DCIT, Ludhiana V. M/s C.R. Auluck & Sons (P) Ltd., Ludhiana

ITA 61/CHANDI/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1368 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMOD VATS
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 61/CHD/2011 ASSESSMENT YEAR: 2005-06 THE DCIT, VS M/S C.R. AULUCK & SONS (P) LTD., CIRCLE-VII, LUDHIANA LUDHIANA PAN NO. AAACC6757F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAMOD VATS RESPONDENT BY: SMT SARITA KUMARI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A)-II, LUDHIANA DATED 22.11.2010 RELATING TO ASSESSMENT YE AR 2005-06 AGAINST THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE I.T. ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A)-II L D. HAS ERRED IN DELETING THE PENALTY OF RS. 5,42,550/- LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT. 2. THAT THE ORDER OF LD. CIT(A), LUDHIANA BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT WHILE COMPL ETING THE ASSESSMENT THE ASSESSEE WAS FOUND TO HAVE ADVANCED INTEREST FR EE LOANS TO ITS SISTER CONCERN ON WHICH THE ASSESSEE WAS ASKED TO EXPLAIN WHY PROPORTIONATE AMOUNT OF INTEREST BE NOT DISALLOWED U/S 36(1)(III) OF THE INCOME TAX ACT AS INTEREST WAS BEING PAID ON BORROWED FUNDS. THE ASSESSING OFFICER PLACING RELIANCE ON THE RATIO LAID DOWN BY THE HON' BLE SUPREME COURT IN M/S S.A. BUILDERS LTD VS. CIT [206 CTR (SC) 631] OB SERVED THAT THE COMMERCIAL EXPEDIENCY OF THE CONCERN WHICH HAD ADVA NCED INTEREST FREE LOANS HAD TO BE SEEN. IN THE CASE OF THE ASSESSEE AS THERE WAS NO SUCH COMMERCIAL EXPEDIENCY, INTEREST AT THE RATE OF 12% AMOUNTING TO RS. 14,82,695/- WAS DISALLOWED U/S 36(1)(III) OF THE AC T. PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED ON THE SAID DISALLO WANCE HOLDING THE ASSESSEE TO HAVE FURNISHED INACCURATE PARTICULARS O F INCOME. PENALTY OF RS. 582,550/- WAS LEVIED U/S 271(1)(C) OF THE ACT. THE CIT(A) NOTED THE ASSESSEE TO HAVE DISCLOSED THE LOANS ADVANCED TO TH E SISTER CONCERN IN THE BALANCE SHEET ACCOMPANYING THE RETURN OF INCOME AND ALSO THE CLAIM OF INTEREST WAS REFLECTED IN THE AUDITED ACCOUNTS. TH E CIT(A) FURTHER NOTED THE ASSESSEE TO HAVE SUBMITTED AN EXPLANATION FOR A DVANCING THE SAID LOAN TO ITS SISTER CONCERN. THE CIT(A) THUS HELD THAT A LL THE PARTICULARS WERE DISCLOSED WHILE FILING THE RETURN OF INCOME. REL YING ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT VS RELIANC E PETRO PRODUCTS PVT LTD [332 ITR 158 (SC)], THE ASSESSING OFFICER W AS DIRECTED TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IN THE INSTANT CASE, THE PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED ON THE ESTIMATED DISALLOWANCE MADE BY THE ASSESSING OFFICE R ON ACCOUNT OF 3 INTEREST RELATABLE TO THE INTEREST FREE ADVANCES MA DE TO THE SISTER CONCERN. COMPLETE DETAILS OF INTEREST FREE ADVANCES MADE TO THE SISTER CONCERN WERE DISCLOSED IN THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME AND ALSO THE INTEREST CLAIMED AS DEDUCTION WAS REFLECTE D IN THE AUDITED ACCOUNTS FILED BY THE ASSESSEE. THE DISALLOWANCE WAS MADE FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN S.A. BUILDER LTD VS. CIT [(2006) 206 CTR (SC) 631] AND HON'BLE PUNJAB & HARYANA HIGH COURT CIT VS. ABHISHEK INDUSTRIES LTD [(2006) 156 T AXMAN 257 (P&H)]. SUCH DISALLOWANCE ON ESTIMATE BASIS CANNOT BE HELD TO BE EQUATED TO HAVING FURNISHED INACCURATE PARTICULARS OF INCOME. FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN RELIANCE PETRO PRODUCTS PVT LTD (SUPRA), WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) THAT THERE IS NO MERIT IN THE LEVY OF PENALTY U/S 271(1)(C) IN THE S AID CIRCUMSTANCES. THE GROUND OF APPEAL RAISED BY THE REVENUE IS THUS DISM ISSED 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF FEBRUARY, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH FEBRUARY, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 4