M/s Somsons Colonizers Pvt. Ltd., Nabha V. ACIT, Sangrur

ITA 904/CHANDI/2014

• Counselvise Citation: 90421514 RSA 2014
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: ASHOK GOYAL
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.RANO JAIN, ACCOUNTANT MEMBER ITA NO. 904/CHD/2014 ASSESSMENT YEAR: 2008-09 M/S SOMSONS COLONIZERS P.LTD., VS THE A CIT, JATTAN WALA BASS, CIRCLE, HOSPITAL ROAD, SANGRUR. NABHA. PAN: AAFCS1058L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK GOYAL RESPONDENT BY : SHRI S.K.MITTAL DATE OF HEARING : 12.10.2015 DATE OF PRONOUNCEMENT : 14.10.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS), PATIALA DATED 27.08.2014 FOR ASSESSMENT YEAR 2008-09, CHALLENGING THE LEVY OF PE NALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT ON DISALLOWANCE OF PROPORTIONATE INTEREST ON INTEREST FREE ADVANCES GIVEN IN A SUM OF RS. 1,55,494/-. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER, DURING THE COURSE OF EXAMINATION OF THE AC COUNTS, 2 NOTED THAT ASSESSEE HAS TAKEN INTEREST BEARING LOAN S FROM THE BANK ON ONE HAND WHEREAS ON THE OTHER HAND, THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCES TO VARIOU S SHAREHOLDERS. THE ASSESSEE HAS PAID INTEREST TO TH E BANK ON THE LOAN TAKEN @ 12%. THE ASSESSING OFFICER PRO POSED TO DISALLOW INTEREST AMOUNT @ 12% ON THE ADVANCES G IVEN TO THE SHAREHOLDERS IN A SUM OF RS. 1,55,492/-. TH E ASSESSEE EXPLAINED THAT ADVANCES HAVE BEEN GIVEN FO R BUSINESS PURPOSES, THEREFORE, NO DISALLOWANCE IS CA LLED FOR. THE ASSESSING OFFICER, HOWEVER, FOLLOWING THE JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. 286 ITR 1 AND CONSIDERING THAT THE ENTIRE MONEY IN BUSINESS ENTIT Y COMES IN A COMMON KITTY, DISALLOWED THE INTEREST SO PROPOSED. THE ASSESSING OFFICER VIDE SEPARATE ORDE R LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THIS ON ACCOUNT OF CONCEALMENT6 OF INCOME/FILING WRONG PARTICULARS OF INCOME. 3. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON MERE DISALLOWANCE OF PROPORTIONATE INTEREST, NO CASE OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICUL ARS OF INCOME HAVE BEEN MADE OUT, THEREFORE, NO PENALTY IS LEVIABLE. HE HAS SUBMITTED THAT ITAT CHANDIGRH BEN CH IN THE CASE OF TRIDENT INFOTECH CORPORATION LTD. V DCI T IN ITA 1298/2010 DATED 26.03.2012 CONSIDERING THE IDEN TICAL 3 ISSUE IN THE LIGHT OF JUDGEMENT OF THE HON'BLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES (SUPRA) CANCELLED THE PENALTY HOLDING TH AT, AFORESAID ADDITION MADE ON ACCOUNT OF APPLICATION OF JUDICIAL RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. (SUPRA) DO ES NOT ESTABLISH THE CASE OF REVENUE FOR THE ASSESSEE TO H AVE EITHER CONCEALED IT PARTICULARS OF INCOME OR FURNIS HED INACCURATE PARTICULARS OF INCOME. PENALTY WAS ACCORDINGLY CANCELLED. ON THE OTHER HAND, LD. DR RELIED UPON O RDERS OF THE AUTHORITIES BELOW AND JUDGEMENT OF THE SUPRE ME COURT IN THE CASE OF UNION OF INDIA VS DHARMENDRA TEXTILES & PROCESSORS 306 ITR 227 IN WHICH IT WAS H ELD THAT PENALTY IS STRICTLY A CIVIL LIABILITY. A ND ALSO RELIED UPON DECISION OF THE DELHI HIGH COURT IN THE CASE O F ZOOM COMMUNICATION PVT. LTD. 327 ITR 510 IN WHICH IT WAS HELD THAT INCORRECT CLAIM MADE BY ASSESSEE ATTRACTS PENALTY. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN THIS C ASE, THE ASSESSING OFFICER MADE PROPORTIONATE DISALLOWAN CE OUT OF THE INTEREST PAID BY THE ASSESSEE ON THE REASONS THAT ASSESSEE HAS GIVEN INTEREST FREE LOANS AND ADVANCES TO THE FOUR SHAREHOLDERS. THE ASSESSING OFFICER NOTED THE DETAILS OF INTEREST FREE ADVANCES TO THE SHAREHOLDERS AT PA GE 3 OF THE ASSESSMENT ORDER WHICH REVEALED THAT IN ALL THE FOUR CASES, THERE WERE OPENING BALANCES AND ONLY RS. 5 L ACS HAVE BEEN ADVANCED APPEARS TO BE IN ASSESSMENT YEAR UNDER APPEAL. THE ASSESSING OFFICER IN PARA 4.1 OF THE 4 ASSESSMENT ORDER ALSO NOTED THAT NO INTEREST AT RS. 5 LACS IS CHARGED AS THE SAID AMOUNT HAS BEEN ADDED UNDER SECTION 2(220(E) OF THE INCOME TAX ACT. THUS, IT I S CLEAR THAT THE INTEREST DISALLOWED WAS ON THE AMOUNTS WHI CH WERE OPENING BALANCES AND WERE COMING FROM THE EARL IER YEARS. THE REPLY OF THE ASSESSEE IS ALSO QUOTED IN THE PENALTY ORDER IN WHICH ALSO, THE ASSESSEE EXPLAINED THAT NO INTEREST HAS BEEN CHARGED FOR THE AMOUNT ADVANCE D WHICH WERE MAINLY CONTINUED FROM THE EARLIER YEARS. THEREFORE, IT IS CLEAR THAT NO AMOUNT WAS ADVANCED IN THE ASSESSMENT YEAR UNDER APPEAL ON WHICH INTEREST HAS BEEN DISALLOWED. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT ASSESSEE HAS NOT CHALLENGED THE AFORESAID ADDI TION IN APPEAL AND ADDITION HAS BEEN CONFIRMED. THESE FACT S CLEARLY SHOW THAT ASSESSEE DISCLOSED ALL THE PARTIC ULARS OF INCOME NOT ONLY IN ASSESSMENT YEAR UNDER APPEAL BUT ALSO IN THE EARLIER YEARS. THERE IS NO CASE OF CONCEALM ENT OF INCOME AT ALL IN THIS CASE. THE ASSESSEE CLAIMED T HAT THESE AMOUNTS WERE GIVEN TO THE SHAREHOLDERS FOR BU SINESS PURPOSES. MAY BE THE ASSESSEE IS NOT ABLE TO PROVE THAT THESE ADVANCES WERE GIVEN FOR BUSINESS PURPOSES, WO ULD NOT MAKE OUT A CASE OF CONCEALMENT OF INCOME OF FURNISHING INACCURATE PARTICULARS OF INCOME BECAUSE ASSESSEE DISCLOSED ALL THE FACTS TO THE AUTHORITIES BELOW. IT IS ALSO NOT A CASE OF THE AUTHORITIES BELOW THAT ASSESSEE MADE A CLAIM OF DEDUCTION OF INTEREST ON FALSE REAS ONS BECAUSE ASSESSING OFFICER HAS ALLOWED DEDUCTION OF THE INTEREST SUBSTANTIALLY AND ONLY PROPORTIONATE INTER EST HAS 5 BEEN DISALLOWED. THESE FACTS WOULD, THEREFORE, CLE ARLY SHOW THAT WHEN ADVANCES WERE COMING FROM EARLIER YE ARS, WERE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE OF PART OF THE INTEREST, THUS WOULD NOT ESTABLISH THAT ASSESSE E HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. THE ITAT CHANDIGARH BENCH IN THE CASE O F M/S TRIDENT INFOTECH CORPORATION LTD. (SUPRA) CANCELLED THE PENALTY ON DISALLOWANCE OF INTEREST UNDER SECTION 3 6(1)(III) OF THE ACT. THE DECISIONS RELIED UPON BY LD. DR WO ULD NOT SUPPORT THE CASE OF REVENUE AND ARE CLEARLY DISTINGUISHABLE ON FACTS. 5. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW IT IS NOT A FIT CASE OF LEVY OF PENALTY ON MERE DIS ALLOWANCE OF PART OF THE INTEREST. WE, ACCORDINGLY, SET ASID E THE ORDERS OF AUTHORITIES BELOW AND CANCEL THE PENALTY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (B HAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH OCTOBER,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH