M/s Arjun Agro Foods, Khanna V. DCIT, Khanna

ITA 967/CHANDI/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0738 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 09-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 27; 271(1)(c)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , !' , # $ % & ' , ()' BEFORE: SMT.DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, A M ./ ITA NO.967/CHD/2018 / ASSESSMENT YEAR : 2014-15 M/S ARJUN AGRO FOODS, SAMRALA ROAD, KHANNA. THE D.C.I.T., KHANNA. ./PAN NO: AAPFA0426P /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI TEJ MOHAN SINGHJ, ADV. (PROXY COUNSEL) ! / REVENUE BY : SMT.CHANDERKANTA, SR.DR '# $ /DATE OF HEARING : 29.11.2018 %&'(# /DATE OF PRONOUNCEMENT: 30.11.2018 (* /ORDER PER ANNAPURNA GUPTA, A.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-2, LUDHIANA (IN SHORT CIT(A) DATED 8.5.2018 PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 (IN SHORT REFERRED TO A S ACT), CONFIRMING THE PENALTY U/S 271(1)(C) OF THE ACT. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE. SHRI TE J MOHAN, AS PROXY COUNSEL SOUGHT ADJOURNMENT BUT ON G OING THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND AFT ER HEARING THE LD. DR IT WAS FOUND THAT THE PENALTY IN THE PRE SENT CASE HAD BEEN WRONGLY LEVIED AND THAT IT WAS NOT A FIT C ASE FOR ITA NO.967/CHD/2018 A.Y.2014-15 2 LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. FROM THE FACTS AS NOTED IN PARA 3 OF THE ORDER OF THE CIT(A), IT WAS FOUND THAT THE PENALTY HAD BEEN LEVIED ON ACCOUNT OF ADDITION MADE TO THE INCOME OF THE ASSESSEE BY WAY OF DISALLOWANCE O F INTEREST OF RS.20,31,600/- U/S 36(1)(III) OF THE ACT ON THE AMOUNTS KEPT IN IMPREST ACCOUNT HOLDING THAT THE SAME WAS F OR NON BUSINESS PURPOSE AND BORROWED FUNDS HAD BEEN USED I N THE SAME. THE ASSESSEE DID NOT CHALLENGE THE DISALLOWAN CE BEFORE THE LD.CIT(A) AND THE A.O., THEREFORE, LEVIED PENAL TY U/S 271(1)(C) OF THE ACT ON THE DISALLOWANCE SO MADE, A MOUNTING TO RS.6,28,000/- BEING @ 100% OF THE TAX SOUGHT TO BE EVADED ON THE DISALLOWANCE OF RS.20,31,600/-, FOR C ONCEALING PARTICULARS OF INCOME ON ACCOUNT OF DISALLOWANCE OF INTEREST MADE. THE LD.CIT(A) UPHELD THE PENALTY LEVIED HOLDI NG THAT THE ASSESSEE HAD CONCEALED PARTICULARS BY CLAIMING SUCH EXPENSES WHICH WERE OTHERWISE NOT CLEARLY ALLOWABLE SINCE THE ASSESSEE HAD DIVERTED BORROWED FUNDS FOR NON BU SINESS PURPOSE AND GIVEN NO EXPLANATION FOR THE SAME. THE RELEVANT PORTION OF THE ORDER OF THE CIT(A) AT PARA 5 OF HIS ORDER IS AS UNDER: 5.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSI NG OFFICER AS MADE BY HIM IN THE ASSESSMENT ORDER WHIL E LEVYING THE IMPUGNED PENALTY. I HAVE ALSO CONSIDERED THE WRIT TEN SUBMISSIONS FILED BY THE ASSESSEE FIRM THROUGH ITS LEARNED AR VIDE LETTER DATED 07.05.2018 ON THE ISSUE UNDER REFERENCE. I HAVE FURTHER CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED AR OF THE ASSESSEE AS WELL AS OTHER MATERIAL PLACED BY HIM ON RECORD. ON CAREFUL CONSIDERATION OF THE ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT THE ASSESSING OFFICER HAS LEVIED THE IM PUGNED PENALTY AS THE ASSESSEE FIRM IN HIS OPINION HAD KEPT HUGE BORROWED FUNDS IN IMPREST ACCOUNT WITHOUT ANY BUSINE SS PURPOSE. ANOTHER REASON FOR LEVYING THE IMPUGNED PEN ALTY WAS THAT THE ASSESSEE FIRM IN THE OPINION OF THE ASSESS ING ITA NO.967/CHD/2018 A.Y.2014-15 3 OFFICER COULD NOT SUBSTANTIATE ITS EXPLANATION FOR K EEPING HUGE BORROWED FUNDS IN IMPREST ACCOUNT. ON THE OTHE R HAND, THE LEARNED AR OF THE ASSESSEE FIRM HAD SUBMIT TED THAT THE ASSESSING OFFICER HAD LEVIED THE IMPUGNED PE NALTY MERELY ON PRESUMPTION UPON THE INCOME THAT COULD HAVE BEEN EARNED BY THE ASSESSEE FIRM BUT HAS NOT BEEN EARNED DURING THE YEAR UNDER CONSIDERATION. IT HAS ALSO BEEN SUBMITTED THAT THE ASSESSING OFFICER HAD COMPLETELY IGNORED THE FA CTS AND CITATIONS OF THE HON'BLE SUPREME COURT PUT FORWARD BEFORE HIM AT THE TIME OF PENALTY PROCEEDINGS. IT HAS, THERE FORE, BEEN SUBMITTED THAT THE PENALTY LEVIED BY THE ASSESSI NG OFFICER IN THE CASE OF THE ASSESSEE FIRM IS ILLEGAL, UNJUST AND IS AGAINST THE MERITS AND CIRCUMSTANCES OF THE CASE. IN SUPPORT OF HIS CONTENTIONS, THE LEARNED AR OF THE AS SESSEE FIRM HAS ALSO RELIED UPON THE DECISION OF THE HONORAB LE SUPREME COURT IN THE CASE OF CIT, GUJARAT VS. RAMAN & COMPANY AS REPORTED AT 1968 AIR 49 WHEREIN IN THE OP INION OF THE LEARNED AR OF THE ASSESSEE FIRM IT HAS BEEN H ELD THAT 'THE LAW DOES NOT OBLIGE A TRADER TO MAKE THE MAXIM UM PROFIT THAT HE CAN EARN OUT OF HIS TRADING TRANSACTIONS, INC OME WHICH HE COULD HAVE, BUT HAS NOT EARNED IS NOT MADE T AXABLE AS INCOME ACCRUED TO HIM' . ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS, I DO NOT FIND ANY FORCE IN THE ARGUME NTS OF THE LEARNED AR OF THE ASSESSEE FIRM AS THE ASSESSEE FIRM HAD CERTAINLY DIVERTED BORROWED FUNDS FOR NON BUSIN ESS PURPOSES BY KEEPING HUGE AMOUNT OF BORROWED FUNDS I N IMPREST ACCOUNT. THE ASSESSEE FIRM ALSO COULD NOT SUBSTANTIATE ITS EXPLANATION WITH REGARD TO KEEPING OF HUGE BORROWED FUNDS IN IMPREST ACCOUNT AND THE EXPLANATION HAS BEEN GIVEN JUST FOR THE PURPOSE OF GIVING EXPLANATI ON. I AM, THEREFORE, OF THE OPINION THAT THE ASSESSEE FIRM HAD CERTAINLY CONCEALED ITS PARTICULARS OF INCOME TO THE EXTENT OF RS.20,31,600/- BY REDUCING ITS TAXABLE INCOME TO THE EXT ENT OF RS.20,31,600/- BY CLAIMING INTEREST EXPENSES ON B ORROWED FUNDS TO THIS EXTENT WHICH WERE NOT OTHERWISE ALLOWABL E TO IT AS THE FUNDS WERE NOT USED FOR BUSINESS PURPOSES. M OREOVER, THE ADMITTED FACTS NEED NOT TO BE PROVED AGAIN AS TH E ASSESSEE FIRM HAS NOT PREFERRED ANY APPEAL AGAINST T HIS ADDITION. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LEARNED AR OF THE ASSESSEE FIRM ALSO DO NOT SUPPORT THE CASE OF THE ASSESSEE FIRM BECAUSE OF DISTINGUISHABLE FACT S. UNDER SUCH CIRCUMSTANCES, THE ACTION OF THE ASSESSING OFF ICER IN LEVYING PENALTY OF RS.6,28,000/- IN THIS CASE UNDER SECT ION 271(L)(C) OF THE ACT FOR CONCEALING PARTICULARS OF INCOME TO THE EXTENT OF RS.20,31,600/- ON THE GROUND THAT THE A SSESSEE FIRM HAD KEPT HUGE AMOUNT OF BORROWED FUNDS IN IMPR EST ACCOUNT AND THAT TOO FOR NON BUSINESS PURPOSES CANN OT BE SAID TO BE UNJUSTIFIED. HAVING SAID SO, THE PENALTY OF RS.6,28,000/- (100% OF TAX SOUGHT TO BE EVADED) LEVI ED BY THE ASSESSING OFFICER IN THIS CASE UNDER SECTION 27 1(1 )(C) OF THE ACT FOR CONCEALING PARTICULARS OF INCOME TO THE EXTENT OF RS.20,31,600/- IS, THEREFORE, UPHELD. IN THE RESULT, THE GR OUNDS NO.1 TO 5 OF APPEAL TAKEN BY THE ASSESSEE FIRM ARE DISMISSED. ITA NO.967/CHD/2018 A.Y.2014-15 4 3. THE LD. DR DURING THE COURSE OF HEARING BEFORE U S SUPPORTED THE ORDERS OF THE CIT(A). 4. BUT WE FIND THAT IN THE FACTS OF THE PRESENT CAS E THERE WAS NO REASON FOR MAKING ANY DISALLOWANCE OF INTERE ST EXPENSES AT ALL IN THE FIRST PLACE. ADMITTEDLY, THE DISALLOWANCE IS IN RELATION TO AMOUNTS KEPT IN IMPR EST ACCOUNT. IMPREST ACCOUNT MEANS THE AMOUNTS KEPT AS IDE AND KEPT READY FOR USE FOR THE BUSINESS OF THE ASSE SSEE. IT IS NOT IN THE NATURE OF ANY ADVANCE GIVEN TO ANY PERSO N. THEREFORE, IT CANNOT BE TERMED AS NON BUSINESS ADVA NCE. IMPREST ACCOUNT IMPLIES AMOUNTS KEPT ASIDE FOR BUSI NESS USE ONLY AND ARE AS GOOD AS AMOUNTS KEPT IN BANKS INSAV ING ACCOUNT AND CURRENT ACCOUNT. THEREFORE, WHEN THE AM OUNT WAS KEPT ASIDE FOR THE PURPOSE OF BUSINESS ONLY, CL EARLY NO DISALLOWANCE U/S 36(1)(III) OF THE ACT WAS WARRANTE D AND THE ASSESSEE, THEREFORE, CANNOT BE SAID TO HAVE CONCEAL ED OR FURNISHED ANY INACCURATE PARTICULARS OF INCOME BY C LAIMING ENTIRE INTEREST EXPENSES AS ITS BUSINESS EXPENSES. MERELY BECAUSE THE DISALLOWANCE MADE BY THE A.O. WAS NOT CHALLENGED BEFORE THE CIT(A) DID NOT JUSTIFY THE DI SALLOWANCE AND NEITHER THE LEVY OF PENALTY ON THE SAME. IN VIE W OF THE ABOVE, WE HOLD THAT SINCE THE DISALLOWANCE OF INTER EST ON WHICH PENALTY WAS LEVIED IN THE PRESENT CASE WAS AG AINST LAW AND, THEREFORE, THE ASSESSEE COULD NOT BE CHARGED W ITH HAVING CONCEALED/FURNISHED INACCURATE PARTICULARS O F INCOME SO AS TO LEVY PENALTY U/S 271(1)(C) OF THE ACT. THE PENALTY SO ITA NO.967/CHD/2018 A.Y.2014-15 5 LEVIED AMOUNTING TO RS.6,28,000/- IS, THEREFORE, DI RECTED TO BE DELETED. 5. IN EFFECT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $& % ' (DIVA SINGH) (ANNAPURNA GUPTA) +' / JUDICIAL MEMBER ()' / ACCOUNTANT MEMBER # /DATED: 30 TH NOVEMBER, 2018 * * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - $ / CIT 4. - $ ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) $ / BY ORDER, 6 ! / ASSISTANT REGISTRAR