ITO, New Delhi V. Sh. Kamal Khanna, New Delhi

ITA 543/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91153 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 16-06-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 30-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.543/DEL/2014 ASSESSMENT YEAR : 2003-04 ITO, WARD-29(2), NEW DELHI. VS. KAMAL KHANNA, E-18, EAST OF KAILASH, NEW DELHI. PAN: AASPK0283H (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI AMRIT LAL, JCIT DATE OF HEARING : 16.06.2015 DATE OF PRONOUNCEMENT : 16.06.2015 ORDER THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT (A) ON 20.11.2013 DELETING THE PENALTY OF RS.5, 77,816/- IMPOSED BY THE AO U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YE AR 2003-04. ITA NO.543/DEL/2014 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE AO MADE DISALLOWANCE OF INTEREST AMOUNTING TO RS.3,92,882/- AND A FURTHER DISALLOWANCE OF INTEREST AMOUNTING TO RS.4,49,953/- . A STILL FURTHER DISALLOWANCE OF RS.9,91,502/- WAS MADE BY DISALLOWI NG 75% OF THE EXPENSES CLAIMED BY THE ASSESSEE. CONSIDERING THES E ADDITIONS TOTALING TO RS.18.34 LAC, THE AO IMPOSED PENALTY AMOUNTING T O RS.5,77,816/-. THE LD. CIT(A) DELETED THE PENALTY. 3. I HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THERE IS NO APPEARANCE FROM THE SIDE OF THE ASSESSEE DESPITE NOTICE. AS SUCH, I AM PROCEEDING TO DISPOSE OF THI S APPEAL EX PARTE QUA THE ASSESSEE. IT IS OBSERVED THAT THE FIRST TWO AD DITIONS ARE ON ACCOUNT OF DISALLOWANCE OF INTEREST, WHICH IN THE OPINION OF T HE AO OUGHT TO HAVE BEEN CHARGED BY THE ASSESSEE ON INTEREST FREE ADVAN CES AND ON ACCOUNT OF DEBIT BALANCE OF THE PROPRIETOR. BUT, FOR THAT, TH ERE IS NOTHING TO SHOW AS TO HOW THE ASSESSEE CONCEALED INCOME OR FURNISHED I NACCURATE PARTICULARS OF INCOME. THE ASSESSEE CLAIMED EXPENDITURE ON PAY MENT OF INTEREST TO ITA NO.543/DEL/2014 3 BANKS AND OTHERS, A PART OF WHICH WAS DISALLOWED BY THE AO ON THE GROUND THAT THE ASSESSEE HAD NOT CHARGED INTEREST O N INTEREST FREE LOANS AND ADVANCES TO RELATED PARTIES. SIMILARLY, OTHER DISALLOWANCE OF INTEREST AMOUNTING TO RS.4.49 LAC IS TOWARDS NOTIONAL INTERE ST ON DEBIT BALANCE OF THE ASSESSEE IN HIS PROPRIETORSHIP CONCERN, M/S COC O PLUS DRY FRUITS (I) COMPANY. SUCH TYPE OF DISALLOWANCES OF INTEREST, M ORE SO WHEN THE ASSESSEE HAS GIVEN COMPLETE NARRATION AND DETAILS O F SUCH EXPENSES, CANNOT CALL FOR AN IMPOSITION OF PENALTY. THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 32 2 ITR 158 (SC) , HAS HELD THAT A MERE MAKING OF A CLAIM WHICH IS N OT SUSTAINABLE IN LAW, BY ITSELF WILL NOT ATTRACT PENA LTY U/S 271(1)(C). IT FURTHER OBSERVED THAT WHEN THE ASSESSEE FURNISHED A LL THE PARTICULARS IN THE RETURN WHICH WERE NOT FOUND TO BE INACCURATE, I T WAS UPTO THE AUTHORITIES TO ACCEPT THE CLAIM OF THE ASSESSEE IN THE RETURN OR NOT, BUT, IT CANNOT BE A CASE FOR IMPOSITION OF PENALTY. AS REG ARDS THE THIRD AMOUNT OF DISALLOWANCE @ 75% OF THE TOTAL EXPENSES CLAIMED , I FIND THAT THE AO HAS MADE THIS DISALLOWANCE BY OBSERVING THAT THE SA LES OF THE ASSESSEE HAS COME DOWN AND, ACCORDINGLY, THE EXPENSES HAVE N OT REDUCED. UNDER ITA NO.543/DEL/2014 4 NO CIRCUMSTANCES, SUCH TYPE OF DISALLOWANCE OF EXPE NSES AND, THAT TOO, ON A MERE ESTIMATE BASIS, CAN NOT BE A REASON FOR I MPOSING PENALTY U/S 271(1)(C). THE HONBLE DELHI HIGH COURT IN CIT VS. AERO TRADERS PVT. LTD., (2010) 322 ITR 316 (DEL), HAS HELD THAT NO PENALTY U/S 271(1)(C) CAN BE IMPOSED WHEN INCOME IS DETERMINED ON ESTIMAT E BASIS. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE P&H HIGH COURT I N HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85 (P&H) AND THE HONBLE GUJARAT HIGH COURT IN CIT VS. SUBHASH TRADING COMPANY, 221 ITR 1 10 (GUJ) . UNDER SUCH CIRCUMSTANCES, I AM INCLINED TO APPROVE THE VI EW TAKEN BY THE LD. CIT(A) IN DELETING THE PENALTY. 4. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.06.20 15. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 16 TH JUNE, 2015. DK ITA NO.543/DEL/2014 5 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.