ACIT, Faridabad V. M/s. Nuchem Ltd., Faridabad

ITA 4038/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90962 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJHA
• Keywords: Revised return
• Section: 194C; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI H.S. SIDHU, JM ITA NO.4038/DEL/2010 ASSESSMENT YEAR : 2005-06 ACIT, CIRCLE II, FARIDABAD. VS. NUCHEM LTD., 54, INDUSTRIAL AREA, NIT, FARIDABAD. PAN: AACCN4332P (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI P. DAM KANUNJHA, SR. DR DATE OF HEARING : 29.04.2015 DATE OF PRONOUNCEMENT : 30.04.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 21.6.2010 DELETING THE PENALTY OF RS. 46,89,660/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOM E-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2005-06. ITA NO.4038/DEL/2010 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE CLAIMED DEDUCTION FOR INTEREST AMOUNTING TO RS.74,71,464/- AGAINST WHICH CREDIT WAS AVAILED BY M/S NUCHEM MACHINE TOOLS LTD., A SU BSIDIARY COMPANY OF THE ASSESSEE. SINCE NUCHEM MACHINE TOOLS LTD. CO ULD NOT MAKE AVAILABLE THE TITLE DEEDS OF LAND AND BUILDING, THE Y FAILED TO GET FINANCE FOR THEIR BUSINESS ACTIVITY AND THAT IS HOW THE INT EREST WAS BORNE BY THE ASSESSEE. THE AO REFUSED TO GRANT DEDUCTION FOR TH E SAID SUM. EVENTUALLY, PENALTY WAS IMPOSED ON THIS DISALLOWAN CE WHICH CAME TO BE DELETED IN THE FIRST APPEAL. 3. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVAN T MATERIAL ON RECORD. THERE IS NO APPEARANCE FROM THE SIDE OF TH E ASSESSEE DESPITE NOTICE. IT CAN BE SEEN FROM THE FACTS RECORDED IN THE ASSESSMENT ORDER ON THIS ISSUE THAT THE ASSESSEE CLAIMED THE DEDUCTION FOR INTEREST IN RESPECT OF A LOAN WHICH WAS AVAILED BY ITS SUBSIDIARY COMPA NY. CONSIDERING THE FACTUAL POSITION PREVAILING IN THE INSTANT CASE ON A HOLISTIC MANNER, WE FIND THAT THE CLAIM OF THE ASSESSEE IS NOT ONE WHIC H IS EVIDENTLY INADMISSIBLE. A PERSON PROPERLY INSTRUCTED IN LAW MAY CANVASS A VIEW ITA NO.4038/DEL/2010 3 ABOUT THE DEDUCTION OF INTEREST FOR THE LOAN OBTAIN ED BY A SUBSIDIARY COMPANY, WHICH IT IS UNABLE TO DISCHARGE. AS THE ASSESSEE SURRENDERED THE AMOUNT DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE POINT OF ITS ALLOWABILITY OR OTHERWISE DOES NOT SURVIVE. IN SO F AR AS THE QUESTION OF PENALTY ON SUCH DISALLOWANCE OF INTEREST IS CONCERN ED, WE ARE SATISFIED THAT THIS DISALLOWANCE DOES NOT COME WITHIN THE MIS CHIEF OF SECTION 271(1)(C) OF THE ACT. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) IN WHICH IT HAS BEEN HELD THAT SIMPLY FOR THE REASON THAT THE AO DID NOT FIND THE CLAIM OF THE AS SESSEE TO BE SUSTAINABLE IN LAW UP TO A CERTAIN EXTENT, CANNOT JUSTIFY PENALTY U/S 271(1)(C), MORE SO, WHEN PARTICULARS FURNISHED BY T HE ASSESSEE WERE NOT FOUND TO BE INACCURATE. THE FACTS OF THE INSTANT C ASE ARE, MUTATIS MUTANDIS, SIMILAR TO THOSE CONSIDERED AND DECIDED BY THE HON BLE SUPREME COURT IN THE ABOVE JUDGMENT. RESPECTFULLY F OLLOWING THE PRECEDENT, WE HOLD THAT THE LD. CIT(A) WAS JUSTIFIE D IN DELETING THE PENALTY U/S 271(1)(C) OF THE ACT ON THIS SCORE. ITA NO.4038/DEL/2010 4 4. SECOND AMOUNT ON WHICH THE PENALTY HAS BEEN IMPO SED IS EXCISE CLAIM RECEIVABLE AMOUNTING TO RS.49.26 LAC WRITTEN OFF BY THE ASSESSEE. THE AO OPINED THAT THIS AMOUNT WAS NOT DEDUCTIBLE. WHEN CONFRONTED, THE ASSESSEE REVISED COMPUTATION OF INCOME OFFERING RS.49.26 LAC AS INCOME. THE AO IMPOSED PENALTY IN RESPECT OF THIS AMOUNT. THE LD. CIT(A) DELETED THE PENALTY. 5. WE FIND THAT OUT OF THE ABOVE SUM OF RS.49.26 LA C, WHICH RELATED TO OLD RECORDS, A SUM OF RS.8.81 LAC WAS PARTLY ALLOWE D BY THE THEN AO AND A SUM OF RS.10.10 LAC WAS ALLOWED BY THE CIT(A) WHI CH FACT HAS BEEN RECORDED BY THE AO HIMSELF IN THE INSTANT ORDER ON PAGE 5 OF HIS ORDER. FURTHER, A SUM OF RS.30.34 LAC WAS ALLOWED AS EXEMP T BY THE CIT(A) VIDE HIS ORDER DATED 3.8.92 FOR AN EARLIER YEAR. T HIS FACTUAL SCENARIO SHOWS THAT THE AMOUNT OF EXCISE CLAIM RECEIVABLE PE RTAINED TO EARLIER ASSESSMENT YEARS AND THE LD. CIT(A) HAS RECORDED TH AT IT RELATED TO THE AYS 1978-79 TO 1988-89 WHICH WAS WRITTEN OFF BECAUS E OF NON-RECEIPT OF THE AMOUNTS EVEN AFTER A PERIOD OF MORE THAN 15 YEARS. IN OUR CONSIDERED OPINION, THIS SURRENDER MADE BY THE ASS ESSEE CANNOT BE ITA NO.4038/DEL/2010 5 BROUGHT WITHIN THE AMBIT OF PENALTY U/S 271(1)(C) O F THE ACT. THE FACTUAL MATRIX AS NOTICED ABOVE CLEARLY SHOWS THE BONA FIDES OF THE ASSESSEES CLAIM IN WRITING OFF THE AMOUNT IN THE ORIGINAL RET URN, WHICH WAS ALBEIT OFFERED FOR TAXATION DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. WE, THEREFORE, UPHOLD THE DELETION OF PENALTY ON THIS A MOUNT. 6. THE LAST COMPONENT OF PENALTY IS A SUM OF RS.4,1 8,142/- DISALLOWED U/S 40(A)(IA) OF THE ACT. THE AO, ON VE RIFICATION OF THE DETAILS OF DEDUCTION OF TAX AT SOURCE AND ITS DEPOS IT IN THE GOVERNMENT ACCOUNT, NOTICED THAT THE ASSESSEE FAILED TO DEPOSI T TDS BEFORE THE RESPECTIVE DUE DATES. SUCH TAX AT SOURCE WAS DEDUC TED UNDER SECTIONS 192, 194C AND 194J. ON BEING CALLED UPON TO EXPLAI N THE DELAY, THE ASSESSEE REVISED ITS COMPUTATION OF INCOME OFFERING DISALLOWANCE U/S 40(A)(IA) OF THE ACT FOR A SUM OF RS.4,18,142/-. T HE AO IMPOSED PENALTY ON THIS AMOUNT, WHICH CAME TO BE DELETED IN THE FIRST APPEAL. 7. AFTER CONSIDERING THE SUBMISSIONS ADVANCED BY TH E LD. DR AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND T HAT THE ASSESSEE HAS TRIED TO MAKE OUT A CASE BEFORE THE LD. CIT(A) THAT THE AMENDED ITA NO.4038/DEL/2010 6 PROVISIONS OF THE FINANCE ACT, 2008 W.E.F. 1.4.2005 DO NOT PERMIT EVEN DISALLOWANCE U/S 40(A)(IA). THE ASSESSEE CLAIMED T HAT THE DISALLOWANCE MADE BY THE AO WAS NOT IN ACCORDANCE WITH THE PROVI SO SUBSTITUTED BY THE FINANCE ACT, 2008 MADE OPERATIVE RETROSPECTIVEL Y FROM 1.4.2005, ALSO COVERING ASSESSMENT YEAR UNDER CONSIDERATION. IN OUR CONSIDERED OPINION, EVEN THOUGH THE ASSESSEE OFFERED THE DISAL LOWANCE IN THE REVISED RETURN AT THE INSTANCE OF THE AO, BUT, THE PENALTY ON THIS DISALLOWANCE IS NOT EXIGIBLE DUE TO THE LATER RETROSPECTIVE AMENDME NT APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION AS WELL. WE, TH EREFORE, UPHOLD THE DELETION OF PENALTY. 8. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.04.201 5. SD/- SD/- [H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 30 TH APRIL, 2015. DK ITA NO.4038/DEL/2010 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.