BIPIN BHUPENDRA MODY, Mumbai V. ACIT CIRCLE-18(1), Mumbai

ITA 455/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5740 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Assessee Lawyers: RAJESH S KOTHARI
• Section: 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.455/MUM/2019 ( ASSESSMENT YEARS: 2013-14 ) BIPIN BHUPENDRA MODY OFFICE NO. 15, 1 ST FLOOR, NVYUG HOUSE 14, DHIRUBHAI PARIKHA, MARG PRINCESS STREET, MUMBAI 400 002. / VS. ACIT, CIRCLE 18(1) ROOM NO. 202, EARNEST HOUSE, MUMBAI 400 021 ./ ./ PAN/GIR NO. : AAFPM9836P ( / // / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI RAJESH S KOTHARI / RESPONDENT BY : SAURABH DESHPANDE DATE OF HEARING 04/02/2020 / DATE OF PRONOUNCEMENT 14 /02 /2020 / O R D E R PER SHRI G. MANJUNATHA- AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDERS OF THE LD. CIT(A)-53, MUMBAI, DATED 07.12.20 18 AND IT PERTAINS TO A.Y 2013-14. THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1) THE LEARNED HON'BLE CIT (A) ERRED IN NOT HOLDING THAT THE ORDER OF PENALTY PASSED UNDER SECTION 271(1)(C) OF THE ACT IS BAD IN LAW AS THE NOTICE ISSUED UNDER SECTIO N 274 READ WITH SECTION 271 OF THE ACT IS NOT DISCERNIBLE AS TO 455/MUM/2019. BIPIN BHUPENDRA MODY. - 2 - WHETHER THE PENALTY PROCEEDINGS IS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR CONCEALING THE PARTICULARS OF INCOME AND THEREFORE, THE IMPUGNED ORDER PASSED DESERVES TO BE QUASHED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED HON'BLE COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 4,21,061 U /S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT) THO UGH A) THE APPELLANT HAD FURNISHED ALL THE INFORMATION, EXPLANATIONS, RELEVANT FACTS AND MATERIALS DURING T HE ASSESSMENT PROCEEDING AND NO PARTICULARS SUBMITTED BY THE APPELLANT WERE FOUND TO BE INACCURATE. B) THE CLAIM OF ALLOWABILITY OF INTEREST EXPENSES PAID TO KOTAK MAHINDRA BANK LTD. FROM INTEREST EARNED FROM HIRANANDANI CONSTRUCTION PRIVATE LIMITED WAS A BONAFIDE CLAIM BASED ON JUDICIAL DECISIONS. C) THE TAXABILITY OF INTEREST INCOME EARNED FROM HIRANANDANI CONSTRUCTIONS PVT. LTD. WITHOUT ALLOWIN G DEDUCTION OF INTEREST EXPENSES IS DEBATABLE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED HON'BLE CIT (A) ERRED IN CONFIRMING LEV Y OF PENALTY FOR BOTH THE DEFAULTS I.E. FOR CONCEALING T HE PARTICULARS OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME THOUGH IT IS NOT PERMISSIBLE IN THE LAW. 4) THE LEARNED HON'BLE CIT (A) ERRED IN CONFIRMING LEVY OF PENALTY THOUGH THE LEARNED ITO WHO HAD INITIATED PE NALTY PROCEEDING AND ISSUED THE NOTICE U/S. 274 WAS TRANSFERRED AND THE NEW ITO HAS PASSED THE PENALTY ORDER WITHOUT GIVING A FRESH NOTICE. 455/MUM/2019. BIPIN BHUPENDRA MODY. - 3 - 5) THE APPELLANT CRAVES, LEAVE TO ADD TO, AMEND, AL TER OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, IF NECESSARY. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE I S AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF TRADERS / WHOLESALERS, FILED HIS RETURN OF INCOME FOR THE A.Y 2013-14 ON 28.09.2013, DECLARING TOTAL INCOME OF RS . 21,86,340/-. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT, ON 17.02.2016, DETERMINING T HE TOTAL INCOME AT RS. 36,84,480/- BY MAKING VARIOUS ADDITIONS INCLUDING ADDITIONS TOWARDS INCOME FROM OTHER SOURCES BEING INTEREST RECEIVED FROM HIRANANDANI CONSTRUCTIONS PVT LTD., AMOUNTING TO RS . 13,62,658/-. THE ASSESSEE HAS ACCEPTED THE ASSESSMENT AND NO APPEAL HAS BEEN FILED AGAINST ASSESSMENT ORDER. THEREAFTER, THE A.O HAS INITIATE D PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, AND ISSUED SHOW CAUSE NOTICE U/S 274 OF THE ACT, DATED 17.02.2016 AND CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHALL NOT BE LEVIED FOR CONCEALM ENT OF PARTICULARS OF INCOME IN RESPECT OF INTEREST REC EIVED FROM HIRANANDANI CONSTRUCTIONS PVT LTD. IN RESPONSE , THE ASSESSEE VIDE LETTER DATED 04.04.2016 SUBMITTED 455/MUM/2019. BIPIN BHUPENDRA MODY. - 4 - THAT, IT HAS NEITHER CONCEALED PARTICULARS OF INCOM E NOR FURNISHED INACCURATE PARTICULARS OF INCOME, BECAUSE INTEREST RECEIVED FROM THE BUILDER HAS NOT BEEN OFFERED TO TAX, AS IT HAS NOT CLAIMED DEDUCTIO N FOR INTEREST PAID TO BANKS ON HOUSING LOAN U/S 24(B ) OF THE ACT, AND IF INTEREST PAID TO BANKS AND INTER EST RECEIVED FROM THE BUILDER ARE CONSIDERED, THEN THE ASSESSEE INCURS LOSSES AND SUCH LOSS HAS NOT BEEN CLAIMED IN THE RETURN OF INCOME FILED FOR THE YEAR AND CONSEQUENTLY NO LOSS OF REVENUE. THE A.O AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSE E AND ALSO TAKEN NOTE OF THE FACT THAT, DEDUCTIONS TOWARDS INTEREST PAID ON HOUSING LOAN U/S 24(B) OF THE ACT, AND ASSESSMENT OF INTEREST INCOME RECEIVED FRO M HIRANANDANI CONSTRUCTIONS PVT LTD., UNDER THE HEAD INCOME FROM OTHER SOURCES ARE DIFFERENT TAXABLE EVE NTS AND HENCE THERE IS NO MERIT IN THE ARGUMENTS OF THE ASSESSEE THAT INCOME RECEIVED FROM BUILDER HAS NOT BEEN OFFERED TO TAX, BECAUSE INTEREST PAID ON LOAN IS MORE THAN THE AMOUNT OF INTEREST RECEIVED AND HENCE OPINED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WHICH LEADS TO CONCEALMENT OF PARTICULARS OF INCOME WITHIN THE MEANING OF 455/MUM/2019. BIPIN BHUPENDRA MODY. - 5 - EXPLANATION (1) TO SEC. 271(1)(C) OF THE ACT AND ACCORDINGLY LEVIED PENALTY OF RS. 4,24,061/- WHICH IS EQUAL TO 100% OF TAX SOUGHT TO BE EVADED. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS REITERATED ITS SUBMISSIONS MADE BEFORE THE A.O AND ARGUED THAT INTEREST RECEIV ED FROM HIRANANDANI CONSTRUCTIONS PVT LTD., HAS NOT BEEN OFFERED TO TAX, BECAUSE INTEREST PAID ON HOUSI NG LOAN TO BANK IS MORE THAN THE AMOUNT OF INTEREST INCOME AND THE ASSESSEE HAS NOT CLAIMED LOSS IN THE RETURN OF INCOME FILED FOR THE YEAR. THE CIT(A) AF TER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSE E AND ALSO TAKEN NOTE OF VARIOUS FACTS CONFIRMED PENA LTY LEVIED BY THE A.O, ON THE GROUND THAT THE ASSESSEE HAS FAILED TO OFFER ANY EXPLANATION FOR NOT OFFERING IN TEREST INCOME FOR TAX EVEN THOUGH SAID INCOME IS TAXABLE UNDER THE HEAD FROM OTHER SOURCES, DESPITE THE FACT THAT THE ASSESSEE CLAIMS INTEREST U/S 24(B) OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 455/MUM/2019. BIPIN BHUPENDRA MODY. - 6 - 4. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT THE LD. CIT(A) WAS ERRED IN CONFIRMED PENALTY LEVIED BY THE A.O U/S 271(1)(C) O F THE ACT, IN RESPECT OF ADDITION MADE TOWARDS INTERE ST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE NEV ER CLAIMED DEDUCTION TOWARDS INTEREST PAID TO BANKS ON HOUSING LOAN AND IF INTEREST PAID TO BANKS AND INTEREST RECEIVED FROM BUILDER IS CONSIDERED, THE N ET RESULT IS A LOSS AND SAID LOSS HAS NOT BEEN CLAIMED IN THE RETURN OF INCOME FILED FOR THE YEAR. 5. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THA T THE A.O HAS BROUGHT OUT CLEAR FACT TO THE EXTENT TH AT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O F INCOME WHICH ATTRACTS PENALTY U/S 271(1)(C) OF THE ACT AND HENCE, THERE IS NO MERIT IN THE ARGUMENTS OF TH E ASSESSEE THAT NO PENALTY COULD BE LEVIED, WHERE NET RESULT OF INTEREST PAID TO BANKS AND INTEREST RECEI VED FROM THE BUILDER IS NEGATIVE. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH 455/MUM/2019. BIPIN BHUPENDRA MODY. - 7 - ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS ENTERED INTO AGREEMENT WITH HIRANANDANI CONSTRUCTIONS PVT LTD., FOR PURCHASE OF RESIDENTIA L FLAT FOR A CONSIDERATION OF RS. 2,89,85,000/- PAYAB LE IN INSTALLMENTS. THE ASSESSEE HAS TAKEN HOUSING LO AN OF RS. 2,25,00,000/- FROM KOTAK MAHINDRA BANK LTD., ON 28.01.2011 AND SAID LOAN HAS BEEN DIRECTLY PAID TO HIRANANDANI CONSTRUCTIONS PVT LTD. SINCE THE INSTALLMENT PAID FOR PURCHASE OF FLAT IS IN EXCESS OF AMOUNT NEEDS TO BE PAID, IN THE SCHEDULE OF PAYMENT S THE DEVELOPER HAS PAID INTEREST OF RS. 13,62,658/- CALCULATED @ 12% ON EXCESS MONEY RECEIVED BEFORE TH E DUE DATE OF PAYMENT FROM THE ASSESSEE. THE ASSESSE E HAS PAID INTEREST ON HOUSING LOAN TO KOTAK MAHINDRA BANK A SUM OF RS. 14,19,435/-, AND DID NOT CLAIM DEDUCTION TOWARDS INTEREST PAID ON HOUSING LOAN U/S 24(B) OF THE ACT. THE ASSESSEE HAS ALSO NOT OFFERED INTEREST INCOME INTEREST RECEIVED FROM HIRANANDANI CONSTRUCTIONS PVT LTD., OF RS. 13,62,658/- UNDER T HE HEAD INCOME FROM OTHER SOURCES. THE SOLE REASON FO R NOT CLAIMING INTEREST DEDUCTION AND NOT OFFERING INTEREST INCOME FOR TAX IS THAT IF YOU CONSIDER INT EREST PAYMENT TO BANK AND INTEREST RECEIVED FROM THE 455/MUM/2019. BIPIN BHUPENDRA MODY. - 8 - BUILDER THE NET RESULT UNDER THE HEAD INCOME FROM OTHER SOURCES IS LOSS AT RS. 56,777/-. NO DOUBT, THE ASSESSEE NEEDS TO DISCLOSE NECESSARY FACTS WITH REG ARD TO PAYMENT OF INTEREST FOR HOUSING LOAN AND RECEIPT OF INTEREST INCOME FROM BUILDER UNDER APPROPRIATE HEAD OF INCOME. BUT FACT REMAINS THAT IF YOU CONSIDER N ET RESULT OF BOTH TRANSACTIONS THE ASSESSEE INCURRED L OSS OF RS. 56,777/- AND FROM THIS IT IS ABUNDANTLY CLEA R THAT THERE IS NO LOSS OF REVENUE TO THE GOVERNMENT. WHEN THERE IS NO LOSS OF REVENUE TO THE GOVERNMENT AND THE CLAIM OF THE ASSESSEE IS BONAFIDE, THEN THE RIGOURS OF PENALTY PROVIDED U/S 271(1)(C) OF THE AC T CANNOT BE INVOKED. IN THIS CASE, ON PERUSAL OF FAC TS, WE FIND THAT THE EXPLANATION OFFERED BY THE ASSESSE E FOR NOT OFFERING INTEREST INCOME TO TAX IS BONAFIDE AND HENCE WE ARE OF THE CONSIDERED VIEW THAT THE A.O AS WELL AS LD. CIT(A) WERE ERRED IN LEVYING PENALTY U/ S 271(1)(C) OF THE ACT. HENCE, WE DIRECT THE A.O TO DELETE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 455/MUM/2019. BIPIN BHUPENDRA MODY. - 9 - THIS ORDER PRONOUNCED IN OPEN COURT ON 14 /02/2020 SD/- SD/- (SAKTIJIT DEY) ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 14 /02/2020 KRK, PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) 4. / CONCERNED CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. / BY ORDER, //TRUE COPY// 1. ( ASST. REGISTRAR) / ITAT, MUMBAI