M/s Sona Projects (P) Ltd., Ludhiana V. DCIT, Ludhiana

ITA 373/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5074 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 27-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.373/CHD/2017 ASSESSMENT YEAR: 2007-08 SONA PROJECTS (P) LTD. VS. THE DCIT NEAR FIRE BRIGADE OFFICE CENTRAL CIRCLE 1 MILLER GANJ LUDHIANA LUDHIANA PAN NO. AACCS2709M (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ASHWANI KUMAR REVENUE BY : SH. S.K. MITTAL DATE OF HEARING : 22/06/2017 DATE OF PRONOUNCEMENT : 05/07/2017 ORDER PER B.R.R. KUMAR A.M. BY WAY OF THE INSTANT APPEAL, ORDER OF PENALTY DT. 30/12/2016 UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX A CT, 1961, PASSED BY THE CIT(A), BATHINDA PERTAINING TO AY 2007-08 HAS BEEN CHALLENGED. 2. IN THIS APPEAL ASSESSEE HAS RAISED FOLLOWING GRO UND: THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX AC T, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA UPHO LDING LEVY OF PENALTY UNDER SECTION 271(1)(C) AT RS. 44,822/- IS AGAINST LAW AN D FACTS ON THE FILE IN AS MUCH NO SUCH PENALTY WAS EXIGIBLE IN THE FACTS AND CIRCUMST ANCES OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT I S A PRIVATE LIMITED COMPANY DEALING IN REAL ESTATE BUSINESS. FOR THE A.Y. 2007- 08, THE APPELLANTS RETURN WAS SCRUTINIZED AND ASSESSMENT WAS FRAMED UNDER THE PRO VISIONS OF SECTION 143(3) OF THE INCOME TAX ACT, 1961, WHEREBY THE TAXABLE INCOM E WAS ASSESSED AT RS. 64,42,921/- WAS AGAINST THE RETURNED INCOME OF RS. 34,90,113/-. THE SAID ASSESSMENT WAS AGITATED BEFORE THE HIGHER APPELLATE FORUM IN WHICH ADDITION OF RS. 1,33,161/- PURPORTEDLY CLAIMED AS INTEREST BORR OWED CAPITAL, WAS CONFIRMED. 2 4. THE ASSESSEE COMPANY HAD CLAIMED THE AFORESAID A MOUNT OF RS. 1,33,161/- AS DEDUCTION ON ACCOUNT OF PAYMENT OF INTEREST ON B ORROWED CAPITAL. IN THE ASSESSMENT PROCEEDINGS, IT WAS CONTENDED BEFORE THE AO THAT THE APPELLANT HAD AVAILED LOANS FOR CONSTRUCTION OF SONA COMPLEX IN THE PAST. THE SAID COMPLEX BROUGHT IN RENTAL INCOME UNDER THE HEAD IN COME FROM HOUSE PROPERTY AGAINST WHICH INTEREST PAYOUT WAS CLAIMED AS DEDUCTION. IT WAS INSISTED THAT SUCH ARRANGEMENT AND TREATMENT OF REN TAL INCOME WAS ACCEPTED IN THE PAST FROM A.YS 2000-01 TO 2006-07. THE AO DID N OT ACCEPT THE CONTENTION OF THE APPELLANT AND PROCEEDED TO TREAT THE RENTAL INC OME AS BUSINESS INCOME, THEREBY MAKING VARIOUS DISALLOWANCES. SO FAR AS PAY MENT OF INTEREST ON CAPITAL BORROWED FOR CONSTRUCTION OF THE RENTED PROPERTY IS CONCERNED, THE AO CATEGORICALLY NOTED THAT NEITHER SUCH INTEREST WAS PAID IN THE IMMEDIATELY PRECEDING YEAR NOR WAS THERE ANY CONSTRUCTION OF PR OPERTY DURING THE YEAR UNDER CONSIDERATION AND THEREBY HELD THE CLAIM OF THE APP ELLANT AS MISCONCEIVED, DISALLOWING THE CLAIM OF DEDUCTION ON ACCOUNT OF IN TEREST PAID ON BORROWED CAPITAL. 4.1 THE APPELLANT FURTHER SUBMITTED THAT FOR REPAYM ENT OF LOANS TAKEN FOR CONSTRUCTION OF SONA COMPLEX FRESH LOANS WERE TAK EN FROM DIRECTORS OF APPELLANT COMPANY AND THEIR FAMILY MEMBERS AND INTE REST THEREON WAS CLAIMED AGAINST RENTAL INCOME. IT WAS, THEN, ADMITTED THAT THE IMPUGNED INTEREST PAYMENT WAS NOT DIRECTLY RELATED TO THE LOANS BORRO WED FOR THE PURPOSES OF CONSTRUCTION OF THE BUILDING COMPLEX FROM WHICH REN TAL INCOME WAS EARNED. ON SUCH APPEAL OF FACTS, THE DISALLOWANCE OF RS. 1,33, 161/- WAS CONFIRMED. ON GOING TO THE CONFIRMATION, PENALTY PROCEEDINGS UNDER SECT ION 271(1)(C) INITIATED AND PENALTY OF RS. 44,822/- WAS LEVIED. 5. IN THE APPELLATE PROCEEDINGS, THE APPELLANT ASSE RTED THAT SUCH CONFIRMATION OF DISALLOWANCE MADE BY THE AO DOES NO T AUTOMATICALLY CALL FOR IMPOSITION OF PENALTY AS HAS BEEN DONE. IT WAS AVER RED THAT MERELY MAKING A CLAIM OF DEDUCTION WHICH IS HELD AS NON-SUSTAINABLE UNDER LAW, SHOULD NOT LEAD 3 TO CONCEALMENT PENALTY, WHEN THE APPELLANT HAD FURN ISHED FULL DETAILS IN THE RETURN ITSELF AND MORE SO WHEN THE CLAIM IS DEBATAB LE ONE. 6. THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CONSI DERED. THE APPELLANT IS A COMPANY AND HAS BEEN FURNISHING THE RETURN OF INCOM E SINCE LAST MANY YEARS. AS PER RECORDS AVAILABLE THE ASSESSEE HAD TAKEN LOAN F ROM DIRECTOR AND THEIR FAMILY MEMBERS FOR THE REPAYMENT OF EXISTING LOAN TAKEN FO R THE CONSTRUCTION. THE AO HAS OBSERVED THAT THERE IS NO DIRECT LINK BETWEEN T HE LOANS TAKEN, CONSTRUCTION OF PROJECT AND INSTANT PAYMENT. HOWEVER, AO DID NOT PR OVE THAT THE LOAN RECEIVED WERE NOT UTILIZED FOR THE REPAYMENT OF EARLIER TERM LOAN. THUS THE ASSESSEES CLAIM OF DEDUCTION ON INTEREST AS ALLOWABLE CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETRO PRODUCTS (P) LTD. [2010] 322 ITR 158 HELD THAT NO PENALTY IS LEVIABLE UNDER SUCH CIRCUMSTANCES. HENCE, PENALTY LEVIED BY THE A.O. IS HEREBY DELETED . 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. SD/- SD/- (SANJAY GARG) (B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR