VASTUMANGAL REALITY P.LTD, MUMBAI V. DCIT 7(3), MUMBAI

ITA 5116/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70764 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 14-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 01-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI .. , ! ' # $$, % ', & BEFORE SHRI R.S.SYAL, AM AND SHRI SANJAY GARG, JM ITA NO.5116/MUM/2011 : ASST.YEAR 2004-2005 M/S.VASTUMANGAL REALITY PRIVATE LIMITED DR.G.M.BHOSALE MARG P.K.KURNE CHOWK, WORLI MUMBAI 400 018. PAN : AAACV2064J. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 7(3) MUMBAI. ( '( / // / APPELLANT) * * * * / VS. ( +,'(/ RESPONDENT) '( - -- - . . . . / APPELLANT BY : SHRI RAJESH ATHAVALE +,'( - . - . - . - . / RESPONDENT BY : SHRI SANJEEV JAIN * - /! / / / / DATE OF HEARING : 14.08.2013 012 - /! / DATE OF PRONOUNCEMENT : 16.08.2013 ' 3 ' 3 ' 3 ' 3 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 24.01.2011 CONFIRMING PENALTY OF ` 45.94 LAKH IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT, IN RELATION TO THE ASSESSMEN T YEAR 2004-2005. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WAS PRIMARILY ENGAGED IN THE BUSINESS OF BUILDERS, ENGI NEERS AND DEVELOPERS. DUE TO SLOWDOWN IN THE CONSTRUCTION BUS INESS, THE ITA NO.5116/MUM/2011. M/S.VASTUMANGAL REALITY PVT.LTD. 2 ASSESSEE, FOR THE TIME BEING, INVESTED INTEREST B EARING FUNDS IN SHARES AND EARNED DIVIDEND INCOME. DEDUCTION OF ` 42.69 LAKH WAS CLAIMED TOWARDS INTEREST EXPENSES ON THE FUNDS BORROWED. ON BEING CALLED UPON TO EXPLAIN AS TO WHY DEDUCTION SHOULD NOT BE D ENIED BECAUSE THE ASSESSEE DID NOT CARRY ON ITS PRIMARY BUSINESS, THE ASSESSEE SUBMITTED EXPLANATION WHICH HAS BEEN INCORPORATED IN THE ASSE SSMENT ORDER. CONSIDERING THE PROVISIONS OF SECTION 14A, THE ASSE SSING OFFICER MADE DISALLOWANCE OF INTEREST OF ` 42.69 LAKH ON THE GROUND THAT THE LOAN ON WHICH INTEREST WAS PAID, WAS INVESTED IN S HARES FETCHING EXEMPT DIVIDEND INCOME. THE LEARNED CIT(A) UPHELD T HE ASSESSMENT ORDER. THE TRIBUNAL IN QUANTUM PROCEEDINGS ALSO SUS TAINED THE DISALLOWANCE SO MADE BY THE ASSESSING OFFICER. THER EAFTER, PENALTY WAS IMPOSED AGAINST THE CONFIRMATION OF DISALLOWANC E OF INTEREST WHICH CAME TO BE AFFIRMED BY THE LEARNED CIT(A). 3. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSE E TEMPORARILY INVESTED INTEREST BEARING FUNDS IN SHARES AS THERE WAS LULL IN THE CONSTRUCTION BUSINESS. DEDUCTION FOR INTEREST WAS C LAIMED BY APPENDING A NOTE IN THE COMPUTATION OF INCOME WHICH IS AVAILABLE ON PAGES 1 AND 2 OF THE PAPER BOOK. THE ASSESSEE ENTER TAINED A VIEW, ON THE BASIS OF CERTAIN JUDICIAL PRECEDENTS PREVAILING AT THAT TIME, THAT SUCH INTEREST IS DEDUCTIBLE AND NOT HIT BY THE PROV ISIONS OF SECTION 14A. IT IS AN ALTOGETHER DIFFERENT MATTER THAT THE CLAIM OF THE ASSESSEE WAS REJECTED AND THE DISALLOWANCE WAS CONFIRMED. HE RE IT IS RELEVANT TO MENTION THAT THE CRITERIA FOR SUSTENANCE OF DISA LLOWANCE AND ITA NO.5116/MUM/2011. M/S.VASTUMANGAL REALITY PVT.LTD. 3 IMPOSING PENALTY U/S 271(1)(C) IS NOT SAME. THE MER E FACT THAT THE DISALLOWANCE HAS BEEN SUSTAINED WOULD NOT PER SE LEAD TO AUTOMATIC IMPOSITION OF PENALTY. IF THE FACTS AND CIRCUMSTANC ES OF THE CASE PROVE THAT THE ASSESSEE MADE A BONA FIDE CLAIM WHICH WAS NEGATIVED IN THE ASSESSMENT, THAT CANNOT CALL FOR AN IMPOSITION OF P ENALTY. HERE IS A CASE IN WHICH THE ASSESSEE CLAIMED DEDUCTION FOR IN TEREST BY FORMING A BONA FIDE VIEW THAT SUCH DEDUCTION IS PERMISSIBLE. SUCH CLAI M WAS JETTISONED. SIMPLE REJECTION OF ASSESSEES CLAIM FO R DEDUCTION OF INTEREST, CANNOT BE CONSIDERED AS CONCEALMENT OF IN COME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MISC HIEF OF SECTION 271(1)(C). THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEES SISTER-CONCERN I.E. GLORIOUS REALTY PVT. LTD. V. ITO [ITA NO.6011/MUM/2009], FOR ASSESSMENT YEAR 2004-2005, V IDE ITS ORDER DATED 08.06.2011 HAS DELETED PENALTY UNDER IDENTICA L CIRCUMSTANCES. SIMILAR VIEW HAS BEEN TAKEN BY A SUBSEQUENT BENCH O F THE TRIBUNAL IN THE CASE OF GLORIOUS REALTY PVT. LTD. VIDE ITS ORDE R DATED 19.06.2013 IN RELATION TO ASSESSMENT YEARS 1999-2000, 2000-200 1 AND 2005- 2006. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS F AIR ENOUGH CONCEDE THAT THE FACTS AND CIRCUMSTANCES PREVAILING IN THE PRESENT CASE ARE MUTATIS MUTANDIS SIMILAR TO THOSE CONSIDERED AND DECIDED BY THE TRIBUNAL IN THE CASES OF GLORIOUS REALTY PVT. L TD. RESPECTFULLY FOLLOWING THE PRECEDENTS, WE ORDER FOR THE DELETION OF PENALTY AMOUNTING TO ` 45.94 LAKH. 4 . 4 /5 6 / 7 - #/ 89 IN THE RESULT, THE APPEAL IS ALLOWED. ITA NO.5116/MUM/2011. M/S.VASTUMANGAL REALITY PVT.LTD. 4 ORDER PRONOUNCED ON THIS 16 TH DAY OF AUGUST, 2013. ' 3 - 012 :'*5 1 - $ SD/- SD/- (SANJAY GARG) (R.S.SYAL) % ' % ' % ' % ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; :'* DATED : 16 TH AUGUST, 2013. DEVDAS* ' 3 - +%/;< = <2/ ' 3 - +%/;< = <2/ ' 3 - +%/;< = <2/ ' 3 - +%/;< = <2// COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. +,'( / THE RESPONDENT. 3. > () / THE CIT, MUMBAI. 4. > / CIT(A) 13, MUMBAI. 5.