ACIT, Chandigarh V. M/s Cheema Spintex Ltd., Chandigarh

ITA 383/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73582 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.383 /CHD/2013 ASSESSMENT YEAR : 2007-08 THE A.C.I.T., VS. M/S CHEEMA SPINTEX LTD., CIRCLE 4(1), SCO 206-207, 3 RD FLOOR, CHANDIGARH. SECTOR 34A, CHANDIGARH, NOW SCO 64-65, 3 RD FLOOR SECTOR 17A, CHANDIGARH. PAN: AAACC6786C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.S.NAGAR, DR RESPONDENT BY : NONE DATE OF HEARING : 10.03.2014 DATE OF PRONOUNCEMENT : 20.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 17.01.2013 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE PEN ALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOU T APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A), HAS ERRED IN DELETING THE PENALTY AMOUNTING TO RS.6.99 LACS WHICH WAS LEVIED BY THE ASSESSING OFFICER U/S 271(L)(C) WITH RESPECT TO THE FOLLOWING THREE ADDITIONS BY DISALLOWING PATENTLY INADMISSIBLE EXPE NSES CLAIMED BY THE ASSESSEE: I) ADDITION OF RS.4,04,493/- ON ACCOUNT OF DISALLO WANCE OF INTEREST U/S 36(L)(III) ON THE ASSETS THAT WERE NOT PUT TO USE D URING THE YEAR AND 2 WERE PENDING AS CAPITAL WORK IN PROGRESS AS ON 31.0 3.2007. II) ADDITION OF RS.6,21,226/- ON ACCOUNT OF DISALL OWANCE OF INTEREST EXPENSES TO BE CAPITALIZED TO THE COST OF ASSET FOR THE PERIOD STARTING FROM THE DATE OF PURCHASE TO THE DATE ON WHICH THEY WERE PUT TO USE. 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) B E SET ASIDE AND THAT THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 3. THE NOTICE OF HEARING WAS SERVED UPON THE ASSESS EE. HOWEVER NONE APPEARED ON BEHALF OF THE ASSESSEE AND IN VIEW OF T HE ISSUE RAISED IN THE PRESENT APPEAL, WE PROCEED TO DECIDE THE SAME AFTER HEARING THE LEARNED D.R. FOR THE REVENUE. 4. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT. DURING THE COURSE O F ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD MADE SEVERAL DISALLOWANCES INCLUDING DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT ON PROPORTIONATE BASIS OF INTEREST FREE ADVANCES AND A LSO IN RESPECT OF THE DISALLOWANCE OF INTEREST ON WORK-IN-PROGRESS AND IN TEREST CAPITALIZED ON ASSETS NOT PUT TO USE. 5. THE CIT (APPEALS) HAD ALLOWED THE APPEAL OF THE ASSESSEE AGAINST THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THE REVENUE IS IN APPEAL AGAINST THE DELETION OF SAID LEVY OF PENA LTY UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF TWO ADDITIONS I. E. (I) ADDITION OF RS.4,04,493/- ON ACCOUNT OF DISALLOWANCE OF INTERES T U/S 36(L)(III) AND (II) ADDITION OF RS.6,21,226/- ON ACCOUNT OF DISALLOWANC E OF INTEREST EXPENSES. 6. WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE TR IBUNAL IN ITA NO.71/CHD/2014 AND VIDE ORDER OF EVEN DATE WE HAVE DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON SIMILA R DISALLOWANCE OF 3 INTEREST UNDER SECTION 36(1)(III) OF THE ACT HOLDIN G AS UNDER: 6. THE ISSUE ARISING BEFORE US IS IN RELATION TO L EVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION HAD BORROWED FUNDS ON INTEREST AND ON THE OTHER HAND, HAD MADE INTEREST FEE ADVANCES. IN VIE W OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN CIT VS. ABHISHEK INDUSTRIES [286 ITR 1 (P&H), THE INTEREST RELATABLE TO SUCH INTEREST FREE ADVANCES WERE NOT ALLOWED AS DED UCTION IN THE HANDS OF THE ASSESSEE RESULTING IN DISALLOWANCE OF INTEREST AT RS.5,53,126/- UNDER SECTION 36(1)(III) OF THE ACT. THE SAID DISALLOWANCE WAS MADE IN THE HANDS OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT AN D THE ISSUE ARISING IN THE PRESENT APPEAL IS WHETHER ON SUCH AD DITION BEING MADE IN THE HANDS OF THE ASSESSEE, IT COULD BE HELD THAT THE ASSESSEE HAD EITHER CONCEALED ITS INCOME OR FURNISH ED INACCURATE PARTICULARS OF INCOME. WE FIND THAT THE HON'BLE PU NJAB & HARYANA HIGH COURT CIT-III, LUDHIANA VS. TRIDENT INFOTECH C ORPN. LTD. REPORTED IN (2013) 34 TAXMAN 132 (P&H) HAVE LAID DO WN THE PROPOSITION THAT NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS LEVIABLE IN CASES WHERE DISALLOWANCE IS MADE UNDER SECTION 36(1)(III) OF THE ACT. ON THE BASIS OF THE RATIO L AID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHI SHEK INDUSTRIES (SUPRA), THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN CIT ABHISHEK INDUSTRIES (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING WE HOLD THAT THE ASSESSEE IS NOT EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE D ISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT. THE ASSE SSING OFFICER IS DIRECTED TO DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. THE GROUND OF APPEAL RAISED BY THE ASSESSEE I S THUS ALLOWED. 7. IN VIEW OF THE SAME PARITY OF REASONING, WE FIND NO MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE AND FOLLOWI NG OUR LINE OF REASONING IN ITA NO.71/CHD/2014, WE HOLD THAT THE A SSESSEE IS NOT EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAID PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 4