The ITO, Ward-8(1), Ahmedabad V. Tipsons Classic Finance Ltd., Ahmedabad

ITA 4304/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5497 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 05-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHANSHU S JHAD R
• Assessee Lawyers: SANJAY R SHAHAR
• Keywords: Earning of tax free income; Bonafide mistake
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING : 28-7-10 DRAFTED ON:28-7-10 ITA NO. 4304 /AHD/ 2007 ASSESSMENT YEAR :2004-05 THE INCOME TAX OFFICER, WARD-8 (1) A-WING, AAJANTA COMM. CENTRE, ASHRAM ROAD, AHMEDABAD. VS. TIPSONS CLASSIC FINANCE PVT. LTD., J-7,NILMANI APARTMENT, OPP.SARTHI ROW HOUSE, GURUKUL ROAD, AHMEDABAD. PAN/GIR NO. : AAACT 7720K (A PPELLANT ) .. ( RESPONDEN T ) APPELLANT BY : SHRI SUDHANSHU S.JHA,D.R. RESPONDENT BY: SHRI SANJAY R.SHAH,A.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI V, AHMEDABAD DATED 11-9-2007 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE I S THAT LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IXV, AH MEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENAL TY OF `.3,00,000/- LEVIED UNDER SECTION 2712(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E CLAIMED INTEREST EXPENDITURE OF `. 5,34,470/- PAID TO IL & FS LTD., OUT OF THE SAID INTEREST `. 4,86,483/- DEBITED ON 31-3-20-03 W AS PAID ON LOAN. FROM THE PERUSAL OF LOAN ACCOUNT THE LEARNED ASSESS ING OFFICER OBSERVED THAT THE ASSESSEE HAD TAKEN LOAN OF `.3 CR ORE ON 15-12- 2003 WHICH WAS INVESTED IN IL & FS INDEXED FUND NIF TY PLAN ON 16- 12-2003 ON WHICH THE COMPANY EARNED A DIVIDEND INCO ME WHICH ITA.4304/AHD/07 TIPSONS CLASSIC FINANCE PVT.LTD. ASSESSMENT YEAR: 2004-05 - 2 - WAS AN EXEMPTED INCOME. THE ASSESSEE COMPANY CLAIME D EXEMPTION ON INCOME OF `. 88,76,566/-. SINCE INTERE ST PAID TO IL & FS WAS NOT AN ALLOWABLE EXPENSE THE SAME WAS DISALL OWED AND ADDED TO THE INCOME OF THE ASSESSEE. SIMILARLY, IT WAS NOTICED THAT THE ASSESSEE COMPANY HAD PURCHASED UNITS OF TATA IN DEX NIFTY FUND OPTION A ON 25-11-2003 FOR `.75 LAKHS WHICH WA S REDEEMED ON 5-3-2004 AND THE AMOUNT INVESTED RECEIVED BACK O N 31-3-2004. THE ASSESSEE COMPANY RECEIVED DIVIDEND OF `. 29,89, 775 WHICH WAS CLAIMED AS EXEMPT INCOME. THE LEARNED ASSESSIN G OFFICER FOUND THAT THE ABOVE INVESTMENT WAS DONE OUT OF THE COMPANYS ACCOUNT WITH HDFC BANK NAVRANGPURA BRANCH. HE ALSO NOTICED THAT THE ASSESSEE PAID INTEREST @ 8% ON THIS ACCOUNT. CA LCULATING AT THIS RATE AN INTEREST OF `.2,12,054/- WAS FOUND TO BE AT TRIBUTABLE TO INVESTMENT MADE IN MUTUAL FUND ON WHICH THE ASSESSE E COMPANY RECEIVED DIVIDEND WHICH WAS CLAIMED AS EXEMPT INCOM E. THEREAFTER THE LEARNED ASSESSING OFFICER LEVIED PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE ASSESSEE FOR FU RNISHING INACCURATE PARTICULARS OF INCOME OF `. 3 LAKHS. 4. IN APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) THE ASSESSEE SUBMITTED THAT IT HAS ITS OWN INTEREST FREE FUNDS TO THE TUNE OF `. 3.35 CR. AND HENCE, AS PER DECISION OF HON'BLE I.T.A.T., AHMEDABAD BENCH IN THE CASE OF TO RRENT FINANCIERS, INTEREST WAS NOT DISALLOWABLE ON LOAN T AKEN FOR INVESTMENT IN THE MUTUAL FUNDS. FURTHER, THE DISALL OWANCE OF ADMINISTRATIVE EXPENSES WAS ONLY ON ESTIMATE BASIS. IT WAS FURTHER SUBMITTED THAT THE PENALTY PROCEEDINGS ARE ENTIRELY DIFFERENT THAN THE ASSESSMENT PROCEEDINGS AND IT IS NOT A CASE THA T THE APPELLANT HAS NOT DISCLOSED THE FULL DETAILS OF ITS INCOME. P ENALTY UNDER SECTION 271(1)(C) CAN NOT BE LEVIED, UNLESS IT IS E STABLISHED THAT THERE IS CONCEALMENT OF INCOME AND/OR FILING OF INA CCURATE PARTICULARS OF ITS INCOME. THEREFORE, IT WAS CONTEN DED THAT THE PENALTY LEVIED IN THIS CASE DESERVES TO BE DELETED. ITA.4304/AHD/07 TIPSONS CLASSIC FINANCE PVT.LTD. ASSESSMENT YEAR: 2004-05 - 3 - 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE PENALTY BY OBSERVING AS UNDER :- 2.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE SUBMISSIONS PUT FORTH BY THE APPELLANT ALONG WITH V ARIOUS CASE LAWS AS RELIED UPON. IT IS SEEN THAT NO PENALT Y CAN BE LEVIED FOR A BONAFIDE MISTAKE AND IN THIS CASE IT I S NOT A CASE THAT THE APPELLANT HAS NOT DISCLOSED FULL DETAILS A T THE TIME OF ASSESSMENT PROCEEDINGS AND IT IS A MERE CHANGE OF O PINION. HENCE, THERE IS NO JUSTIFICATION IN HOLDING THAT TH ERE IS CONCEALMENT OF INCOME AND/OR FILING OF INACCURATE P ARTICULARS OF INCOME. FURTHER, THE ISSUE IS DISPUTABLE AND DEB ATABLE AND MERELY THE FACT THAT THE ADDITION STOOD CONFIRMED A T THE FIRST APPELLATE STAGE WOULD NOT RESULT INTO LEVY OF PENAL TY UNDER SECTION 271(1)(C), AS THE PENALTY PROCEEDINGS ARE E NTIRELY DIFFERENT THAN THE ASSESSMENT PROCEEDINGS AND NO PE NALTY CAN BE LEVIED, UNLESS IT IS ESTABLISHED THAT THERE IS CLEAR CONCEALMENT OF INCOME AND/OR FILING OF INACCURATE P ARTICULARS. IN LIGHT OF THE ABOVE FACTS AND RELYING UPON VARIOU S JUDICIAL PRONOUNCEMENTS, I HOLD THAT THE ACTION OF THE LEARN ED ASSESSING OFFICER IN LEVYING PENALTY UNDER SECTION 271(1)(C) IN THIS CASE WAS NOT JUSTIFIED AND THE SAME IS DIRE CTED TO BE DELETED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE INVESTED IN THE UNITS OF MUTUAL FUND BY BORROWED CA PITAL. INTEREST EXPENDITURE INCURRED IN RESPECT OF BORROWED FUNDS W AS CLAIMED AS DEDUCTION BY THE ASSESSEE. THE LEARNED ASSESSING OF FICER OBSERVING THAT DIVIDEND INCOME EARNED FROM MUTUAL F UND IS EXEMPT FROM TAX AND THEREFORE, DISALLOWED THE CLAIM OF PRO PORTIONATE INTEREST EXPENDITURE OF `.6,98,537/-. THEREAFTER, T HE LEARNED ASSESSING OFFICER LEVIED PENALTY OF `. 3 LAKHS UNDE R SECTION 271(1)(C) OF THE ACT FOR FILING OF INACCURATE PARTI CULARS OF INCOME BY THE ASSESSEE. ON APPEAL, LEARNED COMMISSIONER OF IN COME TAX (APPEALS) OBSERVING THAT THE DISALLOWANCE OF INTERE ST WAS A DEBATABLE ISSUE AND THEREFORE, PENALTY LEVIED WAS D ELETED BY HIM. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFICER. IN THE ABOVE FACTS A ND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE DISCLOSED ALL THE PARTICULARS OF INTER EST AS WELL AS ITA.4304/AHD/07 TIPSONS CLASSIC FINANCE PVT.LTD. ASSESSMENT YEAR: 2004-05 - 4 - DIVIDEND INCOME FILED IN THE RETURN OF INCOME. THE LEARNED ASSESSING OFFICER DISALLOWED THE INTEREST EXPENDITU RE CLAIMED BY THE ASSESSEE AS THE DIVIDEND INCOME EARNED FROM THE INVESTMENT OF `. 3,75,00,000/- WAS EXEMPT FROM INCOME TAX. I N THE INSTANT CASE, THERE IS NO FINDING BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE WHICH WAS NOT ACTUALLY INCURRED BY IT AND WAS BOGUS AND THEREBY FILED INAC CURATE PARTICULARS OF INCOME IN ORDER TO AVOID PAYMENT OF TAX THEREON. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETROPRODUCTS PVT. LTD., (2010) 322 ITR-158 (SC) HA S HELD THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. THEREF ORE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IT IS CONFIRM ED AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30TH JULY,2010 SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTAN T MEMBER AHMEDABAD; ON THIS 30TH DAY OF JULY, 2010 PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA.4304/AHD/07 TIPSONS CLASSIC FINANCE PVT.LTD. ASSESSMENT YEAR: 2004-05 - 5 - DATE INITIALS 1. DRAFT DICTATED ON 28-7-2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 28-7-2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 28-7-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 29-7-2010 ------------------- JM 5. APPROVED DRAFT COMES TO P.S 30-7-2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 30-7-2010 --------- ----------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------