 1' 7 8%2 25 TH JULY 2012 1 - 9 6 ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY 2012 SD/- . . R.S. SYAL ACCOUNTANT MEMBER SD/- !' !' !' !' # # # # AMIT SHUKLA JUDICIAL MEMBER MUMBAI, 8% 8% 8% 8% DATED: 25 TH JULY 2012 ! ! ! ! - -- - *# : *# : *# : *# : ;:' ;:' ;:' ;:' / COPY OF THE ORDER FORWARDED TO : (1) #% &, / THE ASSESSEE; (2) / / THE REVENUE; (3) < ( ) / THE CIT(A); (4) < / THE CIT, MUMBAI CITY CONCERNED; (5) :=9 *# #% , , / THE DR, ITAT, MUMBAI; (6) 9>& / GUARD FILE. +: *# / TRUE COPY !% !% !% !% / BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ? ?? ? / 4 4 4 4 / / / / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI