Shri Nishith Prabhatbhai Desai, Ahmedabad V. The Income Tax Officer, Ward-5(2)(3), Ahmedabad

ITA 480/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6947 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 28-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Keywords: Set aside
• Section: 271(1)(c)

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 480/AHD/2018 ( ASSESSMENT YEAR : 2010-11) NISHITH PRABHATBHAI DESAI 2, KAILASH SOCIETY, B/H. H. K. HOUSE, ASHRAM ROAD, AHMEDABAD / VS. ITO WARD 5(2)(5), 1 ST FLOOR, NATURE VIEW BUILDING, OFF: ASHRAM ROAD, AHMEDABAD 380009 ./ ./ PAN/GIR NO. : AAPPD7867B ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI RAJESH MEENA, SR.D.R. DATE OF HEARING 30/07/2019 !'# / DATE OF PRONOUNCEMENT 31/07/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-5, AHMEDABAD (CIT(A) IN SHORT), DATED 1 2.12.2017 ARISING IN THE PENALTY ORDER DATED 31.03.2016 PASSE D BY THE ITA NO. 480/AHD/18 [NISHITH P. DESAI VS. ITO] A.Y. 2010-11 - 2 - ASSESSING OFFICER (AO) UNDER S. 271(1)(C) OF THE IN COME TAX ACT, 1961 (THE ACT) CONCERNING AY 2010-11. 2. AS PER THE GROUNDS OF APPEAL, THE ASSESSEE HAS IMPUGNED THE ACTION OF THE CIT(A) IN SUSTAINING THE PENALTY OF R S.2,05,000/- UNDER S. 271(1)(C) OF THE ACT. 3. WHEN THE MATTER WAS CALLED FOR HEARING, NONE APP EARED FOR THE ASSESSEE. IT IS SEEN FROM THE RECORD THAT THE NOTICE WAS PROPERLY SERVED ON THE ASSESSEE, THEREFORE, THE MAT TER IS PROCEEDED EX PARTE IN THE ABSENCE OF THE ASSESSEE. 4. THE LEARNED DR FOR THE REVENUE RELIED UPON THE L OWER AUTHORITIES. 5. WE HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHAL F OF THE REVENUE AS WELL AS PERUSED THE ORDERS OF THE AUTHOR ITIES IN QUANTUM PROCEEDINGS AND IN PENALTY PROCEEDINGS. THE RELEVANT FACTS ARE THAT THE ASSESSE HAD CLAIMED DEDUCTION IN RESPECT OF INTEREST PAID TO KOTAK MAHINDRA BANK LTD. AMOUNTING TO RS.7,85,850/- OUT OF INCOME FROM OTHER SOURCES. THE ASSESSEE HAS DECLARED INTEREST INCOME OF RS.1,25,000/- UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE EXPLAINE D BEFORE THE AO THAT HE PROCURED A SECURED TERM LOAN FROM KOTAK MAHINDRA BANK ALONGWITH FAMILY MEMBERS IN THE EARLIER YEARS ON MORTGAGE OF JOINT PROPERTY. IT WAS CONTENDED THAT THE LOAN WAS APPLIED AND UTILIZED FOR THE PURPOSES OF EARNING INTEREST INCOM E. THE AO DISBELIEVED THE NARRATIVE OF THE ASSESSEE AND REJEC TED THE DEDUCTION CLAIMED AGAINST THE INTEREST INCOME TO TH E EXTENT ITA NO. 480/AHD/18 [NISHITH P. DESAI VS. ITO] A.Y. 2010-11 - 3 - INCURRED IN EXCESS OF INTEREST INCOME OF RS.1,25,00 0/-. THE PENALTY WAS CONSEQUENTLY IMPOSED ON SUCH DISALLOWAN CE. 6. THE SUBJECT MATTER OF PENALTY UNDER S. 271(1)(C) OF THE ACT IS DISALLOWANCE OF THE AFORESAID INTEREST EXPENSES OF RS.6,60,850/-. IT IS NOTICED FROM THE CASE RECORDS THAT THE ASSESS EE HAS DULY DISCLOSED RELEVANT FACTS BEFORE THE AO WITHOUT ANY RESERVATION. THE FACT OF THE INCURRING OF EXPENDITURE WAS ALSO S UPPORTED WITH THE RELEVANT EVIDENCES. THE DISALLOWANCE WAS SUSTAI NED IN THE QUANTUM PROCEEDINGS AS THE ASSESSEE DID NOT SUCCEED IN PROVING HOW THE BORROWED FUNDS FROM KOTAK MAHINDRA BANK WER E UTILIZED. THE NEXUS WAS NOT PROVED FOR UTILIZATION OF MONEY F ROM BORROWED FUNDS. THE PENALTY HAS BEEN IMPOSED AS THE EXPEND ITURE CLAIMED WAS NOT FOUND TO BE ALLOWABLE. IN THIS REGARD, WE NOTE THE OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LIMITED (322 ITR 158) (SC) . THE HONBLE SUPREME COURT HAS OBSERVED THAT NO PENALTY IS JUSTIFIED WHERE ALL THE DETAILS OF EXPENDITURE AS WELL AS INC OME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUN D TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT I TS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLA IMED THE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, BY ITSELF, WOULD NOT ATTRACT PENALT Y UNDER S. 271(1)(C) OF THE ACT. WE NOTICE THAT SIMILAR CIRCU MSTANCES EXIST IN THE PRESENT CASE. GUIDED BY THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT, WE FIND MERIT FOR NON-APPLIC ABILITY OF PENALTY IN THE ABSENCE OF ANY FALSITY IN THE PARTIC ULARS FURNISHED. THE AO HAS ADMITTED THE CLAIM OF INTEREST EXPENDITU RE TO THE ITA NO. 480/AHD/18 [NISHITH P. DESAI VS. ITO] A.Y. 2010-11 - 4 - EXTENT OF INTEREST INCOME AND THEREFORE ONE CANNOT DEFINITELY SAY THAT INTEREST EXPENDITURE WAS NOT UTILIZED FOR THE PURPOSE OF EARNING INTERESTS. THE DISALLOWANCE OF EXCESS EXPE NDITURE OVER AND ABOVE SIMILAR INCOME GENERATED, CANNOT, IN OUR VIEW, INVITE PENAL ACTION IN THE FORM OF PENALTY. THE ORDER OF THE CIT(A) IS ACCORDINGLY SET ASIDE AND THE AO IS DIRECTED TO DEL ETE THE PENALTY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED EX PARTE. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 31/07/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 31/07/2 019