ITO 17(3)(1), MUMBAI V. ESTATE ENTERPRISES, MUMBAI

ITA 981/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1695 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 04-03-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 1346/MUM./2012 (ASSESSMENT YEAR : 200506 ) M/S ESTATE ENTERPRISES C/O MANGALDAS JESINGBHAI & CO. PVT. LTD. BOMBAY COTTON MILLS ESTATE DATTARAM LAD MARG, KALA CHOWKI, MUMBAI 400 033. .. APPELLANT V/S THE INCOME TAX OFFICER 17(3)(1) R. NO. 621, 6 TH FLOOR, PIRMAL CHAMBERS, PAREL MUMBAI 400012 .... RES PONDENT PERMANENT ACCOUNT NUMBER AABFE9847R ITA NO. 981/MUM./2012 (ASSESSMENT YEAR : 200506 ) THE INCOME TAX OFFICER 17(3)(1) R. NO. 621, 6 TH FLOOR, PIRMAL CHAMBERS, PAREL MUMBAI 400012 .. APPELLANT V/S M/S E STATE ENTERPRISES C/O MANGALDAS JESINGBHAI & CO. PVT. LTD. BOMBAY COTTON MILLS ESTATE DATTARAM LAD MARG, KALA CHOWKI, MUMBAI 400 033. .... RESPONDENT PERMANENT ACCOUNT NUMBER AABFE9847R REVENUE BY : MR. MANOJ KUMAR ASSESSEE BY : MR. HARESH G. BUCH M/S ESTATE ENTERPRISES. 2 DATE OF HEARING 0 4 .0 3 .2013 DATE OF ORDER 08.03.2013 ORDER PER AMIT SHUKLA, J.M. THESE CROSS APPEALS ARE FILED BY THE DEPARTMENT AS WELL AS BY THE ASSESSEE, AGAINST ORDER DATED 03.11.2011, PASSED BY CIT (APPEALS)29, MUMBAI, IN RELATION TO PENALTY PROCEEDINGS UNDER SE CTION 271 (1) (C) FOR THE ASSESSMENT YEAR 200506. 2. THE REVENUE IS AGGRIEVED BY DELETION OF PENALTY ON ACCOUNT OF ADDITION OF ` 64,02,228/ MADE UNDER SECTION 40 (A) (I) FOR DISA LLOWANCE OF INTEREST PAID ON FOREIGN LOAN. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED INTERES T PAYMENT OF ` 72,59,205/ WHICH INCLUDES INTEREST PAYMENT OF ` 64,02,213/ ON ECB LOAN TAKEN FROM EYLEEN FINANCIAL CORPORATION UK. THE ASS ESSING OFFICER REQUIRED THE ASSESSEE TO SUBMIT THE DETAILS OF AMOUNT OF INT EREST CLAIMED AND THE AMOUNT OF TDS DEDUCTED ON SUCH INTEREST. IN RESPONS E THE ASSESSEE HAD SUBMITTED AS UNDER : (1) WITH REFERENCE TO INTEREST PAYMENT ON ECB FROM M/S EYLEEN CORPORATION, WE HAVE TO SUBMIT AS UNDER : (A) TO COMPLETE THE CONSTRUCTION OF A BUILDING UNDER CO NSTRUCTION, WE AVAILED ECB US$ 3 MILLION (EXTERNAL COMMERCIAL BORR OWING) FROM M/S. EYLEEN CORPORATION FOR TERMS & CONDITION OF LO ANS, METHOD AND TIME FOR PAYMENT OF INTEREST AND REPAYMENT OF P RINCIPAL. THIS AGREEMENT WAS APPROVED BY RESERVE BANK OF INDIA. DU E TO SLACK IN LOCAL MARKET, WE COULD NOT SALE FLATS IN THE SAI D BUILDING AND DEFAULTED IN REPAYMENT OF PRINCIPAL. HOWEVER, AS SO ON AS SOME OF M/S ESTATE ENTERPRISES. 3 THE FLATS WERE SOLD, INTEREST AND PRINCIPAL WAS REP AID. SAID M/S. EYLEEN CORPORATION DEMANDED THE INTEREST FOR THE DE LAYED PERIOD I.E. FROM AGREED DATE OF REPAYMENT TILL ACTUAL REPA YMENT. SINCE THIS WAS NOT MENTIONED IN ECB AGREEMENT APPROVED BY RBI, AN APPLICATION WAS MADE TO RBI TO ALLOW US TO PAY THE INTEREST FOR THE DELAYED PERIOD. RBI MAY OR MAY NOT ALLOW US TO PAY THE INTEREST FOR THE DELAYED PERIOD. HOWEVER, AS PER SEC. 145(2) AND ACCOUNTING STANDARDS NOTIFIED BY CENTRAL GOVERNMENT , WE HAD TO PROVIDE FOR ALL KNOWN LIABILITIES. ACCORDINGLY A PR OVISION OF RS. 64,02,228/ WAS MADE IN THE BOOKS DURING THE YEAR E NDED 31 ST MARCH, 2005. (B) XXXXXXXXXXX (C) XXXXXXXXX WE, HOWEVER, SUBMIT THAT PAYMENT OF INT EREST WAS SUBJECT TO APPROVAL OF RBI WHICH RBI MAY OR MAY NOT GIVE. IN FACT OUR APPLICATION WAS REJECTED TWICE. THEREFORE, WE S UBMIT THAT WE CANNOT BE CONSIDERED AS PERSON RESPONSIBLE FOR PAYI NG TO NON RESIDENT. FURTHER, IN CASE THE INTEREST IS NOT REMI TTED TO THE PARTY, THERE WAS NO PROVISION UNDER INCOME TAX ACT FOR REF UND OF SUCH TDS PAID UNDER SECTION 195. (D) XXXXXXXXXXXX (E) XXXXXXXXXXXX 4. THE ASSESSING OFFICER REJECTED THE ASSESSEES EX PLANATION AND HELD THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON INTEREST EXPENDITURE OF ` 64,02,228/ AND DISALLOWED THE SAME UNDER SECTION 4 0 (A) (I). THIS DISALLOWANCE ALSO STOOD CONFIRMED FROM THE STAGE OF ITAT. 5. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AS SESSEE REITERATED THE SAME EXPLANATION WHICH HAS BEEN REJECTED MAINLY ON THE GROUND THAT SUCH A DISALLOWANCE HAS BEEN CONFIRMED BY THE LEARNED CIT( A) AND THE ASSESSEE M/S ESTATE ENTERPRISES. 4 SHOULD HAVE DEDUCTED THE TDS AT THE PRESCRIBED DATE . THEREFORE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME WITHIN THE MEANING OF SECTION 271(1)(C) READ WITH EXPLANATION1. 6. BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INAC CURATE PARTICULARS, AS THE INTEREST PAYABLE WAS CLEARLY DISCLOSED IN THE A UDITED ACCOUNTS FOR THE YEAR ENDING 31 ST MARCH, 2005. FURTHER, THE NOTE WAS MADE IN AUDITED ACCOUNTS THAT THE ASSESSEE HAD APPLIED TO RBI SEEKI NG ITS PERMISSION TO MAKE THE PAYMENT OF INTEREST ON DELAYED REPAYMENTS OF PRINCIPAL AMOUNT. PENDING SUCH APPROVAL, PROVISION OF INTEREST WAS MA DE. IT WAS ONLY SUBSEQUENT TO RBI APPROVAL, THAT PAYMENT OF INTERES T COULD BE MADE TO THE NONRESIDENT PARTY. THUS, ASSESSEE WAS UNDER BONA FIDE BELIEF THAT TAX WAS NOT REQUIRED TO DEDUCT ON SUCH UNCERTAIN LIABILITY. WITHOUT PREJUDICE, IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS DEDUCTED AND D EPOSITED THE DUE TAX WHEN THE ACTUAL PAYMENT OF INTEREST WAS MADE AFTER OBTAINING THE RBI PERMISSION. THEREFORE, PENALTY COULD NOT HAVE BEEN LEVIED. 7. THE LEARNED CIT(A) DULY APPRECIATED THE ASSESSEE S EXPLANATION AND DELETED THE PENALTY ON THE GROUND THAT THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS OF INCOME AND THE EXPENDITURE CLAIMED W AS A GENUINE EXPENDITURE. THE ASSESSEE HAS INFACT PAID THE INTER EST AFTER TAKING DUE PERMISSION FROM RBI IN THE LATER YEAR AND AT BEST I T IS ONLY DEFERMENT OF TAX BY CLAIMING IT IN THIS YEAR. AFTER RELYING UPON THE SUPREME COURT DECISION IN THE CASE OF CIT V/S. RELIANCE PETROPRODUCTS PVT. LT D. (2010) 322 ITR 158 HE DELETED THE PENALTY. THE RELEVANT FINDING OF CIT(A) IS REPRODUCED HEREUNDER : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS O F THE AUTHORISED REPRESENTATIVE OF THE APPELLANT. THE ISSUE TO BE DE CIDED IS THAT WHETHER APPELLANT CONCEALED PARTICULARS OF INCOME O R MADE AN INACCURATE CLAIM. THE APPELLANT HAS DISCLOSED ALL T HE PARTICULARS OF M/S ESTATE ENTERPRISES. 5 INCOME AND THE EXPENDITURE CLAIMED WAS A GENUINE EX PENDITURE. IT HAS BEEN ALSO PAID TO THE PARTIES AFTER RECEIVED DUE PE RMISSION FROM RBI IN THE LATER YEAR. THEREFORE THERE WAS AT BEST DEFERME NT OF TAX BY CLAIMING IT IN THIS YEAR. HOWEVER THERE WAS NO CLAI M OF EXCESS OR EXPENDITURE WHICH WAS NOT GENUINE. APPELLANT HAS RI GHTLY RELIED UPON DECISION OF BHORUKA LOGISTICS PVT. LTD. 34 ITCL 552 (MUM) FOR THE PROPOSITION THAT WHEN THERE IS A DISALLOWANCE OF EX PENDITURE FOR NOT DEDUCTING TAX THERE IS NO CONCEALMENT OF INCOME AND PENALTY CANNOT BE LEVIED. I FIND THAT APPELLANT WAS UNDER GENUINE IMPRESSION THAT TAX WAS NOT REQUIRED TO BE DEDUCTED WITHOUT APPROVAL OF RBI DESPITE THE FACT THAT PROVISION WAS MADE IN THE ACCOUNTS AND EX PENDITURE ACCRUED DURING ASSESSMENT YEAR 200506. UNLESS RBI APPROVAL WAS OBTAINED IT CANNOT BE CONSIDERED THAT APPELLANT WERE A PERSON R ESPONSIBLE FOR PAYING TO A NONRESIDENT, AND THEREFORE QUESTION OF DEDUCTING TAX AT SOURCE DID NOT ARISE. HENCE I FIND THAT THERE WAS A DOUBT AS TO LIABILITY FOR DEDUCTING TAX AND APPLICABILITY OF SECTION 195( 1) IN THE GIVEN CIRCUMSTANCES. THEREFORE IT WAS A BONA FIDE CLAIM B Y THE APPELLANT AND NOT A PREPOSTEROUS CLAIM. WHEN ALL PARTICULARS ARE DISCLOSED PENALTY CANNOT BE LEVIED IN SUCH A CASE WHEN A BONA FIDE CL AIM IS DISALLOWED AS PER THE DECISION OF THE SUPREME COURT IN THE CASE O F CIT V/S RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). PE NALTY LEVIED IN RESPECT OF THE DISALLOWANCE OF ` 64,02,228-/ IS DELETED. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE, RELYING HEAVILY UPON THE FINDING OF THE ASSESSING OFFICER, SUBMITTED THAT TH E PROVISION FOR INTEREST CANNOT BE ALLOWED AS EXPENDITURE AND THE ASSESSEE W AS LIABLE TO DEDUCT TDS ON SUCH PAYMENT OF INTEREST TO NONRESIDENT UNDER S ECTION 195 OF THE INCOME TAX ACT. SUCH A DISALLOWANCE HAS ALSO BEEN C ONFIRMED BY THE LEARNED CIT(A) AS WELL AS BY THE ITAT AND THEREFORE, IT AMO UNTS TO FURNISHING OF INACCURATE PARTICULARS AND PENALTY HAS RIGHTLY BEEN LEVIED. 9. ON THE OTHER HAND, THE LEARNED COUNSEL SUBMITTED THAT IN THE AUDITED STATEMENT OF ACCOUNTS, THE ASSESSEE HAS GIVEN A SPE CIFIC NOTE THAT INTEREST ON DELAYED PAYMENT OF FOREIGN CURRENCY LOAN WAS A S UBJECT TO APPROVAL BY M/S ESTATE ENTERPRISES. 6 RBI, WHICH WAS PENDING. THE ASSESSEE HAS INFACT MAD E THE PAYMENT AFTER RECEIVING THE RBIS PERMISSION IN THE SUBSEQUENT YEA R AND ALSO DEDUCTED THE TDS. THEREFORE, THE GENUINENESS AND EXPENSES HAVE N OT BEEN DOUBTED. HE THUS, STRONGLY RELIED UPON THE FINDINGS OF THE LEAR NED CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE CIT(A). THE ASSESS ING OFFICER HAS LEVIED THE PENALTY MAINLY ON ACCOUNT OF THE FACT THAT SUCH A D ISALLOWANCE HAS BEEN CONFIRMED FROM THE STAGE OF THE CIT(A). HE HAS INVO KED THE PROVISION OF EXPLANATION1 TO SECTION 271(1)(C). IT IS NOW QUIT E WELL SETTLED LAW THAT MERE DISALLOWANCE IN THE QUANTUM PROCEEDINGS WILL N OT AUTOMATICALLY LEAD TO LEVY OF PENALTY, AS THE PENALTY PROCEEDINGS ARE SEP ARATE AND DISTINCT FROM THE QUANTUM PROCEEDINGS. IN THE PENALTY PROCEEDINGS THE ASSESSEE CAN RELY UPON THE SAME EXPLANATION TO SUBMIT THAT ITS CLAIM WAS BONA FIDE AT THE TIME OF FLING OF RETURN. THE ASSESSEE HAS DULY DISCLOSED THE PARTICULARS OF INTEREST AMOUNT AND ALSO MADE A NOTE IN THE AUDITED ACCOUNT THAT, PROVISION OF INTEREST ON DELAYED REPAYMENT OF FOREIGN CURRENCY L OAN HAS BEEN MADE BECAUSE IT WAS SUBJECT TO APPROVAL BY RBI, WHICH WA S PENDING BEFORE IT. IMMEDIATELY, AFTER THE RBIS PERMISSION, THE ASSESS EE HAS PAID THE INTEREST AFTER DEDUCTING THE TAX. THERE IS NO QUESTION OF EX CESS CLAIM OF EXPENDITURE OR THAT THE CLAIM IS NOT GENUINE. MERELY, BECAUSE T DS HAS NOT BEEN DEDUCTED ON SUCH PROVISION OF INTEREST, IT SHOULD NOT LEAD T O INFERENCE OF FURNISHING OF INACCURATE PARTICULARS. THE ASSESSEES CLAIM OF INT EREST AT THE TIME OF FILING OF RETURN APPEARS TO BE A BONA FIDE CLAIM AND THE EXPLANATION GIVEN BEFORE THE ASSESSING OFFICER WHICH HAS BEEN REPRODUCED ABOVE, HAS NOT BEEN FOUND TO BE FALSE OR NOT GENUINE. THUS, WE DO NOT FIND ANY R EASON TO DEVIATE FROM THE CONCLUSION DRAWN BY THE CIT(A) THAT NO PENALTY UNDE R SECTION 271(1)(C) IS WARRANTED IN RESPECT OF SUCH A DISALLOWANCE. MOREOV ER THE DISALLOWANCE HAS BEEN MADE MERELY ON ACCOUNT OF LEGAL PROVISION OF S ECTION 40(A)(I), WHERE CERTAIN EXPENSES ARE DISALLOWED ON ACCOUNT OF NOND EDUCTION OF TDS AND NOT FOR THE REASON THAT THEY ARE NOT GENUINE OR HAS NOT BEEN PROVED BY THE ASSESSEE THAT THEY ARE ALLOWABLE EXPENSES. ON THESE FACTS THE RATIO LAID M/S ESTATE ENTERPRISES. 7 DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CI T V/S RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) ALSO GETS SQUARELY APPLICABLE. ACCORDINGLY, THE DELETION OF PENALTY ON THIS SCORE BY CIT(A) IS CONFIRMED AND DEPARTMENTS APPEAL STANDS DISMISSED. 11. NOW COMING TO THE ASSESSEES APPEAL WHEREIN THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF PENALTY UNDER SECTIO N 271(1)(C) ON DISALLOWANCE OF ` 64,74,300/ MADE UNDER SECTION 40(A)(IA) ON AMOUNT OF COMPENSATION DEBITED IN THE PROFIT AND LOSS ACCOUNT . THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH MR. RAJIV SHAH AND M R. RAJEN SHAH FOR LOOKING AFTER THE PROJECT UNDERTAKEN BY IT ON DAY T O DAY BASIS, FOR WHICH COMPENSATION AT THE RATE OF ` 100 PER SQ. FT. WAS PAYABLE. IN RESPONSE TO THE SHOWCAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE SAID COMPENSATION WAS PAYABLE ONLY AFTER THE COMPLETION OF THE PROJECT AN D SALE OF MAJORITY OF FLATS. ACCORDINGLY, A PROVISION OF ` 64,72,300/ WAS MADE IN THE BOOKS. SINCE, THERE WAS OVERALL LOSS IN THE PROJECT, A REQUEST WA S MADE TO BOTH THE PERSONS TO REDUCE THE AMOUNT OF COMPENSATION PAYABL E TO THEM. PENDING NEGOTIATION, THE PROVISION WAS MADE IN THE ACCOUNTS . THEREFORE, TDS WAS DEDUCTED ONLY AT THE TIME OF ACTUAL PAYMENT AS THER E WAS NO PROVISION FOR CLAIMING THE REFUND BY THE EITHER PARTY. HENCE, THE ASSESSEE HAS NOT DEDUCTED THE TDS DURING THIS YEAR. THE ASSESSING OF FICER DISALLOWED THE PROVISION MADE FOR COMPENSATION TO THESE TWO PERSON S ON THE GROUND THAT TAX SHOULD HAVE BEEN DEDUCTED AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND DISALLOWANCE WAS MADE UNDE R SECTION 40(A)(IA). SUCH A DISALLOWANCE ALSO STANDS CONFIRMED FROM THE STAGE OF THE ITAT. 12. THE ASSESSING OFFICER HAS LEVIED THE PENALTY ON SUCH A PROVISION FOR COMPENSATION SOLELY ON THE GROUND THAT CIT(A) HAS D ISMISSED THE ASSESSEES PLEA. 13. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE AS SESSEE WAS NEGOTIATING THE AMOUNT OF COMPENSATION WITH THESE TWO PERSONS A ND THEREFORE, THE M/S ESTATE ENTERPRISES. 8 PROVISION WAS MADE IN THE ACCOUNTS. INFACT, THE ASS ESSEE HAS DEDUCTED THE TAX UPON THE FINALIZATION OF THE NEGOTIATION AND TH E PAYMENT OF COMMISSION WAS AGREED AT ` 45,00,000/ AND THEREFORE GENUINENESS OF THE EXPEN SES CANNOT BE DOUBTED AND NO PENALTY COULD HAVE BEEN LE VIED. HOWEVER, THE LEARNED CIT(A) CONFIRMED THE PENALTY ON THE GROUND THAT EXPENDITURE CLAIMED DID NOT ACCRUE IN THE ASSESSMENT YEAR 2005 06 AS COMPENSATION WAS TO BE PAID AT THE TIME OF COMPLETION OF THE PRO JECT. MOREOVER THE ASSESSEE HAS NOT DEDUCTED TAX, THEREFORE, THE AMOUN T OF PROVISION FOR COMPENSATION MADE IN THE ACCOUNTS IS TO BE ADDED BA CK TO THE INCOME. HE, FURTHER, REFERRED TO THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF UNION OF INDIA V/S DHARMENDRA TEXTILE PROCESSORS (2 007) 166 TAXMAN 65 AND CONFIRMED THE PENALTY. 14. BEFORE US THE LEARNED COUNSEL SUBMITTED THAT TH E ASSESSEE HAS DULY DISCLOSED THE PARTICULARS OF THE COMPENSATION IN PR OFIT AND LOSS ACCOUNT AND HAS ALSO GIVEN A DETAILED NOTE IN THE AUDITED ACCOU NTS TO THIS EFFECT. FURTHER, THE DISALLOWANCE HAS BEEN MADE PURELY ON PROVISIONS OF SECTION 40 (A)(IA) AND THERE IS NO DISPUTE WITH REGARD TO THE GENUINEN ESS OF THE EXPENDITURE, WHICH IS FOUND FROM THE FACT THAT THE ASSESSEE HAS MADE THE PAYMENT IN THE SUBSEQUENT YEARS AFTER DEDUCTING THE TDS. HE RELIED UPON THE DECISION OF ITAT, MUMBAI BENCHES, MUMBAI IN THE FOLLOWING CASES : (I) CIT V/S VIP INDUSTRIES LTD. REPORTED IN (2009) 122 ITJ (MUM.) 289 (II) CIT V/S M/S BHORUKA LOGISTICS PVT. LTD. REPORTED IN (2010) ITCL 343 (III) M/S KUMAR PRINTIN WORKS V/S ITAT, (ITA NO. 1487/MUM ./2010 15. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE STRONGLY RELIED UPON THE FINDINGS OF THE LEARNED CIT(A) THAT PENALTY UNDER SECTION 271(1)(C) CAN BE LEVIED ON SUCH DISALLOWANCE BECAUS E ASSESSEE WAS LEGALLY LIABLE TO DEDUCT TDS ON SUCH PROVISION OF COMPENSAT ION. M/S ESTATE ENTERPRISES. 9 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PE RUSED THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) . SO FAR AS PROVISION FOR COMPENSATION MADE IN PURSUANCE OF AGREEMENT WITH TH E TWO PERSONS IS CONCERNED, SAME HAS NOT BEEN DOUBTED. THE ONLY REAS ON FOR DISALLOWANCE WAS THAT THE ASSESSEE HAS FAILED TO DEDUCT THE TDS ON SUCH PROVISION FOR COMPENSATION. ON THE OTHER HAND, THE ASSESSEES EXP LANATION HAS BEEN THAT, DUE TO HEAVY LOSSES IN THE PROJECT, THE ASSESSEE WA S NEGOTIATING WITH THESE TWO PERSONS TO REDUCE THE AMOUNT OF COMPENSATION AN D PENDING SUCH NEGOTIATING, PROVISION WAS MADE. INFACT, IN THE SUB SEQUENT YEAR THE ASSESSEE WAS SUCCESSFUL IN GETTING THE AMOUNT OF CO MPENSATION REDUCED FROM ` 64,72,300/ TO ` 45,00,000/ AND THE ASSESSEE HAS DEDUCTED THE TDS AT THE TIME OF ACTUAL PAYMENT. BALANCE PROVISIO N OF COMPENSATION AMOUNT WAS REVERSED. THE DISALLOWANCE IN THIS CASE HAS BEEN MADE SOLELY ON ACCOUNT OF LEGAL PROVISION AND NOT FOR THE REASON T HAT EXPENDITURE CLAIMED IS NOT GENUINE OR HAS BEEN FOUND TO BE BOGUS. EVEN THO UGH, SUCH A DISALLOWANCE HAS BEEN UPHELD FROM THE STAGE OF ITAT , BUT FOR THE PURPOSE OF PENALTY PROCEEDINGS ONE HAS TO SEE WHETHER THE ASSE SSEES CLAIM IS BONA FIDE OR NOT. AS PER THE AGREEMENT, THE ASSESSEE WAS LIAB LE TO PAY THE COMPENSATION TO TWO PERSONS AT A PARTICULAR RATE, F OR WHICH IT HAS BEEN MADE A PROVISION AND HAS ALSO GIVEN A NOTE IN THE AUDITE D STATEMENT OF ACCOUNTS. THIS FACT HAS NOT BEEN FOUND TO BE FALSE. THE ASSES SEE HAS DULY MADE THE PAYMENT IN SUBSEQUENT YEAR AND HAS ALSO DEDUCTED TH E TDS WHICH ALSO GOES TO SHOW THAT THE ASSESSEES CLAIM OF EXPENDITURE IS GENUINE. THUS, SUCH A DISALLOWANCE SIMPLY ON ACCOUNT OF INVOKING OF SECTI ON 40 (A)(IA), PENALTY CANNOT BE SUSTAINED. THE JUDGEMENTS, RELIED UPON BY THE LEARNED COUNSEL, ARE DIRECTLY ON THIS POINT AND ARE ALSO APPLICABLE ON THE FACTS OF THE ASSESSEES CASE. THEREFORE, DECISION OF HONBLE SUP REME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA), WILL NOT BE APPLICABLE AND MOREOVER THE HONBLE SUPREME COURT IN THE SUBSEQUENT DECISIO N IN THE CASE OF M/S ESTATE ENTERPRISES. 10 RELIANCE PETROPRODUCTS PVT. LTD. HAS DULY CONSIDERE D THE LAW LAID DOWN BY DHARMENDRA TEXTILE PROCESSORS (SUPRA) AND HAS HELD AS UNDER : A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME 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 U SED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT P ENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EX ACT 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 SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CA NNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 17. THUS, ON THE FACTS OF THE PRESENT CASE, WE DO N OT FIND ANY REASON TO CONFIRM THE PENALTY ON SUCH KIND OF DISALLOWANCE AN D ACCORDINGLY SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND DELETE THE PENA LTY. ACCORDINGLY, THE ASSESSEES APPEAL STANDS ALLOWED. M/S ESTATE ENTERPRISES. 11 18. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED, WH EREAS DEPARTMENTS APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH MARCH, 2013 SD/ B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/ AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED: 08 TH MARCH, 2013 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. TRUE COPY BY ORDER S.K. SHARMA (DY./ASSTT. REGISTRAR) ITAT, MUMBAI