AMI BUILDERS P.LTD, MUMBAI V. ASST CIT 5(1), MUMBAI

ITA 803/MUM/2014

• Counselvise Citation: 80319914 RSA 2014
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2014
• Court: TRIBUNAL
• Department Lawyers: DR PRAMOD NIKALJE
• Keywords: Business expenditure; Opportunity of being heard; Bonafide belief; Initiation of penalty proceedings; Wrong claim; Revenue expenditure
• Section: 143(3); 37(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND ASHWANI TANEJA ACCOUNTANT MEMBER ITA NO. 803/MUM/2014 ASSESSMENT YEAR: 2009-10 M/S AMI BUILDERS PVT. LTD. 3 RD FLOOR, 22 RAM MAHAL, SENAPATI BAPAT MARG, OPP. MAHIM RAILWAY STATION, MUMBAI. PAN: AAFCA1960R VS. ACIT - 5(1), R.NO. 568, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S.SINGHVI REVENUE BY : DR. PRAMOD NIKALJE (DR) DATE OF HEARING : 28.01.2016 DATE OF PRONOUNCEMENT : 02.03.2016 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)- 9, MUMBAI DATED 11.11.2013 PASSED AGAINST THE PENAL TY ORDER U/S 271(1)(C) OF THE ACT DATED 28.03.2012 FOR AY-2009-1 0 ON THE FOLLOWING GROUNDS: 2 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. 01. THE ORDER IMPOSING PENALTY U/S. 271(1)(C) OF TH E ACT IS CONTRARY TO THE FACTS OF THE CASE AND PREJUDICIAL TO THE LAW. 02. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) OUGHT NOT TO HAVE CONFIRMED THE ACTION OF THE LEARN ED ASSESSING OFFICER IMPOSING THE PENALTY OF RS. 55,14 ,546/-. THE APPELLANT HAS NEITHER CONCEALED HER INCOME NOR SUBM ITTED ANY INACCURATE PARTICULARS OF INCOME. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS OF THE CASE AND DESERVES TO BE DELETED. 03. ALTERNATIVELY AND WITHOUT PREJUDICE TO GROUND NO . 2, ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ACCEPTED THE ALTERNATE CONTENTION OF THE APPELLANT THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN LEVYING MAXI MUM PENALTY @300%. THE ACTION OF THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS OF TH E CASE AND DESERVES TO BE DELETED. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MAD E BY SHRI R.S.SINGHVI, ADVOCATE ON BEHALF OF THE ASSESSEE-COM PANY AND DR. PRAMOD NIKALJE, CIT(DR) ON BEHALF OF THE REVENUE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-COMPANY WAS ENGAGED IN THE BUSINESS OF RENTING OF COMMERCIAL PR OPERTIES. THE ASSESSEE FURNISHED ITS RETURN OF INCOME FOR THE AY 2009-10 ON 07/12/2011 DECLARING TOTAL LOSS AT RS.58,36,019/-. THE AO COMPLETED THE ASSESSMENT U/S 143(3) DETERMINING TOTAL INCOME AT RS.6,28,080/- ON 07.12.2011. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE A.O HAD MADE DISALLOWANCE OF RS.3,51,783/ - U/S 37(1) O N THE GROUND THAT 3 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. SINCE THE INCOME OF ASSESSEE WAS TAXABLE UNDER THE HEAD HOUSE PROPERTY IT COULD NOT HAVE CLAIMED ANY BUSINESS EX PENDITURE EXCEPT THE DEDUCTIONS AVAILABLE UNDER THE HEAD INCOME FROM HO USE PROPERTY. FURTHER, THE A.O. ALSO DISALLOWED A SUM OF RS.55,97 ,027/- U/S 24 (B) READ WITH U/S 36(1)(III) OF THE ACT ON THE GROUND T HAT A PART OF BORROWED FUND WAS NOT USED IN ACQUIRING HOUSE PROPERTY, SO C ORRESPONDING INTEREST WAS NOT DEDUCTIBLE. PENALTY PROCEEDINGS U/ S 271(1)(C) OF THE ACT WERE ALSO INITIATED AT THE TIME OF ASSESSMENT. DURING THE PENALTY PROCEEDINGS, IT WAS CONTENDED BY THE ASSESSEE THAT PENALTY U/S 271(1)(C) WAS NOT LEVIABLE ON THE DISALLOWANCE MADE BY THE A.O SINCE THE ASSESSEE HAD NOT FURNISHED ANY INACCURATE PARTI CULARS OF INCOME. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM OF RS.3,51,783/- AGAINST INCOME FROM HOUSE PROPERTY AND THE ASSESSEE HAD WRONGFULLY CLAIMED EXPENSES AGAINST 'INCOME FROM HOUSE PROPERT Y' TO THE TUNE OF RS.3,51,783/-. HE FURTHER OBSERVED THAT THE ASSESSE E HAD CLAIMED DEDUCTION OF INTEREST EXPENSES OF RS 1,72,79,082/- U/S 24(B) FOR SECURED LOANS OF RS 14,87,94,217/- BUT THE ASSESSEE HAD INVESTED ONLY RS 10,05,96,235/- OUT OF RS 14,81,93,217/- IN THE P ROPERTY. THEREFORE, AGAINST INCOME FROM HOUSE PROPERTY, THE ASSESSEE CO ULD HAVE CLAIMED 4 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. INTEREST U/S 24(B) ONLY TO THE EXTENT OF CAPITAL IN VESTED/ USED FOR SUCH PROPERTY. THUS, AO DID NOT AGREE WITH THE CONTENTIO NS OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF BOTH THE ABOVE REFERRED ADDITI ONS. ACCORDINGLY, PENALTY WAS LEVIED BY THE AO AT THE RATE OF 300% OF THE TAX SOUGHT TO BE EVADED BEING THE MAXIMUM AMOUNT THAT COULD HAVE BEEN LEVIED AS PRESCRIBED UNDER THE LAW. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BE FORE THE CIT(A), WHEREIN DETAILED SUBMISSIONS WERE MADE BY THE ASSES SEE CHALLENGING LEVY OF PENALTY BY THE AO. RELEVANT PORTION OF WRIT TEN SUBMISSIONS OF THE ASSESSEE IS REPRODUCED BELOW FOR THE SAKE OF RE ADY REFERENCE: ' THE APPELLANT IS A COMPANY DERIVING RENTAL INCOME F ROM ITS PROPERTY AT BANGALORE. THE APPELLANT FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 58,36,019/- THE ASSESSMENT WAS COMPLETED ON THE BAS IS OF THE FOLLOWING ADDITIONS A) DISALLOWANCE OF BUSINESS EXPENSES - RS. 3,51,783 /- U/S 371(1) OF THE INCOME TAX ACT. B) DISALLOWANCE OUT OF INTEREST ON LOAN FOR RS, 55, 97,027/- U/S 24(B) AS WELL AS U/S 36(I)(III) OF THE INCOME TAX ACT. 2. THE APPELLANT HAS DISCLOSED INCOME UNDER THE HEA D 'INCOME FROM BUSINESS' BUT THE LEARNED ASSESSING OFFICER HAS COM PUTED THE SAME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 3. THE APPELLANT COMPANY HAD NOT PREFERRED ANY APPE AL AGAINST THE ASSESSMENT ORDER AND PAID THE DUE TAXES ON THE INCO ME ASSESSED. 5 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. 4. THE LEARNED ASSESSING OFFICER THEREAFTER LEVIED PENALTY @300% ON THE QUANTUM ADDITION. AGAINST THIS ORDER LEVYING PE NALTY THE APPELLANT COMPANY IS IN APPEAL BEFORE 5. AT THE OUTSET WE WOULD LIKE TO SUBMIT BEFORE YOU R GOOD SELF THAT THE PENALTY HAS BEEN LEVIED ON ACCOUNT OF DISALLOWANCE OF CLAIM OF THE FOLLOWING EXPENSES:- A) DISALLOWANCE OF BUSINESS EXPENSES - RS. 3,51,783 /- U/S 371(1) OF THE INCOME TAX ACT. B) DISALLOWANCE OUT OF INTEREST ON LOAN FOR RS. 55, 97,027/- U/S 24(B) AS WELL AS U/S 36(1)(III) OF THE INCOME TAX A CT. 6. REGARDING THE DISALLOWANCE OF BUSINESS EXPENSES AMOUNTING TO RS.3,51,783/-,IT IS SUBMITTED THAT THESE EXPENSES W ERE THE NORMAL BUSINESS EXPENSES TO MAINTAIN THE BASIC EXISTENCE O F THE ASSESSEE COMPANY AND WERE OF ROUTINE NATURE. HOWEVER, THE LE ARNED ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE GROUND OF AB SENCE OF BUSINESS ACTIVITY DURING THE YEAR. PLEASE NOTE THAT THESE RO UTINE EXPENSES WERE DULY CLAIMED AS PER AUDITED ACCOUNTS AND WERE IN TH E NORMAL COURSE OF EXISTENCE OF THE COMPANY. THE LEARNED ASSESSING OFF ICER HAS COMPUTED THE INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPER TY' AND ACCORDINGLY AS PER PROVISIONS OF LAW THE AFORESAID EXPENDITURE WAS DISALLOWED AND INSTEAD 30% OF TOTAL RENTAL INCOME W AS ALLOWED AS A DEDUCTION U/S.24A OF THE ACT. THE DISALLOWANCE IS O NLY TECHNICAL IN NATURE AND DO NOT RESULT IN REDUCTION OF TAX. 7. REGARDING INTEREST PAID ON LOANS FROM M/S DEWAN HOUSING FINANCE CORP, IT IS SUBMITTED THAT THE PART OF LOAN WAS UTI LIZED FOR ACQUISITION OF THE PROPERTY WHICH WAS LET OUT TO M/S HEWLETT PACKA RD INDIA SALES (P) LTD. AND PART OF THESE BORROWED FUNDS WERE USED FOR MAKING ADVANCES TO VARIOUS PARTIES FOR ACQUISITION OF FACILITIES ON JOINT VENTURE BASIS. HOWEVER, THE LEARNED ASSESSING OFFICER COMPLETED TH E ASSESSMENT BY MAKING DISALLOWANCE OUT OF INTEREST PAID ON BORROWE D FUNDS U/S 24(B) READ WITH SEC.36(1)(III) OF THE INCOME TAX ACT. IT IS SUBMITTED THAT THE TOTAL PARTICULARS OF CLAIM OF INTEREST AND UTILIZAT ION OF BORROWED FUNDS WERE DULY REFLECTED IN THE AUDITED ACCOUNTS FILED W ITH THE ASSESSING OFFICER. 8. THE APPELLANT COMPANY HAS ORIGINALLY CONSIDERED HIS ACTIVITY AS A BUSINESS ACTIVITY. ON THAT BASIS CLAIMED THE FULL A MOUNT OF INTEREST FROM THE INCOME. ONLY BECAUSE THE LEARNED ASSESSING OFFI CER HAS COMPLETED THE ASSESSMENT BY CONSIDERING THE SAME AS 'INCOME F ROM HOUSE 6 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. PROPERTY' THE INTEREST WAS RE-CALCULATED AND DISALL OWED AS PER THE VIEW OF THE LEARNED ASSESSING OFFICER. SINCE THE PROPERT Y LET OUT WAS A COMMERCIAL BUILDING TO A, COMPANY IN BANGALORE THE APPELLANT WAS HAVING A BONAFIDE BELIEF THAT THE ACTIVITY OF LETTI NG OUT THE PROPERTY TO A COMPANY CARRYING ITS COMMERCIAL ACTIVITY FROM THAT PLACE AMOUNTS TO INCOME' FROM BUSINESS. ACCORDINGLY AS PER THE PROVI SION OF 28 TO 44 THE COMPANY HAD CLAIMED VARIOUS EXPENSES INCLUDING INTE REST AND ALL THE PARTICULARS OF INTEREST HAS BEEN DISCLOSED TO THE L EARNED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. THE PARTICULARS OF INCOME HAVE NOT BEEN DISPUTED BY THE LEARNED ASSESSING OFFICER AT ANY STAGE OF THE PROCEEDINGS. 9. WE WOULD LIKE TO HUMBLY SUBMIT BEFORE YOUR HONOR THE FINDINGS OF THE LEARNED ASSESSING OFFICER WHILE IMPOSING THE PE NALTY ALONG WITH OUR COMMENTS THERETO.- 9.1 THE LEARNED ASSESSING OFFICER HAS DISTINGUISHED THE DECISION OF HONORABLE APEX COURT IN THE CASE OF DHARMENDRA TEXT ILE PROCESSORS 306 ITR 277 AND OBSERVED AS UNDER: 'THE APEX COURT HELD THAT OBJECT BEHIND ENACTMENT O F SECTION 271(1)(C), READ WITH THE EXPLANATION THERETO, INDIC ATES THAT THE SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REME DY FOR LOSS FOR 'LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILITY.' (EXTRACT FROM THE ORDER LEVYING PENALTY EMPHASIS SUPPLIED) 9.1.1 IN THIS REGARD WE WOULD LIKE TO HUMBLY BRING FORTH BEFORE YOUR HONOR THE DECISION OF THE HONORABLE SC IN THE CASE OF RAJASTHAN SPINNING AND WEAVING MILLS REPORTED IN 180 TAXMANN 609 WHICH HAS BEEN PRONOUNCED AFTER THE DECISION IN THE CASE OF D HARMENDRA TEXTILE PROCESSORS HAS BEEN DELIVERED. THE HONORABLE APEX C OURT HAS VERY CLEARLY LAID DOWN THAT WILLFUL CONCEALMENT OR FRAUD IS AN ESSENTIAL CONDITION FOR LEVY OF PENALTY. THE HONORABLE SC OBS ERVED THAT THE REVENUE HAS NOT UNDERSTOOD THE IMPLICATION OF DHARR NENDRA TEXTILE PROCESSORS'S CASE IN THE RIGHT MANNER. IT HAS BEEN HELD THAT MENS REA IS AN ESSENTIAL CONDITION FOR LEVY OF PENALTY. IN PARA 20 IN THE DECISION OF THE RAJASTHAN SPINNING AND WEAVING MILLS THE HONORAB LE APEX COURT HAS CLEARLY LAID DOWN THE CORRECT LAW IN REGARD TO IMPO SITION OF PENALTY. 7 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. 9.1.2 IN THIS REGARD IT IS HUMBLY SUBMITTED THAT TH E LEARNED ASSESSING OFFICER WHILE ADMITTING THAT PENALTY U/S. 271(1)(C) HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE HAS MERELY STATED THAT THIS CASE LAW IS IN FAVOR OF THE DEPARTMENT. THE APPLICA BILITY OF THE DECISION TO THE CASE OF THE APPELLANT HAS NOT BEEN NARRATED IN DETAIL AND HAS INSTEAD LEVIED 300% OF THE TAX AMOUNT AS PENALTY. I T IS HUMBLY SUBMITTED BEFORE YOUR HONOR THAT THE LEARNED ASSESS ING OFFICER HAS NOT APPLIED HER MIND AS TO THE QUANTUM OF LOSS OF REVEN UE. ON THE FACE OF THE ORDER IT APPEARS THAT THE LEARNED ASSESSING OFF ICER HAS MECHANICALLY LEVIED' THE PENALTY. THE LEARNED ASSESSING OFFICER HAS NOT CONSIDERED THE DECISION OF HONORABLE SC IN THE RAJASTHAN SPINNI NG AND WEAVING MILLS WHILE HOLDING THAT THE DECISION DHARMENDRA TE XTILE PROCESSORS IS IN FAVOR OF THE DEPARTMENT. 9.2 THE LEARNED ASSESSING OFFICER HAS ALSO DISTINGU ISHED THE DECISION OF HONORABLE APEX COURT IN THE CASE OF RELIANCE PETROP RODUCTS 189 TAXMAN 322. THE LEARNED ASSESSING OFFICER HAS MENTIONED EXTRACT FROM THE ABOVE DECISION WHICH IS REPRODUCED HEREUNDER.- A MERE MAKING OF THE CLAIM, WHICH 'IS HOT SUSTAINA BLE IN LAW BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MA DE IN' THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, W HICH CLAIM WAS NOT ACCEPTED OR WAS NO ACCEPTABLE TO THE REVENU E, THAT, BY ITSELF, WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C)' (EXTRACT FROM THE ORDER LEVYING PENALTY EMPHASIS SU PPLIED) 9.3 IN THE INSTANT CASE THE LEARNED ASSESSING OFFIC ER HAS GIVEN THE FOLLOWING FACTS FOR CONCLUDING THAT THE APPELLANT H AS WILL FULLY CONCEALED / FURNISHED INACCURATE PARTICULARS OF INCOME. OBSERVATION OF THE LEARNED ASSESSING OFFICER OUR VIEW ON THE FACTS THE ASSESSEE HAD CONSCIOUSLY AND KNOWINGLY CLAIMED VARIOUS AS BUSINESS EXPENSES AGAINST INCOME FROM HOUSE PROPERTY WHICH WAS NOT PERMISSIBLE BY THE ACT FURTHER THE ASSESSEE CLAIMED INTEREST WHILE FILING THE RETURN THE EXPENSES HAVE BEEN CLAIMED AS REFLECTED IN THE BOOKS OF ACCOUNTS. 8 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. EXPENSES U/S 24(B) KNOWING FULLY WELL THAT THE PRINCIPAL AMOUNT HAD NOT BEEN UTILIZED FOR THE REPAIR, PURCHASE OR CONSTRUCTION OF THE HOUSE PROPERTY FROM WHICH THE ASSESSEE WAS IN RECEIPT OF RENTAL INCOME WHICH IT HAD OFFERED AS INCOME FROM HOUSE PROPERTY. ON THE OTHER 'HAND THE ASSESSEE HAD DIVERTED THE PRINCIPAL AMOUNT TAKEN AS THE HOUSING LOAN TOWARDS GINNING AWAY OF INTEREST FREE LOANS. AS A BUSINESS ENTITY THE MONEYS RECEIVED AS INCOME AND LOAN ARE DEPOSITED IN TO A COMMON BANK ACCOUNT AND IS USED FOR VARIOUS PURPOSES AS PER NEEDS. THERE IS NO ELEMENT OF INTENTIONAL DIVERSION OF FUNDS WITH A VIEW TO REDUCING TAX PAYMENT. EVEN DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHEN THE ISSUE WAS BROUGHT BEFORE THE ASSESSEE, IT DID NOT VOLUNTARILY OFFER THE SAID AMOUNT TO TAX. THE APPELLANT WHILE APPEARING BEFORE THE LEARNED ASSESSING OFFICER HAS MERELY SUBMITTED THE ACCOUNTS AND THE FACTS AS KNOWN TO COMPANY AND INTERPRETED THE TAX LAWS AS PER HIS KNOWLEDGE. THAT IS THE REASON WHY THE APPELLANT COMPANY HAD NOT VOLUNTARILY OFFERED THE SAID AMOUNT TO TAX. IT IS PERTINENT TO MENTION THAT AFTER THE ASSESSMENT PROCEEDINGS WERE OVER AND THE ADDITIONS AWARE MADE ON THE SAID GROUNDS, THE ASSESSEE DID NOT PREFER AN APPEAL BEFORE THE LD CIT(A) THE APPELLANT HAD NOT PREFERRED TO FILE AN APPEAL BEFORE LD. CIT(A) TO CO-OPERATE WITH THE DEPARTMENT BY REDUCING LITIGATION AND FOR MAKING PAYMENT OF THE DUE TAXES AS PER THE. VIEW OF THE DEPARTMENT THIS CLEARLY SUGGESTS THAT THE ASSESSEE WAS WELL AWARE OF THE FACT THE DEDUCTION IT WAS CLAIMING WAS NOT IN CONFORMITY WITH THE THIS CONCLUSION OF THE LEARNED ASSESSING OFFICER IN OUR HUMBLE OPINION IS NOT CORRECT. THE APPELLANT DID NOT PREFER AN APPEAL 9 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. PROVISIONS OF THE I T ACT 1961. IMPORTANT TO NOTE HERE IS THE FACT THAT OVER THE LAST COUPLE OF YEARS THE ASSESSEE HAS BEEN CLAIMING SIMILAR DEDUCTION WITH THE SOLE INTENT OF CONCEALING ITS TAXABLE INCOME. TO CO - OPERATE WITH THE DEPARTMENT ONLY AFTER HE CAME TO KNOW THE VIEW POINTS OF THE DEPARTMENT THROUGH THE ASSESSMENT ORDER. IT CANNOT BE PRESUMED THAT THE APPELLANT COMPANY WAS AWARE OF THIS VIEW POINT OF THE DEPARTMENT AT THE TIME OF FILING HIS RETURN OF INCOME. IT WAS NOT THE CASE OF ASSESSEE THAT IT WAS ADVISED THAT THE AMOUNT OF INCOME TAX PAID BY IT COULD BE CLAIMED AS A REVENUE EXPENDITURE. IT WAS ALSO NOT THE CASE OF THE ASSESSEE THAT DEDUCTION OF INCOME-TAX PAID BY IT WAS A DEBATABLE ISSUE. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH INCORRECT, IN LAW, WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDE BEING INCORRECT, IN LAW, IS MALA FIDE THE EXPLANATION 1 TO SECTION 271(1) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. (EXTRACT FROM THE DECISION CIT V/S. ZOOM COMMUNICATIONS PVT. LTD) IN THE EXTANT CASE IT HAS ALREADY BEEN ESTABLISHED THE CLAIM MADE BY THE ASSESSEE IS MALAFIDE. HAD IT NOT BEEN SO THE ASSESSEE WOULD HAVE PREFERRED APPEAL AGAINST THE ORDER OF THE AO. THE FACT THAT ADDITION MADE WAS ACCEPTED THE ASSESSEE PROVES BEYOND DOUBT FOR THE REASONS STATED IN THE EARLIER PARAGRAPHS THE LEARNED ASSESSING OFFICER HAS NOT ESTABLISHED BEYOND DOUBT THAT THE CLAIM MADE BY THE APPELLANT IS MALA FIDE. SHE HAS MERELY STATED AS SUCH TO JUSTIFY THE LEVY OF 300% PENALTY. THE LEARNED ASSESSING OFFICER HAS MISCONSTRUED THE NON FILING OF THE APPEAL BY APPELLANT AS A POINTER TO THE INTENTIONS OF THE APPELLANT AT THE TIME OF FILING THE RETURN. THIS IS NOT HUMANLY POSSIBLE SINCE THE VIEW POINT OF THE DEPARTMENT HAS BEEN MADE THROUGH THE ASSESSMENT ORDER ONLY AND NOT KNOWN TO THE APPELLANT AT THE TIME OF FILING THE RETURN OF INCOME. AT THAT POINT OF TIME THE APPELLANT WAS UNDER A BONA-FIDE BELIEF THAT INTEREST PAID ON MONEYS BORROWED FOR ACQUIRING THE PROPERTY IS DEDUCTIBLE U/S. 24(B) 10 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. THAT THE ASSESSEE KNEW ALL ALONG THAT THE CLAIM IT WAS MAKING WAS INACCURATE. 9.4. THE LEARNED ASSESSING OFFICER HAS CONCLUDED IN THE LAST PARAGRAPH OF THE ORDER AS UNDER.- I THEREFORE HOLD THAT THE ASSESSEE HAS DELIBERATEL Y AND CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF INC OME AND ATTEMPTED TO CONCEAL INCOME TO THE TUNE OF RS. 59,4 8,810/-' 9.5 WE RESPECTFULLY SUBMIT BEFORE YOUR HONOR THAT T HE LEARNED ASSESSING OFFICER- HAS NOT CONCRETELY HELD THAT THE APPELLANT HAS CONCEALED ANY INCOME AND RATHER HAS OBSERVED THAT H E HAS DELIBERATELY AND CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF INCOME. IN THIS RESPECT WE' WOULD ALSO LIKE TO SUBMIT BEFORE YOUR H ONOR THAT THE APPELLANT HAS CORRECTLY SUBMITTED AN PARTICULARS OF INCOME VIZ. THE NATURE, SOURCE AND QUANTUM, WHICH HAS NOT BEEN DISP UTED BY THE LEARNED ASSESSING OFFICER. THE ADDITION TO THE TOTA L INCOME IS BY WAY OF DISALLOWANCE OF A CLAIM VIS. 24(B) OF THE ACT. THIS CLAIM HAS BEEN DISALLOWED ON THE BASIS OF A DIFFERENT METHOD OF CA LCULATION UNDER A DIFFERENT HEAD OF INCOME ADOPTED BY THE LEARNED ASS ESSING OFFICER. THIS AMOUNTS TO A DIFFERENT INTERPRETATION OF LAW LEADIN G TO A DIFFERENT METHOD OF CALCULATING THE APPELLANT'S INCOME FROM T HE SAME PARTICULARS SUBMITTED BY THE APPELLANT. HENCE WE RESPECTFULLY S UBMIT THAT THERE IS NO CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE APPELLANT COMPANY AND CONSEQUENTLY THE DECISION OF HONORABLE APEX COURT IN THE CASE RELIANCE PETROPRODUCTS AND DELHI HIGH COURT IN THE CASE OF ZOOM DEVELOPERS IS SQUARELY APPLICABLE IN F AVOR OF THE APPELLANT. 10. IN VIEW OF THE ABOVE FACTUAL AND LEGAL ASPECTS OF THE CASE WE REQUEST YOUR HONOR TO DELETE THE PENALTY IMPOSED BY THE LEARNED ASSESSING OFFICER AND ALLOW OUR APPEAL IN TOTO. 11. ALTERNATE PRAYER 11.1 IN THE EVENT YOUR HONOR DO NOT CONSIDER OUR SU BMISSION AND PRAYER AS ABOVE IN THE PRECEDING PARAGRAPHS, WE WOULD LIKE TO PUT FORTH BEFORE YOUR HONOR THE FACTS OF THE CASE IN BRIEF AND OUR A LTERNATE PRAYER IN REGARD TO THE QUANTUM OF THE PENALTY 11.2 KINDLY REFER TO THE OBSERVATION OF THE LEARNED ASSESSING OFFICER AS GIVEN IN PARAGRAPH 9.1 SUPRA REPRODUCING THE OBSERV ATION OF THE APEX COURT IN THE CASE OF DHANNENDRA TEXTILE PROCESSORS 306 ITR 277 11 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. 11.3 CONSIDERING THE ABOVE CONCLUSION OF THE HONORA BLE APEX COURT WE RESPECTFULLY REQUEST YOUR HONOR TO CONSIDER LOSS OF REVENUE FROM THE ATTEMPTED CONCEALMENT AS EQUIVALENT TO 100% OF THE TAX THAT WOULD HAVE BEEN PAYABLE BY THE APPELLANT IN THE ABSENCE O F THE ASSESSMENT ORDER AS THE TAX SOUGHT TO BE AVOIDED AND DIRECT TH E LEARNED ASSESSING OFFICER TO REDUCE THE PENALTY TO THAT EXTENT. IN VIEW OF THE ABOVE, YOUR HONOUR IS HUMBLY REQUEST ED TO ADOPT A LIBERAL APPROACH AND DROP THE PENAL ACTION FOR WHIC H THE APPELLANT COMPANY SHALL EVER REMAIN GRATEFUL AND OBLIGE.' 5. BUT LD. CIT(A) DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE, AND HE CONFIRMED THE ACTION OF THE AO IN LEVYING TH E PENALTY @ 300%. IT WAS HELD BY HIM THAT THE ASSESSEE HAD MADE A WRO NG CLAIM AND IT WAS NOT A DEBATABLE ISSUE WHERE TWO OPINIONS WERE P OSSIBLE AND THAT IT WAS A CASE OF OLD ASSESSEE WHO WAS EXPECTED TO KNOW BASIC ASPECT OF DEDUCTION AVAILABLE U/S 24(B) OF THE ACT. ACCORDING LY, HE CONFIRMED THE ACTION OF AO IN LEVYING THE PENALTY AND ALSO REJECTE D THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT MAXIMUM PENALTY COULD NO T HAVE BEEN LEVIED IN THIS CASE. THUS, APPEAL OF THE ASSESSEE WAS DISM ISSED BY HIM WITHOUT ANY RELIEF. 6. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BE FORE THE TRIBUNAL. DURING THE COURSE OF HEARING BEFORE US, BOTH THE PA RTIES HAVE MADE DETAILED SUBMISSIONS. IT WAS ARGUED BY LD. COUNSEL OF THE ASSESSEE THAT IN THIS CASE NO SATISFACTION HAS BEEN RECORDED AS P ER LAW BY THE AO IN 12 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. THE ASSESSMENT ORDER WHILE INITIATING THE PENALTY P ROCEEDINGS, NOTHING HAS BEEN MENTIONED WHETHER THERE WAS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE OF PARTICULARS OF INCOME. IT WAS FURTHER ARGUED THAT SATISFACTION IS NOT DISCERNIBLE EVEN FROM THE PERUSAL OF THE ASSESSMENT ORDER, AND THAT COMPLETE INFORMATION WAS PROVIDED IN THE RETURN FILED AND IN THE ASSESSMENT PROCEEDINGS WITH REGARD TO CLAIM OF EXPENSES AND INTEREST MADE BY THE ASSESSEE, AND NO INFORMATION HAS BEEN CONCEALED. ALL THE INFORMATION HAS BEEN CORREC TLY PROVIDED TO THE AO, AND HE COULD MAKE DISALLOWANCE ON THE BASIS OF DETAILS PROVIDED BY THE ASSESSEE ONLY. IT WAS FURTHER SUBMITTED THAT CL AIM OF EXPENSES AND INTEREST WAS MADE BY THE ASSESSEE IN THE NORMAL COU RSE OF BUSINESS UNDER THE BELIEF THAT ALL THE EXPENSES INCURRED IN THE COURSE OF BUSINESS ARE ALLOWABLE AS DEDUCTION. IT WAS FURTHER SUBMITTE D THAT ALL THE EXPENSES HAVE BEEN FOUND TO BE GENUINE. THE CLAIM O F THE EXPENSES HAS NOT BEEN FOUND TO BE BOGUS BY THE AO. THE DISAL LOWANCE HAS BEEN MADE ONLY BECAUSE OF CHANGE OF HEAD OF ASSESSMENT O F INCOME AND DIFFERENT LEGAL INTERPRETATION ADOPTED BY THE AO. N ONE OF THE INFORMATION/DETAILS FILED BY THE ASSESSEE WAS FOUND TO BE INCORRECT BY THE AO. IT WAS THUS, SUBMITTED THAT IT WAS NEITHER A CASE OF CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULAR S OF INCOME. IN 13 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. SUPPORT OF HIS ARGUMENTS, LD. COUNSEL RELIED UPON T HE FOLLOWING JUDGMENTS: A. CIT V. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 3 22 ITR 158(SC). B. PRICE WATERHOUSE COOPERS P. LTD. VS. CIT [2012] 348 ITR 306 (SC). C. CIT VS. M/S. S.M. CONSTRUCTION (ITA NO. 412/13)[ BOMBAY HC]. D. SMT. KAJAL V MANGE VS. ITO (ITA NO. 6000/D/10) [D EL ITAT]. E. MR. NARESH KUMAR VS. ACIT (ITA NO. 49/13) [BOMBA Y HC]. F. CIT V. NALIN P. SHAH (HUF) (ITA NO. 49/13) [BOMB AY HC]. G. GLOBAL GREEN CO. LTD. V. DCIT (ITA NO. 1390/D/11 ) [DEL ITAT]. LASTLY, IT WAS SUBMITTED BY LD. COUNSEL THAT SIMILA R CLAIM HAS BEEN ALLOWED TO THE ASSESSEE IN THE SUBSEQUENT YEARS. OU R ATTENTION WAS DRAWN UPON THE COPY OF RETURN FILED FOR AY 2010-11 TO SHOW THAT SIMILAR CLAIM WAS MADE ON ACCOUNT OF INTEREST AMOUNTING TO RS 14780632/-, WHICH HAS BEEN ACCEPTED AND NO DISALLOWANCE HAS BEE N MADE BY THE AO IN AY 2010-11. THUS, MERELY BECAUSE, THE CLAIM H AS BEEN DISALLOWED IN THIS YEAR, IT DOES NOT CALL FOR LEVY OF PENALTY. 7. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES AND ARGUED THAT IMPUGNED DISALLOWANCES CALL FOR LEV Y OF PENALTY. SINCE THE CLAIM OF THE ASSESSEE WAS FOUND TO BE WRONG, TH E AO WAS JUSTIFIED IN LEVYING OF PENALTY. IN RESPONSE TO OUR QUERY ABO UT THE LEVY OF PENALTY 14 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. @ 300%, LD DR WAS FAIR ENOUGH TO STATE THAT HE COUL D NOT FIND ANY SPECIFIC REASON TO LEVY PENALTY AT THE MAXIMUM RATE OF 300% IN THE GIVEN FACTS OF THE CASE. 8. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOT H THE SIDES, ORDERS OF THE LOWER AUTHORITIES AND JUDGMENTS PLACED BEFORE US FOR OUR CONSIDERATION. AT THE OUTSET, IT IS NOTED BY US THA T IN THE PENALTY ORDER AND THE ASSESSMENT ORDER, THE AO HAS NOT MADE OUT A CASE THAT WHETHER IT WAS A CASE OF CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME. 9. IT IS FURTHER NOTED BY US THAT, ADMITTEDLY, CLAI M OF EXPENSES AND INTEREST HAS NOT BEEN FOUND TO BE BOGUS. IT HAS ALS O BEEN ACCEPTED BY THE LOWER AUTHORITIES THAT THESE EXPENSES WERE INCU RRED BY THE ASSESSEE IN THE NORMAL COURSE OF HIS BUSINESS. THE ONLY ALLE GATION OF THE AO WAS THAT ROUTINE EXPENSES WERE NOT ALLOWABLE BECAUSE AS SESSEE DID NOT CARRY OUT ITS MAIN BUSINESS ACTIVITY AND INTEREST W AS NOT FULLY ALLOWED. ACCORDING TO THE AO, PART OF THE FUNDS WAS NOT UTIL IZED FOR ACQUIRING/CONSTRUCTING THE PROPERTY FROM WHICH RENT AL INCOME WAS RECEIVED. 10. WE HAVE ANALYZED THE NATURE OF BOTH OF THE DISA LLOWANCES. REGARDING THE DISALLOWANCE OF RS. 3,51,783/- OUT OF EXPENSES, IT IS 15 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. NOTED THAT THESE EXPENSES WERE OF ROUTINE NATURE E. G. DIRECTORS SALARY, BANK CHARGES, FILING FEE, AUDIT FEE ETC. UNDOUBTEDL Y, THESE EXPENSES WERE OF STATUTORY NATURE AND WERE NECESSARY FOR MAI NTAINING THE EXISTENCE OF THE COMPANY AND THUS THESE CAN BE SAID TO BE INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, AND THEREF ORE THESE EXPENSES WERE CLAIMED UNDER THE HEAD BUSINESS. THE CLAIM O F THE ASSESSEE WAS VERY MUCH PLAUSIBLE NOT ONLY ON FACTS BUT IT IS ALS O SUPPORTED ON THE BASIS OF VARIOUS JUDGMENTS IN FAVOUR OF THE ASSESSEE . SIMILAR CLAIM WAS HELD TO BE ALLOWABLE BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. GANGA PROPERTIES LTD. 199 ITR 94(CAL.), RELEVAN T PORTION OF THE JUDGMENT IS REPRODUCED BELOW: IN OUR VIEW, A LIMITED COMPANY, EVEN IF IT DOES NO T CARRY ON BUSINESS BUT IT DERIVES INCOME FROM 'OTHER SOURCES' HAS TO MAINTAIN ITS ESTABLISHMENT FOR COMPLYING WITH STATU TORY OBLIGATIONS SO LONG IT IS IN OPERATION AND ITS NAME IS NOT STRU CK OFF THE REGISTER OR UNLESS THE COMPANY IS DISSOLVED WHICH MEANS CESS ATION OF ALL CORPORATE ACTIVITIES OF THE COMPANY FOR ALL PRACTIC AL PURPOSES. SO LONG AS IT IS IN OPERATION, IT HAS TO MAINTAIN ITS STATUS AS A COMPANY AND IT HAS TO DISCHARGE CERTAIN LEGAL OBLIG ATIONS AND, FOR THAT PURPOSE, IT IS NECESSARY TO APPOINT CLERICAL S TAFF AND SECRETARY OR ACCOUNTANT AND INCUR INCIDENTAL EXPENSES. IN THI S BACKGROUND, THE CONCLUSION OF THE TRIBUNAL THAT THE EXPENSES IN CURRED WERE WHOLLY AND EXCLUSIVELY FOR THE ACTIVITIES TO EARN I NCOME IS PRE- EMINENTLY A REASONABLE CONCLUSION. WE HAVE CONSIDER ED A SIMILAR CASE IN INCOME-TAX REFERENCE NO. 360 OF 1979 (CTT V . NEW SAVAN SUGAR AND GUR REFINING CO. LTD.), WHERE THE JUDGMENT WAS DELIVERED ON APRIL 18, 1989. 16 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. 11. REGARDING THE OTHER DISALLOWANCE U/S 24(B) R.W. 36(1)(III), IT IS NOTED BY US AT THE OUTSET THAT ASSESSEE WAS IN THE BUSINESS OF REAL ESTATE. THE CLAIM OF THE ASSESSEE WAS THAT FUNDS WE RE BORROWED FOR THE PURPOSE OF BUSINESS ON WHICH INTEREST WAS PAID. THE INCOME FROM HOUSE PROPERTY ALTHOUGH WAS PART OF BUSINESS OF THE ASSESSEE BUT DUE TO SPECIFIC PROVISIONS, THE SAME WAS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. BUT, THE INTRINSIC NATURE OF THE INCOME REMAINS AS INCOME FROM BUSINESS, EVEN IF IT WAS ASSESSED UN DER A DIFFERENT HEAD. UNDER THESE CIRCUMSTANCES, THE BELIEF OF THE ASSESSEE THAT ANY EXPENSE INCURRED DURING THE COURSE OF ITS BUSINESS (INCLUDING INTEREST PAID ON FUNDS BORROWED) SHOULD BE ALLOWABLE AGAINST THE INCOME EARNED DURING THE COURSE OF BUSINESS, CANNOT BE SAID TO BE WHOLLY UNFOUNDED AND WITHOUT ANY BASIS. THE CLAIM OF THE ASSESSEE WA S REJECTED DUE TO APPLICATION OF PARTICULAR PROVISIONS OF LAW BY THE AO. IT IS FURTHER NOTED BY US THAT THE AO HAS HIMSELF ALLOWED PART OF THE T OTAL CLAIM OF INTEREST. THE ASSESSEE HAD CLAIMED A SUM OF RS. 1,72,79,082/- . OUT OF THE SAID CLAIM, ONLY A SUM OF RS. 55,97,027/- HAS BEEN DISAL LOWED BY THE AO U/S 24(B) OF THE ACT. THUS, EVEN AS PER THE AO, THE CLA IM OF THE ASSESSEE WAS NOT WHOLLY DISALLOWABLE. RATHER, SUBSTANTIAL AM OUNT WAS ALLOWED BY THE AO, AND DISALLOWANCE OF PART OF THE TOTAL CLAIM WAS MADE BY THE AO 17 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. ON THE BASIS OF SOME CALCULATIONS DONE BY HIM BY AL LEGING THAT WHOLE OF THE FUNDS WERE NOT UTILIZED FOR ACQUIRING THE PROPE RTY. THUS, AN ELEMENT OF GUESS WORK WAS INVOLVED WHILE COMPUTING AND QUAN TIFYING THE AMOUNT OF DISALLOWANCE. FURTHER, IT IS BROUGHT TO O UR NOTICE THAT SIMILAR CLAIM HAS BEEN ACCEPTED BY THE AO IN THE SUBSEQUENT YEAR I.E. AY 2010-11, WHEREIN NO DISALLOWANCE HAS BEEN MADE BY T HE AO. UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID, ON CERTAIN AND UNAMBIGUOUS BASIS THAT THE CLAIM OF THE ASSESSEE IN THIS YEARWA S PATENTLY ERRONEOUS. UNDER THESE CIRCUMSTANCES, THE AO WAS NOT ABLE TO M AKE OUT A CASE FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME WHILE INITIATING THE PENALTY IN THE ASSESSMENT ORDE R OR WHILE LEVYING THE PENALTY IN THE PENALTY ORDER. IT IS NOTED THAT PENA LTY HAS BEEN LEVIED IN THE MANNER AS IF ONCE DISALLOWANCE HAS BEEN MADE, T HEN LEVY OF PENALTY WOULD BE AUTOMATIC, DISREGARDING THE WELL-SETTLED P OSITION OF LAW THAT PENALTY PROCEEDINGS ARE INDEPENDENT OF THE ASSESSME NT PROCEEDINGS. 12. OUR VIEW IS SUPPORTED BY MANY JUDGMENTS, SOME OF WHICH HAVE BEEN RELIED UPON BY THE LD. COUNSEL BEFORE US. WE B EGIN WITH THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS INDIA (P) LTD. 322 ITR 158 WHEREIN IT WAS HELD THAT 18 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. IF THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE, THEN THERE IS NO QUESTION OF INVOKING THE PENALTY UNDER SECTION 271( 1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN, IPSO FAC TO, CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 13. HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. S.M. CONSTRUCTION VIDE ITS ORDER DATED 12.03.2015 HELD AS UNDER: THERE HAS BEEN A COMPLETE DISCLOSURE OF ALL FACTS BY THE ASSESSEE. BESIDES THE CLAIM MADE BY THE ASSESSEE OF NOT BEING TAXABLE WAS NOT FOUND TO BE NOT BONAFIDE. AS HELD B Y THE SUPREME COURT IN RELIANCE PETROPRODUCTS PVT. LTD 322 ITR 15 8 MAKING OF AN INCORRECT CLAIM WOULD NOT TANTAMOUNT TO FURNISHI NG INACCURATE PARTICULARS OF INCOME. IN THIS CASE, THE ASSESSEE B ONAFIDE BELIEVED THAT THE DIFFERENCE OF RS.1.65 CRORES AND RS.55 LAK HS IS NOT CHARGEABLE TO TAX AND HAD SO STATED BEFORE THE ASSE SSING OFFICER. THE FACT THAT THE EXPLANATION OF ASSESSEE IS NOT AC CEPTED IN QUANTUM PROCEEDINGS WOULD NOT IPSO FACTO VISIT THE ASSESSEE WITH PENALTY IN THE ABSENCE OF THE CLAIM BEING HELD TO B E NOT BONAFIDE. THE DECISION OF THE DELHI HIGH COURT IN ZOOM COMMUN ICATION P. LTD. 327 ITR 510 (DEL) IS NOT APPLICABLE IN THE PRE SENT FACTS FOR THE REASON THAT IN THIS CASE, THE STAND TAKEN BY TH E ASSESSEE CANNOT BE SAID TO BE IN DEFIANCE OF LAW AND THUS NO T BONAFIDE. IN THIS CASE IT IS NOT THE CASE OF REVENUE THAT THE CL AIM MADE BY THE ASSESSEE WAS NOT ON THE BASIS OF BONA FIDE VIEW. 19 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. 14. SIMILARLY IN ANOTHER JUDGMENT, HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. NALIN P. SHAH (HUF) VIDE ITS ORDER DATED 04.03.2012 IN ITA NO.49/2013 HELD AS UNDER: THOUGH THE INCOME FROM THE TRANSFER OF UNITS OF A MUTUAL FUND IS EXEMPT U/S 10(33), THE ASSESSEE CLAIMED A DEDUCTION FOR THE LOSS OF RS. 3.08 CRORES SUFFERED BY HIM ON TRANSFER OF U S 64 UNITS. THE AO DISALLOWED THE LOSS ON THE GROUND THAT THE EXEMP TION IN S. 10(33) APPLIED TO A LOSS AS WELL AND IMPOSED PENALT Y U/S 271(1)(C).THE CIT(A) CONFIRMED THE PENALTY. ON APPE AL BY THE ASSESSEE, THE TRIBUNAL ALLOWED THE APPEAL ON THE GR OUND THAT AS THE ASSESSEE HAD DISCLOSED THE DETAILS WITH THE RET URN, HE HAD NOT FILED INACCURATE PARTICULARS OF HIS INCOME AND THAT THE MAKING OF A WRONG CLAIM/INCORRECT CLAIM DID NOT ATTRACT PENALTY U/S 271(1)(C). ON APPEAL BY THE DEPARTMENT TO THE HIGH COURT, HELD DISMISSING THE APPEAL: AS THE ASSESSEE HAD DISCLOSED ALL DETAILS IN THE RE TURN OF INCOME, AT THE HIGHEST IT CAN BE SAID THAT THE CLAIM OF THE ASSESSEE WAS NOT SUSTAINABLE IN LAW. BUT AS THERE WAS NO FURNISH ING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE, PENALTY U/S 271 (1)(C) COULD NOT BE LEVIE D. 15. IT IS FURTHER NOTED BY US THAT SIMILAR ISSUE HA S BEEN DECIDED BY HONBLE DELHI BENCH OF ITAT IN THE CASE OF NARESH K UMAR VS. ACIT (ITA NO. 6000/DEL/2010) ORDER DATED 27.04.2015. IN THIS JUDGMENT ALSO THE FACTS ARE SIMILAR IN THE MANNER THAT CLAIM OF INTER EST WAS DISALLOWED U/S 24(B), THE CLAIM OF THE ASSESSEE WAS PARTLY ALLOWED AND PARTLY DISALLOWED AND ON THE DISALLOWANCE MADE BY THE AO, PENALTY WAS ALSO LEVIED WHICH WAS CONFIRMED IN FIRST APPEAL. THE MAT TER REACHED BEFORE THE TRIBUNAL WHERE THE TRIBUNAL FOUND THAT PENALTY WAS NOT LEVIABLE ON 20 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. SUCH TYPE OF DISALLOWANCE. RELEVANT PORTION OF THE ORDER IS USEFUL FOR DECIDING THE CASE BEFORE US AND THEREFORE, OPERATIV E PORTION OF SAME IS REPRODUCED HEREUNDER FOR THE SAKE OF READY REFERENC E: 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE CLAIM ED INTEREST AMOUNTING TO RS. 79,16,523/- AS DEDUCTIBLE U/S 24 OF THE ACT. THE ASSESSEE ALSO CLAIMED INTEREST OF RS. 70,22,831/- ON THE LOANS FR OM CERTAIN COMPANIES WHICH WERE UTILIZED FOR PURCHASE OF PROPERTY, INVES TMENT IN COMPANIES AND GIVING LOANS ETC. THE ASSESSEE ALSO RECEIVED IN TEREST AMOUNTING TO RS. 55,30,319/- FROM DIFFERENT COMPANIES. THE AO LI MITED THE INTEREST @ 9% ON THE LOANS ADVANCED AMOUNTING TO RS. 4,20,80,0 00/- AND WORKED OUT THE INTEREST OF RS. 37,87,200/- WHICH WAS ALLOW ED AS DEDUCTION U/S 57 OF THE ACT AGAINST THE INTEREST INCOME OF RS. 55 ,30,319/-. 12. FROM THE ABOVE FACTS IT IS CLEAR THAT THE AO AL LOWED THE INTEREST ON ESTIMATE BASIS I.E. @ 9% AMOUNTING TO RS. 37,87,200 /- AS AGAINST THE INTEREST CLAIMED AT RS. 70,22,831/-. IN THE PRESENT CASE, THE ASSESSEE FURNISHED ALL THE PARTICULARS RELATING TO THE INTER EST EARNED AND PAID BUT THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED IN TOTO. NOW QUESTION ARISES AS TO WHETHER PENALTY U/S 271 (1)(C) OF THE ACT IS LEVIABLE WHEN THE CLAIM OF THE ASSESSEE IS PARTLY ALLOWED. IN THIS RE GARD THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SUPRA) HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271 (J)(C) O F THE LNCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS ' USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND T O BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY O F FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGI NATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD 21 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PA RTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE I NACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271 (1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUST AINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTI CULARS.' 13. FROM THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE AFORESAID REFERRED TO CASE IT CAN BE HELD THAT THE PENALTY U/S 271 (1)(C) OF THE ACT WAS NOT LEVIABLE TO THE FACTS OF THE PRE SENT CASE BECAUSE THE AO DISALLOWED THE CLAIM OF THE ASSESSEE, IN PART. I N OTHER WORDS THE AO ESTIMATED THE INTEREST PAYABLE ON THE LOANS @ 9% I. E. RS. 37,87,200/- INSTEAD OF ACTUAL AMOUNT PAID AT RS. 70,22,831/-. H OWEVER, ALL THE PARTICULARS RELATING TO THE PAYMENT OF INTEREST WER E FURNISHED TO THE AO., THEREFORE, THE PENALTY U/S 271 (1)(C) OF THE A CT WAS NOT LEVIABLE BECAUSE THE AO DID NOT ACCEPT FULL CLAIM OF THE ASS ESSEE. IN THE PRESENT CASE, IT IS ALSO NOTICED THAT THE AO IN THE ASSESSM ENT ORDER NOWHERE RECORDED HIS SATISFACTION THAT THE ASSESSEE CONCEAL ED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME, HE SIMP LY STATED AS UNDER: 'PENALTY U/S 271 (1)(C) OF THE ACT FOR FILING INACC URATE PARTICULARS OF INCOME IS BEING INITIATED SEPARATELY. ' 14. FROM THE ABOVE OBSERVATION, IT CANNOT BE SAID T HAT THE AO WAS SATISFIED THAT THE ASSESSEE CONCEALED THE INCOME. O N A SIMILAR ISSUE THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MS . MADHUSHREE GUPTA VS UNION OF INDIA AND ANOTHER (2009) 317 ITR 107 HE LD AS UNDER: 'THE LEGAL POSITION THAT POWER TO IMPOSE PENALTY UN DER SECTION 271 OF THE ACT DEPENDS UPON THE SATISFACTION OF THE INCOME-TAX OFFICER IN THE COURSE OF THE PROCEEDINGS UNDER THE ACT REMAINS THE CASE EVEN AFTER THE INSERTION OF SECTION 271 (1B). PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER AS REFLECTED IN THE RECORD AS AGAINST HIS 'FINAL CONCLUSION' SHOULD BE DISCERNIBL E CLEARLY FROM THE 22 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. ORDER PASSED DURING THE COURSE OF SUCH PROCEEDINGS. THE PROVISION ONLY PROVIDES THAT AN ORDER INITIATING PE NALTY CANNOT BE DECLARED BAD IN LAW ONLY BECAUSE IT STATES THAT PEN ALTY PROCEEDINGS ARE INITIATED, IF OTHERWISE IT IS DISCE RNIBLE FROM THE RECORD, THAT THE ASSESSING OFFICER HAS ARRIVED AT P RIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS. THE ISSUE IS OF DISCERNIBILITY OF THE 'SATISFACTION' ARRIVED AT BY THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDING BEFORE HIM. SECTION 271(1) (C) HAS TO BE READ IN CONSONANCE WITH SECTIO N 271 (1B). THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIA TION OF PENALTY PROCEEDINGS WAS AND REMAINS A JURISDICTIONAL FACT. T HE CONTENTION THAT PRIMA FACIE SATISFACTION OF THE ASSESSING OFFI CER NEED NOT BE REFLECTED AT THE STAGE OF INITIATION BUT ONLY AT TH E STAGE OF IMPOSITION OF PENALTY WOULD RENDER THE PROVISION AR BITRARY. THE ASSESSING OFFICER WOULD IN SUCH A SITUATION BE IN A POSITION TO PICK A CASE FOR INITIATION OF PENALTY MERELY BECAUSE THE RE IS AN ADDITION OR DISALLOWANCE WITHOUT ARRIVING AT A PRIMA FACIE S ATISFACTION WITH RESPECT TO INFRACTION BY THE ASSESSEE OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT.' 15. SIMILARLY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS LAKHDHIR LALJI (1972) 85 ITR 77 HELD AS UNDER: 'THAT THE PENALTY PROCEEDINGS HAD BEEN COMMENCED AG AINST THE ASSESSEE ON A PARTICULAR FOOTING, VIZ., CONCEALMENT OF PARTICULARS OF INCOME, BUT THE FINAL CONCLUSION FOR LEVYING THE PENALTY WAS BASED ON A DIFFERENT FOOTING ALTOGETHER, VIZ., ON T HE FOOTING OF FURNISHING INACCURATE PARTICULARS OF INCOME. UNDER THE CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE ASSESS EE HAD BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD BEFOR E THE ORDER IMPOSING THE PENALTY WAS PASSED. 'THE VERY BASIS FO R THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE INITIATED BY THE I NCOME-TAX OFFICER DISAPPEARED WHEN THE APPELLATE ASSISTANT CO MMISSIONER HELD THAT THERE WAS NO SUPPRESSION OF INCOME BY THE ASSESSEE. THE CONCLUSION OF THE TRIBUNAL THAT THE INSPECTING ASSISTANT COMMISSIONER HAD NO JURISDICTION TO IMPOSE A PENALTY UNDER SECTION 271(1)(C) FOR CONCEALMENT OF INCOME WAS COR RECT.' 16. IN THE PRESENT CASE ALSO THE AO IN THE COURSE O F ASSESSMENT PROCEEDINGS HAD NOT RECORDED ANY SATISFACTION WHILE INITIATING THE 23 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. PENALTY PROCEEDINGS, THEREFORE, THE PENALTY U/S 271 (1)(C) OF THE ACT WAS NOT LEVIABLE. IN THE PRESENT CASE, THIS CONTENTION OF THE ID. COUNSEL FOR THE ASSESSEE THAT IN THE SUBSEQUENT YEAR SIMILAR CL AIM WAS ALTHOUGH DISALLOWED BUT PENALTY PROCEEDINGS WERE DROPPED WAS NOT REBUTTED. THEREFORE, ON THE IDENTICAL FACTS IN THE YEAR UNDER CONSIDERATION VIS-A- VIS THE SUBSEQUENT YEAR PENALTY U/S 271(1)(C) OF TH E ACT WAS NOT LEVIABLE, PARTICULARLY WHEN THE DEPARTMENT ITSELF D ROPPED THE PENALTY IN THE SUBSEQUENT YEAR IN SIMILAR FACTS. IN THE INSTAN T CASE THE ASSESSEE CLAIMED THE DEDUCTION ON ACCOUNT OF INTEREST U/S 24 OF THE ACT BECAUSE IT WAS CLAIMED AND ALLOWED IN THE PRECEDING YEAR, T HEREFORE, THE CLAIM OF THE ASSESSEE WAS A BONAFIDE CLAIM BASED ON A SIM ILAR CLAIM OF THE EARLIER YEAR, THE ASSESSEE DISCLOSED ALL THE FACTS RELATING TO THE PAYMENT OF INTEREST AND CLAIM OF DEDUCTION BEFORE THE AO. T HEREFORE, ONLY ON THIS BASIS THAT THE CLAIM IN FULL WAS NOT ACCEPTED BY TH E AO, IT CANNOT BE SAID THAT THE ASSESSEE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME. AS SUCH THE PENALTY U/S 271(1)(C) OF THE ACT WAS NOT LEVIABLE. WE, THEREFOR E, BY CONSIDERING THE PECULIAR FACTS OF THIS CASE AS DISCUSSED HEREINABOV E DELETE THE PENALTY SUSTAINED BY THE LD. CIT(A). 16. IT IS NOTED THAT THE FACTS OF THE CASE BEFORE U S ARE IDENTICAL TO THE CASE DECIDED BY THE CO-ORDINATE BENCH IN THE CASE O F NARESH KUMAR (SUPRA) AND OTHER CASES DISCUSSED ABOVE, THUS, RESP ECTFULLY FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT, HONBLE BOMBA Y HIGH COURT AND THE CO-ORDINATE BENCH, AS DISCUSSED ABOVE, WE F IND THAT PENALTY LEVIED BY THE AO IS BEYOND JURISDICTION AND CONTRARY TO LAW AND FACTS, AND THEREFORE, THE SAME IS DIRECTED TO BE DELETED. 24 ITA NO.803/MUM/14 M/S AMI BUILDERS PVT. LTD. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND MARCH, 2016. SD/- SD/- ( SAKTIJIT DEY ) ( ASHWANI TANEJA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 02/03/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/