ACIT, Pune v. Shri Raichand B Kunkulol, Pune

ITA 1849/PUN/2012 | 2008-2009
Pronouncement Date: 31-10-2013 | Result: Dismissed

Appeal Details

RSA Number 184924514 RSA 2012
Assessee PAN ABFPK3583Q
Bench Pune
Appeal Number ITA 1849/PUN/2012
Duration Of Justice 1 year(s) 1 month(s) 10 day(s)
Appellant ACIT, Pune
Respondent Shri Raichand B Kunkulol, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 31-10-2013
Assessment Year 2008-2009
Appeal Filed On 20-09-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE: SHRI G. S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 1849 /PN/201 2 ASSESSMENT YEAR : 2008 - 09 ASST. COMMISSIONER OF INCOME TAX CIRCLE - 3 PUNE VS. SHRI RAICHAND B. KUNKULOL P. NO. 10 RAHUL CHAMBERS KARVE ROAD PUNE - 411004 (APPELLANT) (RESPONDENT) PAN NO. ABFPK3583Q APPELLANT BY: SHRI P.L. PATHADE RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 28 - 10 - 2013 DATE OF PRONOUNCEMENT : 31 - 10 - 2013 ORDER P ER R.S. PADVEKAR JM : - IN THIS APPEAL THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - II PUNE DATED 18 - 05 - 2012 FOR THE A.Y. 2008 - 09 IN WHICH THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271( 1)(C) OF THE INCOME - TAX ACT HAS BEEN DELETED. THE REVENUE HAS TAKEN FOLLOWING GROUND IN THE APPEAL: 1. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED U/S. 271(1)(C) OF THE INCOME - TAX ACT 1961 AMOUNTI NG TO RS.11 21 497/ - ? 2. THE FACTS WHICH ARE REVE ALED FROM THE RECORD AS UNDER IN WHICH WE PREFER TO REPRODUCE FROM THE ORDER OF THE LD. CIT(A) . THE APPELLANT IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF PROMOTER AND BUILDERS AND IS ALSO A PARTNER IN VAR IOUS FIRMS SUCH AS RAHUL CONSTRUCTION AND RAHUL ASSOCIATES. THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7 60 08 299/ - AND THE SAME WAS COMPLETED DETERMINING TOTAL INCOME OF RS.8 07 68 713/ - . DURING THE ASSESSMENT PROCEEDINGS THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST LEGAL EXPENSES AND FEES TO RCC 2 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE CONSULTANTS AGAINST INCOME EXEMPT U/S. 80IB(10) THE DETAILS OF WHICH ARE AS UNDER WHICH HAS BEEN CONSIDERED FOR THE PENALTY PROCEEDINGS. A. INTEREST ON EXCESS WITHDRAWALS FROM THE FI RM M/S. RAHUL ASSOCIATES WRONGLY TAKEN AT RS.20 70 915/ - B. LEGAL EXPENSES IN CONNECTION WITH THE D ISPUTES AMONGST THE PARTNERS IN M/S. RAHUL CONSTRUCTION CO. RS.10 95 150/ - C. FEE TO RCC CONSULTANTS AGAINST INCOME EXEMPT U/S. 80I B(10) RS.83 967/ - R S.32 50 032/ - DURING THE COURSE OF PENALTY PROCEEDINGS IT WAS HELD BY THE A.O. THAT THE APPELLANT HAD CLAIMED DEDUCTION ON ACCOUNT OF THE EXPENSES WHICH WERE PERSONAL IN NATURE AS BUSINESS EXPENSES AND EVEN IF THE S AME HAD BEEN OFFERED VOLUNTARILY DURING THE COURSE OF ASSESSMENT PROCEEDINGS THERE WAS NO ESCAPEMENT FROM PENALTY FOR CONCEALING THE PARTICULARS OF INCOME IN THE RETURN OF INCOME. THE A.O. THUS HELD THE ENTIRE AMOUNT OF RS.32 50 032/ - TO HAVE BEEN CONCEAL ED AND THEREFORE LIABLE FOR PENALTY U/S. 271(1)(C) R.W. EXPLANATION. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AND THE CIT(A) DELETED THE PENALTY. THE REASONS AND FINDINGS GIVEN BY THE LD. CIT(A) FOR DELETING THE PENALTY LEVIED BY THE A SSESSING OFFICER U/S. 271(1)(C) ARE AS UNDER: 3.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE MATERIAL ON RECORD. THE APPELLANT HAS RAISED FOUR GROUNDS OF APPEAL AND IN GROUNDS OF APPEAL NO. 1 TO 3 HAS CONTESTED THE LEVY OF PENALT Y U/S. 271(1)(C) OF RS.11 21 497/ - . THE APPELLANT CLAIMED VARIOUS EXPENSES LIKE INTEREST ON BORROWINGS LEGAL EXPENSES AND OTHER EXPENSES AS DEDUCTION FROM THE TOTAL INCOME. THE APPELLANT IS HAVING A PROPRIETORSHIP BUSINESS AS A BUILDER AND IS ALSO A PART NER IN THE FIRMS RAHUL CONSTRUCTION AND RAHUL ASSOCIATES. THE A.O. HAS LEVIED PENALTY ON THE FOLLOWING DISALLOWANCES WHICH WERE VOLUNTARILY AGREED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. 3 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE INTEREST ON LOAN RS.20 70 915/ - PERSONAL LEGAL EXPE NSES RS.10 95 150/ - LEGAL EXPENSES DEBITED AGAINST INCOME NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10) RS.83 967/ - RS.32 50 032/ - 3.4. THE A.O. HAS LEVIED PENALTY OF RS. 11 21 497 / - U/S 271(1)(C) AFTER HOLDING THAT THE APPELLANT HAD CONCEALED THE PAR TICULARS OF INCOME IN RESPECT OF THE AFORESAID ITEMS OF EXPENSES AMOUNTING TO RS. 32 50 032/ - . DURING THE APPELLATE PROCEEDINGS IT HAS BEEN CONTENDED BY THE APPELLANT THAT IN RESPECT OF THE AMOUNT OF RS. 20 70 915/ - CONSIDERED BY THE A.O. FOR CONCEALING TH E INCOME AT LEVYING PENALTY U/S 271(1)(C) WITH RESPECT TO THE INTEREST THAT DURING THE YEAR THE TOTAL INTEREST PAID TO M/S RAHUL ASSOCIATES WAS OF RS. 20 70 915/ - . IT WAS EXPLAINED BY THE APPELLANT THAT THE FUNDS BORROWED FROM RAHUL ASSOCIATES WERE UTILIZE D BY THE ASSESSEE FOR THE PURPOSES OF BUSINESS OF HIS PROPRIETARY CONCERN M/S RAHUL CONSTRUCTION CO. IT WAS FURTHER EXPLAINED THAT TWO PROJECTS M/S RAHUL TOWERS AND RAHUL COMPLEX WERE CARRIED OUT AND OUT OF THE TWO PROJECTS RAHUL TOWERS WAS ELIGIBLE FOR D EDUCTION U/S 80IB(10) WHILE THE PROJECT RAHUL COMPLEX WAS A TAXABLE PROJECT. IT HAS BEEN FURTHER SUBMITTED THAT THE A.O. HELD THAT THE INTEREST TO HAVE BEEN UTILIZED BY THE APPELLANT FOR BOTH THE PROJECT AND ACCORDINGLY ALLOCATED THE INTEREST PAID OVER THE TWO PROJECTS AND THE AMOUNT OF RS.10 31 750/ - ALLOCATED TO RAHUL TOWERS PROJECT ENTITLED TO DEDUCTION U/S 80IB(10) TO THAT EXTENT THE PROFITS OF THAT PROJECT DECREASED AND THE DEDUCTION CLAIMED ALSO DECREASED SIMULTANEOUSLY AND THE OTHER PART OF INTEREST AMOUNTING TO RS. 10 31 730/ - ALLOCATED TO THE OTHER PROJECT RAHUL COMPLEX WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE APPELLANT. IT HAS BEEN CONTENDED THAT THE A.O. HAS FALSELY CLAIMED THE DEDUCTION ON ACCOUNT OF EXPENSES AND THEREFORE CONCEALED THE PARTICULAR INCOME AND THEREFORE LEVY OF PENALTY WAS JUSTIFIED WHICH IS NOT CORRECT AS THE BORROWED FUNDS HAD BEEN UTILIZED FOR THE PURPOSES OF BUSINESS IN THE PROPRIETARY CONCERN. IT HAS BEEN CONTENDED THAT THE A.O. HAS PRESUMED THAT PART OF THE FUN DS WERE UTILIZED FOR THE PROJECT RAHUL TOWERS WHOSE PROFITS WERE ELIGIBLE FOR DEDUCTION U/S 80IB(10) AND THUS THE ADDITION MADE BY THE A.O. WAS PURELY ON AN ESTIMATED BASIS. THE APPELLANT FURTHER SUBMITS THAT THE A.O. HAD NOT ESTABLISHED THE NEXUS OF THE U TILIZATION OF THE BORROWED FUND FOR THE PURPOSE OF RAHUL TOWERS. IT HAS ALSO BEEN STATED THAT NO PENALTY CAN BE LEVIED IN RESPECT OF SUCH ESTIMATED ADDITION. THE APPELLANT HAS RELIED ON THE FOLLOWING JUDICIAL 4 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE DECISION IN SUPPORT OF THE CLAIM WITH RESPECT T O THE ESTIMATED ADDITION AND PROVING OF NEXUS: 1. DCW LTD. VS ADDL. CIT (2010) 132 TTJ 442 (MUM) 2. EXTERMPORE SECURITIES & INVESTMENTS (P) LTD. VS DCIT (2008)116 TTJ 525(MUM) 3. SHAM LAL VS ITO (2004) 91 TTJ 443 (CHD) 4. ACIT VS RAJASTHAN AGENCI ES (2004) 87 TTJ 373 (JD) 5. SHYAM OIL CAKE LTD. VS ACIT (2004) 83 TTJ 414 (JD) THE APPELLANT ALSO CONTENDED THAT ONCE NEXUS IS NOT PROVED DISALLOWANCE CANNOT BE MADE AND ACCORDINGLY THE CLAIM MADE BY THE APPELLANT IS JUSTIFIED OR AT THE MOST IS AN ARGUAB LE ONE AND TWO OPINIONS ARE POSSIBLE AND WHEN TWO OPINIONS ARE POSSIBLE NO PENALTY U/S 271(1)(B) CAN BE LEVIED. THE APPELLANT HAS PLACED RELIANCE ON THE SUPREME COURT DECISION IN THE CASE OF CIT VS VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC) WHICH HEL D THAT WHEN TWO OPINIONS ARE POSSIBLE NO PENALTY IS LEVIABLE U/S 271(1)(C). THE APPELLANT HAS RELIED UPON THE FOLLOWING DECISIONS TO SUPPORT THE CONTENTION THAT WHERE THE CLAIM/DEDUCTION MADE BY THE ASSESSEE IS DEBATABLE NO PENALTY CAN BE IMPOSED: 1. CIT VS HARSHVARDHAN CHEMICALS & MINERALS LTD (2003) 259 ITR 212(RAJ) 2. CIT VS RAM SINGHANI DALL MILLS (2002) 254 ITR 264 (MP) 3. DCIT VS RAHOUL SIEMSSEN ENGG. (P) LTD. (2004) 91 TTJ 62 (DEL) 4. JCIT VS KARNAL CO - OP SUGAR MILLS LTD (2006) 99 TTJ 330 (DEL) THE APPELLANT HAS ALSO PACED RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158) WHICH HELD THAT BY NO STRETCH OF IMAGINATION CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. 3.5 THE APPELLANT FURTHER SUBMITS REGARDING THE DISALLOWANCE OF RS.10 95 150 / - ON ACCOUNT OF LEGAL EXPENDITURE PERTAINING TO THE FIRM RAHUL CONSTRUCTION CO BY THE A.O. ON THE GROUND THAT THE EXPENDITURE WAS PERSONAL IN NA TURE. THE APPELLANT HAS CONTENDED THAT DISPUTES AROSE WITH SOME EX - PARTNERS OF THE PARTNERSHIP FIRM M/S RAHUL CONSTRUCTION CO AND THE MATTER WAS REFERRED TO ARBITRATION AND FOR LITIGATION PURPOSE THE APPELLANT INCURRED LEGA L EXPENSES. IT HAS BEEN STATED T HAT THE SAID EXPENSES WAS INCURRED FOR SETTLING THE DISPUTES AND THE APPELLANT BEING A PARTNER WAS OBLIGED TO SAFEGUARD THE INTEREST IN THE PARTNERSHIP FIRM. THUS IT HAS BEEN CONTENDED THAT THE LEGAL AND PROFESSIONAL EXPENSES WERE INCURRED FOR SAFEGUARDIN G THE 5 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE BUSINESS INTEREST OF THE APPELLANT AND HENCE THE CLAIM OF THE SAID EXPENSES. IT HAS ALSO BEEN STATED THAT THE CLAIM WAS ALSO MENTIONED IN THE AUDIT REPORT FILED IN FORM NO. 10CCB. IT HAS BEEN SUBMITTED THAT THE CLAIM MADE IS AT THE MOST A DEBATABLE O NE AND TWO OPINIONS ARE CLEARLY POSSIBLE WHICH WOULD JUSTIFY FOR NOT LEVYING THE PENALTY. THE APPELLANT HAS RELIED ON THE SAME SET OF JUDICIAL DECISIONS CITED EARLIER ON THE ISSUE. THE APPELLANT REGARDING THE ADDITION OF RS. 83 697 / - HAS STATED THAT M/S RU IKAR AND ASSOCIATES RCC CONSULTANTS HAD BEEN ENGAGED FOR THE VARIOUS HOUSING PROJECTS AND HE HAD AGREED FOR DISALLOWANCE OF 50% OF THE FEES ON THE GROUND THAT IT MAY BE RELATING TO THE PROJECT QUALIFYING FOR DEDUCTION US 80IB(10). IT HAS BEEN CONTENDED THA T THE ADDITION MADE WAS ON AN ESTIMATED BASIS AND THERE WAS NO DIRECT EVIDENCE TO PROVE THAT THE AMOUNT OF DISALLOWANCE WAS CORRECT AND THEREFORE PENALTY SHOULD NOT BEEN LEVIED WHEN THE DISALLOWANCE WAS BASED ON ESTIMATE. 3.6 THE FACT BROUGHT ON RECORD H AS BEEN CONSIDERED ALONGWITH THE SUBMISSION MADE BY THE APPELLANT. THE A.O. DURING THE ASSESSMENT PROCEEDINGS HAD POSED THE QUESTION BEFORE THE APPELLANT REGARDING THE ALLOCATION OF EXPENSES BETWEEN THE TWO PROJECTS UNDERTAKEN ONE WHICH QUALIFIED FOR DEDUC TION U/S 80IB(10) I.E. RAHUL TOWERS AND THE OTHER WITHOUT SUCH CLAIM I.E. RAHUL COMPLEX. THE APPELLANT IN ITS LETTER DATED 25.10.2010 HAD VOLUNTARILY OFFERED THE INTEREST EXPENSES AMOUNTING TO RS. 20 70 715 / - AS PART OF THE BUSINESS EXPENSES AND ALLOCATED ON THE BASIS OF ELIGIBLE AND NON - ELIGIBLE PROJECTS FOR DEDUCTION U/S 80IB(10). THE A.O. HAD ADDED A SUM OF RS. 10 31 730 / - ON ACCOUNT OF EXCESS INTEREST CLAIMED IN THE COMPUTATION OF INCOME. THE AFORESAID INTEREST WAS ACTUALLY CLAIMED BY THE APPELLANT AGAI NST THE REMUNERATION RECEIVED FROM THE FIRM M/S RAHUL ASSOCIATES FROM WHOM THE FUNDS WERE WITHDRAWN WERE STATED TO HAVE BEEN UTILIZED FOR THE PURPOSES OF THE PROPRIETARY BUSINESS. THE INTEREST OF RS. 20 70 915 / - HAD BEEN PAID TO RAHUL ASSOCIATES ON THE DEB IT BALANCE IN THE CAPITAL ACCOUNT OF THE APPELLANT IN THE SAID FIRM. THE A.O THUS INFERRED THAT IF THE AFORESAID INTEREST EXPENSES WOULD BE ALLOCATED IN THE TWO PROJECTS UNDERTAKEN BY THE APPELLANT THE PROFIT DECLARED BY THE APPELLANT IN THE PROPRIETARY C ONCERN WOULD INCREASE AND THESE FACTS WERE ALSO CONFRONTED TO THE APPELLANT. IT WAS IN THE SET OF CIRCUMSTANCES THAT THE APPELLANT VOLUNTARILY OFFERED THE SAID INTEREST EXPENSES AS PART OF BUSINESS EXPENSES WHICH WAS ALLOCATED BETWEEN THE TWO PROJECTS. 6 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE 3.7 LIKEWISE THE A.O. NOTICED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 13 . 45 LACS AS LEGAL AND PROFESSIONAL FEES TO THE P & L A/C AND OUT OF THE ABOVE RS.13.04 LACS WAS ALLOCATED TO THE ABOVE PROJECT OF THE PROPRIETARY BUSINESS WHICH WAS NOT ELIGIBLE FOR D EDUCTION U/S 80IB (10) AND RS. 40 834 / - TO THE BUSINESS ELIGIBLE FOR DEDUCTION. THE A.O. THUS SOUGHT THE EXPLANATION OF THE APPELLANT IN THE BIFURCATION OF ALL EXPENSES BETWEEN THE TWO BUSINESSES WHICH WERE BASED ON THE PROPORTION OF SALES MADE IN THERE. T HOUGH THE DISPUTES AND ARBITRATION BETWEEN THE PARTNERS IN RAHUL CONSTRUCTION CO. (PARTNERSHIP FIRM) WAS UNDISPUTED THE PAYMENTS WERE DEBITED TO THE ACCOUNT OF THE APPELLANT'S PROPRIETORY BUSINESS AS THE PARTNERSHIP'S BANK ACCOUNT REMAINED NON - OPERATED DUR ING THE LITIGATION PERIOD. IT WAS IN THESE CIRCUMSTANCES THAT THE APPELLANT IN ITS LETTER DATED 25.10.2010 OFFERED THE LEGAL FEES AMOUNTING TO RS. 10 95 150 / - AS PERSONAL EXPENSES AND THE A.O. ALONG WITH OTHER PROFESSIONAL FEES OF RS.83 967 / - WAS ADDED TO THE TOTAL INCOME. 3.8 THE APPELLANT HAD NOT FILED ANY APPEAL AGAINST THE AFORESAID ADDITION MADE BY THE A.O. BASED ON THE VOLUNTARY AGREEMENT MADE BY THE APPELLANT. THE QUESTION WHICH ARISES NOW IS WHETHER PENALTY IN SUCH A CASE IS EXIGIBLE OR NOT. IT HAS BEEN A LONG ESTABLISHED PRACTICE THAT THE TAX PAYER AGREE TO CERTAIN ADDITIONS DURING ASSESSMENT PROCEEDINGS NOT ALWAYS BECAUSE THEY ARE CONVINCED THAT SUCH ADDITION IS WARRANTED OR OTHERWISE JUSTIFIED BUT WITH A VIEW TO BRING FINALITY TO THE WHOLE MATTER TO PURCHASE PEACE AND AVOID LITIGATION. THE GENERAL VIEW HAS ALWAYS BEEN THAT MERE ADMISSION BY ITSELF NEED NOT OFFER IMMUNITY TO THE TAX PAYER WHERE THE ADMISSION HAS BEEN EXTORTED FROM HIM AFTER CONCEALMENT HAD BEEN BROUGHT HOME. BUT THERE ARE A NUMBER OF CASES WHERE THERE IS HARDLY ANY MATERIAL TO JUSTIFY THE ADDITION AT THE TIME WHEN ADDITION IS CONCEALED. IT IS TRUE THAT IN SOME CASES THE ADDITION MAY BE AGREED WITH A VIEW TO FORESTALL ENQUIRY. EVEN IN SUCH CASES IT WOULD APPEAR THAT PENALTY MAY NOT BE EXIGIBLE IN THE ABSENCE OF ANY MATERIAL AGAINST THE ASSESSEE. IT IS BECAUSE A MERE ATTEMPT TO CONCEAL INCOME HAS NOT BEEN SPECIFICALLY MADE LIABLE FOR PENALTY. THE SUPREME COURT IN SIR SHADI LAL SUGAR AND GENERAL MILLS LTD & ANR. (1987) 168 ITR 705 (SC) HELD THAT THE VIEW THAT MERE AGREEMENT IS NOT ENOUGH TO JUSTIFY PENALTY CANNOT BE SUPPORTED EVEN AFTER THE EXPLANATION MAKING THE LAW MORE RIGID AND HENCE BECOME PART OF THE STATUTE. THE APEX COURT HAD CATEGORICALLY POINTED OUT THAT THE TAXPAYER MAY ACCEP T AN ADDITION MERELY WITH A VIEW TO MAINTAIN GOOD RELATIONS WITH THE IT. DEPT. THE PROPOSITION LAID DOWN IN THIS CASE 7 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE HOWEVER HAS BEEN FOUND TO BE APPLICABLE IN MANY CASES EVEN AFTER THE EXPLANATION BECOME MORE STRINGENT. THE APEX COURT ALSO POINTED OUT THAT WHERE AN ASSESSEE AGREES TO CERTAIN ADDITIONS IT DOES NOT FOLLOW THAT SUCH AGREEMENT IMPLIES THAT HE HAS ALSO CONCEALED THE INCOME. IT IS OBSERVED THAT 'THERE MAY BE A HUNDRED AND ONE REASONS FOR SUCH ADMISSION THAT IS WHEN THE ASSESSEE REALIZED THE TRUE POSITION IT DOES NOT DISPUTE CERTAIN DISALLOWANCES BUT THAT DOES NOT ABSOLVE THE REVENUE FROM PROVING THE MENS REA OF A QUASI CRIMINAL OFFENCE'. THOUGH THE CONTROVERSY AS TO MENS REA IS BEST ACCORDED ESPECIALLY IN THE LIGHT OF THE EXPLANATION AND TH E LANGUAGE OF LAW THE FACT REMAINS THAT CONTUMACIOUS CONDUCT SHOULD BE PROVED OR INDICATED OR AT LEAST SUGGESTED. IN THE CONTEXT THE DECISION OF THE SC IN CIT VS MUSSADILAL RAM BHAROSE (1987) 165 ITR 14 (SC) HELD THAT FRAUD NO DOUBT WOULD ATTRACT PENALT Y GROSS OR WILLFUL NEGLIGENCE SHOULD ALSO ATTRACT PENALTY. BUT WHERE NONE OF THE CIRCUMSTANCES INDICATING SUCH DELINQUENCY ARE PROVED THE FACT THAT THE EXPLANATION ITSELF HAD BECOME APPLICABLE WOULD ONLY MEAN THAT THE INITIAL BURDEN IS PLACED ON THE TAX PAYER AND NOT THAT PENALTY ITSELF BECOMES AUTOMATICALLY LEVIABLE. EXPLANATION HAVE BEEN MADE MORE STRINGENT AGAINST THE TAX PAYER AFTER THIS DECISION BETWEEN THE BASIC PRINCIPLE IN THE CASE OF CONCEALMENT PENALTIES INVOLVING ELEMENT OF CONSCIOUSNESS CANNOT BE SAID TO HAVE BEEN DISPLACED IT IS IN THE LIGHT OF THE ACCEPTED POSITION OF LAW AS NOW THAT THE EARLIER DECISION EITHER WAY HAVE TO BE CONSIDERED THOUGH THE PREPONDERANT VIEW HAS BEEN THAT THE AGREEMENT BY ITSELF DOES NOT JUSTIFY PENALTY WHETHER BEFORE OR AFTER THE EXPLANATION. 3.9 THE APPELLANT IN THE PRESENT CASE HAS DISCLOSED ALL THE MATERIAL FACT IN THE RETURN OF INCOME. THE A.O. DIFFERED IN THE VIEWS TAKEN BASED ON THE MATERIAL ON RECORD WHERE FULL PARTICULARS ARE GIVEN THERE WILL ORDINARILY BE NO INFERENCE OF CONCEALMENT. IN THE CASE OF INDIA CINE AGENCIES VS DCIT (2005) 275 ITR 430 (MAD) HELD THAT THOUGH ADDITION HAD BEEN ACCEPTED BUT THAT D OES NOT MEAN THAT PENALTY IS EXIGIBLE. THE ASSESSEE HAD NOT CONCEALED THE RELEVANT FACT. HIS CLAIM WOULD B E AN INNOCENT ONE EVEN IF NOT CORRECT. THE WORD CONCEALMENT IN SUCH A CASE IN ITS ORDINARY SENSE CANNOT APPLY TO SUCH A SITUATION. IT WAS IN THIS CONTEXT THAT PENALTY WAS CANCELLED WHERE FACTS ARE DISCLOSED BUT INFERENCE IS DIFFERENT THERE IS NO CASE OF PENALTY AS HELD IN CIT VS MEHTA ENGINEERS LTD (2008) 300 ITR 308 (P&H). 3.10 THE ALLOCATION OF THE EXPENSES ON ACCOUNT OF INTEREST HAS BEEN TONE BASED ON ESTIMATE AND THE A.O. HAS NOT BROUGHT ON RECORD ANY MATERIAL EXCEPT FOR THE FACT THAT THE ALLOCATION OF THE EXPENSES WOULD 8 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE RESULT IN TAXATION OF A HIGHER INCOME. THE A.O. HAS RESORTED TO THE ADDITION ON PRESUMPTION THAT PART OF THE FUNDS WERE UTILIZED FOR THE PROJECT. THUS THE ADDITION MADE BY THE A.O. IS ON AN ESTIMATED BASIS WITHOUT ESTABLISHING THE NEX US BETWEEN THE FUNDS BORROWED HAVING BEEN UTILIZED FOR THE PURPOSES OF THE PROJECT RAHUL TOWERS. THE A.O. HAS NOT PINPOINTED THE EXPENSES RATHER APPORTIONED ON AN ESTIMATED PROPORTIONATE BASIS SO THAT THE RESULT WOULD BE TAXABLE OF A HIGHER INCOME WITHOUT SPECIFYING ITS UTILIZATION. IN THE CASE OF DCW LTD. (2010) 132 TTJ 442 (MUM) RELIED UPON BY THE APPELLANT THE ITAT MUMBAI HELD THAT INDIRECT EXPENSES NOT RELATED TO THE ELIGIBLE UNIT NEED NOT BE APPORTIONED THOUGH THE APPELLANT HAS ACCEPTED AND AGREED T O THE ADDITION MADE BUT ON FACTS LEVY OF PENALTY ON SUCH APPORTIONMENT APPEARS TO BE FAR STRETCHED AND THAT TOO ON AN ESTIMATED BASIS. CONCEALMENT OF INCOME IS PRESUMED IN EVERY CASE OF DIFFERENCE BETWEEN REPORTED AND ASSESSED INCOME UNDER EXPLANATION I T O SECTION 271(1)(C) OF THE IT. ACT. BUT SUCH PRESUMPTION IS REBUTTABLE. THE EXPLANATION ITSELF PROVIDES FOR SUCH REBUTTAL IN CASES WHERE THE TAXPAYER HAS AN EXPLANATION FOR THE DIFFERENCE PRODUCES ALL THE MATERIALS AVAILABLE WITH HIM AND SUCH EXPLANATION IS NOT FOUND TO BE MALAFIDE. IN CIT VS DHILLON RICE MILLS (2002) 256 ITR 447 (P&H) THE HIGH COURT HELD THAT IN A CASE OF ADDITION BASED UPON ESTIMATED HIGHER YIELD IN MANUFACTURE AND LOW GROSS PROFIT THERE CAN BE NO PENALTY UNLESS THE IT. DEPT. BRINGS SOM ETHING ON RECORD TO INDICATE THAT THERE HAS BEEN CONCEALMENT ON THE PART OF THE ASSESSEE. THE PROPOSITION THAT PENALTY CANNOT BE IMPOSED WHERE AN ADDITION IS BASED MERELY ON ESTIMATE FINDS FURTHER SUPPORT IN HARIGOPAL SINGH VS CIT (2002) 258 ITR 85 (P&H). IN THE CASE OF CIT VS SMT. K. MEENAXI KUTTI (2002) 258 ITR 494 (MAD) THE ASSESSMENT WAS MADE ON AN ESTIMATED BASIS AND THE ESTIMATE MADE BY THE A.O. WAS MUCH HIGHER THAN THAT OF ASSESSEE AND THE HON'BLE COURT HELD THAT THE TRIBUNAL'S FINDING THAT THERE W AS NEITHER CONCEALMENT NOR GROSS OR WILLFUL NEGLIGENCE IN ESTIMATING INCOME AND THEREFORE PENALTY WAS RIGHTLY CANCELLED. 3.11 FURTHER THE APPELLANT HAD FURNISHED FULL PARTICULARS IN THE RETURN OF INCOME FILED AND WHERE FULL PARTICULARS ARE GIVEN THERE WILL ORDINARILY BE NO INFERENCE OF CONCEALMENT. THE ADDITION MADE BY THE A.O. WAS BASED ON DIFFERING PERCEPTIONS AND COURTS HAVE NOT TAKEN AN UNIFORM VIEW IN THE MATTER OF PENALTY LARGELY BECAUSE OF DIFFERING PERCEPTIONS IN APPLICATION OF FACT. IN CIT VS JALARAM OIL MILLS (2002) 253 ITR 192 (GUJ) CASH CREDITS WERE NOT FOUND TO BE ACCEPTABLE AS GENUINE CREDITS YET IT WAS HELD THEY COULD NOT BE SUBJECT MATTER OF 9 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE PENALTY ON THE GROUND THAT NOTWITHSTANDING THE EXPLANATION AND THE ADMISSION OFFERING THE SAME FOR ASSESSMENT NO PENALTY WAS EXIGIBLE. ASSESSMENT AND PENALTY PROCEEDINGS ARE DIFFERENT SO THAT MATERIAL GOOD ENOUGH TO JUSTIFY ADDITION MAY NOT JUSTIFY PENALTY. 3.12 THE APPELLANT'S CONTENTION THAT THE CLAIM MADE WAS JUSTIFIED AND THAT AT THE MOST IT C AN BE STATED TO BE ARGUABLE AND TWO OPINIONS ARE POSSIBLE WHICH IS ALSO INDICATED BY THE FACTS ON RECORD THEN IT IS A SETTLED LAW THAT NO PENALTY U/S 271(1)(C) IS LEVIABLE AND SUCH A SITUATION CANNOT BE OVERLOOKED ALTOGETHER IN THE PRESENT. THE SUPREME CO URT IN THE CASE OF VEGETABLE PRODUCTS (1973) 88 ITR 192 (SC) HAS HELD THAT IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADOPTED. THIS IS A WELL ACCEPTABLE RULE OF CONSTRUCTION MORE PARTICULARLY SO BECAUSE THE PROVISION RELATES TO IMPOSITION OF PENALTY. A WRONG CLAIM BY ITSELF DOES NOT WARRANT PENALTY IF THE FACTS RELATING TO THE SAME ARE DISCLOSED. IN THE CASE OF SANTHOSH FINANCIERS & ORS. (2001) 247 ITR 742 (KER) THE ASSESSEE WHILE DISCLOSING EXTRA INTEREST CHARGED OVER AND ABOVE THE LIMIT FIXED BY THE MONEY LENDERS ACT 1958 OF KERALA HAD CLAIMED IT TO BE NOT LIABLE TO TAX. THOUGH THE AMOUNT WAS TAXABLE IT WAS HELD THAT PENALTY WAS NOT EXIGIBLE BECAUSE THERE WAS NO CONCEALMENT OF F ACT OF RECEIPT BUT ONLY A CLAIM THAT IT WAS NOT TAXABLE THOUGH SUCH CLAIM WAS MISCONCEIVED. THE HIGH COURT IN COMING TO THE CONCLUSION FOLLOWED THE GUIDELINES OF THE SUPREME COURT IN ADDL. CIT VS JEEVAN LAL SHAH (1994) 205 ITR 244 (SC) AND SIR SHADI LAL S UGAR AND GENERAL MILLS LTD. VS CIT (SUPRA). A BONAFIDE CLAIM ERRONEOUSLY MADE DOES NOT JUSTIFY PENALTY AS HELD IN CIT VS SPAN HOLDINGS LTD. (2007) 294 ITR 83 (DEL). MERELY BECAUSE SUCH CLAIM IS ADMITTED AND WITHDRAWN PENALTY DOES NOT BECOME EXIGIBLE IT WA S SO HELD IN CIT VS FREEMENTLE INDIA TELEVISIO (2007) 294 ITR 88 (DEL). THERE IS NO FINDING TO THE EFFECT THAT THE CLAIMS MADE BY THE APPELLANT WHICH SUBSEQUENTLY WAS VOLUNTARILY AGREED FOR ADDITION WAS MALAFIDE EITHER AT THE ASSESSMENT STAGE OR DURING PEN ALTY PROCEEDINGS BY THE A.O. MERE WITHDRAWAL OF BONAFIDE CLAIM OF DEPRECIATION WITHDRAWN ON BEING POINTED OUT DOES NOT JUSTIFY PENALTY AS HELD IN CIT VS. MANIBHAI AND BROS (2007) 294 ITR 501 (GUJ). THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPR ODUCTS (P) LTD. (2010) 322 ITR 158 (SC) HELD AS FOLLOWS: 'A GLANCE AT THE PROVISION OF SECTION 271(1)(C) WOULD SUGGEST THAT IN ORDER TO BE COVERED THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY THE 10 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE ASSESSEE MUST HA VE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. AS PER LAW LEXICON THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETA ILS OF A CLAIM OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFORE THE WORD 'PARTICULARS' USED IN THE SECTION 271(1)(C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE AT LEAST PRIMA FACIE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION MAKING AN INCORRECT CALIM IN LAW CANNOT TANTAMOUNT TO FURNIS HING INACCURATE PARTICULARS. THEREFORE IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS U/S 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCU MENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. 'READING THE WORDS 'INACCURATE' AND 'PARTICULARS' IN CONJUNCTION THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCURATE NOT EXACT OR CORRECT NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY U/S. 271(1)(C). A MERE MAKIN G OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN WHICH DETAILS IN THEMSELVES WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART.' 3.13 THE ASSESSEE HAVING CLAIMED CERTAIN EXPENDITURE AS REVEN UE EXPENDITURE WHICH WAS DISALLOWED AS CAPITAL THE CLAIM BEING 11 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE DEBATABLE PENALTY U/S 271(1)(C) IS NOT LEVIABLE WAS HELD IN THE CASE OF CIT VS KRISHNA MARUTI LTD. (2011) 330 ITR 547 (DEL). IN CIT VS RUBBER UDYOG VIKAS (P) LTD. (2011) 335 ITR 558 (P&H) IT WAS HELD THAT INCORRECT CLAIM OF THE ASSESSEE FOR SET OFF OF UNABSORBED BUSINESS LOSSES AGAINST CAPITAL GAINS DID NOT AMOUNT TO DELIBERATE CONCEALMENT OR FURNISHING INACCURATE PARTICULARS SINCE THE ASSESSEE HAD DISCLOSED ALL THE PARTICULARS ALONG WITH THE RETURN AND THEREFORE PENALTY U/S 271(1)(C) IS NOT LEVIABLE. PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS AND PENALTY CANNOT THEREFORE BE LEVIED AS A MATTER OF COURSE AS THOUGH IT IS CONTINUATION OF ASSESSMENT PROCEEDINGS. IN THE ABSENCE OF ANY SPEC IFIC FINDING APART FROM A MERE REFERENCE TO THE CONCLUSION IN THE ASSESSMENT WHERE THERE IS NO MATERIAL AT ALL INDICATING INFERENCE OF CONCEALMENT NO PENALTY CAN BE IMPOSED. ON THIS GROUND ITSELF PENALTY HAS BEEN CANCELLED IN A NUMBER OF JUDICIAL DECISIO NS. 3.14 IN THE CASE OF T. ASHOK PAI VS CIT (2007) 292 ITR 11 (SC) THE APEX COURT RELIED ON THE DECISION IN (1994) ADDL. CIT VS JEEVAN LAL SAH K.C. BUILDERS & ANR. VS ACIT 265 ITR 562 (SC) AND HELD THAT ORDER IMPOSING PENALTY BEING QUASI CRIMINAL IN NATU RE BURDEN LIES ON THE DEPARTMENT TO ESTABLISH THAT ASSESSEE HAD CONCEALED HIS INCOME IF AN EXPLANATION GIVEN BY THE ASSESSEE HAS BEEN TREATED AS BONAFIDE THE QUESTION OF FAILING TO DISCHARGE THE BURDEN UNDER EXPLANATION TO SECTION 271(1)(C) WOULD NOT ARI SE. IT SIGNIFIES A DELIBERATE ACT OF OMISSION ON THE PART OF THE ASSESSEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS EVEN IF THE EXPLANATIONS ARE TAKEN RECOURSE TO A FINDING HAS TO BE ARRIVED AT HAVING REGARD TO CLAUSE (A) OF EXPLANATION I THAT THE A.O. IS REQUIRED TO ARRIVE AT A FINDING THAT THE EXPLANATION OFFERED BY AN ASSESSEE IN THE EVENT HE OFFERS ONE WAS FALSE. HE MUST BE FOUND TO HAVE FAILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY BONAFIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE INCOME WERE NOT DISCLOSED BY HIM. THUS APART FROM HIS EXPLANATION BEING NOT BONAFIDE IT SHOULD BE FOUND AS OF FACT THAT HE HAS NOT DISCLOSED ALL THE FACT WHICH WAS MATERIAL TO CO MPUTATION OF INCOME. THE OMISSION OF THE WORD 'DELIBERATE' THUS NOT BE OF MUCH SIGNIFICANCE. 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS' CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSIO VERI OR SUGGESTIO FALSI. IT IS NOT A CASE WHERE PENALTY HAS BEEN IMPOSED FOR BREACH OF CONTRAVENTION OF A COMMERCIAL STATUTE 12 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE WHERE LACK OF INTENTION TO CONTRAVENE OR EXISTENC E OF BONAFIDE MADE NOT BE OF MUCH IMPORTANCE. IT IS ALSO NOT A CASE WHERE PENALTY IS MANDATORILY IMPOSABLE. IT WAS THEREFORE NOT A CASE WHERE THE ENABLING PROVISION SHOULD HAVE BEEN INVOKED. 3.15 IN VIEW OF THE ABOVE STATED FACTS AND THE RATIO OF THE JUD ICIAL CITATIONS THE PENALTY LEVIED BY THE A.O. US 271(1)(C) IS DIRECTED TO BE DELETED AND THE GROUNDS OF APPEAL NO. 1 TO 3(A TO F) RAISED BY THE APPELLANT ARE LIABLE TO BE ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US AND RAISING THE GRIEVANCE AGAINST THE LD. CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. DR ARGUED THAT THE ASSESSEE HAS NOT CONTESTED THE ADDITIONS BUT THE ACCEPTED THE SAME. HE SUBMITS THAT WRONG CLAIM TOWARDS LEGAL EXPENDITURE WAS ALSO MADE BY THE ASSESSEE AND HENCE THE ASSESSEE DELIBERATELY ATTEMPTED TO EVADE THE TAX. PER CONTRA THE LEARNED COUNSEL SUBMITS THAT SO FAR AS THE INTEREST EXPENDITURE IS CONCERNED THE TOTAL INTEREST PAID BY THE ASSESSEE WAS TO THE TUNE OF RS.20 70 915/ - OU T OF WHICH THE ASSESSING OFFICER HAS ACTUALLY DISALLOWED RS.10 31 730/ - BUT ASSESSING OFFICER HAS CONSIDERED THE ENTIRE INTEREST EXPENDITURE I.E. RS. 20 70 915/ - FOR THE PURPOSE OF LEVYING THE PENALTY U/S. 271(1)(C) OF THE ACT. HE SUBMITS THAT IT IS ONLY TH E PRESUMPTION AND ESTIMATION OF THE ASSESSING OFFICER BUT ASSESSING OFFICER HAS NOT PROVED THAT THE FUND S ARE ACTUALLY UTILIZED BY THE ASSESSEE FOR THE PROJECT IN RESPECT OF WHICH THE DEDUCTION U/S. 80IB(10) WAS CLAIMED. HE SUBMITS THAT LAW IS WELL SETTLE D BY THE DIFFERENT JUDICIAL PRONOUNCE MENT S IF THE ADDITION IS MADE ONLY ON THE ESTIMATION THEN NO PENALTY CAN BE LEVIED. HE SUBMITS THAT THE ASSESSING OFFICER HAS PRESUMED THAT THE PART OF THE BORROWED FUNDS ARE UTILIZED BY THE ASSESSEE FOR HOUSING PROJEC T I.E. M/S. RAHUL TOWERS ON WHICH THE DEDUCTION U/S. 80IB(10) HAS BEEN CLAIMED. EVEN THE ASSESSING OFFICER HAS NOT GIVEN THE WORKING BUT STRAIGHTWAY ESTIMAT ED ON 13 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE PRESUMPTION IN RESPECT OF THE LEGAL EXPENDITURE. HE SUBMITS THAT THE ASSESSEE HAS CLAIMED TH E LEGAL AND PROFESSIONAL EXPENSES AMOUNTING TO RS. 13 45 653/ - AND OUT OF THE SAID AMOUNT THE ASSESSEE HAD PAID RS.10 95 150/ - ON ACCOUNT OF THE LEGAL EXPENDITURE PERTAINING TO THE FIRM RAHUL CONSTRUCTION C OMPANY. THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE ON THE PRETEXT THAT IT WAS A PERSONAL EXPENDITURE . T HE ASSESSEE HAD DISPUTE WITH ONE EX - PARTNER OF PARTNERSHIP FIRM I.E. M/S. RAHUL CONSTRUCTION C OMPANY AND THE DISPUTE WAS REFERRED TO THE ARBITRATION AND ON LITIGATION PURPOSES T HE ASSESSEE IN CURRED CERTAIN EXPENDITURE. HE SUBMITS THAT IN ORDER TO PROTECT THE ASSESSEE S INTEREST IN THE FIRM THE ABOVE EXPENDITURE WAS INCURRED AND THERE ARE TWO VIEWS ON IT WHETHER THE SAID EXPENDITURE CAN BE ALLOWED OR NOT TO BE ALLOWED. ADMITTEDLY THE EXPENDI TURE WAS IN THE COURSE OF BUSINESS OF THE ASSESSEE ONLY. H E FURTHER SUBMIT S THAT THE SAID DISALLOWANCE CANNOT BE SUBJECTED TO PANEL CONSEQUENCES . IN RESPECT OF RS. 83 697/ - THAT IS THE FEES OF RCC CONSULTANTS WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE REASON THAT IT PERTAINS TO THE HOUSING PROJECT COVERED U/S. 80IB(10) OF THE ACT WHICH IS ALSO ON THE SURMISES ONLY. 5. WE ARE GONE THROUGH THE WELL - REASONED ORDER OF THE LD. CIT(A). WE HAVE ALSO CONSIDERED THE ASSESSMENT ORDER . SO FAR AS INTERES T EXPENDITURE IS CONCERNED WE FIND THAT THE ENTIRE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE HAS BEEN CONSIDERED BY THE ASSESSING OFFICER FOR LEVY OF THE PENALTY WHEN IN FACT ONLY RS.10 31 730/ - WAS DIS ALLOWED ON PRESUMPTION THAT THE SAID FUNDS ARE UTI LIZED FOR THE HOUSING PROJECT WHICH IS COVERED U/S. 80IB(10) OF THE ACT. NOTHING HAS BEEN DEMONSTRATED BY THE ASSESSING OFFICER THAT IN FACT THERE IS EVIDENCE TO SUGGEST ASSESSEE HAS USED SAID FUNDS FOR PROJECT COVERED U/S. 80IB(10). I T IS TRUE THAT THE SAID ADDITION HAS NOT BEEN CONTESTED BY THE ASSESSEE BUT THERE MAY BE DIFFERENT REASONS FOR NOT CONTESTING THE SAID ADDITION . I N RESPECT OF THE LEGAL AND PROFESSIONAL FEES W E FIND THAT THERE WAS DISPUTE BETWEEN THE ASSESSEE AND 14 ITA NO. 1849/PN/2012 SHRI RAICHAND B. KUNKULOL PUNE EX - PARTNERS OF THE RAHUL C ONSTRUCTION COMPANY PARTNERSHIP FIRM AND MATTER WAS REFERRED TO THE ARBITRATION AND EXPENDITURE WAS INCURRED BY THE ASSESSE . HE WAS UNDER BONAFIDE BELIE F THAT SAID EXPENDITURE WAS ALLOWABLE EXPENDITURE. THE ASSESSING OFFICER MADE THE DISALLOWANCE BUT AS RIGHTLY ARGUED BY THE L EARNED COUNSEL THERE MAY BE TWO VIEWS ON THE ALLOWABILITY OF THE SAID EXPENDITURE . I N RESPECT OF THE DISALLOWANCE OF THE PORTION OF THE ARCHITECT FEES A GAIN THE SAID IS ON THE REASON THAT IT PERTAIN S TO THE PROJECT UNDER COVERED U/S. 80IB(10) OF THE INCOME - TAX ACT . C ONSIDERING THE TOTALITY OF FACTS I N OUR OPINION THIS IS NOT A CASE WH ERE IT CAN BE SAID THAT THE BASIC MANDATES OF SEC. 271(1)(C) ARE MET FOR LEVY OF PENALTY. NOTHING IS ON THE RECORD TO ESTABLISH THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME NO R IT IS A CASE THAT THE ASSESSEE HAS C ONCEALED THE PARTICULARS OF INCOME. IN OUR OPINION AS RIGHTLY HELD BY THE LD. CIT(A) THERE IS NO JUSTIFICATION TO LEVY THE PENALTY OF THE DISALLOWANCE DISCUSSED HERE - IN - ABOVE. ACCORDINGLY GROUNDS TAKEN BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 - 10 - 2013 SD/ - SD/ - (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMB ER RK/PS PUNE DATED : 31 ST OCTOBER 2013 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - II PUNE 4 THE CIT - II PUNE 5 THE DR ITAT A BENCH PUNE. 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE