M/s Vishal Coaters Ltd., Patiala V. ACIT, Patiala

ITA 527/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80853 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: YASH PAUL GOYAL
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 527/CHD/2014 ASSESSMENT YEAR: 2007-08 M/S VISHAL COATERS LTD. VS. THE ACIT, CIRCLE, PATIALA PATIALA PAN NO. AABCV2767P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. YASH PAUL GOYAL RESPONDENT BY : SHRI. MANJIT SINGH DATE OF HEARING : 05/08/2014 DATE OF PRONOUNCEMENT : 19/08/2014 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31/03/2014 OF CIT(APPEALS), PATIALA. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. THAT THE APPELLATE ORDER DATED 31.03.2014 IS AGAINS T LAW AND FACTS ON THE FILE. 2. THAT THE APPELLANT ASSESSEE HAS NEITHER CONCEALED T HE PARTICULARS OF INCOME NOR FURNISHED INACCURATE 2 PARTICULARS OF SUCH INCOME DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08. 3. THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMATION O F AMOUNT OF PENALTY ON MERE DISALLOWANCE OF INTEREST WORTH RS. 133185/- UNDER PROVISION OF SECTION 36(1)(III) OF INCOME TAX ACT ON AMOUNT OF INVESTMENT IN PURCHASE OF SHARES BY THE APPELLANT ASSESSEE COMPANY. 4. THAT LEARNED CIT(A) HAS FAILED TO APPRECIATE WRITTE N SUBMISSIONS FILED DURING THE APPELLATE PROCEEDINGS. THE CONFIRMATION OF PENALTY IS AGAINST LAW LAID DOWN BY HONBLE APEX COURT OF INDIA. . 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS VARIOUS ADDITIONS WERE MADE AND PENALTY PROCEEDINGS WERE ALSO INITIATED. MOST OF THE ADDITIONS MADE BY THE ASSESS ING OFFICER WERE UNTIMELY DELETED BY THE TRIBUNAL AND THE PRESENT APPEAL FOR CONFIRMATION OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT PERTAINING TO ONL Y ONE TYPE OF ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST AMOUNTING TO R S. 1,33,185/-. 4. THE ASSESSEE HAD MADE INVESTMENT OF RS. 1,45,29 ,250/- IN THE SHARE CAPITAL OF M/S DSG PAPERS (P) LIMITED. SINCE ASSES SEE HAD ALSO BORROWED CERTAIN FUNDS, THEREFORE, ASSESSEE WAS ASKED WHY TH E PROPORTIONATE INTEREST SHOULD NOT BE DISALLOWED. IN RESPONSE, IT WAS MAINL Y STATED THAT ASSESSEE HAD NOT DIVERTED ANY FUNDS BY WAY OF LOANS BUT HAS MADE INVESTMENT FOR BUSINESS PURPOSES, THEREFORE, NO DISALLOWANCE SHOULD BE MADE . HOWEVER, ULTIMATELY THE ASSESSING OFFICER DISALLOWED THE INTEREST TO TH E EXTENT OF RS. 1,33,185/- AND INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3 5. IN RESPONSE TO THE SHOW CAUSE NOTICE AGAINST LEV Y OF PENALTY IT WAS MAINLY STATED THAT SINCE APPEAL IS PENDING BEFORE T HE TRIBUNAL, THEREFORE, PENALTY PROCEEDINGS MAY BE KEPT IN ABEYANCE. HOWEVE R, THE ASSESSING OFFICER DID NOT AGREE WITH THE SAME AND LEVIED THE MINIMUM PENALTY. 6. ON APPEAL, ACTION OF THE ASSESSING OFFICER WAS C ONFIRMED BY CIT(A) VIDE FOLLOWING PARA:- 5. AS REGARDS, THE ADDITION ON ACCOUNT OF INTEREST AT RS. 1,33,185/-. IT IS NOTED THAT THE INVESTMENT IN THE PURCHASE OF SHARES HAS BEEN HELD TO BE NOT FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. THIS VIEW HAS BEEN CO NFIRMED BY HONBLE ITAT. SINCE, THE EXPENDITURE IS NOT INTE NDED FOR THE PURPOSE OF BUSINESS, THEREFORE, THIS EXPENSE IS PRIMA- FACIE DISALLOWABLE. IN MY OPINION, WHEN THE EXPENS E ITSELF IS PRIMA-FACIE DISALLOWABLE, THE A.O. HAS CORRECTLY LEVIED PENALTY (REF. CIT VS. ZOOM COMMUNICATION PVT. LTD. 327 ITR 510) AGAINST THIS ADDITION. THEREFORE, PENALTY IMPOSED IS CONFIRMED AGAINST THIS ADDITION MADE BY THE A.O. 7. BEFORE US IT WAS SUBMITTED THAT AT BEST IT IS A CASE OF DISALLOWANCE OF EXPENSES ON NOTIONAL BASIS AND, THEREFORE, PENALTY IS NOT ATTRACTED. 8. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF CIT(A). 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE. THE AS SESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS. 46,17,227/- WHICH HAVE BEEN DULY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT, THEREFORE, IT IS NOT A CAS E OF CONCEALMENT OF PARTICULARS. HOWEVER, DURING THE ASSESSMENT PROCEED INGS, PART OF THE INTEREST 4 HAS BEEN DISALLOWED FOLLOWING THE DECISION OF HONB LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S ABHISHEK INDUSTRIES LTD 286 ITR 1(P&H) . HOWEVER, HERE AGAIN THERE CAN BE TWO OPINIONS BECA USE INVESTMENT WAS MADE IN SHARES AND, THEREFORE, IT CANNOT BE SAI D THAT ASSESSEE HAS ADVANCED INTEREST FREE LOANS. THE ASSESSEE COULD HA VE ALSO ARGUED THAT INVESTMENT WAS FOR BUSINESS PURPOSES. THEREFORE, IT CAN BE SAID THAT DISALLOWANCE OF INTEREST IS RATHER DEBATABLE ISSUE AND WOULD NOT ATTRACT PENAL PROVISIONS. IN OUR OPINION, THIS IS NOT A FIT CASE OF LEVY OF PENALTY AND ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) AN D DELETE THE PENALTY. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19/08/20 14 SD/- SD/[ (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 TH AUGUST, 2014 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR