P.Chhotalal Manufacturers & Exporte,r, Ahmedabad V. The Dy.CIT.,Circle-10, Ahmedabad

ITA 711/AHD/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6350 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N MASHRUWALA
• Section: 271(1)(c); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 711/AHD/2015 (ASSESSMENT YEAR: 2008-09) M/S. P. CHHOTALAL MANU & EXPORTER C/O. M/S. MADHUSUDAN C. MASHRUWALA & CO., CHARTERED ACCOUNTANTS AKIK, 301-303, OPP. LIONS HALL, MITHAKHALI, AHMEDABAD-380006 V/S DY. COMMISSIONER OF INCOME TAX, CIRCLE-10, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAEFP8511B APPELLANT BY : SHRI S.N. MASHRUWALA, AR RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 01 -11-201 8 DATE OF PRONOUNCEMENT : 01 -02-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) FOR CONFIRMING THE PENALTY U/S. 271(1)(C) OF THE AC T. ITA NO. 711/ AHD/2015 . A.Y. 2008-0 9 2 2. IN THIS CASE, SCRUTINY ASSESSMENT WAS COMPLETED U/S .!43(3) OF THE ACT ON 16/12/2010 DETERMINING THE TOTAL INCOME AT RS. 66,4 2,980/- AS AGAINST RETURNED INCOME OF RS.54,13,780/-. THE AO HAS MADE FOLLOWING ADDITIONS: 1. DISALLOWANCE OUT OF INTEREST EXPENSES - RS. 3,07,142/- 2. DISALLOWANCE U/S. 80(IB) - RS. 9,22,058/- 3. THE A.O. INITIATED PENALTY PROCEEDINGS U/S.271(L)( C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND ACCORDINGLY, P ENALTY NOTICE U/S 274 R.W.S. 271(L)(C) OF THE ACT WAS ISSUED ON 16/12/2010. BEIN G AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE PREFE RRED APPEAL BEFORE THE LD.CLT(A). THE LD.CIT(A)-XVL, AHMEDABAD VIDE HIS OR DER IN APPEAL NO.CLT(A)XVI/JCIT/R.10/619/10-LL DATED 01/11/2011 D ISMISSED THE APPEAL OF THE ASSESSEE ON DISALLOWANCE OF 80(IB) CLAIM AND INTEREST. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 30/ 01/2013 CALLING FOR ASSESSEE'S REPLY IF ANY FOR LEVY OF PENALTY. 4. CONSEQUENT TO THE ORDER OF LD.CLT(A), A FRESH OPPOR TUNITY VIDE LETTER DATED 02/01/2012 WAS ISSUED TO THE ASSESSEE GRANTING OPPO RTUNITY OF BEING HEARD IN THE MATTER OF LEVY OF PENALTY ON THE ISSUE CONFIRME D BY THE LD.CLT(A). SUBSEQUENTLY, DUE TO CHANGE OF INCUMBENT, ANOTHER L ETTER DATED 31/01/2013 WAS ISSUED AND SERVED ON THE ASSESSEE GRANTING ONE MORE OPPORTUNITY FOR MAKING ANY FURTHER SUBMISSION IN ADDITION TO THE EA RLIER SUBMISSION IN THE MATTER OF LEVY OF PENALTY. THE ASSESSEE VIDE HER LE TTER DATED 19/02/2013 HAS SUBMITTED REPLY IN COMPLIANCE TO NOTICE DATED 31/01 /2013 HAS FURNISHED THE FOLLOWING REPLY- WITH REFERENCE TO THE ABOVE AND ON BEHALF OF OUR CL IENT THE ASSESSEE ABOVE NAMED, WE REFER TO NOTICE U/S. 2 71 (L)(C) OF THE I . T. ACT FOR A. Y. 2008-09 AND WE HAVE TO STATE AS UNDER :- ITA NO. 711/ AHD/2015 . A.Y. 2008-0 9 3 THAT OUR CLIENT HAS NOT COMMITTED ANY DEFAULT FOR A .Y. 2008-09 UNDER IT. ACT AND HENCE PENALTY CANNOT BE LEVIED. THAT THE A.O. HAS DISALLOWED THE INTEREST OF RS. 30 7142/- FOR INTEREST FREE ADVANCES AND DISALLOWED DEDUCTION U/S. 801B OF RS. 9,22,058/-. 5. THE ASSESSEE CONTENTION IS AS FOLLOWS: 1. THAT THE AO HAS INITIATED THE PENALTY U/S. 271 (L)[C) OF THE ACT WITHOUT SPECIFYING AS TO WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME. IT IS SUBMITTED THAT THE INITIATION OF THE PENALTY PROCEEDINGS U/S. 271(L)(C) OF THE ACT WITHOUT SPECIFYING AS TO WHETHER ASSESSE E IS GUILTY OF CONCEALING THE PARTICULARS OF INCOME OR GUILTY OF FURNISHING INACC URATE PARTICULARS OF INCOME IS PATENTLY BAD AND ILLEGAL AND REQUIRES TO BE QUASHED AND NO PENALTY CAN BE LEVIED ON SUCH INITIATION RELIANCE IS PLACE ON CIT V/S. MA NU ENGINEERING WORKS 1221TR 306(GUJ). 2. THE ASSESSEE FURTHER SUBMITS THAT AO HAS NOT G IVEN ANY INDEPENDENT FINDINGS TO THE DEMONSTRATE THAT THE ASSESSEE HAS EITHER CON CEALED OR FURNISHED INACCURATE PARTICULARS OF INCOME. 3. THE ASSESSEE FULLY AND TRULY DISCLOSED ALL THE FACTS AS WELL AS ALL THE DETAILS REQUIRED BY AO WERE SUBMITTED AT THE TIME OF HEARIN G. THE AO HAS NOT POINTED OUT ANY DEFECTS IN BOOKS OF ACCOUNT AND MERELY DISA LLOWING ANY EXPENSE OR INCOME DOES NOT ATTRACT PENALTY. 4. THE ASSESSEE RELIES ON THE DECISION OF NATIONA L TEXTILE V/S. CIT 249 ITR 125 WHEREIN IT IS HELD THAT THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPR ESENT THE ASSESSEE INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT TH E AMOUNT HAS BEEN ASSESSED AS INCOME AND CIRCUMSTANCES MUST SHOW THAT THERE WAS A NIMUS I.E. CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PART ICULARS ON THE PART OF THE ASSESSEE. 5. THE RATIO OF ABOVE JUDGMENT SQUARELY APPLIES T O THE ASSESSEE. THAT MERELY BECAUSE THERE IS ADDITION TO INCOME DOES NOT MAKE T HE CONTENTION OF THE ASSESSEE FALSE. 6. PENALTY U/S. 271(L)(C) EXPLN - CONCEALMENT DEE MING FICTION CONTAINED IN EXPL.L WILL NOT APPLY IF THE EXPLANATION GIVEN BY THE ASSE SSEE WHICH HE COULD NOT SUBSTANTIATE IS OTHERWISE BONAFIDE AND IF HE HAS DI SCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME. IN THE ASSESSEE'S CASE ALL THE FACTS AND DETAILS WERE GIVEN FOR INTER EST FREE LOAN AND CLAIM UNDER SECTION 801B. BUT THE EXPLANATION OFFERED WAS REJEC TED, THERE WOULD ARISEN NO ITA NO. 711/ AHD/2015 . A.Y. 2008-0 9 4 PRESUMPTION OF CONCEALMENT OF THE PARTICULARS OF IN COME THAT WAS ADDED OR DISALLOWED. 7. THEREFORE, WE OBJECT TO YOUR PROPOSAL TO LEVY TH E PENALTY U/S. 271(L)(C) OF THE L.T. ACT ON ADDITIONS MADE BY AO FOR REASONS MENTIO NED ABOVE. 6. THE REPLY OF THE ASSESSEE CAREFULLY CONSIDERED HOWE VER THE SAME IS NOT ACCEPTED. IN VIEW OF THE FOLLOWING FACTS OF THE CAS E : 7. BEFORE A DISCUSSION IN RESPECT OF THE LEVIABILITY O F PENALTY IN THE CASE OF THE ASSESSEE IS UNDERTAKEN A LOOK AT THE PENALTY PROVIS IONS IS NECESSARY. SECTION 271(L)(C) READS AS UNDER: [FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, C ONCEALMENT OF INCOME, ETC. 271.(1) IF THE [ASSESSING] OFFICER OR THE [***] [CO MMISSIONER (APPEALS}] [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT, IS SATISFIED THAT ANY PERSON- . (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR [* * *] FURNISHED INACCURATE PARTICULARS OF [SUCH INCOME, OR] [(III) IN THE CASES REFERRED TO IN CLAUSE (C) [OR C LAUSE (D)], [IN ADDITION TO TAX, IF ANY, PAYABLE] BY HIM, A SUM WHICH SHALL NOT BE LESS THAN , BUT WHICH SHALL NOT EXCEED [THREE TIMES], THE AMOUNT OF TAX SOUGHT TO BE EVADE D BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME [OR FRINGE BENEFITS] OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. 8. DURING THE ASSESSMENT PROCEEDINGS, THE AO VIDE PAR A.3 & 4 OF THE ASSESSMENT ORDER OBSERVED AS UNDER. ITA NO. 711/ AHD/2015 . A.Y. 2008-0 9 5 9. THE ASSESSEE HAS GIVEN INTEREST FREE LOANS TO THE A FORESAID PERSONS AND NOT CHARGED INTEREST ON THE FUNDS GIVEN AND TO THAT EXT ENT INTEREST BEARING FUNDS ARE NOT UTILIZED FOR THE BUSINESS PURPOSE OF THE ASSESS EE. THE CONTENTION OF THE ASSESSEE FOR NOT CHARGING INTEREST IS NOT CONVINCIN G AND THAT PART OF THE INTEREST EXPENSES ARE REQUIRED TO BE DISALLOWED. THE INTERES T @11% ON THE ADVANCES GIVEN TO P. CHHOTALAL EXTRUSION WORKS COMES TO RS. 2,94,406/- AND IN THE CASE OF SHAH ALTUBE PVT. LTD. IT COMES TO RS. 12,736/-. ACCORDINGLY, RS. 3,07,142/- OUT OF THE INTEREST EXPENSES CLAIMED ARE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. INITIATE PENALTY PROCEEDING S U/S. 271(L)(C) OF THE L.T. ACT. (ADDITION RS. 3,07,142/-). 10. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE A.O. 11. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. IN THIS CASE, A.O. HAS DISALLOWED THE INTEREST OF RS. 3,70,142/- FOR INTEREST FREE ADVANCES AND DISALLOWED DEDUCTION UNDER 80IB(10). IT IS A WELL SETTLED LAW THAT FOR DISALLOWANCE OF ANY CLAIM CANNOT BE A GROUND FOR PE NALTY. THOUGH, SAME CAN BE GOOD FOR THE PURPOSE OF MAKING ADDITION WHEREAS IN SUCH CASES, PENALTY CANNOT BE LEVIED AS IT HAS BEEN HELD IN SEVERAL JUDGMENTS OF THE HIGHER FORUM THAT IF ANY CLAIM MADE BY THE ASSESSEE IS NOT ACCEPTABLE TO THE DEPARTMENT , SAME CANNOT BE GROUND FOR LEVYING THE PENALTY. THOUGH, A DDITION CAN BE MADE ON THAT BASIS OR SUCH CLAIM CAN BE DISALLOWED BY THE R EVENUE AUTHORITY. 12. AS WE CAN SEE, IN THIS CASE, ASSESSEE HAS GIVEN ALL STATEMENT WITH REGARD TO HIS CLAIM BUT REVENUE AUTHORITY HAS NOT ACCEPTED THE CL AIM OF THE ASSESSEE THAT ITA NO. 711/ AHD/2015 . A.Y. 2008-0 9 6 CANNOT BE A GROUND FOR LEVYING THE PENALTY. THUS, W E DELETE THE PENALTY WAS CONFIRMED OF THE LD. CIT(A). 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 01- 02- 2019 SD/- SD/- (PRAMOD KUMAR) (MAHAVIR PRASAD) VICE PRESIDENT TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 01/2/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD