ACIT, CIRCLE- 27(1), NEW DELHI V. UNITECH LTD., NEW DELHI

ITA 8914/DEL/2019

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which deleted a penalty imposed on M/s. Unitech Ltd. under Section 271(1)(c) of the Income Tax Act, 1961, for the Assessment Year 2012-13. The penalty was originally imposed by the Assessing Officer based on certain additions made during the assessment. However, these additions were later deleted by the ITAT in quantum proceedings, leading to the CIT(A)'s decision to delete the penalty. The Revenue challenged this decision, but the ITAT upheld the CIT(A)'s order, citing judicial consistency and the lack of merit in the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121727 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-02-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 14-11-2019
• Other Referred Cases: CIT vs. Max India Ltd., CIT vs. Reliance Utilities Ltd., Dharamendra Textile Processors vs. CIT, Dilip N. Shroff vs. CIT, NG Technologies Ltd. vs. CIT, SAB Builders Ltd. vs. CIT, Max India Ltd. vs. CIT, Nayan C. Shah vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 27; 37; 2; 43; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H” DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.8914/DEL/2019 Assessment Year 2012-13 ACIT, Circle-27(1), New Delhi. Vs. M/s. Unitech Ltd., 6, Unitech House, Community Center, Saket, New Delhi. TAN/PAN: AAACU1482H (Appellant) (Respondent) Appellant by: None Respondent by: Ms. Sapna Bhatia, CIT-DR Date of hearing: 09 02 2023 Date of pronouncement: 15 02 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he c apti oned a ppeal has be en filed by t he R evenue a gainst the orde r of t he C o mmiss ione r o f I nco me Tax (A ppeals)- IX , New D elhi [‘ C IT (A )’ in s h ort ] da ted 13. 08.2 019 aris ing from the penal t y order da ted 28. 03. 2018 pass ed b y t he Assessing O f fi ce r (A O ) under Secti on 271 (1) (c) of t he Inc ome Tax A ct, 1961 ( the A ct) c onc er ning A Y 2012- 13. 2. A s per the caption ed a ppe als, t he ass essee h as chal lenged the imposi t io n o f pena lt y of Rs. 72,2 5, 64, 86 7/- i mp os ed un der Secti on 271(1)(c) of the A ct. 3. When the mat ter was call ed for t he hearing, t he l d. D R for the Re ve nue made ref er enc es to t he ass ess me nt o rder, penal t y order and p laced reliance on s uc h orde rs. I.T.A. No.8914/Del/2019 2 4. T he ld. counse l fo r the assessee, on the ot he r hand, relied upon the or de r of the C IT (A ) a nd su bmi tte d t ha t the C IT (A ) has ri ght l y del eted the penalt y in tune w it h t he ord er of t he IT A T in qua ntum pr oc eedi ngs and having re ga rd to the l aw preva iling in res pect of appl ica ti on o f Sec tion 271( 1)(c) o f t he A ct. 5. We hav e hea rd the ri val submi ssi ons. T he C IT (A ) has take n note of the o rde r of t he IT AT in quan tu m pr oceedi ngs in ITA N o. 1905 to 1907/ D el/ 2017 or der da ted 24. 07.2 019 an d reversed the act ion of t he Assessi ng O f fice r tow a rds impos iti on of penal t y under Sect ion 2 71(1 )(c ) of the A ct. T he rele vant ope ra tive pa ra graphs of the order o f t he CI T(A ) is ext racted hereunde r: - “ 5 . 1 I h av e c o n si d e re d t he f a c t s o f t he c a s e a nd c on t e nt i o n of t h e A R o f t h e ap pe l l an t. A t t he o u t se t, t he c o nt e n ti o n s of t h e A R i n st a t i n g t ha t t he o r d e r le v y i ng p e na l t y is l i a b l e t o b e s e t a s i d e a s t h e s a m e i s p as s e d m e c h a n i c a l l y by th e A O by p i cki n g i n c o rr e c t f i g u r e s o f ad di t i on i n t h e q ua nt u m p r o c e ed i n gs i s a na l y s e d . T h e A R i n t hi s r e g a r d ha s su b m i tt e d t ha t " I n p a ra gr ap h 3 o f t h e i m p u g n e d p e na l ty o r de r, t he A O ha s ob s e r v e d t h at t h e L d . C I T ( A ) i n t h e ap pe l l a t e o r d e r ha s co nfi r m e d t h e a dd i ti o n o f R s. 2 13 , 39 , 95 , 81 8/ - a n d d e l e t e d t h e a d dit i o n of R s. 1 3, 1 2, 6 8, 1 42 /- F ur th e r, i n pa ra g r a ph 6 of t h e i mp u gn e d p e n a lt y or d e r, th e A O h a s pa s s e d a n or d e r le v y i ng pe na l t y o f R s. 7 2, 5 3, 4 5, 1 79 /- w h i c h i s c a lc u l a t e d o n t h e b a s is of t h e s a i d c o n f i rm e d a dd i ti o n s o f R s. 2 13 , 39 , 95 , 8 1 8/ - I t i s su bm i t t e d i n t hi s r e g ar d t h a t t he A O h a s p ro ce ed e d m e c h an i c a ll y a n d w it h o u t a n y ap pl i c at i on of m i nd in st a t i n g t h at t h e L d . C I T ( A ) ha s c on f i rm e d a dd i t i o n s o f R s. 21 3, 3 9, 9 5, 8 1 8 / - , I t i s e a r f ro m t he a pp e l l a t e o r d e r ( s u m m a r i s e d i n t h e t a bl e a b ov e ) t h at t he L d. C I T ( A ) ha s s u st a in e d a d d it i on s on l y o f a n a m ou nt of R s. 2 07 , 7 4 , 25 , 69 8 . " T h e A R h a s r e l i e d u po n t h e f o l l o wi n g c h a r t i n t hi s r e g ar d : S r . A D D I T I O N S / A M O U N T I N M O D I F I C A T IO N S B y N o . D I S S A L L O WA N C E S B Y A O R s / - L d . C I T ( A ) 1 . C a p i t a l G a in s t r e a t e s a s 7 3 , 2 5 , 7 3 , 4 2 5 A dd i t i o n u p h e l d B u s i n e s s I n c o m e 2 . N o t i o n a l I n t e r e s t o n S h a r e 1 3 , 8 9 , 5 0 , 0 0 0 A d d i t i o n u p h e l d A p p l i c a t i o n M o n e y I.T.A. No.8914/Del/2019 3 3 . N o t i o n a l I n t e r e s t o n U n s e c u r e d 1 , 1 5 , 5 9 , 4 9 , 1 7 1 A d d i t i o n u p h e l d L o a n s 4 . R e n t a l I n c o m e t r e a t e d a s 1 , 1 7 , 6 1 , 1 0 1 A d di t i o n u p h e ld B u s i n e s s I n c o m e 5 . C l a i m o f F i x e d A s s e t s W r i t t e n o f f 8 1 , 7 9 , 7 9 5 A d d i t i o n u p h e l d 6 . A d v e r t i s i n g & P r o m o t i o n a l 4 0 , 0 1 , 8 3 1 A d d i t i o n u p h e l d E x p e n s e s 7 . P r i o r P e r i o d C h a r g e s 5 , 2 2 , 6 8 3 A d d i t i o n u p h e l d 8 . C a s h P a y m e n t s U / s . 4 0 A ( 3 ) 1 5 , 0 8 , 8 7 , 9 0 8 A d d i t i o n u p h e l d 9 . D i s a l l o w a n c e U / s . 1 4 A 1 5 , 0 8 , 8 7 , 9 0 8 A d di t i o n m o d i f i e d t o R s . 4 , 1 7 , 0 5 , 3 8 1 / - T O T A L A D D I T I O N S 2 0 7 , 7 4, 2 5 , 6 9 8 S U S T A I N E D O n pe r u s a l o f t he o r de r pa s s e d b y t h e C I T ( A ) , i t i s o b s e r v e d t h at t h e r e i s m e r i t i n t hi s s u bm i s s i on o f th e A R . 5 . 2 (a ) T r e a t m e nt o f g a i n s a r i s i n g o n s a l e of 1 00 % s h a r e s b y t he a s s e s s e e c o m pa n y o f it s w ho l l y ow n e d s ub s i d i a r i e s as bu s i n e s s i n c om e i n s t e a d o f c a p i t al g a i n . T he A R h a s s u bm i t t e d t he j u dg m e n t d a t e d 2 4 . 0 7 . 2 01 9 i n I T A N o . 1 9 06 / D e l / 2 0 17 p as s e d i n it s c as e o n q u a n t um i s s u e s by t h e H o n ’ bl e I TA T. T he A R ha s d r aw n m y a t t e nt i o n t o p ar a g r a ph nos . 5 t o 11 of t h e s a i d d e c i s i on , r e p r o d u c e d b e l ow : 5 . F or t h e a s s e s s m e n t y e a r 20 07 - 0 8 , as s e s s e e f i l e d r e tu r n of i n c om e o n 3 1/ 1 0 / 2 00 7 d e c l ar i n g t o t al i nc o m e of R s . 1 2 , 1 8 , 5 3 , 3 7, 4 1 0/ - in c l ud i n g lo n g - t e r m c a p i ta l g a i n s of R s . 1 1 , 1 0 , 8 2, 7 3 , 6 2 7/ - . L e ar n e d A s s e s s i n g O f f ic e r , t o t h e e x t e nt t h e s e ap p e a l s a r e c o n c e r ne d , m a de ad d i ti o n s o n ac c oun t o f c a p i t al g a in s t r e at i n g i t a s bu s i ne s s i n c om e t o t h e t u ne of R s . 1 , 5 3 , 9 8 , 17 , 8 8 3 / - , l oa n f r o m B U U I P L tr e at i n g i t as a d e e m e d d i v i de n d t o t he t un e o f R s . 1 1 , 0 7 , 40 , 7 0 8 / - , no t i on al i nt e r e s t on s ha r e a pp l i c at i o n m o n e y t o t h e t un e of R s . 1, 8 5 , 3 5 ,5 4 9 / - , a nd n o ti o na l i nt e r e s t o n u n s e c ur e d l o a n s t o t h e t u n e o f R s . 2 , 1 3 , 3 8 , 3 6 8/ - . 6 . Wh e n t he a s s e s s e e p r e f e r r e d a p p e al , L d. C I T (A ) by w a y of i m pu gn e d o r d e r d e l e te d t h e ad di t i o n m ad e on a c c o u nt o f d e e m e d d i v i de n d u nd e r s e c t i o n 2 ( 2 2 ) (e ) o f t h e A c t an d c onf i r m e d t he o t he r a d di t i o ns . H e n c e , t h e as s e s s e e p r e f e r r e d a p p eal . 7 . In r e s pe c t o f t he i s s u e r e l at i n g t o t a x i n g , t h e ga i n s a r i s i n g f r o m th e s a l e o f s h a r e s , l e ar n e d A s s e s s i n g O f f i c e r f o un d th a t t he a s s e s s e e e n te r e d in t o s h ar e p ur c h a s e a gr e e m e nt w i t h v a r i ou s b u y e r s i n r e s pe c t o f s ha r e s o f a l l t h e w h ol l y o w n e d s u b s i d i a r i e s w h o ar e c a r r y i n g l a nd an d w ho s e l a n d d e v e lo p m e n t r ig h ts w e r e t r a n s f e r r e d to t he a s s e s s e e , a n d h e ld t ha t w h a t w a s be i n g I.T.A. No.8914/Del/2019 4 t r a n s f e r r e d t h r o u g h t h e a p p ar e nt t o t r a n s f e r o f s h ar e s in al l th e s e c o m p a n i e s w e r e t he p r o p e r t i e s he l d b y th e w ho l l y own e d s ub s i di a r y c o m p a n y . L e a r n e d A s s e s s i n g O f f i c e r r e l ie d up o n t he a s s e s s m e n t o r d e r s r e l at i n g t o a s s e s s m e n t y e a r s 20 0 9- 10 an d 2 01 0 - 1 1 t o r e a c h a c o n c l u s i o n t h at t h e t r a n s a c t io n s of sa l e of s h a r e s w e r e i n f a c t i n ac c o r da n c e w i t h t h e or di n ar y l i ne s o f bu s i n e s s a s d e f i ne d i n MO U a n d A r t i c l e s of A s s o c i at i o n o f t h e co m p a ny . L e ar n e d A s s e s s i n g O f f i c e r f ur t he r f o un d t h at t h e t ra n s ac t i o ns w e r e f o un d t o b e c a r r i e d o ut i n a m a n ne r w h ic h i nd i c at e s s y s t e m a ti c a nd o r g a n i s e d a c t i v i t y w i t h p r o f i t m o t i v e an d , t h e r e f ore , t he t r a n s ac t i o n of s a l e o f s h a r e s of a w ho l l y ow n e d s ubs i di a r y c o m p a n i e s i s i n f e c t e d b us i ne s s pr of i t a n d n ot c a pi ta l g a i n a s t he i n t e nt i o n o f t h e c o m p a ny w as n o t t o e ar n i n g d i v i d e nd bu t ag a i n p r o f i t b y s a l e of s h a r e s o f t ho s e c o m p a n i e s . 8 . Ld . C I T ( A ), on t h e s e f ac t s , no t i c i n g hi s pr e d e c es s o r s or d e r d a te d 1 6 / 0 8 / 20 1 3 f o r t h e as s e s s m e n t y e a r 20 0 9 - 10 i n a s s e s s e e ’ s o w n c as e , f e l t t h a t t he s a i d o r d e r f o r t h e as s e s s m en t y e a r 2 0 0 9 - 1 0 i s s e l f e x p l an at o r y , e x h au s t i v e o n t he ba s i s of m o du s o p e r an d ! a d op t e d b y t h e a s s e s s e e , an d t o fo l l ow t h e r u l e o f j ud i c i al c o ns i s t e nc y , h e f o u n d i t di f f i c ul t t o t a k e a di f f e re n t v ie w a nd , t h e r e f or e , up he l d t he a d di t i on . 9 . A R s ub m i t t e d t h at t hi s i s s u e i s no l o n g e r r e s I nt e g r a a nd v i d e pa r a gr a p h N o . 1 5 of t h e or de r d a t e d 1 2 / 02 / 2 0 19 i n I T A N o . 6 5 85 / D e l / 2 0 15 f o r a s s e s s m e nt y e a r 2 0 1 1 -1 2 , a c o - or di n at e B e n c h o f th i s Tr i b u n a l h e l d t h e i s s ue i n f a v o u r of t he a ss e s s e e . A c o p y of t h e o r d e r is p r o du c e d b e fo r e us a n d w e h av e go ne t hr ou g h t he s am e . V i d e p ar a g r ap h N o . 1 5 , i t w a s h e ld t h at , - 1 5 . “ F ur t h e r t he g ui d e l i n e i s s ue d by t h e C B D T , c l ear l y l a y s do w n t h at , w h a t h as t o b e s e e n is , f i r s t ly , t h e o bj e c t i ve o f a c qu i r i n g t he s ha r e s , t ha t i s , w h e t he r i t ha s b e e n t r e at e d a s i n ve s t m e nt o r to e n j oy i n c o m e t he r e f r om or to m a k e p r of i t b y bu y i ng a nd s e l l i ng s ha r e s i n s h or t r u n ; s e c on dl y , t he pe r i o d o f w h i c h s ha r e s h av e b e e n h e l d, t h at i s , w h e t he r t h e s ha r e s a r e he l d f or m or e t h a n t h r e e y e a r s ; t h ir dl y , w h e th e r t h e r e i s f r e qu e nc y o f t r a n sac t i o n s i n a p a r t i c u l a r s h a r e ; a n d l a s t l y , t h e t r e at m e n t an d c l as s i f i c at i o n g i v e n i n t h e b oo k s o f ac c o un t s h a s to be gi v e n s i g ni f i c a nc e . I f w e ap pl y t h e s ai d gu i de l i n e s , t he n a l l t he f ac t o r s i n di c a t e t h at i nt e n t i o n w a s n e v e r t o t r a d e i n s h ar e s . H e r e t he r e v e nu e ’s s t a nd t h a t t he r e w a s t r a d i ng o f u nd e r l y i n g a s s e ts o f t he s u b s i d i ar y c omp a ni e s , c an n ot b e u ph e l d i n l a w a s s ha r e h ol d e r d oe s n o t h av e r i g h t t o a s s e t s of t h e c o m p a n y bu t o n l y s h ar e i n pr o f i t . T h e c om pa ny al on e c a n w i t h t h e a pp r o v al of bo a r d o f d i r e c t or s s e l l i t s a s s e t s . Th us , w e d o n ot f i n d an y r e a s o n a s t o w hy s al e o f s h a r e s i s tr e at e d as t r a d i n g i n l a nd s o a s t o be t a x e d a s b u s i n e s s i n c om e i n t h e h and s o f t he a s s e s s e e . H e n c e , i n v i e w o f ou r d i s c us s i on m a de a b ov e , w e h o l d t h at i n c o m e f r o m s a l e of s h a r e s c a n n ot be t a x e d a s bu s i n e s s i n c o m e I.T.A. No.8914/Del/2019 5 b u t h a s t o t a x e d a s c ap i t al g a in . I n t he r e s u lt , t he s e gr o u n d s a r e a l l ow e d. ” 1 0 . It i s , t h e r e f o r e , c l e ar t ha t u n de r s i m i l ar s e t of f a c t s , i t w a s h e l d b y t h e Tr i b u n a l t h at t h e i n c o m e f r o m s a l e of sh ar e s c a n no t be t a x ab l e as bu s i n e s s i n c o m e , b u t h a s t o b e t a x e d a s c ap i t al g a in . S i nc e t h e r e i s n o di s p u t e as t o t h e s i m i l a r i t y of fa c t s , i n t he a b s e nc e of an y r e a s o ns c o m p e ll i n g u s t o t a k e a d i f fe r e nt v ie w , w h il e f o l l ow i ng t he s a m e , w e ho l d th e i s s u e i n f a v ou r o f t he a s s e s s e e . 1 1 . Si m i l a r i s t he i s s u e i n v ol v e d i n g r o u n d N o. 1 in I T A N o . 1 9 06 / D e l / 2 0 17 i n r e s p e c t o f t he a s s e s s m e n t y e ar 2 012 - 1 3 . H e nc e , t h i s g r o u nd in r e s p e c t o f t h e a s s e s s m e n t y e a r 2 0 12 -1 3 i s a l s o h e l d i n f av o ur of t h e as s e s s e e . 5 . 3 (b ) N o ti o n a l D i s a l l ow a nc e o f i nt e r e s t o n a n e s t im a te d r a t e of i n t e r e s t u nd e r S e c t i o n 36 ( 1 ) (i i i ) of th e I nc o m e Tax A c t , 1 9 6 1 to t h e e x te n t o f s ha r e a pp l i c at i o n m on e y : W i t h r e s pe c t t o t h i s d i s a ll o w an c e , n o s . 1 2 t o 1 4 o f th e I TA T d e c i s i on d at e d 24 . 0 7 . 2 01 9 , r e pr o d u c e d b e lo w : 1 2 . N o w c om i ng t o t he i s s u e r e l a t i n g to t h e d is al l ow a n c e of p r o p o r t i o na l i n t e r e s t un d e r s e c t io n 3 6 ( 1 )( i i i ) of t h e A c t o n t he b o r r o w e d fu n d s t o th e e x te n t of f un d s ad v an c e d i n re s p e c t o f s ha r e a p pl i c at i o n m o n e y , i t i s in v o lv e d f or t h e as s e s s m e nt y e ar s 20 0 7- 08 , 2 0 12 -1 3 an d 20 1 3 - 14 . Le a r n e d A s s e s s i n g O f fi c e r f o u nd c e r t a i n a m o un t s s h o w n as o u t s t an d in g ba l a n c e of s h a r e a p pl ic a t i on m o ne y , w h ic h a r e e x c e e d in g 6 w e r e s o l d , a pe r i o d c o n s i d e r ed r e a s o na bl e f o r al l o t m e n t o f s ha r e s a n d , t he r e f o r e , he l d th a t in t e r e s t s ho u l d h a v e be e n c h a r ge d o n t h e s e l o an s as t he c om pa ny i s op e r a t i n g o n b o r r o w e d f u n d s . W hi l e f o l l ow i ng t h e a s s e s s m e nt or d er s f o r t he a s s e s s m e n t y e ar s 2 0 0 9 - 1 0 an d 2 0 1 0 - 1 1 , le a r n e d A s s e ss i n g O f f i c e r b r o u g h t t h e p r op o r t i on at e i n t e r e s t t o ta x . 1 3 . It is s u bm i tt e d t h at t h i s i s s ue a l s o i s n o l on ge r r e s In t e gr a a n d is c o v e r e d by th e o r d e r i n I T A N o . 6 5 85 / D e l / 20 15 f o r t he a s s e s s m e n t y e ar 2 01 1- 1 2. O n a pe r u s a l o f t h e o r de r , w e f i n d t h at t h e Tr i b un al d e al t w i t h t h is i s s u e v i d e p a r a gr a p h nu m be r s 16 - 2 1 of t h e or de r , a n d v i d e p a r a g r ap h N o . 2 1 h e l d t h a t , - 2 1 . “F u r t he r , i f a t a l l s u c h d is al l o w a nc e i s b e i ng m a de o n n o ti o na l a n d h y p o t h e t i c al b a s i s t r e a t i ng s h ar e ap pli c a t io n m o ne y a s a d v an c e o r i n t e r e s t f r e e l o a n, t h e n A O a l s o n e e ds t o ta k e i n t o c o ns i de r a t i on , w he t h e r a s s e s s e e c o m p a ny h as s u f fi c ie n t s u r pl u s f u nd o r no t ; an d i f s u r p l us f un d e x c e e de d t h e a m o u nt o f ad v a nc e , t h e n a g a i n , n o n ot i o n a l i nt e r e s t o r d i s al l o w a n c e c an be m a d e . H e r e i t i s u nd i s p ut e d f ac t t h at a s s e s s e e c o m p a n y h as m ore t h a n R s . 9 2 81 . 8 7 c r o r e s o f a c c u m u l a t e d r e s e r v e s a nd d u r i ng t h e y e a r i t s e l f i t s r e s e r v e s h a v e i n c r e a s e d b y R s . 1 37 9 c r o re s a n d a m o un t of s ha r e ap p l ic a t i o n m o ne y a dv a n c e w a s on l y R s . 24 5 . 3 4 c r o r e s . T h u s , i n s u c h c i r c u m s t a n c e s , p r e s u m p t i on i s al w ay s i n th e f a v ou r I.T.A. No.8914/Del/2019 6 o f t h e as s e s s e e t h at th e s e a r e a d v an c e s o ut o f s u r pl us f u n d s o nl y a n d s u c h p r e s u m p t i o n h a s b e e n l a i d d ow n b y t h e H o n’bl e J u r i s d i c t io n al H i g h C o ur t i n t he c a s e o f C I T v s . M ax I nd i a L td . ( P &H ) H i g h C o u r t , r e po r t e d i n 3 98 I T R 2 0 9. T h us , u nde r t h e fa c t s a n d c i r c u m s t an c e s o f t h is c a s e , w e h ol d t h at no d i sa ll o w an c e c an b e m a d e . I n s o f a r a s r e l i an c e pl a c e d on e a r l i e r y ea r o r d e r s , C o un s e l h as b r ou g ht on r e c o r d t h at th e r e v e n u e ’ s a pp e a l s fo r t he A s s t t . Ye a r 2 0 0 9 - 1 0 an d 20 1 0- 11 h av e b e e n di s m i s s ed b y t he T r i bu n a l by qu as hi n g t he a s s e s s m e n t s o n t he gr ou nd of l i m i t a t i on . T h u s , o n m e r i t s w e h o ld t ha t n o ad d i ti o n i s c al l e d f o r a nd c o ns e qu e nt l y t h e g r o u nd no . 4 t o 4 . 2 i s t r e at e d a s al l o w e d . ” 1 4 . Si n c e t h e f ac t s an d c ir c um s t a n c e s a r e v e r y s i m il a r t o t h o s e i n v ol v e d f o r t he y e ar s un de r c o ns i d e r a t i on , w h i l e re s pe c t f ul l y f o l l ow i ng t he s a m e , w e h ol d t h a t i n v i e w of t he d e ci s io n o f t he H on ’b l e J u r is d i c t i o n a l H i gh C ou r t i n t h e c as e of C IT v s . M a x In d i a L t d ( P & H H i gh C o ur t ) , 3 98 I T R 2 0 9 t h e p r e s u m p t i on in f av o u r of t h e a s s e s s e e t h at t he ad v an c e s w e r e o n l y o u t o f t h is s ur p l u s f u nd s a n d s u c h a p r e s u m p t i o n d oe s n ot s t a nd r e v e r t e d, a nd c o n s e q u e nt l y t h e i s s u e i s he l d i n f a v ou r o f t he a s s e s s e e . G r o un d N o . 2 in a s s e s s e e ’s a p p e a l s f o r t h e a s s e s s m e n t y e a r s 2 00 7 -0 8, 2 01 2 -1 3, a n d g r o u n d N o . 1 in t h e ap pe a l f or t he a s s e s s m e nt y e a r 2 01 3- 1 4 a r e a n s w e r e d , a c c or d i n g l y i n fa v o ur o f t h e as s e s s e e . 5 . 4 (c ) N o t i on a l D is al l o w a n c e o f i nt e r e s t o n an e s t im a t e d r a t e of i n t e r e s t u nd e r S e c t i o n 3 6 (1 ) (i i i ) of t h e i nc o m e T ax A c t , 1 9 6 1 t o t h e e x te n t o f in t e r e s t f r e e a dv a n c e s t o i t s s ub s i d ia r i e s . W i t h r e s p e c t t o t h i s di s al l o w a nc e , pa r a g r ap h no s . 15 t o 1 7 of t he I TA T d e c i s i o n d at e d 24 . 0 7. 2 0 19 , r e p r od u c e d b e lo w : 1 5 . In s o f ar a s t h e i s s u e r e l a t i ng t o t h e d i s al l o w a nc e of i n t e r e s t u n de r s e c t i on 36 ( 1 ) ( i i i ) o f t h e A c t o n b o r r ow e d f u nd s t o t he e x t e nt o f f u n ds ad v a n c e d b y t he a s s e s s e e t o i t s s u bs id i ar ie s , s u c h a n i s s ue c o v e r s gr o u nd N o . 3 in th e a p pe a l s of th e as s e s s e e f o r t he a s s e s s m e n t y e a r s 20 07 - 08 , 2 0 1 2 - 13 a n d 2 01 3- 1 4. O n th i s a s pe c t , c a s e o f th e R e v e n ue i s t h at t he as s e s s e e ha d s h ow n c e r t a i n o u ts t an di n g b al a nc e am ou n t i s of i nt e r e s t f r e e l o ans t o v a r i ou s s ub s i di a r y c om pa n ie s o f t he as s e s s e e , h av i n g s e p ar at e b u s i ne s s / P r oj e c t a c t i v it i e s an d du r i n g t h e a s s e s s m en t p r oc e e d i ng s f o r t h e y e a r s 20 0 9 - 1 0 a nd 2 0 10 -1 1 , i t w as h e ld t h a t s u c h in t e r e s t ( a t t h e r at e of a v e r a g e r at e o f i n t e r e s t p a i d b y t he a s s e s s e e du r i n g t h e y e ar , w h i c h i s 1 1 % i n 20 07 - 08 , on i n t e r e s t f r e e l oa n s t o r e l a t e d c o nc e r n s m us t be a d d e d t o t he i n c om e of t h e as s e s s ee . L e ar n e d A s s e s s i n g O f f i c e r , t he r e f o r e , m ad e s u c h a n a d di t i o n a n d b a s i n g on t he s a m e a na l o g y of t he e a r l i e r y e ar f i n di n g s of 2 0 0 9- 1 0 a n d 2 01 0 - 1 1, L d. C I T (A ) a l s o u p he l d t he s a m e . 1 6 . It i s b r o ug ht to o u r n ot i c e t h at t hi s i s s u e i s c o v e r e d by t he o r d e r d at e d 1 2 / 0 2 / 20 1 9 f o r t h e a s s e s s m e n t y e ar 2 0 1 1- 1 2 , v i de p a r a g r a ph nu m b e r s 27 - 31 a n d v i de p ar a g r ap h n u m be r s 3 0 a n d 31 , I.T.A. No.8914/Del/2019 7 a c o - o r d i n a te B e n c h o f t h i s Tr i b un a l h e l d a s f o l l ows : - “2 7. I n g r o u n d N o . 6 to 7 . 2 a s s e s s e e ha s c ha l l e ng e d t he di s a l l ow a nc e o f R s . 1, 3 2 , 17 , 1 5 , 3 6 4 / - as i nt e r e s t i mp ut e d b y A O on i nt e r e s t fr e e l o a n/ a dv a nc e t o s i s t e r c o nc e r n s . T he f a c t s i n br ie f a r e th a t as s e s s e e c o m p an y h as g iv e n a dv a nc e s du r i n g t he y e a r t o s u b s i d i a r i e s / J o in t v e nt u r e / as s o c i a t e s f o r su m of R s . 23 3 . 01 c r o r e s . Th e o ut s t a nd i n g b a l a n c e a s o n 3 1 . 3 . 20 0 1 ag g r e g a t e d to R s . 9 86 , 67 , 8 7, 6 9 4 / - , t h e de t a i l s o f out s t a n d i ng ba l an c e s h av e b e e n i n c or po r a t e d a t pa g e 11 of t h e as s e s s m e nt or de r . A O h a s he l d t h at t h i s i s s ue ha s b e e n e x a m i n ed in d e t ai l du r i n g t h e as s e s s m e n t p r oc e e d i n g s f o r t h e a s s e s s m e nt y e a r 2 0 0 9 - 10 a nd 2 01 1 -1 2, w h e r e i n i t h a s be e n h e ld t h a t i nt e re s t pa i d by t he a s s e s s e e o n th i s b or r ow e d fu n d s h o ul d be d i s a l lo w e d @ 1 4 %. F ol l o w i n g t h e s a m e pr e c e d e nt A O h a s c al c u l at e d t he di s a l l ow a nc e o f i n t e r e s t o n b o r r o w e d c a pi t a l f u n d s t o R s . 1, 3 2 , 17 , 15 , 3 6 4 / - b y a pp l y i n g t he i n t e r e s t r a t e o f 14° /o . 28 . B e f or e us , Ld . C o u n s e l h a s s u b m i t t e d t h at t h e as s e s s e e ha s hu g e s u r p l us f u nd s w h i c h i s e v i de n t fr o m t h e f a c t th a t i t h a s ac c u m u l a t e d r e s e r v e s o f R s . 9 2 81 . 8 7 c r o r e s , t h e r e f or e th e r e c an no t b e an y p r e s u m p t i on t h at m o ne y ha s be e n a dv a nc e d to s u bs i d i ar i e s ou t of b or r ow e d f u nd s . I n a n y c a s e t he m on e y w h i c h ha s b e e n ad v an c e d to t h e s e c o m pa n i e s / c o n c e r ns w e r e a l s o e ng ag e d i n r e a l e s t a t e bu s i n e s s an d s uc h an ad v an c e w a s f o r t he bu s i n e s s pu r p o s e w h i c h i s i n c i de n t al t o t he b us i n e ss c ar r i e d o ut by t he a s s e s s e e , b e c a u s e as s e s s e e ha d e n te r e d i nt o j o i n t v e n t u r e on v ar i ou s p r o je c t s w i t h th e s e c o m p an i e s . Th u s , t her e w a s n ot on l y c o m m e r c i al e x p e d i e n c y bu t b u s i ne s s l i n k in ad va n c i ng s u c h f un ds t o t h e c o m pa ni e s . 29 . O n t h e ot h e r h a nd , Ld . D R s t r o n gl y r e l i e d u po n t h e o r d e r of t he A O . 30 . A f t e r c o ns i de r i n g t h e r i v a l s u b m i s s i o n s a nd r e le v a n t f i nd i n g gi v e n i n t h e i m p ug n e d or d e r s , w e f i nd t h a t n ow he r e t h e A O ha s r e bu t t e d t h e c o n t e nt i on o f t h e as s e s s e e t ha t t he s e a d v a n c e s t o s i s t e r c o n c e r ns w e r e f o r b us i ne s s p ur p o s e o r f o r c om m e r c i al e x p e d i e n c y n or he ha s t r i e d t o e s t ab l i s h t he n e x us b e t w e e n t he m o ne y a dv a nc e d f r om t he b or r ow e d f u nd s o r h a s a s k e d t he as s e s s e e t o e s ta b l is h t h at s u c h a d v a n c e h a s be e n giv e n ou t of s u r pl u s o r i nt e r e s t t h r o u g h f un d. H e r e i n t h i s c a s e t he s u b s i di a r y c om pa ni e s / c o nc e r n s t o w h om m o n e y h a v e b e e n ad v a nc e d w e r e al s o e n g a ge d i n r e a l e s t a te b u s i ne s s w i t h w h o m a s s es s e e c om pa ny ha d e n te r e d in t o J o i n t v e n t u r e f or v a r i ou s p r oj e c t s . O n c e s u c h a c o n t e nt i on of t h e a s s e s s e e h as n o t b e e n r e b ut t e d o r r e f ut e d b y t he A O , t h e n i t h as t o be a c c e pt e d t h at s uc h a n ad v an c e w a s f o r t he b us in e s s p u r po s e . A c c or di n g l y , w e ho l d t h at s u c h a n a d v a nc e w a s f o r c o m m e r c i a l e x p e di e n c y an d the r e f o r e , no d i s a ll o w an c e c o u l d h av e b e e n m a de i n v i e w o f t he j u d gm e nt of H o n ’ b l e S u p r e m e C ou r t i n t h e c a s e of S A B u i l de r s L t d. v s I.T.A. No.8914/Del/2019 8 C I T ( A ) 2 8 8 I TR 1 (S C ) . 31 . It i s f u r t h e r n ot i c e d t h at t h e a s s e s s e e c o m p an y h ad h u ge s u r pl u s f u nd s w hi c h f ar e x c e e d e d t h e a d v a nc e s ; a nd t he r e f o r e , w i t h ou t t he i r b e i ng a n e x us pr ov e d by t h e A O t ha t on l y bo r r o w e d f un ds w e r e a dv a n c e d , t h e n pr e s u m pt i o n c an b e d r a w n t h at s u c h ad v an c e s h av e be e n gi v e n o u t o f i nt e r e s t f r e e f u nd s. T h i s v i e w i s no w w e l l s u p po r t e d b y v ar io u s j ud g m e nt s , l i k e ; C I T v s . R e l i a nc e U t i l i ti e s Lt d . r e p or t e d i n 3 13 I T R 3 4 0 ( B o m ) ; a n d CI T v s . M ax In di a L t d. , r e p o r t e d i n 3 98 I T R 2 0 9 (P &H ) . A c c o r d i ng l y , s uc h a di s a l l ow a nc e i s d e l e t e d o n t h i s g r ou n d a l s o . ” 17 . R e v e n ue do e s no t d i s pu t e t h e a pp l i c a b i l i ty of the s e f i nd i n g s f or t he y e ar s u n de r c on s i d e r a t io n a l s o a nd i n v i e w o f t h e a b ov e f in d i n g of t h e T r i bu n al , w e h o l d t h at i n t h e ab s e n ce o f an y n e x u s pr ov e d by t h e l e a r n e d A s s e s s i n g O f f ic e r th a t on l y bo r r o w e d f un ds w e r e a dv a nc e d , a p r e s u m p t io n h a s t o b e d r a w n t h a t s u c h ad v an c e s w e r e p r o v i de d ou t of i nt e r e s t f r e e f u nd s , i n v i e w o f t he de c i s i o n o f t he H on ’ bl e P u n ja b a nd H a r y a n a H i gh C o ur t i n t he c as e of C I T v s . M ax In di a L td ( s u p r a ) . H e n c e , g r o und N o . 3 of t he ap p e al s o f t h e a s s e s s e e f o r t he a s s e s s m e nt y e ar 2 0 07 -0 8 a nd 20 1 2 - 1 3 a n d gr o u nd N o . 2 f or t h e ap p e al f or t he a s se s s m e n t y e a r 20 1 3 - 1 4 ar e a ns w e r e d i n f a v ou r of t h e a s s e s s e e an d t h e a d di t i on s t an d s d e l e t e d . 5. 5 ( d ) D is al l o w a nc e of s t a nd a r d d e d u c ti o n u / s 2 4 o n a c c o u n t of t r e at m e n t o f I nc o m e f r o m H o u s e P r o pe r t y as B us i n e s s I n c o m e It i s o b s e r v e d f r o m t he or de r p as s e d b y t he C I T ( A ) t h at t he di s a l l ow a nc e o n t h i s gr o u nd i s d e l e t e d by t he C IT (A) . F ur t he r , i t i s o bs e r v e d f r o m t h e j ud g m e nt d a t e d 2 4. 0 7 . 2 0 1 9 i n IT A N o . 19 0 6/ D e l / 2 01 7 pa s s e d in a p pe l l a n t ’ s c a s e on q u a n t u m i s s u e s by t he H o n ’ b l e I T A T t h at t h e d e p a r t m e n t h a d pr e fe r r e d an a pp e al on t hi s g r o un d b e f o r e t h e H o n ’ bl e I T A T. T h e s ai d appe a l ha s be e n di s m i s s e d w i t h t he f o l l ow i ng f i n d i ng s b y t he Ho n ’ b l e IT A T : 24 . I n r e s pe c t of t he ad di t i o n ou t of de d uc t i o n un de r s e c t i o n 2 4 of t he A c t , t h e T r i b u n al de a l t w i t h t hi s i s s u e v i d e p a r a gr a p h nu m b e r s 3 2 -3 5 , a n d v id e p ar ag r a p h N o. 35 t h e r e of i t w a s h e ld t ha t , - “3 5. “A f t e r he a r i n g bo t h t h e p a r t i e s a n d o n pe r us a l of t he u m p ug ne d o r d e r i t i s s e e n t ha t , n ow h e r e i t ha s be e n de n i e d t ha t t h e r e nt a l i n c o m e b y t h e a s s e s s e e is f r om l e a si ng o f t he pr e m i s e s a n d s uc h r e n t al i nc o m e h as b e e n d e c l ar e d un d e r t he he a d 'i n c om e f r o m h ou s e pr o p e r t y ' . T h e e n t i r e f in d in g o f t he A O i s b as e d o n p r e s u m p t i o n t h a t a s s e s s e e m us t ha v e i n cu r r e d c e r t ai n e x pe n d it u r e i n r e l a t io n t o th e e a r n in g of re nt a l i nc o m e w i t h ou t i de n t i fy a s t o w h i c h e x p e n d i t u r e c a n b e s a id t o be r e l at e d t o e a r n i ng o f r e n t al i n c o m e o r t h e r e i s a ny s y s t e m a t i c ac t i v i t y f or e x p l o it i n g th e p r o pe r t y f o r c o m m e r c i a l or bu s i n e s s pu r p os e . H e r e t h e e n t i r e r e nt a l in c o m e h a s be e n e a rn e d f r o m l e t t i n g o ut t he pr op e r t i e s ow ne d by t he as s e s s e e , he n c e w h e n I.T.A. No.8914/Del/2019 9 i nc o m e h a s b e e n e a r ne d f r om s i m p l y l e t t i ng o u t t h e p r op e r ty t he n i t ha s t o b e t ax e d un d e r t he h e a d ' i nc o m e f r o m h ou s e pr op e r t y '. H o n ’ b l e S u pr e m e C o ur t in t h e c a s e o f Ra j D a d a r k a r & A s s o c i a t e s v . A s s t t . C I T [ 2 01 7] 81 t ax m a n n . c o m 1 9 3/2 48 T a x m a n 1/ 3 94 I T R 5 9 2 , a f te r c on s i d e r i ng t he e a r l i e r j u d g e me n t s o f t he H o n ’ bl e S up r e m e C o ur t a s c i t e d b y t he L d. C o u n s e l ha s h e l d t h at w h e r e v e r t h e r e i s an i n c om e f r o m le a s i n g o u t o f p r em i s e s a n d c ol l e c t i ng r e n t , n o r m a l l y s u c h an in c o m e i s t o be tr e at e d a s i nc o m e f r o m h ou s e p r op e r t y , i f t he c o n d i t i on s o f prov i s i o n s of Se c t i o n 2 2 of t h e A c t a r e s a t i s f i e d. M o r e o v e r , i t ha s al s o b e e n po i nt e d o u t b y t he L d . C o u n s e l t ha t al l t hr ou gh o ut i n t h e e a r l i e r y e a r s as s e s s e e h a s b e e n s ho w i n g r e n t a l i n c o m e un de r t he h e a d 'i nc o m e f r o m ho u s e pr o p e r t y ' w h i c h h a s b e e n a c c e pt ed b y t he r e v e nu e u n de r t h e s c r u t i n y p r o c e e d i ng s i n v ar i ou s ye ar s . T he de t a i ls o f e a r l i e r a s s e s s m e n t ac c e p t i ng t he r e nt a l i nc o m e a s i nc o m e f r o m h ou s e p r op e r t y ha s b e e n g i v e n i n t he c ha r t e n c l o s e d at p a ge 3 o f t he pa pe r bo o k v ol u m e V . T h u s , un de r the s e fa c t s an d c i r c u m s t a n c e s , w e h ol d th a t r e nt a l i n c om e c an not be t r e a t e d as b u s i ne s s i n c o m e an d c o ns e q u e nt l y , be n e f i t o f s t an d ar d de d uc t i o n o f 3 0 % h a s t o be a l l ow e d . ” 2 7 . I n v ie w o f t he ob s e r v a t i on ta k e n b y t h e Tr i b un al i n a s s e s s e s 's o w n c as e f o r t he as s e s s m e n t y e a r 20 1 1 - 1 2 w hi c h i s a p p l ic a b le t o t he f ac t s of t he c as e f o r t he a s s e s s m e nt y e a r s 2 01 2- 1 3 a n d 20 1 3 - 14 , w e f i n d t h at gr ou nd s N o . 1 t o 3 o f I T A N o . 6 43 7 a nd 4 78 1 / D e l / 2 0 17 a r e l ia b l e t o b e di s m i s s e d . 5. 6 B as e d o n a b o v e de l i be r at i o n, i t e m a n a t e s t ha t fo l l o w i n g ad d it i o ns / di s al l o w a nc e s m a d e b y t h e A O o n t h e b asis o f w h i c h pe n al t y w as l e v ie d h av e b e e n f o un d t o b e e r r o n e ou s b y t he H o n ’ bl e I TA T ; a nd c on s e q ue n t i al l y t he s a m e ha v e be en de l e t e d. S R . A D D I T I O N S / D I S A L L O W A N C E S A M O U N T IN R S . / - N O . 1 . C a p i t a l G a i n s t r e a t e d a s B u s i n e s s I n c o m e 7 3 ,2 5 , 7 3 , 4 2 5 2 . R e n t a l I n c o m e t r e a t e d a s B u s i n e s s I n c o m e 5 ,8 5 , 3 7 , 0 0 3 3 . N o t i o n a l I n t e r e s t d i s a l l o w a n c e o n S h a r e A p p l i c a t i o n M o n e y 1 3 , 8 9 , 5 0 , 0 0 0 4 . N o t i o n a l I n t e r e s t d i s a l l o w a n c e o n U n s e c u r e d L o a n s 1 , 1 5 , 5 9 , 4 9 , 1 7 1 5 . D i s a l l o w a n c e U / s . 1 4 A 15 , 08 , 87 , 9 0 8 5. 7 Si n ce al l t h e a b o v e a dd i ti o n s / d is al l o w an c e s ma d e b y t he AO w e r e t he g e n e si s of t h e p r e se nt p e n a lt y p ro c e e d in g s ; o nc e th e s ai d g e n e si s h as b e e n f o u n d t o be e r ro n e o u s, n ot h i n g re m a i n s. I t i s t ri t e t h at t h e pe n al t y pr o c e e d i ng s can no t be m ad e t o re ac h a l o gi c al c on c l u si o n , o n c e i t i s h e l d t ha t- | he I.T.A. No.8914/Del/2019 10 ad d i t i on s m a d e b y t he A O a re e r r o n e o u s. I t i s n o lon g e r re s I n te g ra t ha t o n c e t h e qu an t um ad di t i on s a r e d e l e t e d, t he pe n a l t y c a nn ot s u st ai n. A c c o r di ng l y, s i n c e a l l t h e a b ov e qu a n tu m a d d it i o n s / d i s al l o w an c e s ha v e b e e n de c i d e d i n fa v ou r of t he ap pe l l an t b y t h e H o n ’ b le I T A T , t h e p ena l t y de t e rm i n e d by t h e A O o n t he a b o v e a dd i t i o n I di sa l lo wa nc e s m e ri ts d e l e ti o n a n d i s a c c or d i n gl y d el e t e d. 5. 8 T he A O h o w ev e r h a d al so m ad e d i s a ll o wa nc e on acc o u nt of c l a i m o f F i x e d A s se t s Wr i t t en o f f R s . 8 1, 7 9, 7 95 /- a n d C as h Pa y m e nt s U / s. 4 0A ( 3 ) 6 7, 9 2 6 / - wh i c h we r e su bj e c t m at t e r of Ap pe a l b e f o r e L d . CI T (A ) b ut w e r e u p he l d i n th e Q u an t u m Ap pe a l . I ha v e go ne th r o ug h th e s u b m i s si o n s of t h e A p p e l la nt bu t d o n o t f i nd t he sa m e . T h e a p p e l l an t ha s n ot b een ab l e t o pl a c e a b on af i de e x p l a n at i on a s r e q u i r e d u/ s 2 7 1 ( 1 ) ( c ) w i t h re s pe c t to ab o v e cl a im . I n f a c t , on t h e is s ue o f f ix e d a s s e t s w ri t t e n of f a m o u nt i ng to R s. 81 7 9 7 9 5/ - , t h e a pp e l lant h a s ne i t h e r c h a ll e n ge d t he j ud g m e n t o f L d. CI T ( A ) b e f o re t he H on ’ b l e 1 T A T . A t t h i s p o i n t , e v e n i f i t i s a d m it t e d t ha t n ot c on t e st i n g an ad d i t i on be f o re a p p el l a t e a ut h o ri t y do e s n ot sa n c ti f y th e p e na l t y , st i l l t h i s i s i n c u m b e nt on the a pp e l l a nt t o e x p l a i n t h e b a s i s of m ak i n g c la i m o f w r i t e o f f w he n p ro v i si on s of t h e A ct do es no t p r ov i d e t h e sa m e . I t i s al s o n ot a c a s e of c la i m b e i n g o ut c om e of i n t e r pr e t a ti o n of a p ro v i si on o f t he Ac t . 5. 9 I n t hi s r e g a rd , r e l i a nc e i s pl a c ed on t he j u d g me n t in t he c a se of C I T v s. NG T e c h no l o g i e s L t d . w he r e i n H on ’ ble J u ri sd ic t i o n al H i g h Co u r t o f D e lh i h a s i nt e r al i a h el d t hu s: “ 9. Se c t i o n 2 7 1 ( 1 ) ( c ) a n d E x pl a n at i o n 1 t h e r e t o re ad a s un d e r: " 27 1. ( 1) I f t h e A s se s s i n g O f f i c e r o r t h e C o m m i ss i o ne r (A p p e al s ) o r t h e P r i n c i p a l C o m m i s s io n e r o r C o m m is s ion e r i n th e c o u r se of an y p r o c e e d i n g s u nd e r t h is A c t , i s s at i sf i e d t h at an y p e r so n- . . . ( c ) h as co nc e a l e d t h e p a rt i cu l a r s o f hi s i n c o m e o r f u rni s h e d in a c c u rat e pa rt i cu l a r s o f su c h i n c om e , o r. . . Ex p l an at i o n 1 . - W h e r e in r e s p e c t o f an y f a c t s m a t eri a l t o t he c o m p u t at i o n o f t h e t o ta l i n c o m e o f an y p e r s on un de r t h is Ac t , - su c h p e r so n f a l l s t o of f e r a n e x p l an at i o n o r o ff e r s a n e x p l a n at i o n w h i c h is f o u n d b y t he A s se s si ng O f f i ce r o r t he Co m m i ss i o n e r (A p p e al s ) o r t h e C o m m is si on er t o be f al s e , o r su c h p e r so n of f e r s a n e x p l a na t io n w h ic h h e i s n o t ab l e t o su b st a n t i a t e a n d f a i l s to p r ov e t ha t su c h e x pl an at ion i s b o n a fi d e a nd t h at a l l t h e fa c t s r el a t i n g t o t h e sa m e a nd m at e ri a l to I.T.A. No.8914/Del/2019 11 th e c o m pu t at i on o f h i s t o t al in c o m e h a v e b e e n d i s clo s e d by hi m , T he n , t h e a m ou nt a dd e d o r d i sal l o w e d i n c o m p ut i n g th e t o t al in c om e of su c h p e r so n a s a r e s ul t t h e re of s ha l l , f or t he pu rp o s e s o f c l a u s e ( c ) of t h i s s ub s e c ti o n, b e de e m ed t o re p re s e n t t h e i n c o m e i n r e sp e c t o f w hi c h p a r t i c ul a rs h a v e b e e n c on c e a l e d . " 11 . M e n s r e a i s n o t a n e c e s s a r y at t r i bu t e t o i m po s e p e n a lt y un d e r s e c t i o n 2 71 ( 1) ( c ) o f t h e A c t . P en a l t y u nd e r th e s a i d se ct i o n i s i m po se d a s a c i v i l l i a b i l i t y / ob l i ga t i o n. T h e p r o v i s i o n is b ot h r e m e d i a l an d c o e rc i v e i n n at u re . I t i s f a r di f f e re nt an d un li k e a ny p e n a l t y f or a c ri m e o r a f i n e o r f or fe i tu r e i m p o s e d un d e r t he c ri m i na l a n d p e n al l a w s . Pe n a l t y u nd e r sec t i o n 27 1 ( 1 ) (c ) o f t h e A c t re f e r s to bl a m e w o r t h y c o nd uc t fo r c on t ra v e nt i on o f t h e A c t a nd i t e q u al l y a p p l i e s t o t ax de l i nq ue nc y c a s e s . I n D h ar a m e n d ra T e xt i l e P r oc e s so rs ( su p ra ), i t w as h e l d t ha t t h e e a rl i e r d e c i si o n o f th e S u p r e m e Co u rt i n D i l i p N . S h r of f v. J t . CI T [ 20 0 7] 29 1 I T R 5 1 9 / 16 1 T ax m a n 2 1 8 , wa s w r o n gl y d e c i d e d a s i t di d no t c o n s id e r t he e ff e c t an d r e l e v a nc e of s e c t io n 2 71 ( 1 ) ( c ) of t he A ct . T he o b j ec t be h i n d t he e n ac t m e nt of s e c t i on 2 7 1 ( 1 ) ( c ) a l o n g w it h Ex p l an at i o n s w a s t o p ro v i d e f o r a r e m e d y f o r l o s s of r e v e n ue an d i m p o se s a c i vi l l i ab il i t y . W i l f u l c o nd u c t , et c ., i s no t a n e s s e n t i a l i ng r e di e nt . 12 . H o w e v e r , i t i s n o t ne c e s sa r y th at p en al t y s h o uld b e im p o se d i n a l l c a se s w h e re i n a c cu r at e p a rt i c u l a r s ha v e b e e n fu rn i s he d. T h i s i s t he ob j e c t a n d p u r p o s e b e hi nd e na c t i n g Ex p l an at i o n 1 , w h i c h c on si st s of t w o l im bs, i . e . , cl au se ( A ) an d c l a u se (B ) . Cl a us e ( A ) a p p li e s w he n an a s s es s e e fa i l s t o fu rn i s h a n e x pl a n a t i o n o r w he n t h e e x p l a n at i o n of f ere d i s fo u n d to b e f a l se . I n su c h c a se s, p e na l t y c a n b e i mpo se d. Cl au se (B ) a pp li e s t o c a s e s w he r e i n e xp l an at i on i s o f fe r e d b ut th e a s s e s se e ha s n o t be e n a b l e t o su b s t an t ia t e t h e sa m e . T he as s e ss e e c a n e sc a p e ri g o u r s of p e n al t y , p r ov i d e d he s a t i s fi e s th e t wo c o nd i t i o ns, n a m el y , ( 1 ) th e as s e s s e e s h ou l d de m o n s t r a t e t h at hi s e x p la na t io n w a s b on a f i d e ; and ( 2 ) he ha d f u rni s h e d a nd di sc l o s e d f a c t s a n d m a te ri a l re l at i n g t o c o m p u t at i o n o f hi s i n c om e . O n u s of e st ab l i s hi n g t h at t he t w o c on d i t io ns a r e sat i s f i e d i s on th e a s se s s e e . B ot h th e c o n d it i on s ar e cu m ul a t i v e a n d w h e n t h e c o n d i ti o n s ar e sa t i sf i ed, p e n a lt y un d e r s e c t i o n 2 71 ( 1 ) ( c ) o f t h e A c t s h o u ld no t be im po se d. 16 . We h a v e e x a m i n e d t he a f or e sa i d r e a so n i ng b u t a re un ab l e to a c c e p t t h e sa i d f i nd i n g. A l l c l a i m s o r de du c t i o ns w ro n g ly m ad e c a n n ot b e t re a t e d a s b on a f i de a n d p ro t e c t ed by Ex p l an at i o n 1 t o se c t i o n 2 7 1 ( 1 ) (c ) of t he A c t . Whe t h e r o r n ot I.T.A. No.8914/Del/2019 12 th e c o nd u c t o f t he a s se s se e w as l e gi t i m a t e o r m e r e le g e rd e m a i n wo ul d d ep e n d u p o n^ p c t s o f e a c h c a s e , natu re a n d c ha r ac t e r o f t h e c l a i m , w h e th e r t h e l e g a l p r ov i s i o n a p pl i c a b le wa s c a pa bl e o f t w o i n t e r p re t a t i on s, w h e t h e r t he c la i m / e x e m p t i o n w a s pl a u si bl e a nd c on c ei v a bl e , e t c. I n c a se s wh e r e i n t e rp r et i v e sk i l l s a n d d iv e rg e n t v i e w s ar e pl a u si b l e , pe n a l t y f o r c o nc e a l m e nt sho ul d no t b e i m p os e d . T h e a s s e s se e ne e d no t be a sk e d t o p ay p e n a l t y i f he h a s t ak e n a p a rt i c u la r le g al st an d a nd p r e f e r r e d a n i n t e r p r e ta t i on i n hi s f a v o u r. H o w e v e r, a t t he s a m e t i m e , t h e i n t er p re t at i o n p ut fo r w a r d o r th e c l a i m m ad e s ho ul d n o t b e b an al o r a ru s e , pe r se o r e x fa c i e i n c o r r e c t o r w ro n g. P l a ti t u d i no u s c o n d u c t o r c l ai m i s n ot a b on a f i de c on du c t. 17 . I n t h e f ac t s of t h e p r e se nt c a s e , i t i s no ti c e ab l e t h a t t he as s e ss e e ha d c l a i m e d l o s s o n a c c o u nt o f sa l e o f p l an t a n d m a c h i n e r y , i . e . , t h e fi x e d a s se t s, i n t h e p ro f i t a nd l o s s ac c ou nt . T hi s s ho ul d no t h a v e be e n o b v io u s ly cl a im ed . I t wa s wi t ho ut an y de ba t e a nd di s c u s s i o n a c ap i t a l l o s s. The c l ai m c an n o t b e e x p la i n e d a nd j u st i f i ed by a n y a r g um en t an d re a so ni n g. T he c l ai m wa s p o s i t i v e l y an d m e a n in gf u l ly in c o rr e c t an d c on tr ar y t o t h e p ri n c i p l es o f st ra i ght f o r w a r d an d p ri m a ry a cc o u n ta nc y . I t i s t r ue an d c o rr e c t t hat a n as s e ss e e w o u ld no r m a l l y r e l y u p o n t h e l e ga l o pi n io n o f a c ha r te r e d a c c o u nt a n t , w ho i s r e q ui r e d to a u d i t ac c ou nt s of t h e c o m p a n y a nd al so s u bm i t an au di t r e p o r t b u t pe n al t y c a n n ot be de l e t e d on gu i se o r p r e t e n c e o f le g al o pi ni o n a s a sm ok e sc r e e n an d f a c a d e . T h e c l a i m o r t he e n t r y in th e p r e s e nt c a se w a s c o nt r a ry t o t h e e l e m e n t ar y an d w e l l - k n o wn th e b a si c pr i n ci p l e s o f a c c o u n ta nc y . T he p re s e n t c a se i s n o t a c a se of a de b a t ab l e i s su e r e l a t i n g t o l e g al o r ac c ou nt an c y p ri nc i pl e wh ic h c ou l d ha v e b e en i nt e rp r et e d di f f e r e n t ly . 18 . I t i s m an da t o ry a n d c om p ul s o ry f o r a c om p an y t o g et t he i r ac c ou nt s a ud i t e d f r o m a c h a rt e re d a c c o u nt an t , w h o is r e q u i re d to s u b m i t a n a ud i t re p o rt t o b e f i l ed wi t h th e r e t urn . We c an n o t , t h e r e fo r e , a c c e p t th e c on t e n t i on o f t h e a s se s s ee a s un i v e r sa l an d c o m p r e h e n si v e t h a t al l c l ai m s h o w s o e ve r un t e n ab l e, on ce c e rt i f i ed b y a c h ar t e re d a c c ou nt a nt o r t he di re c t o r s of t h e c o m pa ny , c a nn o t b e m a de a su bj e c t m a t te r of pe n a l t y p r o c e e d i n g s. T hi s w i l l b e f e t c hi n g a nd m ak ing t he re qu ir e m e n t t o p r o v e b o n a f id e c o nd u c t il l u s i o na r y an d in e f fe c t i v e a nd wo ul d f a i l to , c h e c k an d st o p f an c ifu l an d in c r e di b l e c la i m s. I t i s n o t i c e a bl e t h a t m o st o f t he i n c o m e - t ax re tu rn s a re a c c e p t e d wi t h ou t sc r u t i n y o r r e g u l ar a ss e s s m e nt an d se lf - c o m p l i a n c e o f t a x p ro v i s io n s i s a r ul e re qui r e d t o be fo l l ow ed . T he v i e w, w h i c h w e h av e t a ke n , i s i n c o n so n a nc e wi t h t h e rat i o e x p o u nd ed i n Re l i a n c e Pe t ro pr o d u c ts (P . ) L t d. I.T.A. No.8914/Del/2019 13 ( su p ra ). 19 . T he s e c o nd a sp e c t , w hi c h a ri s e s fo r c o n si d e r at ion , i s wh et h e r th e re v i s e d re tu rn w a s f i l e d v ol u nt a r i l y a nd b e f o r e t he no ti c e o f t h e i n a c c u ra t e p a rt i c u l a r s by t he A s s e s sing O f f i c e r. T he f a c t u m o f fi l i n g a re v i s e d re t u rn t o r e ct i f y a n e a r l i e r m i st a k e i s a n im p or ta n t a n d re l e v a n t fa c t o r t o d e t erm i ne wh et h e r t h e c o n d u c t o f t he as s e s s e e w a s b o na f i d e . T he T ri bu na l , i n t h e i m p ug n e d o rd e r, h a s he l d th at t h e re v i s e d re tu rn wa s f il e d be f o re a n y sp e c i f i c q u e r y w a s ra i se d b y t h e As se s si ng O f fi c e r. T h e T r ib un a l a t t h e s a m e t i m e o bse r v e d t h at th e A s se s si n g O f f i c er ha d d i r e c t e d t h e a s se s se e t o f i l e t ax au d i t r e p o r t, de p r e c i a t i o n c h a rt , d e t ai l s o f a l l e xe m pt i on s a n d de d u c t io n s a s w e l l a s de t ai l s of a d di t i o n t o f ix e d a s se t s bu t n o qu e s ti o n h a d b e e n ra i s e d a bo u t d e d u c ti o n i n re sp e c t o f t he as s e t s. T h e a fo r e sa i d r e a so ni n g b y th e T r i b u n al a c ce pt s t h e fa c t t ha t t he a s se s s e e ha d b e e n a s k e d t o f u rni s h d et a il s of fi x e d as s e t s a nd d et a i l s o f a l l d e d u c t io n s w e r e c all e d. No ti c e a b l y , i n t h e a s se s s m e nt o rd e r, t h e A s s e ss i n g O f f i c e r ha s re co r d e d t he f o l l o w i ng fa c t s : T he c a se w a s t ak e n u p f o r s c r ut i ny as s e ss m e nt b y i ss u e o f no ti c e u nd e r s ec t i o n 1 43 ( 2 ) d a t e d O c to be r 12 , 2 00 7, w a s d u ly se r v e d o n t h e re s po n d e nt - a s s e ss e e wi t hi n t h e p r e s c ri b e d st at u t o ry t i m e l i m i t . T he a s se s s e e w a s as k e d t o f u rn i s h t he f o ll o wi n g de ta i l s " Fu rn i s h t he de t ai l s of a l l e x e m pt i on s a n d d ed uc t i on s c l a i m e d. Al s o J u st i f y a s t o w h y t h e s a m e sh ou l d no t b e ac c e pt e d b y t he D e pa rt m e n t . " T he a s s e s sm e nt or d e r sp e c i f i c a l l y re c o rd s t ha t o n e of t he de d u c t io n s cl a i m e d wa s d e b i t o f R s. 2 , 3 3, 0 7, 3 49 re co r de d i n sc he du l e 1 6 " g e ne r a l e x pe ns e s " of t h e pr o fi t a n d los s ac c o u nt be i ng l o s s o n ac c o un t o f sa l e o f t h e f i x e d a s se t s. S p e c i f ic re fe r e n c e h as b e e n m a d e i n t h e a s s e s sm e n t o rd e r t o t hi s n o t e . 20 . T he r e f o r e, i t i s c l e a r t o u s t h at t he a ss e s s e e h a d n o t f i l e d re vi s e d re t u rn v ol u n t a ri l y b u t ha d f i l ed t h e r e v i sed r e t ur n af t e r t h e A s s e s si n g O f f i c e r c o n f r o nt e d t h e a ss e s se e an d t he y we r e a sk e d t o e x p la i n h o w a nd wh y t h e l o s s on a c c oun t of s al e of f i x e d a s s e t s wa s c l a im ed i n t he p ro f i t an d l o s s ac c o u nt . T he sa i d l o ss, c ap i t al i n n at ur e a nd co ul d no t h a v e be en c l a im ed i n th e p ro f i t a n d l o s s a c c o un t . 21 . I n v i e w o f t he a f o re sa i d d i sc u s s i o n , we an s w e r t h e su b st a n t i a l q u e st i o n o f l a w i n f a v ou r of t h e R ev e n ue an d ag a i n s t t he re s po nd e nt - a ss e s se e . We up ho l d le v y o f p e n a l t y by th e A s s e s si n g O f f i c e r u n d e r s e c t i on 2 7 1 ( 1 ) ( c ) o f the A c t. T he ap p e a l i s d i s p o se d o f . N o c o s t s . ” I.T.A. No.8914/Del/2019 14 5. 1 0 I n f a c t um o f t he c as e a n d i n du e d e f e r e n c e t o t h e ju di c i al p r ec e d e n t s r e l i e d o n by t h e A s s e s si n g O f f ic e i n t he im p u g n e d p e na l ty o rd e r a n d th e c a s e o f N G T e c h n o lo gi e s L t d. ( su p ra ), t h e p e n al t y le v i e d on th i s i s s ue of f i x e d a s se t s wr i t t e n of f i s he re b y c o nf i r m e d. 5. 1 1 A s fa r a s p e n a l t y o n i m p ug n e d ad di t i o n of Rs . 67 9 2 6 / - u / s 4 0A ( 3 ) i s c o n c e r ne d , t h e s a m e i s a te c h n i c a l ad d i t i on i n a s m uc h a s al l i n f o r m at i o n p e r t a i ni n g to pa rt i c u l a r s of i n c o m e i nc l ud in g ex p e n d it u re we r e m ade av a i l a bl e i n t h e t a x a ud i t re po rt a n d i n th e b o o k s of ac c o u n t s. T he r e i s n o p o s i t i v e f i nd in g i n t h e i m pu g n e d o r d e r th a t t he sa m e w a s p o s i t i v e i n t h e n at u r e o f in a c c ur at e p a r t ic u l a rs o r c on c e a l m e n t o f i n c o m e . T h e s e t y p e of a d di t i o n b e in g v e ni al i n na t u r e , c o ul d n ot b e s u b je c t e d t o r i g o r s o f p e n a lt y u/ s 2 7 1 (1 ) ( c ) . R e l i a n c e i s pl a ce d o n t h e d e c i s i on o f H o n ’ bl e G u j a r at H i g h C ou r t i n t he c a s e o f N a y an C . S h ah v e r su s I T O 3 8 6 I T R 20 4 w he r e i n t he H o n’ bl e Co u rt h e ld t hu s: Se c t i o n 27 1 ( 1 ) ( c ), r e ad w i th se c t i on 4 0 ( a ) ( i a ) , o f t h e I nc o m e - ta x A c t , 1 96 1 - P en a l t y - F o r c o nc e al m e nt o f in c o m e ( D i sa l lo wa nc e o f c l a i m , ef f e c t o f ) - A ss e s s m e n t y e ar 20 0 6- 07 - Wh et h e r w o rd s ' i n ac c u r at e p a r t i c u l ar s' u s e d i n s e c ti o n 27 1 ( 1 ) (c ) m u s t m e a n d e t ai l s s up pl i ed i n r e t u rn, w h ic h a r e n ot ac c u ra t e , n ot ex a c t or c o r re ct o r n ot a c c o rd i ng t o t r u t h o r e r r on e o u s - H e l d , y e s - W h e t he r m e r e l y su b m i t t i ng an in c o rr e c t c l a i m i n l a w f o r e x p e n di t u r e w ou l d no t a mo u nt t o fu rn i s hi n g in a c c u r a t e p a r t i c ul a r s of i nc o m e - H e l d, y e s - Wh et h e r t h e re f o re , w h e re a s se s s e e h ad m ad e a cl a i m of e x p e nd i t u re i n re l at i on t o l ab ou r p a y m e nt s, wh i c h he wa s n ot e nt i tl e d t o c l a i m i n v i e w o f s e c t i o n 4 0 ( a ) ( i a ) , i t w o ul d n ot am o un t t o f u r n i s h i n g in ac c u r at e p a rt i c u l a rs o f i n c om e so a s t o at t ra c t p e na l t y u n d e r se c t i o n 27 1 (1 ) ( c ) - H e l d, ye s [ P ar a s 8- 10] [ I n f av ou r o f a s se s s e e] T ho ug h t h e a b o v e j u dg m e nt , i s i n r e sp e ct o f p e n a l t y u / s 2 7 1 (1 ) ( c ) r. w. S 40 ( a ) ( i a ) o f t h e A c t , t h e r a t i o d e c i d en d i i s e q u a ll y ap p l i c ab le t o t h e f a c t of t he p re s e n t c a s e w it h r e sp e c t t o ad d i t i on m a de u / s 4 0A ( 3 ) o f t h e A c t wh i c h i n t e r a l i a d e a l s w i t h ad d i t i on t o b e m a d e f o r t e c hn i ca l v i o l a t i on o f p a y me n t i n c a s h ov e r an d a b o v e a p re s c ri b e d l i m i t. T h i s i s no t a c as e w h e r e i t c an b e c o n c l u de d t ha t t h e re h a s b e e n a po si ti v e f i nd in g wi t h re s pe c t t o c on ce a l m e n t o r i n a c c u ra t e pa r t i c u l a r s of i n c om e be i ng f u rn i s h e d b y t h e ap pe l l a n t . I n v i e w of t he f a c t u a l m at r i x of t he c a s e a nd j u d i ci a l p re c e d e n t re li e d a bo v e ( su p r a ), t h e l e v y o f p e na lt y o n t hi s is su e i s di re c t ed t o b e d e l et e d. 6. I n t he re su l t, a pp e al i s pa rt l y al l o w e d . ” I.T.A. No.8914/Del/2019 15 6. O n pe rus al, w e see tha t t he C IT (A ) has obje ctivel y analyze d the f ac t s it ua ti on and add it ions made i n quantum proceed ings on va ri ous issues. The C IT (A ) has als o taken cognizance of the o rde r of t he ITA T in quantum proceedi ngs as noted a bove whi le adju dicati ng the is sue i n favo ur of the assessee i n the li ght of the qua ntum pr oc eedi ngs. The C IT (A ) obs erve d t hat Co-o rdi na te Bench of ITA T has deleted the additions / disal lowances in the qua ntum p rocedings and thus the ba sis f or i mp os ition of penal t y doe s not su rvi ve at al l. H aving r eg ar d to t he obs erva tions made b y the C IT (A ) as n oted above, w e see no reason to in terfere ther ew ith. We thus find no me rit i n t he appeal o f the Re venue. 7. In the res ul t, the appeal of t he R eve nue is d is miss ed. Order pronounced in the open Court on 15/02/2023. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /02/2023 Prabhat