ACIT, Chandigarh V. Sh. Prince Sharma, Chandigarh

ITA 492/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95518 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: ANIL BATRA
• Keywords: Proportionate interest; Non-deduction of tax; Notional interest; Onus to prove
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.492/CHD/2015 (ASSESSMENT YEAR : 2009-10) THE A.C.I.T., VS. SH.PRINCE SHARMA, CIRCLE 5(1), L/H SHIV KUMAR SHARMA, CHANDIGARH. PLOT NO.6, TRANSPORT AREA, SECTOR 26, CHANDIGARH. PAN: ADQPS0155B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL RESPONDENT BY : SHRI ANIL BATRA DATE OF HEARING : 01.09.2015 DATE OF PRONOUNCEMENT : 03.09.2015 O R D E R PER RANO JAIN, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH DATED 26.2.2015 FOR ASSESSM ENT YEAR 2009-10, WHEREBY HE HAS DELETED THE PENALTY AMOUNTING TO RS.5,80,303/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSE HAD NOT DEDUCTED TAX ON PAYMENT OF RS.57,450/- ON A CCOUNT OF AUDIT FEE AND THE SAME WAS DISALLOWED BY THE ASS ESSING OFFICER INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT. THE PROPORTIONATE INTERESTS OF RS.5,02,839/-, RS.5, 36,439/- AND RS.4,68,000/- WERE ALSO DISALLOWED BY THE ASSES SING OFFICER UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSING OFFICER HAD ALSO DISALLOWED AN AMOUNT OF RS.2 LACS ON ESTIMATED BASIS TO PREVENT ANY LOSS TO THE REVENUE. THOUGH THE ASSESSEE FILED AN APPEAL AGAINST THE SAME BEFOR E THE LEARNED CIT (APPEALS), THE SAME WAS DISMISSED AND T HE ASSESSEE PREFERRED NOT TO FILE ANY FURTHER APPEAL A ND PAID THE DUE TAXES. THEREAFTER THE ASSESSING OFFICER INITI ATED THE PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IN THE PENALTY PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS WITH REGARD TO THE ADDITIONS AND DISALL OWANCES MADE BY THE ASSESSING OFFICER IN QUANTUM PROCEEDING S. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD., 322 ITR 158 (SC). FURTHER, IT WAS SUBMITTED THAT MERELY BECAUSE CERTAIN EXPENSES CLAIMED BY THE ASSESSEE AR E DISALLOWED BY THE ASSESSING OFFICER, IT CANNOT BE S AID THAT THE PARTICULARS FURNISHED BY THE ASSESSEE ARE WRONG. IN THIS REGARD, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL IN THE CASE OF CIT VS. AJAIB SINGH & CO. (2002) 253 ITR 630 (P&H). HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND LEVIED 3 PENALTY AMOUNTING TO RS.5,80,303/- BEING 100% OF TH E INCOME TAX SOUGHT TO BE EVADED IN RESPECT OF RS.17,07,278/ - BEING THE TOTAL ADDITION AND DISALLOWANCE MADE BY THE ASSESSI NG OFFICER. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT (APPEALS), WHEREBY THE CONTENTIONS RAISED BEFORE TH E ASSESSING OFFICER WERE REITERATED. THE LEARNED CI T (APPEALS) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT CAN BE I NVOKED ONLY IF THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS IN COME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. FURTHER, HE MADE ANALYSIS OF ALL THE THREE DISALLOWANCES AND ADDITIONS MADE BY THE ASSESSING OFFICER. REGARDING THE PENAL TY LEVIED ON THE ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE LEARNED CIT (APPEALS) HEL D AS UNDER : REGARDING DISALLOWANCE U/S 40(A)(IA) OF THE ACT, THE APPELLANT CANNOT BE SAID TO HAVE DELIBERATELY FURNIS HED INACCURATE PARTICULARS OF INCOME. HON'BLE ITAT DELHI IN THE CASE OF AT & T COMMUNICATIONS SERVICES INDIA PVT. LTD. (42 DT R 22) HAS HELD THAT THE DISALLOWANCE MADE BY INVOKING PROVISI ONS OF SECTION 40(A)(I) CANNOT BE A GROUND TO LEVY PENALTY U/S 271(L)(C) SINCE IN SUCH SITUATIONS, IT CANNOT BE SAID THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELE VANT TO THE DEDUCTION CLAIMED BY THE ASSESSEE. SECTION 40(A)(I) PERTAINS TO PAYMENTS MADE TO NON-RESIDENTS AND THE CORRESPONDING PROVISION FOR RESIDENTS IS SECTION 40(A)(IA) AND SO THE RATIO OF THIS DECISION IS APPLICABLE IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) ALSO. FURTHER, THE ENTIRE AMOUNT HAS BEEN ADDED U/S 40(A) (IA) FOR NON-DEDUCTION OF TAX AND THE APPELLANT HAS ALREADY BEEN PENALIZED BY TAXING WHOLE OF THE AMOUNT, ON WHICH TA X WAS TO BE DEDUCTED. IN VIEW OF THIS DISCUSSION AND BY RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT DELHI (SUPRA), THE CON CEALMENT PENALTY 4 LEVIED ON ADDITIONS MADE OF RS. 57,243/- AND RS. 4,6 5,654/- IS CANCELLED. 4. REGARDING PENALTY LEVIED ON DISALLOWANCES MADE UNDER SECTION 36(1)(III) OF THE ACT, THE LEARNED CI T (APPEALS) HELD AS UNDER : THE ASSESSING OFFICER HAS DISALLOWED PROPORTIONATE INTERESTS ON INTEREST FREE ADVANCES AND ON INVESTMENT S MADE FOR PURCHASE OF LAND AND ONE HOUSE ON THE GROUND THAT T HESE AMOUNTS WERE FOR NON-BUSINESS PURPOSES. IN MY CONSID ERED VIEW, CONCEALMENT PENALTY CANNOT BE LEVIED ON SUCH DISALLOWANCES, SINCE THESE ARE NOTIONAL DISALLOWANCES AND THE APPELLANT HAS NOT CONCEALED ANY INCOME. HENCE, THE ASSESSING OFFICER WAS NOT RIGHT IN IMPOSING PENALTY ON THIS ISSUE A ND THE SAME IS CANCELLED. 5. AS REGARDS PENALTY LEVIED ON ESTIMATED DISALLOW ANCE OF RS.2 LACS, THE LEARNED CIT (APPEALS) HELD AS UND ER : THE ASSESSING OFFICER HAS DISALLOWED RS. 2,00,000/- ON ESTIMATED BASIS TO PREVENT ANY LOSS TO REVENUE. PENALTY FOR CO NCEALMENT CANNOT BE LEVIED ON ESTIMATED DISALLOWANCE IN VIEW OF THE JUDGEMENT OF HONBLE PUNJAB & HARYANA COURT IN THE CASE OF HARIGOPAL SINGH (258 ITR 85), IN WHICH IT HAS BEEN HELD: 'ADDITIONS IN HIS INCOME WERE MADE, AS ALREADY OBSE RVED, ON ESTIMATE BASIS AND THAT BY ITSELF DOES NOT LEAD T O THE CONCLUSION THAT THE ASSESSEE EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THERE HAS TO BE A POSIT IVE ACT OF CONCEALMENT ON HIS PART AND THE ONUS TO PROVE THIS IS ON THE DEPARTMENT.' 5 IN THIS WAY, THE LEARNED CIT (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE PENALTY UNDER SECTION 271(1)(C) LEVIED BY THE ASSESSING OFFICER. 6. NOW THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US AGAINST THE SAID ORDER OF THE LEARNED CIT (APPEA LS) RAISING THE FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED BY THE AO ON ACCOUNT OF FAILURE OF ASSESSEE TO COMPLY WITH STATUT ORY PROVISIONS OF SECTION 40(A)(IA) IN RESPECT OF EXPENSE OF RS.57,450/- PAID AS AUDIT FEES WITHOUT DEDUCTION OF TAX AT SOURCE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED BY THE AO ON ACCOUNT OF CLAIM OF EXPENDITURE OF RS.15,07,278/- NO T INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE AND WAS T HEREFORE DISALLOWED U/S 36(I)(III) OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD.CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED B Y THE AO ON ACCOUNT OF CLAIM OF EXPENDITURE IN VIOLATION OF PROVISIO N OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961 AND WAS THEREFORE DISALLOWED OF RS.2,00,000 OF THE ACT. 5. THE LD. CIT(A) HAS FURTHER IGNORED THE EXPLANATION 1 T O SECTION 271 AS THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE T HE FACTS WHICH ARE MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME . UNDER SUCH CIRCUMSTANCES THE AMOUNT ADDED/DISALLOWED IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. 6. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OF. 7. THE LEARNED D.R. WHILE ARGUING BEFORE US SUBMIT TED THAT THE ASSESSEE HAS NOT CHALLENGED THE ADDITIONS AND 6 DISALLOWANCES MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LEARNED CIT (APPEALS) IN ANY FURTHER APPEAL. I N VIEW OF THIS, IT IS MATTER OF FACT THAT THE ASSESSEE HAS AG REED TO ADDITIONS SO MADE BY THE ASSESSING OFFICER. THEREF ORE, THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTI ON 271(1)(C) OF THE ACT IS CORRECT AND PRAYED BEFORE US TO SET A SIDE THE ORDER OF THE LEARNED CIT (APPEALS) AND RESTORE THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1 )(C) OF THE ACT. 8. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N THE ORDER OF THE LEARNED CIT (APPEALS). HE SUBMITTED T HAT THE LEARNED CIT (APPEALS) HAS MADE A DETAILED ANALYSIS OF THE ADDITIONS AND DISALLOWANCES MADE BY THE ASSESSING O FFICER AND HAS GIVEN CATEGORICAL FINDINGS ON EACH OF THE I SSUES. IN VIEW OF THIS, IT WAS PRAYED THAT THE ORDER OF TH E LEARNED CIT (APPEALS) MAY BE UPHELD. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. WE ARE IN FULL AGR EEMENT WITH THE FINDINGS OF THE LEARNED CIT (APPEALS) WITH REGARD TO DELETION OF PENALTY UNDER SECTION 271(1)(C) OF T HE ACT. THE ASSESSING OFFICER HAS MADE THREE ADDITIONS, ONE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT , SECOND ON ACCOUNT OF NOTIONAL INTEREST UNDER SECTION 36(1) (III) OF THE ACT AND THE OTHER ON ESTIMATED DISALLOWANCE TO PREVENT ANY LOSS TO THE REVENUE. WE DO NOT SEE ANY FINDING OF THE ASSESSING OFFICER) AS REGARDS ANY CONCEALMENT OF IN COME 7 BY THE ASSESSEE OR AS REGARDS FURNISHING OF ANY INA CCURATE PARTICULARS OF INCOME BY THE ASSESSEE. THE ASSESS EE HAS MADE FULL DISCLOSURE OF ALL THE FACTS AND IN FACT, THE ASSESSING OFFICER WHILE MAKING THE ADDITION AS WELL AS WHILE LEVYING THE PENALTY HAS PICKED UP ALL THE FACTS AND FIGURES FRO M THE RETURN FILED BY THE ASSESSEE AND OTHER DETAILS FIL ED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THER EFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS REG ARDS THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE AC T, THE SAID DISALLOWANCE IS MADE WHEN THE ASSESSEE FAILS TO DED UCT THE TAX AT SOURCE ON PAYMENT MADE BY HIM. THE WHOLE OF THE PAYMENT SO MADE IS EXIGIBLE TO TAX. THE SAME PAYME NT IS ALLOWABLE IN THE YEAR IN WHICH THE TAX ON THE SAME IS DEDUCTED AND DEPOSITED. IN VIEW OF THESE FACTS, THE DISALLO WANCE MAY BE SUSTAINABLE BEING AS PER THE MANDATE PROVIDED IN THE STATUTE IN THE FORM OF SECTION 40(A)(IA) OF THE ACT . HOWEVER, THE PENALTY ON THE SAME CANNOT BE LEVIED. RELIANC E PLACED BY THE LEARNED CIT (APPEALS) ON THE ORDER OF THE ITAT DELHI IN THE CASE OF AT & T COMMUNICATIONS SERVICES INDIA PVT. L TD., 42 DTR 22 IS NOT OUT OF PLACE, WHEREBY IT HAS BEEN HEL D THAT THE DISALLOWANCE MADE BY INVOKING THE PROVISIONS OF SEC TION 40(A)(IA) OF THE ACT CANNOT BE A GROUND TO LEVY THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. AS REGARDS TH E DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE A CT, THE SAID DISALLOWANCE IS A NOTIONAL DISALLOWANCE AND IT CANN OT BE INFERRED THAT THE ASSESSEE HAS CONCEALED ANY INCOME . IN VIEW OF THE SAME, THE DISALLOWANCE ITSELF MAY BE SUSTAIN ABLE, NO 8 PENALTY CAN BE LEVIED ON THE SAID DISALLOWANCE. A S REGARDS THE ESTIMATED DISALLOWANCE OF RS.2 LACS, THE ASSESS ING OFFICER HAS MADE THE SAID DISALLOWANCE TO PREVENT ANY LOSS TO REVENUE. THERE IS NO FINDING THAT THE ASSESSEE HA S CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS IN T HIS REGARD. FURTHER NO PENALTY FOR CONCEALMENT CAN BE LEVIED ON AN ESTIMATED DISALLOWANCE MADE BY THE ASSESSING OFFICE R. RELIANCE PLACED BY THE LEARNED CIT (APPEALS) ON THE JUDGMENT OF HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COU RT IN THE CASE OF HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85 (P&H) IS SQUARELY APPLICABLE IN THE PRESENT CASE. FURTHER, SUCH KIND OF DISALLOWANCES AND ADDITIONS ARE NOT EXIGIBLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD. (SUPRA). IN VIEW OF THE ABOVE, WE UPHOLD THE ORDE R OF THE LEARNED CIT (APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF SEPTEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 3 RD SEPTEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9