CHIMANLAL R. SAVLA, MUMBAI v. ITO 10(3)(4), MUMBAI

ITA 2304/MUM/2010 | 2003-2004
Pronouncement Date: 08-07-2011 | Result: Allowed

Appeal Details

RSA Number 230419914 RSA 2010
Assessee PAN AACPS9901J
Bench Mumbai
Appeal Number ITA 2304/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 15 day(s)
Appellant CHIMANLAL R. SAVLA, MUMBAI
Respondent ITO 10(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 08-07-2011
Date Of Final Hearing 30-06-2011
Next Hearing Date 30-06-2011
Assessment Year 2003-2004
Appeal Filed On 23-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NOS. 2302 2303 & 2304/MUM/2010 (ASSESSMENT YEARS: 2004-05 2005-06 & 2003-04) SHRI CHIMANLAL R. SAVLA INCOME TAX OFFICER - 10(3)( 4) BHAKTI BUILDING 9 KELUSKAR MUMBAI ROAD SHIVAJI PARK DADAR VS. MUMBAI 400028 PAN - AACPS9901 J APPELLANT RESPONDENT APPELLANT BY: SHRI MAYUR MAKADIA RESPONDENT BY: SHRI JITENDRA YADAV O R D E R PER B. RAMAKOTAIAH A.M. THESE THREE APPEALS ARE BY THE ASSESSEE AGAINST THE ORDERS OF THE CIT(A) XXII MUMBAI DATED 01.01.2010 CONFIRMING THE PENALT Y UNDER SECTION 271(1)(C) FOR ASSESSMENT YEARS 2003-04 TO 2005-06. 2. ASSESSEE FILED THE RETURNS OF INCOME FOR THE RESPEC TIVE ASSESSMENT YEARS. IN THE COURSE OF SCRUTINY ASSESSMENT ON NOTI CING THAT ASSESSEE CLAIMED INTEREST ON BORROWED FUNDS A.O. CONSIDERED THAT ASSESSEE ALSO ADVANCED MONEY INTEREST FREE AND DISALLOWED AMOUNTS INVOKING PROVISIONS OF SECTION 36(1)(III) IN THE RESPECTIVE ASSESSMENT YEA RS. FOR THE SAKE OF CLARITY THE FACTS IN A.Y. 2003-04 ARE DISCUSSED ELABORATELY . 3. DURING THE FINANCIAL YEAR RELEVANT FOR THIS ASSESSM ENT YEAR ASSESSEE BORROWED FUNDS AMOUNTING TO ` 1 92 10 000/- AS ON 31.03.2003 AND HAS PAID INTEREST OF ` 21 90 699/-. ASSESSEE HAS ALSO ADVANCED CERTAIN MON EY ON INTEREST WHICH AMOUNTING TO ` 79 03 070/- AS ON 31.03.2003 ON WHICH INTEREST OF ` 19 20 773/- HAS BEEN RECEIVED. THE ASSESSEE ALSO AD VANCED RS.3 39 71 242 TO SISTER CONCERNS INTEREST FREE. OUT OF THE ABOVE INT EREST INCOME OF ` 19 20 773 ASSESSEE MADE A CLAIM FOR DEDUCTION ON ACCOUNT OF INTEREST PAID ` 21 90 699/- BUT RESTRICTED TO THE INTEREST INCOME OF ` 19 20 773/-. HOWEVER THE A.O. ITA NOS. 2302 2303 & 2304/MUM/2010 SHRI CHIMANLAL R. SAVLA 2 DISALLOWED THE CLAIM OF ASSESSEE OF ` 15 17 838/- IN RESPECT OF CERTAIN ADVANCES MADE TO M/S. BENZER DEPARTMENTAL STORES PVT. LTD. A ND ` 1 20 600/- IN RESPECT OF ADVANCES MADE TO MR. CHIMANLAL SALVA. ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) CONFIR MED THE ORDER OF THE A.O. ON THE GROUND THAT ASSESSEE HAS FAILED TO ESTABLISH A NEXUS BETWEEN INTEREST INCOME AND INTEREST EXPENDITURE. ON BEING AGGRIEVED THE MATTER WAS TAKEN UP TO THE ITAT. ON EXAMINATION OF THE FACTS AND ARGUME NTS OF BOTH THE PARTIES IT WAS NOTICED THAT ASSESSEE HAS OWN FUNDS AS WELL AS INTEREST BEARING BORROWINGS TOTALLING TO ` 7.23 CRORES WHEREAS ASSESSEE HAD INTEREST FREE ADVANCES AND INVESTMENTS TO THE EXTENT OF ` 6.44 CRORES. CONSIDERING THE CLAIM OF INTEREST THE ITAT PROPORTIONATELY ALLOWED THE IN TEREST TO THE EXTENT OF INTEREST BEARING ADVANCES OF ` 79 03 070/- OUT OF INTEREST BEARING BORROWINGS. THEREFORE VIDE PARA 6 OF THE ORDER IN ITA NO. 1721 /MUM/2008 DATED 31 ST JULY 2000 AN AMOUNT OF ` 9 01 262/- WAS ALLOWED AS INTEREST OUT OF TOTAL CLA IM MADE BY ASSESSEE AND THE BALANCE WAS RESTRICTED. 4. SIMILAR ORDERS WERE PASSED FOR OTHER TWO ASSESSMENT YEARS AS THE FACTS ARE SIMILAR. THE A.O. CONSEQUENT TO CONFIRMA TION BY THE CIT(A) CONSIDERED THE AMOUNT DISALLOWED FOR PENALTY UNDER SECTION 271(1)(C) AND LEVIED PENALTY IN THE RESPECTIVE ASSESSMENT YEARS. THE SAME WAS ALSO CONFIRMED BY THE CIT(A). HENCE ASSESSEE IS AGGRIEV ED. 5. IT WAS THE SUBMISSION OF THE LEARNED COUNSEL THAT A SSESSEE HAD NEITHER CONCEALED PARTICULARS OF INCOME NOR FURNISHED ANY I NACCURATE PARTICULARS. HE REFERRED TO THE COMPUTATION OF INCOME FILED TO SUBM IT THAT ASSESSEE HAD EARNED AN INTEREST OF ` 19 20 773/- IN A.Y. 2003-04 AND UNDER THE HEAD INC OME FROM OTHER SOURCES HAS CLAIMED INTEREST OF THE SAME AMO UNT AND NOT THE ENTIRE INTEREST CHARGED IN THE P & L ACCOUNT OF ` 21 90 699/-. THE A.O. HOWEVER CONSIDERED THE ENTIRE INTEREST PAID EVENTHOUGH THE SAME WAS NOT CLAIMED FULLY. IT WAS HIS SUBMISSION THAT ASSESSEE HAD LARGE AMOUN T OF OWN FUNDS OUT OF WHICH FUNDS WERE ADVANCED TO SISTER CONCERNS AND GR OUP CONCERNS THE FACTS OF WHICH WERE NOT DISPUTED FOR THE PURPOSE OF BUSINES S ONLY. THEREFORE THE CLAIM OF INTEREST PER SE IS A BONAFIDE CLAIM AND JUST BE CAUSE THE A.O. DID NOT ALLOW THE FULL CLAIM IT DOES NOT ATTRACT PENALTY PROCEEDI NGS UNDER SECTION 271(1)(C). IT WAS FURTHER SUBMITTED THAT DISALLOWANCE WORKED OUT BY AO WAS NOT UPHELD ITA NOS. 2302 2303 & 2304/MUM/2010 SHRI CHIMANLAL R. SAVLA 3 AND THE ITAT ON CONSIDERATION OF FACTS RESTRICTED THE AMOUNT AND ALLOWED MAJOR RELIEF TO THE ASSESSEE. IN VIEW OF THIS IT W AS HIS SUBMISSION THAT JUST BECAUSE THE CLAIMS WERE RESTRICTED PENALTY CANNOT B E LEVIED AND RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P. LTD. 322 ITR 158. IN REPLY THE LEA RNED D.R. REITERATED THE FACTS AND RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A) AND SUBMITTED THAT THE PENALTY IS WARRANTED AS THE ITAT CONFIRMED THE DISA LLOWANCE MADE IN THE ASSESSMENT TO A LARGE EXTENT. 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RECOR D. THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS P. LTD. (SUPRA) CONSIDERED THE SCOPE OF PENALTY UNDER SECTION 271(1 )(C) AND HELD THAT MERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION OF INTEREST EXPENDITURE WHICH WAS NOT BEING ACCEPTED BY THE REVENUE PENALTY UNDER SEC TION 271(1)(C) IS NOT ATTRACTED; MERE MAKING OF THE CLAIM WHICH IS NOT SU STAINABLE IN LAW WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG INCOME OF THE ASSESSEE. IN THE ABOVE SAID CASE ALSO THE ADDITION IN RESPECT OF INTEREST EXPENDITURE WAS MADE WHICH WAS THE ISSUE BEFORE TH E HON'BLE SUPREME COURT IN CONSIDERING PENALTY UNDER SECTION 271(1)(C ). IN THIS CASE ALSO ASSESSEE CLAIMED INTEREST EXPENDITURE OUT OF THE IN TEREST EARNED WHICH WAS PARTLY DISALLOWED. SINCE THE FACTS ARE SIMILAR THE PRINCIPLES ESTABLISHED BY THE HON'BLE SUPREME COURT IN THE ABOVE REFERRED CAS E OF RELIANCE PETROPRODUCTS (SUPRA) APPLY IN ASSESSEES CASE AS W ELL. THEREFORE RESPECTFULLY FOLLOWING THE PRINCIPLES ESTABLISHED T HEREIN WE ARE OF THE OPINION THAT THE FACTS OF THE PRESENT CASE DOES NOT WARRANT ANY PENALTY UNDER SECTION 271(1)(C). THEREFORE THE PENALTIES AR E CANCELLED. 7. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 8 TH JULY 2011 ITA NOS. 2302 2303 & 2304/MUM/2010 SHRI CHIMANLAL R. SAVLA 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXII MUMBAI 4. THE CIT X MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.