ITO 7(1)(1), MUMBAI V. NAMAN ESTATE P. LTD, MUMBAI

ITA 5975/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8402 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 24-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMARDR
• Section: 14A; 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA ( ACCOUNT MEMBER) I.T.A.NO. 5975 & 5976/MUM/2014 ( ASSESSMENT YEARS 2004-2005 & 2005-06) INCOME TAX OFFICER 7(1)(1), MUMBAI V/S M/S NAMAN ESTATES PVT.LTD., (MERGED WITH PRUDENTIAL MANAGEMENT AND SERVICES PVT.LTD,) MAHINDRA TOWERS, ROAD NO.-13 MUMBAI-400018 PAN AAACN1980F APPELLANT RESPONDENT APPELLANT BY SHRI SUMAN KUMAR(DR) RESPONDENT BY NONE DATE OF HEARING 01.03.2017 DATE OF ORDER 01.03.2017 O R D E R PER ASHWANI TANEJA, AM:- THESE APPEALS PERTAIN TO SAME ASSESSEE INV OLVING IDENTICAL ISSUE FOR DIFFERENT ASSESSMENT YEARS FILED BY THE REVENUE, TH EREFORE THESE APPEALS WERE HEARD TOGETHER AND BEING DISPOSED OF BY THIS COMMO N ORDER, FOR THE SAKE OF CONVENIENCE. 2 2. FIRST WE SHALL TAKE UP APPEAL FOR THE ASSESSM ENT YEAR 2004-05 IN I.T.A. NO. 5975/MUM/2014. 3. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [I N SHORT, REFERRED TO AS CIT(A)] PASSED AGAINST THE ORDER OF THE ASSESSIN G OFFICER U/S 271(1)(C) OF THE ACT, DATED 29.05.13 FOR ASSESSMENT YEAR 2004-05 ON THE FOLLOWING GROUNDS:- THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DEL ETING THE PENALTY OF RS. 17,19,762/- LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, BY THE ASSESSING OFFICER WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT OUT BY THE ASSESSING OFFICER IN THE PENALTY ORDER IMPOSING THE PENALTY. THE LD.CIT(A)S ORDER IS CONTRARY TO LAW AND FACTS A ND DESERVES TO BE SET ASIDE AND A.O.S ORDER MAY BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND THAT MAY BE NECESSARY. 4. DURING THE COURSE OF HEARING NONE APPEARED BE FORE US ON BEHALF OF THE ASSESSEE. LEARNED DR MADE ARGUMENTS ON BEHALF OF THE REVENUE. 5. THE SOLITARY ISSUE IN THIS APPEAL IS ABOUT LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE PENALTY WAS LEVIED BY THE AO ON THE A MOUNT OF DISALLOWANCE MADE BY HIM U/S 36(1)(III) OF THE ACT ON ACCOUNT OF INTEREST EXPENDITURE. IT HAS BEEN BROUGHT TO OUR NOTICE THAT SIMILAR DISALLOWANC E WAS MADE IN ASSESSES OWN CASE IN ASSESSMENT YEAR 2001-02 AND THE PENALTY WAS ALSO LEVIED UPON THE SAME. THE MATTER REACHED BEFORE THE TRIBUNAL WHER EIN THE PENALTY ORDER WAS UPHELD BY THE TRIBUNAL VIDE ITS ORDER PASSED IN I.T .A.NO. 863/MUM/2008 BY OBSERVING AS UNDER:- 'THE QUESTION AS TO WHEN FUNDS ARE BORROWED FOR THE PURPOSE OF BUSINESS AND WHERE SUCH BORROWED FUNDS ARE DEPLO YED AND YIELDS INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME STILL DISALLOWANCE CAN BE MADE U/S 36(L)(III) OF THE ACT WAS DEBATABLE ISSUE. IN FACT A SPECIAL BENCH WAS CONSTI TUTED TO DECIDE THE QUESTION WHERE SHARE TRADERS BORROW FUND S FOR PURPOSE OF BUSINESS BUT WHERE THE SHARES PURCHASED YIELDED 3 DIVIDEND INCOME WHETHER THE CLAIM FOR DEDUCTION OF INTEREST ON BORROWINGS CAN BE ALLOWED AS DEDUCTION U/S 36(I)(II I). THE QUESTION WHETHER MOTIVE FOR BORROWINGS FUND ON WHIC H INTEREST IS PAID IS RELEVANT OR NOT IS STILL A DEBATABLE ISS UE BEING AGITATED BY THE ASSESSEE BEFORE THE HON'BLE HIGH COURTS. BES IDES THE ABOVE, WE FIND THAT THE ASSESSEE IN THE PRESENT CAS E HAS DULY CLARIFIED IN THE NOTES TO THE COMPUTATION OF INCOME THE METHOD OF COMPUTATION OF INTEREST THAT CAN BE DISALLOWED U /S 14A OF THE ACT. THERE HAS THEREFORE BEEN A COMPLETE DISCLO SURE OF ALL FACTS BEFORE THE ASSESSING OFFICER. THE EXPLANATION OFFERED BY THE ASSESSEE REGARDING ITS CLAIM FOR INTEREST EXPENSES IN OUR VIEW I S BONA FIDE EXPLANATION. THE ASSESSEE HAS DISCLOSED ALL FACTS MATERIAL FOR COMPUTATION OF ITS TOTAL INCOME. EVEN THE BURDEN THAT LAYS ON THE ASSESSE UNDER EXPLANATION 1 TO SECTION 271(1)(C) IN OUR VIEW HAS BEEN DISCHARGED. ON THE F ACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT L EARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF AO IMPOSING PENALTY. WE ARE OF THE VIEW THAT THIS IS NOT A FIT CASE FOR IMPOSING PENALTY ON THE ASSESSEE. 6. IN THE YEAR BEFORE US LD. CIT(A) HAS RIGHTLY CO NSIDERED AFORESAID JUDGMENT OF THE TRIBUNAL WHILE DELETING THE PENALTY LEVIED I N THIS YEAR, BY OBSERVING AS UNDER:- 3.3 I HAVE DULY CONSIDERED THE FACTS AND SUBMISSION S. IT IS UNDISPUTED THAT FOR BOTH THESE CASES DISALLOWANCES WERE MADE U/S 3 6 (1) (III) AS PER PROVISIONS OF SECTION FOR THE REASON THAT ASSESSEE HAD NO BUSINESS ACTIVITY AND THEN HAD EXEM PT INCOME IN FORM OF DIVIDEND. HOWEVER IT IS NOT THE C ASE OF A.0 THAT THE APPELLANT FILED WRONG PARTICULARS OR GAVE INACC URATE PARTICULARS OR CONCEALED THE FACTS OR PARTICULARS A T ALL. IN A CASE LIKE THIS WHERE DISALLOWANCES WERE MADE AND UP HELD ALSO; HOWEVER THERE IS NO CASE OF FILING INACCURATE / WRONG PARTICULARS FILED BY THE APPELLANT AND THEN MATERIA L FACTS WERE DULY DISCLOSED, IT CANNOT BE SAID THAT APPELLANT HA S CONCEALED OR FILED WRONG PARTICULARS AND HENCE PROVISIONS OF PENALTY UNDER SECTION. 271(1)(C) ARE NOT ATTRACTED IN SUCH A CASE. APPELLA NT HAVE FURTHER RELIED UPON DECISION GIVEN BY HONBLE ITAT, MUMBAI IN THEI R OWN CASE IN ITA 4 NO.863/MUM/08 FOR A.Y 2001-02 WHERE IN ON THESE FAC TS PENALTY LEVIED U/S 271(1)(C) WAS DELETED. AFTER GOING THRO UGH THE SAME AND HAVING FOUND THAT FACTS ARE IDENTICAL IN THIS, I AM OF THE CONSIDERED VIEW FOR THE DISALLOWANCE MADE U/S 36(1)(III) PENAL TY U/S 271(1)(C) IS NOT ATTRACTED. IT S ALSO AS PER THE RATION OF THE D ECISION GIVEN IN THE CASE OF RELIANCE PETRO PRODUCTS LTD.322 ITR 158(SC) AND HENCE PENALTY LEVIED FOR BOTH THE A.YS BEING NOT SUSTAINABLE ARE DELETED HEREWITH. THE GROUND TAKEN IN BOTH THESE APPEALS BEARING NUMB ER 212/13-14 ARE ALLOWED. 7. IT IS NOTICED BY US THAT LD. CIT(A) HAS RIGHTLY CON SIDERED THE JUDGMENT OF THE CIT(A) IN DELETING THE PENALTY LEVIED IN THIS Y EAR SINCE THE FACTS AND CIRCUMSTANCES AND LEGAL POSITION IS IDENTICAL. NO D ISTINCTION HAS BEEN MADE IN THIS REGARD BY THE LD. D.R BEFORE US. THUS WE FIND THAT THE ORDER BY THE LD. CIT(A) IS WELL REASONED AND IN ACCORDANCE WITH THE LAW AND FACTS AND NO INTERFERENCE IS CALLED FOR THEREIN BY US, THEREFORE SAME IS UPHELD. AS A RESULT APPEAL FILED BY THE REVENUE IS DISMISSED. 8 . NOW WE SHALL TAKE UP APPEAL FOR ASSESSMENT YEAR 2005 -06 IN I.T.A.NO. 5976/MUM/2014 . IT IS NOTED THAT THE ISSUE INVOLVED IN THIS IS A PPEAL IDENTICAL TO APPEAL OF ASSESSMENT YEAR 2004-05. THEREFORE F OLLOWING OUR ORDER FOR ASSESSMENT YEAR 2004-05, THIS APPEAL IS ALSO DISMIS SED. 9 . AS A RESULT BOTH THE APPEALS FILED BY THE REVENUE A RE HEREBY DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF HEARING ON 01.03.2017. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 01.03.2017 KT/- COPY TO : 5 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES