ITO 12(3)4, MUMBAI V. ARTI KATHOTIA, MUMBAI

ITA 4633/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8156 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN Y P
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Opportunity of being heard

Judgement Text

, ( ), IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI . . , , . .. .! ! ! ! , #$ %& BEFORE SHRI H L KARWA, PRESIDENT, & SHRI D KARUNAKA RA RAO, AM ./ITA NO.4633/MUM/2013 ( ' ( / ASSESSMENT YEAR : 2006-07) ITO 12(3)(4) MUMBAI VS. ARTI KATHOTIA, THE INTERNATIONAL HOUSE, 4 TH FLOOR, NEW MARINE LINES, CROSS ROAD NO.1, NEW AMERICAN CENTRE, 16 M K MARG, MUMBAI- 400 020 PAN AAAPK0722H ( )* /APPELLANT) ( +,)* / RESPONDENT) APPELLANT BY : SHRI ASGHAR ZAIN Y P RESPONDENT BY : SHRI SANJAY R PARIKH DATE OF HEARING : 30.09.2014 DATE OF PRONOUNCEME NT : 30.09.2014 %#- / O R D E R PER H L KARWA, PRESIDENT : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A)- 23, MUMBAI, DATED 26.03.2013, IN CANCELLING THE PEN ALTY OF RS.6,19,970/- IMPOSED U/S. 271(1)(C) OF THE I.T.ACT, 1961 FOR THE ASSESSM ENT YEAR 2006-07. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS IN THE BUSINESS OF TRADING AND INVESTMENT IN SHARES AND SECURITIES. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.18,41,873/- IN THE PROFIT AND LOSS ACCOUNT ON AC COUNT OF INTEREST ON LOANS. ON DETAILED SCRUTINY OF THE RECORDS, THE AO NOTICED TH AT THE ASSESSEE HAD MADE INVESTMENT IN FLAT TO THE EXTENT OF RS.1,35,00,000/ - AND ALSO APPLICATION FOR SHARES IN 2 ITA NO.4633/MUM/2013 AY:2006-07 M/S. GSTAAD PROPERTIES PVT. LTD. TO THE TUNE OF RS. 1,13,00,000/- THE AO ALSO NOTICED THAT THE ASSESSEE HAD PURCHASED JEWELLERY WORTH RS. 9,98,316/- DURING THE YEAR UNDER CONSIDERATION. FROM THE BANK DETAILS, THE AO FOUND THAT THE JEWELLERY WORTH RS.9,98,316/- AND PURCHASE OF SHARES AMOUNTING TO R S.3,17,400/- DURING THE YEAR UNDER CONSIDERATION WAS MADE FROM THE LOAN TAKEN FR OM M/S. KHAZANA TRADELINKS LTD. ACCORDING TO THE AO, THE ASSESSEE ACCEPTED TH AT THE INVESTMENT IN FLAT AND APPLICATION FOR SHARES WERE MADE FROM THE FUNDS BOR ROWED FROM KHAZANA TRADELINKS LTD., ON WHICH THE ASSESSEE HAD CLAIMED INTEREST EX PENSES DURING THE YEAR. THE AO OPINED THAT THE INTEREST EXPENSES CLAIMED ON THE LO AN TAKEN FROM KHAZANA TRADELINKS LTD. COULD NOT BE ALLOWED AGAINST THE BU SINESS RECEIPTS AS IT WAS NOT INCURRED FOR THE BUSINESS ACTIVITY OF THE ASSESSEE. THE AO FURTHER HELD THAT THE ASSESSEE HAD DELIBERATELY MADE AN INCORRECT CLAIM A ND CONCEALED HER TAXABLE INCOME. CONSEQUENTLY, ON THE AMOUNT OF RS.18,41,87 3/- BEING CLAIM OF INTEREST ON LOANS, THE AO IMPOSED PENALTY OF RS.6,19,970/- U/S. 271(1)(C) OF THE ACT. 3. ON APPEAL, THE CIT(A) VIDE HIS ORDER DATED 26.03 .2010, DELETED THE PENALTY AND, HENCE, THE REVENUE IS IN APPEAL BEFORE THE TRI BUNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS OBSERVED THAT WHILE MAK ING THE ASSESSMENT IN THIS CASE FOR THE YEAR UNDER CONSIDERATION, THE AO MADE DISALLOWA NCE OF RS.18,41,873/- U/S. 36(1)(III) OF THE I.T.ACT, 1961. THE ORDER OF THE AO WAS CHALLENGED BY THE ASSESSEE IN APPEAL BEFORE THE CIT(A), WHO VIDE HIS ORDER DAT ED 26.03.2010 UPHELD THE DISALLOWANCE OF RS.18,41,873/- MADE BY THE AO. THE ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE CONFIRMATION OF DISALLOWANCE OF RS.18,41,873/- AND THE TRIBUNAL VIDE ITS ORDER DATED 20.04.2011 PA SSED IN ITA NO.3357/MUM/2010 SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND R EMANDED THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO DECIDE THE ISSUE AFRE SH AND IN ACCORDANCE WITH LAW, AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 5. KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMSTANC ES OF THE CASE, WE HOLD THAT PENALTY IMPOSED U/S. 271(1)(C) CANNOT STAND IF THE ASSESSMENT ITSELF IS SET ASIDE. IN THIS REGARD THE LAW IS WELL SETTLED THAT WHERE AN O RDER OF ASSESSMENT OR REASSESSMENT ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSEE HAS 3 ITA NO.4633/MUM/2013 AY:2006-07 BEEN FINALLY SET ASIDE BY THE TRIBUNAL OR OTHERWISE , THE PENALTY CANNOT STAND BY ITSELF AND THE SAME IS LIABLE TO BE CANCELLED. 6. ACCORDINGLY, IN THIS CASE PENALTY U/S. 271(1)(C) LEVIED BY THE AO CANNOT BE SUSTAINED. CONSEQUENTLY, WE DISMISS THE APPEAL FOR THE ABOVE MENTIONED REASONS. 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (D KARUNAKARA RAO) (H L KARWA) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DT : 30 TH SEPTEMBER, 2014 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, MUMBAI A BENCH BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI