CATSTAR EQUIFIN P.LTD, MUMBAI V. ITO 8(1)(2), MUMBAI

ITA 7659/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79426 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim
• Section: 143(3); 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.7659/MUM/2011 (ASSESSMENT YEAR: 2007-08) M/S. CATSTAR EQUIFIN P. LTD. 157/6, SURYA PRAKASH AZAD ROAD, VILE PARLE(E) MUMBAI-400 057. VS. INCOME TAX OFFICER - 8(1)(2) MUMBAI. (APPELLANT) (RESPONDENT) P ERMANENT ACCOUNT N O. : AABCC 5302 M ASSESSEE BY : SHRI ANUJ KISNADWALA REVENUE BY : SHRI RAVINDER SINDHU DATE OF HEARING : 14/7/2014 DATE OF PRONOUNCEMENT : 25/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 1/8/2011 OF CIT(A) ARISING FROM PENALTY ORDER DATED 25/03/2010 PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT FOR T HE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS IN THIS APPEAL. 1. CIT (A) ERRED IN LAW AND FACT IN CONFIRMING PEN ALTY U/S.271 (1 )(C) LEVIED ON ACCOUNT OF DISALLOWANCE DETERMINED U S/ 36(1) (III) & U/S 14A BY AO THOUGH SAME WAS REVISED DURING THE CO URSE OF HEARING. 2. CIT(A) ERRED IN LAW AND FACT BY IGNORING THE VAR IOUS LEGAL PRONOUNCEMENTS INCLUDING OF SUPREME COURT IN THE CA SE OF RELIANCE PETROPRODUCTS PVT. LTD. ITA NO.7659/M/11 AY:07-08 2 3. APPELLANT PLEAD BEFORE YOUR HONOUR TO DELETE THE PENALTY LEVIED U/S.271 (1 )(C). 2. THE ASSESSEE FILED ITS RETURN OF INCOME WITHOUT CLAIMING EXEMPTION OF LONG TERM CAPITAL GAIN ON SALE OF SHARES UNDER S ECTION 10 OF THE INCOME TAX ACT. IN THE ASSESSMENT UNDER SECTION 143(3) DAT ED 31/08/2009 THE AO ASSESSED THE TOTAL INCOME OF ASSESSEE AT RS.4,64 ,770/- . WHILE COMPLETING THE ASSESSMENT THE AO DISALLOWED INTERES T UNDER SECTION 36(1)(III) OF RS.22,80,076/-, BANK CHARGES OF RS.1 6,824/- AND DISALLOWANCE UNDER SECTION 14A OF RS.47,825. ACCORD INGLY THE AO HAD MADE AN ADDITION/DISALLOWANCE AMOUNTING TO RS.23,44 ,725/-.IN COMPUTATION THE AO TOOK THE INCOME FROM BUSINESS AT LOSS OF RS.18,99,454/- IN RETURN HOWEVER, THE AO HAS ASSESS ED TOTAL INCOME AT RS.4,64,770/- BY DISALLOWING THE EXPENDITURE OF RS. 23,44,725/-. THE AO HAS ALSO INITIATED THE PENALTY IN RESPECT OF DISALL OWANCE UNDER SECTION 36(1)(III) OF RS.22,80,076/- AND BANK CHARGES OF RS .16,824/- TOTAL AMOUNTING TO RS.22,96,900/- AND LEVIED PENALTY OF R S.7,73,173/- BEING 100% OF TAX SOUGHT TO BE EVADED. THE ASSESSEE CHALL ENGED THE LEVY OF PENALTY BEFORE CIT(A). THE CIT(A) CONFIRMED THE LEV Y OF PENALTY VIDE IMPUGNED ORDER. 3. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AO AS WELL AS CIT(A) HAS MISUNDERSTOOD THE FACT THAT THE AO H AS INFACT MADE AN ADDITION OF RS.4,64,770/- AND NOT RS.23,44,725/- BE CAUSE THE ASSESSEE DID NOT CLAIM LOSS OF RS.18,99,584/- IN THE COMPUT ATION OF INCOME. HE HAS THUS SUBMITTED THAT THE AO HAS WRONGLY TAKEN IN TO CONSIDERATION AN AMOUNT OF RS.22,96,900/- FOR THE PURPOSE OF LEVY OF PENALTY WHEN THE ASSESSEE ITSELF HAS DISALLOWED A SUM OF RS.18,71,82 4/- . HE HAS REFERRED TO THE COMPUTATION AT PAGE NO.1 OF THE PAPER BOOK A S WELL AS P&L ACCOUNT AND SUBMITTED THAT THE ASSESSEE ITSELF HAS DISALLOWED EXPENDITURE OF RS.18,17,824/- ON ACCOUNT OF TAX FRE E INCOME AND INTEREST FREE ADVANCES. HE HAS FURTHER SUBMITTED THAT THE AO DID NOT INITIATE ANY ITA NO.7659/M/11 AY:07-08 3 PENALTY IN RESPECT OF DISALLOWANCE MADE UNDER SECTI ON 14A. HOWEVER, THE CIT(A) WHILE CONFIRMING THE PENALTY HAS MADE AN OBS ERVATION ABOUT DISALLOWANCE UNDER SECTION 14A. THE LD. AR HAS FURT HER SUBMITTED THAT WHEN THE ASSESSEE ITSELF HAS DISALLOWED A REASONABL E AND APPROPRIATE AMOUNT THEN THE PENALTY IS NOT JUSTIFIED EVEN ON TH E REMAINING ADDITION OF RS.4.00 LACS AND SOME ODD AMOUNT. 4. ON THE OTHER HAND THE LD. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE AO MADE AN ADDITION OF RS.23,44,725/-. THEREFORE, THE PENALTY ON THE ADDIT ION OF RS.22,96,900/- IS JUSTIFIED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY GONE THROUGH THE RELEVANT RECORD. THE AO HAS ASSESSED A TOTAL INCOME OF RS.4,64,770/- WHILE FRAMING THE ASSESSMENT AS AGAIN ST NIL RETURN. IT IS CLEAR FROM THE COMPUTATION OF THE INCOME THAT THE A SSESSEE ITSELF HAS DISALLOWED THE EXPENSES TO THE TUNE OF RS.18,71,824 /- RESULTING IN NIL INCOME AS PER RETURN OF INCOME OTHERWISE THE ASSES SEES RETURN INCOME WOULD HAVE BEEN A LOSS OF RS.18,71,824/-. THE AO HA S ALSO COMPUTED THE BUSINESS LOSS OF RS.18,99,454/- IN THE COMPUTATION WHILE FRAMING THE ASSESSMENT. THEREFORE, AS FAR AS COMPUTATION OF INC OME IS CONCERNED THE AO HAS ALSO COMPUTED THE LOSS OF RS.18,99,484/- AND FURTHER DISALLOWED THE EXPENSES OF RS.23,44,725/- OUT OF WHICH A SUM O F RS.22,80,076/- HAS BEEN DISALLOWED ON ACCOUNT OF INTEREST UNDER SE CTION 36(1)(III). THIS DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) I S ON ACCOUNT OF INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE. IT IS NOT A CA SE OF BOGUS CLAIM OR ABSOLUTELY IMPERMISSIBLE CLAIM OF EXPENDITURE. THE AO HAS NOT GIVEN THE FINDING WHETHER ASSESSEES OWN FUND WAS USED FOR AD VANCING OR BORROWED FUND HAS BEEN UTILIZED FOR THIS PURPOSE. IT IS PERT INENT TO NOTE THAT OUT OF TOTAL DISALLOWANCE OF RS.22,80,076/- UNDER SECTION 36(1)(III) THE ASSESSEE HAS ITSELF DISALLOWED A SUM OF RS.18,71,824/-. THER EFORE, THE DIFFERENCE ITA NO.7659/M/11 AY:07-08 4 WHICH IS OVER AND ABOVE THE DISALLOWANCE ALREADY MA DE BY THE ASSESSEE IS ONLY RS.4.00 LACS AND SOME ODD AMOUNT. ACCORDING LY WHEN THE ISSUE OF DISALLOWANCE UNDER SECTION 36(1)(III) ON ACCOUNT OF INTEREST FREE ADVANCES IS NOT A BOGUS CLAIM AND IS A DEBATABLE ISSUE, THER EFORE, EVEN IF THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE THE SAME WOULD NO T LEAD TO THE CONCLUSION THAT THE ASSESSEE HAD FURNISHED INACCURA TE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME. ACCORDIN GLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT E VEN ON THIS DIFFERENTIAL AMOUNT OF RS.4,25,076/- THE PENALTY IS NOT WARRANTE D BECAUSE THE DISALLOWANCE IS MADE BY THE AO UNDER SECTION 36(1)( III) OF THE ENTIRE INTEREST PAID TO THE BANK ON OVERDRAFT FACILITY. MO REOVER, THE PENALTY UNDER SECTION 271(1)(C) IS NOT WARRANTED WHEN THE A O HAS PROCEEDED ON THE ASSUMPTION OF WRONG FACTS AND TAKING INTO CONSI DERATION A WRONG FIGURE AND WITHOUT CONSIDERING THE REASONABLENESS O F THE DISALLOWANCE ALREADY MADE BY THE ASSESSEE ITSELF. HENCE PENALTY IS CANCELLED. 6. IN THE RESULT APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 25/07/2014. JV. ITA NO.7659/M/11 AY:07-08 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.