Noida Roll Bridge Company Ltd., Gautam Buidh Nagar V. DCIT, New Delhi

ITA 734/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3959 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RA J TANDON
• Assessee Lawyers: VIKAS SRIVASTAVA
• Keywords: Depreciation; Wrong claim
• Section: 43B; 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NO. 734(DEL)/2010 ASSESSMENT YEAR: 2003-04 NOIDA TOLL BRIDGE CO. LTD., DE PUTY COMMISSIONER OF INCOME DND FLYOVER, NOIDA. VS. TAX, C IRCLE 13(1), NEW DELHI. PAN-AAACN3498A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIKAS SRIVASTAVA , C.A. RESPONDENT BY : SHRI RAJ TANDON, CIT-DR ORDER PER K.G. BANSAL : AM THE FACTS OF THE CASE ARE THAT THE ORIGINAL RE TURN WAS FILED ON 2.12.2003 DECLARING LOSS OF RS. 54,05,37,910/-. T HE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 24.2.2006 AT LOS S OF RS. 19,49,39,431/-. THEREAFTER, THE ASSESSMENT WAS REOPENED U/S 14 7 ON THE GROUND THAT THE INTEREST PAYABLE TO BANKS AND FINANCIAL INSTITUT IONS, PROVIDED IN THE BOOKS BUT NOT ACTUALLY PAID, IS NOT DEDUCTIBLE U/S 4 3B. HOWEVER, THE ASSESSEE HAD CLAIMED DEDUCTION OF SUCH AMOUNT IN CONTRAVEN TION OF THE PROVISION CONTAINED IN SECTION 43B. THEREFORE, A NOTICE WAS ISSUED U/S 148 ON 21.3.2007. THE REASONS RECORDED FOR REOPENIN G THE ASSESSMENT WERE FORWARDED TO THE ASSESSEE ON 12.7.2007. THE OBJ ECTIONS FILED BY THE ITA NO. 734(DEL)/2010 2 ASSESSEE WERE DISPOSED OFF ON 13.11.2007. THE AS SESSEE FILED RETURN ON 14.4.2007 DECLARING TOTAL LOSS OF RS. 43,40,39,4 50/-. IN THE COURSE OF RE- ASSESSMENT PROCEEDINGS, THE AMOUNT NOT DEDUCTIBLE U/S 43B WAS WORKED OUT AT RS. 10,64,98,451/-, THE DETAILS OF WHICH A RE AS UNDER:- S.NO. PARTICULARS TOTAL INTEREST ON TERM LOAN FUNDED INTEREST CONVERTED INTO TERM LOAN BALANCE PAID WITHIN THE STIPULATED TIME U/S 43B OF THE ACT. 1. BANKS 11,59,26,200 8,84,15,891 2,75,10,309 2. FINANCIAL INSTITUTIONS 2,66,18,296 1,80,82,570 8 5,36,356 TOTAL 14,25,45,126 10,64,98,461 3,60,46,665 THE LOSS WAS EARLIER DETERMINED U/S 250 READ WI TH SECTION 143(3) ON 17.10.2006 AT RS. 52,87,35,987/-. AFTER DEDUCTI NG THE AMOUNT NOT ALLOWABLE U/S 43B, THE LOSS WAS FINALLY DETER MINED AT RS. 42,22,37,530/-. THIS ORDER HAS BECOME FINAL. 1.1 PENALTY PROCEEDINGS WERE ALSO INITIATED U/S 271(1)(C) OF THE ACT. THE PROCEEDINGS WERE DISPOSED OFF ON 30.05.200 8 BY LEVYING THE MINIMUM PENALTY OF RS. 3.95 CRORE BY HOLDING TH AT THE ASSESSEE HAD NOT VOLUNTARILY SURRENDERED THE AFORESAID AMOUNT FOR TAXATION ALTHOUGH IT WAS DISALLOWABLE U/S 43B. ITA NO. 734(DEL)/2010 3 2. IN PROCEEDINGS BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTED THAT THE RETURN OF INCOME WAS ACCOMPANIED BY AUDITED FINANCIAL STATEMENTS AND TAX AUDIT REPORT. IN THE NOTES TO THE ACCOU NTS, THE REQUIRED PARTICULARS WERE DISCLOSED. IT WAS FURTHER SUBMITTED THA T SECTION 43B OF THE ACT WAS AMENDED BY FINANCE ACT, 2006 RETROSPECTIVELY W.E.F . 01.04.1989, UNDER WHICH EXPLANATIONS 3C AND 3D WERE INTRODUCED. IT WAS CLARIFIED THAT CONVERSION OF OUTSTANDING INTEREST PAYABLE TO B ANKS AND FINANCIAL INSTITUTIONS INTO LOANS SHALL NOT BE ALLOWED AS A DEDUCTION UNTIL SUCH INTEREST (NOW LOAN) IS NOT ACTUALLY PAID. IT WA S ALSO SUBMITTED THAT THE EXPLANATION OF THE ASSESSEE SHOULD BE CONSIDERED TO BE BONA FIDE ON THIS GROUND. THE LD. CIT(APPEALS) CONSIDERED THE FAC TS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM. HE WAS OF THE VIEW THAT SECTION 43B EMPLOYS THE WORDS ACTUAL PAYMENT, WHICH CANNOT BE EQUATED WITH CONSTRUCTIVE PAYMENT, WHEN INTEREST IS CONVERT ED INTO LOAN. THEREFORE, THE AMENDMENT WAS ONLY CLARIFICATORY IN NATURE A ND EVEN IN ABSENCE OF SUCH A CLARIFICATION, THE ASSESSEE WAS NOT ENTIT LED TO DEDUCTION OF INTEREST WHICH WAS NOT ACTUALLY PAID, BUT CONVERTED INTO LOAN. 2.1 IT WAS ALSO SUBMITTED BEFORE HIM THAT THE AS SESSEE VOLUNTARILY SURRENDERED THE AFORESAID AMOUNT VIDE ITS LET TER DATED 22.9.2006. AFTER ITA NO. 734(DEL)/2010 4 PERUSING THE RECORD OF THIS AND THE NEXT YEARS, IT WAS FOUND THAT RE- ASSESSMENT PROCEEDINGS WERE INITIATED IN THE MONT H OF MARCH, 2007, WHILE SECTION 43B WAS AMENDED IN THE YEAR 2006. THE RE WAS NO EVIDENCE IN THE RECORD OF THIS OR IMMEDIATELY SUCCEEDING YEA R THAT THE AMOUNT WAS SURRENDERED VOLUNTARILY BY THE ASSESSEE. ON THE OTHER HAND, THE ASSESSEE OBJECTED TO REOPENING THE ASSESSMENT WHICH SHO WS THAT THE AVERMENT REGARDING VOLUNTARY SURRENDER WAS WRONG. 2.2 THE LD. CIT(A) REFERRED TO THE DECISION IN T HE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS, 306 IT R 277(SC), IN WHICH IT HAS BEEN HELD THAT THE LEVY UNDER SECTION 271(1 )(C) IS CIVIL IN NATURE, WHICH HAS TO BE DECIDED ON THE BONA-FIDES OF THE EX PLANATION OF THE ASSESSEE. SINCE THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND TO BE BONA FIDE, THE LEVY OF PENALTY HAS BEEN UPHELD. 3. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ORIGINAL RETURN WAS FILED ON 2.12.2003. THIS RETURN WAS ACCOMPANIED BY TAX AUDIT REPORT IN FORM 3CD. NOTE NO. 2 WAS APPEND ED IN ANNEXURE 7 OF THIS FORM STATES THAT AS PER TERMS OF RESTRUCTURING APPROVED BY THE CORPORATE DEBT RESTRUCTURING EMPOWERED GROUP OF THE BANKS AN D FINANCIAL INSTITUTIONS, ITA NO. 734(DEL)/2010 5 IN THE CASE OF BANK, THE FUNDED INTEREST WAS ADDED TO THE PRINCIPAL AND WAS TO BE REPAID ALONG WITH ORIGINAL TERM LOAN AND WAS TO CARRY INTEREST @ 8.5%. FOR FINANCIAL INSTITUTIONS, THE FUNDED INTEREST SHALL NOT CARRY ANY INTEREST AND SHALL BE REPAID IN THE YEAR 2006-07. IT FURTHER STATES THAT THE ABOVE STRUCTURE HAS BEEN WORKED OUT KEEPING IN MI ND THE OVERALL RETURN OF 8.5% FOR EACH LENDER. ACCORDING TO THE LD. COUNSE L, THIS NOTE MADE FULL DISCLOSURE OF THE TRANSACTION THAT THE INTEREST WAS CONVERTED INTO LOAN WITH OR WITHOUT INTEREST, AS THE CASE MAY BE. THE O RIGINAL ASSESSMENT WAS COMPLETED ON 24.2.2006, IN WHICH THE CONVERSIO N OF INTEREST INTO LOAN WAS ALLOWED. AFTER AMENDMENT IN SECTION 43B, T HE ASSESSEE WROTE A LETTER DATED 11.9.2006, PLACED IN THE PAPER BOOK ON PAGE NOS. 130 TO 132, IN WHICH A STATEMENT HAS BEEN MADE REGARDING THE AFORESAID AMENDMENT AND IT IS MENTIONED THAT THE ASSESSEE-COMPANY WI LL LIKE TO WITHDRAW VOLUNTARILY ITS EARLIER CLAIM AMOUNTING TO RS. 10 .64 CRORE. THE REVISED COMPUTATION OF INCOME WAS ALSO FURNISHED. ON THE BASIS OF THIS LETTER, THE CASE OF THE LD. COUNSEL IS THAT AFTER THE AMENDM ENT, THE ASSESSEE VOLUNTARILY WITHDREW THE CLAIM. BEFORE THE A MENDMENT, A BONA FIDE BELIEF EXISTED IN THE MIND OF THE ASSESSEE THAT THE CONSTRUCTIVE PAYMENT, AS ABOVE, IS DEDUCTIBLE IN COMPUTING THE TOTAL INCOME U/S 43B ON THE DATE ON WHICH INTEREST WAS CONVERTED INTO LOAN. ITA NO. 734(DEL)/2010 6 3.1 IN REPLY, THE LD. DR DREW OUR ATTENTION TOW ARDS THE DISCUSSION ON PAGE 4 OF THE ASSESSMENT ORDER, WHERE IT IS MENT IONED THAT IT IS THE SUBMISSION OF THE ASSESSEE THAT IT VOLUNTARILY OF FERED THE AMOUNT FOR TAXATION IN LETTER DATED 22.9.2006, BUT IT IS NO T CORRECT. THE ISSUE WAS POINTED OUT TO THE ASSESSEE IN THE PROCEEDINGS OF ASSESSMENT YEAR 2004- 05, BEING THE IMMEDIATELY SUCCEEDING YEAR, IN O RDER-SHEET NOTE DATED 22.8.2006. THUS, THE FINDING IS THAT THE LETTER WAS FILED AFTER THE MATTER WAS BROUGHT TO THE NOTICE OF THE ASSESSEE. OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS THE FINDINGS OF THE LD. CIT(APPEAL S) THAT :- (I) THE LEVY OF PENALTY IS A CIVIL LIABILITY AND TH E DECISION IN THE CASE OF DILIP N. SHROFF DOES NOT LAY DOWN THE CORR ECT LAW; (II) EVEN BEFORE THE AMENDMENT, THE DEDUCTION WAS BA SED ON ACTUAL PAYMENT AND CONSTRUCTIVE PAYMENT CANNOT BE EQUAT ED WITH ACTUAL PAYMENT; ITA NO. 734(DEL)/2010 7 (III) THE AMENDMENTS WERE CLARIFICATORY IN NATURE WH ICH IS CLEAR FROM THE OPENING WORDS OF THE EXPLANATION- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED; AND (IV) THE RECORDS DO NOT SHOW THAT THE AMOUNT WAS SUR RENDERED VOLUNTARILY. 3.2 THUS, IT IS ARGUED THAT THE ASSESSEE FAILED TO SUBMIT FULL AND CORRECT FACTS IN THE ORIGINAL RETURN AND THE CLAIM IN RESPE CT OF CONSTRUCTIVE PAYMENTS WAS WITHDRAWN IN THE RETURN FILED U/S 1 48 ONLY AFTER THE ASSESSEE HAD BEEN APPRAISED ABOUT THE CORRECT P OSITION. THUS, THE EXPLANATION OF THE ASSESSEE IS NOT BONA FIDE. 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE HAD FILED ORIGINAL RETURN ON 2.12.2003 DECLARING LOSS OF ABOUT RS. 54.05 CR ORE, IN WHICH DEDUCTION OF INTEREST WAS CLAIMED AT ABOUT RS. 10.65 CRORE. THIS INTEREST WAS NOT ACTUALLY PAID TO THE BANKS AND FINANCIAL INSTITUT IONS. THE CLAIM WAS BASED ON THE FACT THAT THIS INTEREST WAS CONVERTED INTO LOAN. THE AUDIT REPORT DID CONTAIN A NOTE ABOUT SUCH CONVERSION. SUBSE QUENTLY, WHILE EXAMINING ITA NO. 734(DEL)/2010 8 THE RETURN FOR ASSESSMENT YEAR 2004-05, IT W AS NOTICED BY THE AO THAT THE CLAIM HAS BEEN WRONGLY MADE IN VIEW OF AMENDME NT IN SECTION 43B, MADE BY FINANCE ACT, 2006, RETROSPECTIVELY WITH EFFECT FROM 01.04.1989, UNDER WHICH IT HAS BEEN ENACTED THAT CONVERSIO N OF INTEREST INTO LOAN OR BORROWING SHALL NOT BE DEEMED TO BE THE ACTUAL PAYMENT. THE AMENDMENT IS CLEARLY EXPLANATORY IN NATURE AS THE OPENING WORDS OF THE EXPLANATION ARE FOR THE REMOVAL OF DOUBTS, IT I S HEREBY DECLARED.. THEREFORE, NOTICE U/S 148 WAS ISSUED. A RETURN W AS FILED IN RESPONSE TO THIS NOTICE, IN WHICH THE CLAIM WAS WITHDRAWN. THE Q UESTION IS THAT WHETHER THE ASSESSEE IS LIABLE TO BE PENALIZED UNDER SECT ION 271(1)(C) OF THE ACT? 4.1 WE MAY DEAL WITH VARIOUS DECIDED CASES ON WHICH THE RIVAL PARTIES HAVE RELIED UPON. IN THE CASE OF CI T VS. BASSEIN METALS (P) LTD., (2003) 263 ITR 518, THE FACTS ARE THAT THE ASSESSEE MAINTAINED A SEPARATE ACCOUNT IN RESPECT OF SALES-TAX. THE CASE OF THE ASSESSEE WAS THAT SINCE A SEPARATE ACCOUNT HAD BEEN MAINT AINED, IT HAD NO EFFECT ON PROFIT AND LOSS ACCOUNT. THE ITO DISALLOWED T HE DEDUCTION OF RS. 5.78 LAKH, BEING THE SALES-TAX COLLECTED BY THE ASS ESSEE BUT NOT PAID EVEN TILL THE DUE DATE OF FILING THE RETURN U/S 139(1), AL THOUGH THE AMOUNT WAS PAYABLE WITHIN 30 DAYS OF THE END OF THE QU ARTER. THE HONBLE COURT ITA NO. 734(DEL)/2010 9 DISTINGUISHED THE FACTS OF THE CASE OF ALLIED MOTORS LTD. VS. CIT, (1997) 224 ITR 677 (SC) AND MENTIONED THAT SECTION 43B HAS NO APPLICATION TO THE FACTS OF THE CASE. IN THIS CASE, THE ASSE SSEE HAD COLLECTED SALES-TAX BUT FAILED TO PAY THE SAME. THUS, THERE IS NO QUESTION OF DISALLOWANCE OR APPLICABILITY OF SECTION 43B. ON THE FACTS, T HE PROVISION CONTAINED IN SECTION 271(1)(C) IS APPLICABLE. HAVING CONSIDERE D THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE SAME ARE DISTINGUIS HABLE. IN THIS CASE, THERE IS NO QUESTION OF COLLECTION OF ANY INTEREST. THE ASSESSEE WAS ADMITTEDLY LIABLE TO PAY THE INTEREST OF ABOUT RS. 10.65 CR ORE TO THE BANKS AND FINANCIAL INSTITUTIONS. INSTEAD OF ACTUALLY PAY ING THE AMOUNT, IT WAS CONVERTED INTO LOAN. THIS ONLY AMOUNTS TO CONVE RSION OF ONE KIND OF LIABILITY INTO ANOTHER KIND OF LIABILITY. 4.2 THE LD. COUNSEL HAS ALSO POINTED OUT THAT ON THE DATE ON WHICH THE ORIGINAL RETURN OF INCOME WAS FILED, BONA FIDE DISPUTE EXISTED AS TO WHETHER SUCH CONVERSION AMOUNTED TO CONSTRUCTI VE PAYMENT AND, THEREFORE, DEDUCTIBLE UNDER SECTION 43B. FOR TH IS PURPOSE, RELIANCE HAS BEEN PLACED ON THE DECISION IN THE CASE OF DE PUTY CIT VS. EICHER TRACTORS LTD., (2003) 79 TTJ (DEL) 158, IN WHICH SIMILAR MATTER HAS BEEN ITA NO. 734(DEL)/2010 10 DECIDED AGAINST THE REVENUE. FOR THE SAKE OF R EADY REFERENCE, THE RELEVANT PARAGRAPH NOS. 28 AND 29 ARE REPRODUCE D BELOW:- 28. AFTER EXAMINING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE CIT(A) DOE S NOT REQUIRE ANY INTERFERENCE ON OUR PART SINCE THE MAJO RITY OPINION EXPRESSED BY VARIOUS BENCHES OF THE TRIBUNAL IS IN FAVOUR OF THE RESPONDENT. THE SOLITARY DECISION, WHICH IS IN FAVOUR OF THE REVENUE AND WHICH HAS BEEN HEAVILY RELIED UPON IS THAT OF THE INDORE BENCH (SUPRA). ALL THAT WE WOULD LIKE TO OBSERVE IS THAT IN ARGUING THE SAID APPEAL THE ASSESSEE HAD PLACED RELIANCE ON THE DECISIONS OF THE TRIBUN AL IN (1992) 44 TTJ 261 (DEL) (SUPRA), SUNIL SILK MILLS LTD. VS. DY. CVIT (1993) 46 ITD 4 (BOM.), 55 TTJ 375 (PUNE) (SUPRA) AND SUBHRA MOTEL (P) LTD. VS. CIT (1998) 64 ITD 134 (DEL) BUT NONE OF THEM ARE DISCUSSED IN THE SAID OR DER ALTHOUGH SPECIFICALLY NOTED IN PARA 4 AT P. 181 OF THE REPORT. 29. UNDER THE AFORESAID CIRCUMSTANCES, WE UPH OLD THE ACTION OF THE CIT(A) WHEREBY HE HAS DIRECTED TH E AO TO ALLOW THE REQUISITE RELIEF SUBJECT TO VERIFIC ATION OF THE FACTS AND FIGURES. AS WE HAVE UPHELD THE VIEW OF THE CIT(A) ON THE MAIN GROUND. WE SAY NOTHING ABOUT THE ALT ERNATIVE STAND TAKEN BY THE ASSESSEE. GROUND NO. 6 IN THE REVENUES APPEAL IS ACCORDINGLY REJECTED. 4.3 FURTHER, RELIANCE HAS BEEN PLACED ON THE D ECISION IN THE CASE OF CIT VS. ZOOM COMMUNICATION P. LTD., (2010) 327 I TR 510 (DEL). THE FACTS OF THE CASE ARE THAT TWO SUMS OF RS. 1,21,4 9,861/- AND OF RS. 1.00 LAKH HAD BEEN DEBITED IN THE PROFIT AND LOSS AC COUNT AS EQUIPMENT WRITTEN OFF AND INCOME-TAX PAID. THE AMOUNTS WE RE CLUBBED IN A SCHEDULE RELATING TO ADMINISTRATIVE AND OTHER EXP ENSES. THE AMOUNTS WERE ITA NO. 734(DEL)/2010 11 DISALLOWED WITH THE CONSENT OF THE ASSESSEE AND P ENALTY WAS ALSO LEVIED. THE EXPLANATION OF THE ASSESSEE WAS THAT THE MIS TAKE WAS ON ACCOUNT OF OVERSIGHT. THE TRIBUNAL DELETED THE PENALTY. IN RESPECT OF EQUIPMENT WRITTEN OFF, IT WAS MENTIONED THAT THE ASSESSEE COULD CLAIM DEDUCTION OF DEPRECIATION UNDER SECTION 32(1)(III). THE HONBLE COURT DISMISSED THIS ARGUMENT BY MENTIONING THAT THE REAL QUESTION IS AS TO WHETHER THE EXPLANATION FURNISHED BY THE ASSESSEE IS BONA FID E OR NOT. IT WAS NOT EXPLAINED AS TO WHO HAS COMMITTED THE OVERSIGHT . THE CIRCUMSTANCES IN WHICH THE OVERSIGHT HAS BEEN COMMITTED HAVE ALS O NOT BEEN EXPLAINED. IT IS ALSO MENTIONED THAT ONLY A FEW CASES ARE PI CKED UP FOR SCRUTINY. IN SUCH A SITUATION, IF AN ASSESSEE MAKES A TOTALLY UNTENABLE CLAIM, IT WILL BE DIFFICULT TO HOLD THAT HE IS STILL NOT LIABLE TO P ENALTY. ON CONSIDERATION OF THE FACTS OF THE CASE, WE ARE AGAIN OF THE VIEW THA T THESE ARE DISTINGUISHABLE. INCOME-TAX IS NOT AN EXPENDITURE INCURRED FOR EA RNING THE INCOME. SUCH A CLAIM IS INADMISSIBLE ON PRINCIPLES OF ACCOUNTANC Y AS WELL AS THE STATUTORY PROVISION IN THE MATTER. FURTHER, UNDER THE CONCE PT OF BLOCK OF ASSETS, THE AMOUNT WRITTEN OFF IN THE BOOKS CANNOT BE DEDUCT ED FROM PROFITS. THEREFORE, IT WAS INCUMBENT ON THE ASSESSEE TO DISALLOW THE AMOUNT. THE FAILURE TO DO SO WAS NOT SATISFACTORILY EXPLAIN ED. IN THE INSTANT CASE ALTHOUGH THE PROVISION CONTAINED IN SECTION 43B USES THE WORDS ACTUALLY ITA NO. 734(DEL)/2010 12 PAID, THERE WAS A CONTROVERSY SUBSISTING ABO UT THE IMPORT OF THIS TERM IN A CASE WHERE INTEREST HAS BEEN CONVERTED I NTO LOAN. IT MAY BE MENTIONED THAT THE DECISION IN THE CASE OF EICHE R TRACTORS LTD. (SUPRA) WAS RENDERED BY THE TRIBUNAL ON 01.10.2002, PRI OR TO DATE OF FILING OF THE ORIGINAL RETURN. THEREFORE, THE EXPLANATION THAT A VALID CONTROVERSY SUBSISTED IN THE MATTER OF DISALLOWANCE CANNOT BE OVERLOOKED. IN VIEW THEREOF, THE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE WHOLLY UNTENABLE. IT HAD THE FOUNDATION IN THE DECISION OF THE TRIBUNAL . 4.4 IN THE CASE OF CIT VS. ESCORTS FINANCE LTD. , (2010) 328 ITR 44 (DEL), THE HONBLE COURT SUSTAINED THE LEVY OF P ENALTY IN RESPECT OF PRIMA FACIE INADMISSIBLE CLAIM FOR DEDUCTION U/S 35D OF THE ACT. THE REASON WAS STATED TO BE THAT THE LEVY OF PENALTY IS CI VIL IN NATURE AND THE CLAIM MADE BY THE ASSESSEE WAS INADMISSIBLE ON THE FAC E OF IT. HOWEVER, THE QUESTION OF DEDUCTION U/S 43B IN THIS CASE WA S NOT FULLY SETTLED AND MAJORITY OF DECISIONS WERE IN FAVOUR OF THE AS SESSEE, AS POINTED OUT IN THE CASE OF EICHER TRACTORS LTD. 4.5 THE FACTS IN THE CASE OF B.B. SAHU VS. CI T, (1993) 199 ITR 212, ARE THAT THE ASSESSEE FILED RETURN OF INCOME IN WHICH IT WAS INDICATED THAT ITA NO. 734(DEL)/2010 13 A SUM OF RS. 16,725/- RECEIVED BY HIM AS MANAG ING DIRECTOR OF M/S SAHU MINERALS (P) LTD. HAD BEEN SHOWN IN THE HAN DS OF HIS WIFE UNDER THE PROVISION CONTAINED IN SECTION 64(1)(II). TH E AMOUNT WAS ASSESSED IN THE HANDS OF THE ASSESSEE. THE HONBLE COURT MENTI ONED THAT UNFORTUNATELY THE TRIBUNAL DID NOT CONSIDER THE APPLICABILITY OF THE PROVISION ON WHICH THE DEPARTMENTAL AUTHORITIES BASED THEIR CONCLUS ION. IF THE PROVISO HAS APPLICATION, THE QUESTION WHETHER THE EXPLANATION-I WOULD BE APPLICABLE BECOMES ONLY OF ACADEMIC INTEREST. THEREFORE, THE MATTER WAS RESTORED TO THE TRIBUNAL TO CONSIDER THE PROVISO TO SECT ION 64(1)(II) AND THEREAFTER DECIDED THE APPEAL REGARDING LEVY OF PENALTY. ACCORDING TO US, THIS CASE HAS NO APPLICABILITY TO THE FACTS OF OUR CAS E. IN THE CASE OF CIT VS. VIDYAGAURI NATVERLALA & OTHERS, (1999) 238 ITR 91, THE FACTS ARE THAT IN THE RETURN FOR ASSESSMENT YEAR 1972-73, THE ASS ESSEE DISCLOSED CASH CREDIT OF RS. 1.35 LAKH AS MONIES BORROWED FROM TH REE DIFFERENT PERSONS, IN PART-III OF THE RETURN. THE AMOUNT WAS ADDED TO THE INCOME AND PENALTY WAS ALSO LEVIED. THE HONBLE COURT MENTIONED TH AT SUCH A DISCLOSURE DOES NOT ABSOLVE THE ASSESSEE FROM LEVY OF PEN ALTY. AS MENTIONED EARLIER, THE ONLY DISCLOSURE MADE IN THE RETURN IS BY WAY OF NOTE NO. 2, MENTIONED EARLIER, TO THE EFFECT THAT THE FUNDED INTEREST SHALL BE ADDED TO THE PRINCIPAL AND REPAID ALONG WITH ORIGINAL TE RM LOAN AND SHALL CARRY ITA NO. 734(DEL)/2010 14 INTEREST @ 8.5% IN THE CASE OF BANKS AND NO IN TEREST IN CASE OF FINANCIAL INSTITUTIONS. THIS NOTE HAS BEEN MADE IN ANNEX URE-7 REGARDING THE DETAILS OF LENDERS/DEPOSITORS. THE AMOUNT HAS NO T BEEN MENTIONED WHILE COMPUTING DEDUCTION/DISALLOWANCE U/S 43B. ACCORD ING TO US, IT MAY BE A CASE OF PASSIVE DISCLOSURE BUT NOT ACTIVE DISC LOSURE. THEREFORE BUT FOR THE CASE OF EICHER TRACTORS LTD., THE CASE OF THE ASSESSEE WOULD HAVE TO BE EXAMINED IN DETAIL AS TO WHETHER THE CONDI TION OF ACTUAL PAYMENT HAS BEEN SATISFIED OR NOT. ACCORDINGLY, IT IS HEL D THAT THIS CASE ALSO DOES NOT ADVANCE THE CASE OF THE ASSESSEE OR THE REV ENUE. 4.6 IN THE CASE OF CIT VS. RELIANCE PETRO PRODUC TS LTD. (2010) 322 ITR 158 (SC), THE FACTS ARE THAT THE ASSESSEE F ILED ITS RETURN FOR ASSESSMENT YEAR 2001-02 ON 31.01.2001, DECLARING LOSS OF RS. 26,54,554/-. THE ASSESSMENT WAS COMPLETED ON 25.11.2003 AT T HE TOTAL INCOME OF RS. 2,22,690/-. IN THIS ASSESSMENT, AN ADDITION WA S MADE IN RESPECT OF INTEREST EXPENDITURE BY INVOKING THE PROVISION CONTAINED IN SECTION 14-A. PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) . THE PENALTY WAS ALSO LEVIED. THE CASE OF THE LD. COUNSEL BEFORE TH E HONBLE COURT WAS THAT THE CLAIM OF DEDUCTION WAS MERELY A CLAIM, IN RESPEC T OF WHICH ALL DETAILS HAD BEEN FURNISHED. THE CLAIM BY ITSELF WILL NOT AMOU NT TO FURNISHING ITA NO. 734(DEL)/2010 15 INACCURATE PARTICULARS OF INCOME. THE HONBLE COURT MENTIONED THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITU RE, WHICH WAS NOT ACCEPTED BY THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT PENALTY U/S 271(1)(C). IF SUCH A CONTENTION IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS MADE BUT NOT ACCEPTED FOR A NY REASON, THE ASSESSEE WILL INVITE PENALTY. THAT IS NOT THE INTENDMENT OF THE LEGISLATURE. THE ADDED FACT IN THIS CASE IS THAT EVEN THE ASSESSI NG OFFICER ALLOWED THE CLAIM ON THE BASIS OF UN-AMENDED PROVISION. WE DO FIND SOME SIMILARITY IN THE TWO CASES. THE ASSESSEE HAD MADE CLAIM OF DED UCTION OF INTEREST, WHICH MAY OR MAY NOT HAVE BEEN DEDUCTIBLE. FROM THE LAN GUAGE OF EXPLANATIONS 3C AND 3D OF SECTION 43B, IT IS CLEAR THAT TH E CONVERSION OF INTEREST INTO LOAN WAS NEVER INTENDED TO BE ACTUAL PA YMENT U/S 43B. THESE PROVISIONS WERE REQUIRED TO BE INSERTED POSSIBLY BECAUSE OF ERRONEOUS VIEW TAKEN BY THE TRIBUNAL IN THE MATTER IN T HE CASE OF EICHER TRACTORS LTD. AND SOME OTHER CASES. BUT THE EXISTENCE OF THIS DECISION CANNOT BE OVERLOOKED. HOWEVER, THE ISSUE IN THE CASE OF R ELIANCE PETRO PRODUCTS LTD. (SUPRA) WAS TOTALLY DIFFERENT, NAMELY, AS T O WHETHER THE INTEREST WAS PAID ON LOAN TAKEN FOR THE PURPOSE OF BUSINES S OR NOT. HERE THE CASE BECOMES DISTINGUISHABLE. ITA NO. 734(DEL)/2010 16 4.7 HAVING CONSIDERED THE JURISPRUDENCE IN THE MA TTER, WE FIND THAT NONE OF THE DECIDED CASES RELIED UPON BY THE RIVAL PARTIES CAN BE SAID TO REALLY COVER THE FACTS OF THIS CASE. THE QUESTION WHET HER THE ASSESSEE FURNISHED INACCURATE PARTICULARS IS A QUESTION OF FACT. THEREFORE, IT HAS TO BE DECIDED ON THE FACTS OF EACH CASE. IT IS SEEN THAT ANNEXURE-7 GIVES THE DETAILS OF LENDERS AND DEPOSITORS. THIS A NNEXURE WAS FILED WITH THE RETURN. NOTE NO. 2 TO THE ANNEXURE FURNISHES TH E DETAILS THAT INTEREST IN CASE OF BANKS AND FINANCIAL INSTITUTIONS HAS BEEN CONVERTED INTO LOANS WITH OR WITHOUT INTEREST. THEREFORE, IT CAN BE S AID THAT PRIMARY FACTS HAD BEEN DISCLOSED IN THE RETURN ALBEIT IN A PASSIVE MANNER, IN SO FAR AS APPLICABILITY OF SECTION 43B IS CONCERNED. THE TR IBUNAL HAD DECIDED SIMILAR ISSUE IN A PARTICULAR MANNER AND THIS DE CISION WAS AVAILABLE AT THE TIME OF FILING OF THE ORIGINAL RETURN. THEREFO RE, IT CANNOT BE SAID THAT ANY PRIMA FACIE FALSE OR WRONG CLAIM WAS MADE BY THE ASSESSEE. AT BEST WHAT CAN BE SAID IS THAT THE CLAIM WAS BESET WITH CONTROVERSY. IN SUCH A SITUATION, THE QUESTION WHETHER THE SUBSEQUENT SUR RENDER WAS VOLUNTARY OR IT BECAME NECESSARY IN VIEW OF SCRUTINY OF RETUR N OF IMMEDIATELY SUCCEEDING YEAR BECOMES INSIGNIFICANT. THE FA CT IS THAT AS PER DECIDED CASES, THE POSITION OF LAW, AS EXISTED ON THE D ATE OF FILING OF ORIGINAL RETURN,P WAS FLUID. THEREFORE, THE CLAIM OF THE ASSESSEE CANNOT BE SAID TO ITA NO. 734(DEL)/2010 17 BE PRIMA FACIE INADMISSIBLE. THE CLAIM WAS WITHD RAWN IN THE RETURN FILED UNDER SECTION 148, IN VIEW OF AMENDMENT TO SECT ION 43B, MADE FOR REMOVAL OF DOUBTS. IN SUCH A SITUATION, ACCORDI NG TO US, NO FURTHER BURDEN WAS CAST ON THE ASSESSEE TO MAKE ACTIVE DISCLO SURE OF FACTS IN ANNEXURE IN THE AUDIT REPORT REGARDING DISALLOWANCE TO BE MADE UNDER SECTION 43B. TO THIS EXTENT, THE DECISION IN THE CASE OF RELI ANCE PETRO PRODUCTS LTD. ADVANCES THE CASE OF THE ASSESSEE. THEREFORE, W E ARE OF THE VIEW THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE LEVY OF PENALTY. 5. IN THE RESULT, THE APPEAL IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13 MAY, 2011. SD/- SD/- (I.P. BANSAL) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 13TH MAY, 2011. SP SATIA COPY OF THE ORDER FORWARDED TO:- NOIDA TOLL BRIDGE CO. LTD., NOIDA. DY. CIT, CIRCLE 13(1), NEW DELHI. CIT CIT(A) THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR .