M/s. Mansarover Builders Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5984/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4189 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 04-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KJS MEHRA
• Keywords: Fair market value
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. NO. 5984/DEL/2015 A.Y. : 2006-07 M/S MANSAROVER BUILDERS PVT. LTD., 48/1, COMMERCIAL CENTRE, MALCHA MARG, CHANKYA PURI, NEW DELHI 11 0021 (PAN: AAACM6591R) VS. DCIT, CIRCLE 16(2), CR BUILDING, NEW DELHI 2 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH.KJS MEHRA, FCA DEPARTMENT BY : SH. ARUN KUMAR YADAV, SR. DR ORDER PER H.S. SIDHU, JM ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER D ATED 18.9.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-20, NEW DELHI PERTAINING TO ASSESSMENT YEAR 2006-07 ON THE FOLLOW ING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE APPELLANT COMPANY THE LD. CIT(A) HAS ERRED IN BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE LD . AO IN LEVYING PENALTY U/S. 271(1)(C) IN RESPECT OF ADDITI ON MADE AMOUNTING TO RS. 9,84,375/- ALLEGEDLY ON THE 2 GROUND THAT EXCESSIVE INTEREST HAS BEEN PAID U/S. 40A(2)(B) OF THE ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D THE GROUNDS OF APPEAL AT A LATER STAGE. 2. THE FACTS IN BRIEF ARE THAT ASSESSMENT WAS COMPL ETED VIDE ORDER DATED 30.3.2014 PASSED U/S. 143(3) OF THE INCOME TA X ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) AT THE ASSESSED INCOME OF RS. 5,18,80,460/- AS AGAINST INCOME OF RS. 5,06,78,170 /- AFTER MAKING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF INTEREST PAI D RS. 9,84,375/-; DISALLOWANCE U/S. 14A RS. 68,530/- AND ADDITION OF RS. 40(A)(IA), STTR AND CAPITAL EXP. OF RS. 84,040/-. SIMULTANEOUSLY, PENALTY U/S. 271(1)(C) OF THE ACT WAS INITIATED FOR CONCEALING / FURNISHI NG INACCURATE PARTICULARS OF INCOME. SHOW CAUSE NOTICE WAS ISSUED ON 29.12.2 008 ASKING THE ASSESSEE TO EXPLAIN AS TO WHY AN ORDER IMPOSING A P ENALTY SHOULD NOT BE PASSED. THE ASSESSEE REPLY CONTENDING THEREIN THAT AN APPEAL BEFORE CIT(A) HAS BEEN FILED CHALLENGING THE ADDITIONS, TH EREFORE, THE PENALTY PROCEEDINGS MAY BE KEPT IN ABEYANCE. ACCORDINGLY, T HE LD. CIT(A) KEPT THE PENALTY PROCEEDINGS IN ABEYANCE AND THEREAFTER HAS CONFIRMED THE ADDITION OF DISALLOWANCE OF INTEREST PAID TO RELA TED PARTY AND DISALLOWANCE U/S. 14A AND DELETED THE OTHER ADDITIO N OF RS. 84,040 MADE ON ACCOUNT OF PROVISION OF SECTION 40(A)(IA). AO FU RTHER OBSERVED THAT ASSESSEE COMPANY MADE CERTAIN CLAIMS BY WAY OF BUSI NESS EXPENDITURE IN THE RETURN OF INCOME BUT WAS NOT ABLE TO SUBSTANTIA TE THESE CLAIMS. IN 3 VIEW OF EXPLANATION 1 TO SECTION 271(1)(C), WHERE I N RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME, ASSESS EE FAILS TO OFFER ANY EXPLANATION OR FAILS TO SUBSTANTIATE ANY EXPLANATIO N / CLAIM MADE BY HIM, THEN THE AMOUNT ADDED/DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL BE DEEMED TO REPRESENT THE INCOME UNDER EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. THEREFORE, THE AO LEVIED THE PENALTY FO R FURNISHING INACCURATE PARTICULARS OF ITS INCOME AND IMPOSED A PENALTY OF RS. 3,53,776/- @100% OF THE TAX SOUGHT TO BE EVADED VIDE ORDER DATED 30. 3.2014 PASSED U/S. 271(1)(C) OF THE ACT. 3. AGGRIEVED WITH THE PENALTY ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER 18.9.2015 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND CONFIRMED T HE PENALTY OF RS. 9,84,375/-. 4. AT THE TIME OF HEARING, LD. AUTHORISED REPRESENT ATIVE OF THE ASSESSEE, STATED THAT THE QUANTUM ADDITION ON WHI CH THE PENALTY HAS BEEN IMPOSED, HAS ALREADY BEEN DELETED BY THE ITAT IN ITA NO. 4193/DEL/2012 (AY 2006-07) & ITA NO. 85/DEL/2012 (A Y 2008-09) VIDE ORDER DATED 18.05.2017. IN THIS BEHALF HE FILED TH E COPY OF THE TRIBUNALS ORDER DATED 18.05.2017 IN ASSESSEES OWN CASE AND HE REQUESTED THAT PENALTY IN DISPUTE MAY BE DELETED. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT AO HAS LEVIED THE PENALTY U /S. 271(1) OF THE ACT AMOUNTING TO RS. 9,84,375/- ON THE GROUND OF EXCESS IVE INTEREST HAS BEEN PAID U/S. 40A(2)(B) OF THE ACT. WE FURTHER NOTE THA T IN ASSESSEES OWN CASE IN ITA NO. 4193/DEL/2012 (AY 2006-07) & ITA NO . 85/DEL/2012 (AY 2008-09) VIDE ORDER DATED 18.05.2017, THE TRIBUNAL HAD ADJUDICATED THE ISSUES VIDE PARA NO. 12 TO 17 AT PAGES 5 TO 7 AND DELETED THE QUANTUM ADDITIONS IN THIS REGARD. FOR THE SAKE OF CONVE NIENCE, WE ARE REPRODUCING THE RELEVANT PORTION OF THE TRIBUNAL OR DER DATED 18.5.2017 AS UNDER:- 12. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 13. IT IS OBSERVED THAT AUTHORITIES BELOW HAVE COMPARED BORROWING RATE WITH THE LENDING RATE. SECTION 40A(2)(B) OF THE ACT READS AS UNDER:- SECTION 40(A)2(B): WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE TO ANY PERSON REFERRED TO IN CLAUSE B OF THE SECTION WHICH IN THE OPINION OF ASSESSING OFFICER IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE 5 GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OF PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS DEDUCTION. 14. A PLAIN READING OF THE SECTION REVEALS THAT IT DEALS WITH EXPENDITURE INCURRED IN RESPECT OF ALL PAYMENTS MADE BY ASSESSEE TO ANY OTHER PERSON. IN THE FACTS OF THE PRESENT CASE, ASSESSING OFFICER IS ATTEMPTING TO DISALLOW INTEREST PAID BY ASSESSEE TO ANOTHER COMPANY BY HOLDING THAT RATE OF INTEREST IS EXCESSIVE IN COMPARISON WITH THE RATE AT WHICH ASSESSEE HAS ADVANCED MONEY TO OTHER COMPANIES. SUCH KIND OF COMPARISON UNDER THIS SECTION DEFEATS THE BASIC INTENT OF LEGISLATURE. 15. IT IS FURTHER OBSERVED THAT ASSESSING OFFICER HAS TO BASE HIS OPINION OF EXCESSIVENESS OR UNREASONABLENESS IN REGARD TO FAIR MARKET VALUE OF GOODS SERVICES OR FACILITIES FOR WHICH PAYMENT IS 6 MADE. IN THE PRESENT CASE, ASSESSING OFFICER DO NOT HAVE ANY MATERIALS ON RECORD IN RESPECT OF EXISTING MARKET RATE OF INTEREST, THAT WOULD BE APPLICABLE IN SIMILAR CIRCUMSTANCES THAT OF ASSESSEE. 16. IN A NUTSHELL ENTIRE ONUS LIES UPON ASSESSING OFFICER TO ESTABLISH THAT EXPENSES INCURRED BY ASSESSEE IS EXCESSIVE. IN THE FACTS OF PRESENT CASE ASSESSING OFFICER HAS NEITHER DONE ANY EXERCISE NOR HAS BROUGHT ANY MATERIAL /EVIDENCES ON RECORD BASED ON WHICH AN OPINION COULD BE FORMED FOR DISALLOWANCE OF EXPENSES INCURRED BY ASSESSEE. 17. IN OUR CONSIDERED OPINION DISALLOWANCE MADE IN THIS MANNER WILL NOT STAND TEST OF LAW. ACCORDINGLY, WE ALLOW THIS GROUND OF APPEAL RAISED BY ASSESSEE. 6.1 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE CASE, WE FIND THAT THE ADDITIONS ON WHICH THE PENALTY IN DISPUTE WAS LEVIED, HAS ALREADY BEEN DELETED BY THE ITAT VIDE ORDER DATED 18.5.2017 PASSED IN ITA NO. 4193/DEL/2012 (AY 2006-07) AND ITA NO. 85/DEL/2012 (AY 2008-09) IN ASSESSEES OWN CASE AS AFORESAID, HENCE, THE PENA LTY IN DISPUTE WILL NOT 7 SURVIVE. ACCORDINGLY, WE CANCEL THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENALTY IN DISPUTE BY ALLOWING THE APPEA L FILED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/10/2017. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 04/10/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY OR DER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES