The ITO, Ward-1(1),, Ahmedabad v. Advaitya Products Pvt.Ltd., Ahmedabad

ITA 3058/AHD/2010 | 1998-1999
Pronouncement Date: 16-09-2011 | Result: Dismissed

Appeal Details

RSA Number 305820514 RSA 2010
Assessee PAN AABCA6038J
Bench Ahmedabad
Appeal Number ITA 3058/AHD/2010
Duration Of Justice 10 month(s) 3 day(s)
Appellant The ITO, Ward-1(1),, Ahmedabad
Respondent Advaitya Products Pvt.Ltd., Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 16-09-2011
Date Of Final Hearing 05-08-2011
Next Hearing Date 05-08-2011
Assessment Year 1998-1999
Appeal Filed On 12-11-2010
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI D.K. TYAGI JM AND R. C. SHARMA A.M . INCOME-TAX OFFICER WARD 1(1) AHMEDABAD. ADVAITYA PRODUCTS (P) LTD. AHMEDABAD PAN AABCA 6038J APPELLANT VS. RESPONDENT APPELLANT BY :- SHRI S. K. MEENA SR.DR RESPONDENT BY:- SHRI P. D. SHAH AR O R D E R DATE OF HEARING 05-08.2011 DATE OF PRONOUNCEMENT -16/9/2011. PER D.K. TYAGI JUDICIAL MEMBER . BY WAY OF THIS APPEAL THE REVENUE HAS CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN DELETING THE PENALTY OF RS.3 84 6 56/- LEVIED BY THE AO U/S 271(L)(C) OF THE ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED THE RETURN OF INCOME SHOWING LOSS OF RS. 1 63 067/-. THE ASSESSME NT WAS COMPLETED U/S 143(3) OF THE ACT ASSESSING THE TOTAL INCO ME AT RS. 34 30 333/- AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCES INCLUD ING THE DISALLOWANCE OF INTEREST EXPENSES OF RS 10 99 018/- FOR WHICH P ENALTY PROCEEDINGS U/S 271(1) WERE INITIATED. THE AO NOTICED THAT THE ASSE SSEE HAD DEBITED INTEREST EXPENSES OF RS.11 79 746/- IN PROFIT AND L OSS ACCOUNT OUT OF ITA NO.3058/AHD/2010 ASST. YEAR 1998-99 ITA NO.3058/AHD/2010 ASST. YEAR 1998-99 2 WHICH INTEREST OF RS 7 47 945/- AND MANAGEMENT FEES AND SECURITY HANDLING CHARGES OF RS 3 51 073/-TOTALING TO RS 1 0 99 018/- WERE PAID TO BIRLA GLOBAL FINANCE LIMITED FOR OBTAINING LOAN OF RS. 200 LACS ON 26.9.1997 I.E. DURING THE YEAR UNDER APPEAL. HE F URTHER THAT THOUGH DURING THE YEAR THE LOANS AND ADVANCES G IVEN BY THE ASSESSEE HAD INCREASED FROM RS.4.35 CRORES TO RS. 6.03 C RORES THERE WAS NO INTEREST INCOME DURING THE YEAR. AS SUCH THE INTE REST BEARING FUNDS BORROWED DURING THE YEAR HAD BEEN UTILIZED FOR GIVI NG LOANS TO GROUP CONCERNS AND ASSOCIATES. THE AO ACCORDINGLY CALL ED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE INTEREST EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT SHOULD NOT BE DISALLOWED CONSIDE RING THE SAME AS NOT INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E COMPANY IN RESPONSE TO WHICH THE ASSESSEE CONTENDED THAT IN THE MONTH O F SEPTEMBER 1997 IT HAD BORROWED RS.200 LACS FROM BIRLA GLOBAL FINANCE LIMITED TO REPAY RS. 165.36 LACS TO ARPAN REALITY PRIVATE LIMITED AN D THE BALANCE TO THE OTHERS. THIS REPLY OF THE ASSESSEE DID NOT FIND FAV OUR WITH THE AO AND HE ACCORDINGLY DISALLOWED THE INTEREST AND OTHER CHARG ES OF RS. 10 99 018/- INCURRED FOR OBTAINING LOAN FROM BIRLA GLOBAL FINAN CE LIMITED AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE COMPA NY. IN THIS VIEW OF THE MATTER THE AO INITIATED PROCEEDINGS U/S 271(1) (C) OF THE ACT BY ISSUING NOTICE U/S 274 READ WITH SECTION 271 (1)(C) OF THE ACT. 3. IN THE WAKE OF THE ABOVE FACTS THE LEARNED AO AFTER CONSIDERING THE REPLY OF THE ASSESSEE IMPOSED MINIMUM PENALTY OF RS.3 84 656/- U/S 271(L)(C) OF THE ACT. AGAINST THE ORDER OF THE AO THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO AFTER RELY ING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODIICTS PRIVATE LIMITED; 322 ITR 158 DELETED THE PENALTY. NOW THE DEPARTMENT IS BEFORE US. ITA NO.3058/AHD/2010 ASST. YEAR 1998-99 3 4. WE HAVE CONSIDERED THE ISSUE IN THE LIGHT OF THE SUBMISSIONS MADE BY BOTH THE PARTIES. WE FIND THAT THE ADDITION WAS MADE BY THE AO BY DISALLOWING PART OF THE INTEREST CLAIM. IN THE FIRS T APPEAL THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE. IN THE FURTHER APPEAL BEFORE THE TRIBUNAL THE MATTER WAS RESTORED BACK. AS PER THE LEARNED AR UNDER SUCH CIRCUMSTANCES THE MATTER HAS BECOME DEBATABLE W HICH DOES NOT ATTRACT PENALTY PROVISIONS U/S 271(L)(C) OF THE ACT. FROM RECORD WE FIND THAT CIT(A) HAS DELETED THE PENALTY AFTER OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PA RTICULARS OF INCOME NOR CONCEALED ANY INCOME AFTER RELYING ON THE PROPO SITION OF LAW AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO (SUPRA) CIT(A) HELD THAT DISALLOWANCE OF CLAIM OF EXPENSES DOES NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY. HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. - 322 ITR 158 WHILE CONFIRMING THE ORDER OF HON'BLE HIGH COURT DE LETING THE PENALTY IMPOSED U/S 271(L)(C) FOR DENIAL OF ASSESSEE'S CLAI M OF DEDUCTION OF INTEREST EXPENDITURE HAS CATEGORICALLY OBSERVED THAT BY ANY STRETCH OF IMAGINATION MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS'. ACCORDIN GLY IT WAS HELD THAT DECLINE OF 'ASSESSEE'S CLAIM OF INTEREST AGAINST T HE LOAN UTILIZED FOR MAKING INVESTMENT IN TAX FREE SECURITIES WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO ATTRACT PENALTY U/S 271(L)(C) OF THE ACT. HON'BLE SUPREME COURT IN THIS CASE AFTER CONSIDERIN G THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF DILIP N.SHROFF- 291 IT R 519 (SC) AND DHARMENDER TEXTILE PROCESSORS - 306 ITR 277 (SC) H ELD AS UNDER;- A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINAB LE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS ITA NO.3058/AHD/2010 ASST. YEAR 1998-99 4 REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MA DE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT IN OUR OPINION ATTRACT THE PE NALTY U/S 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IE SNOT ACCEPTED BY AO FOR ANY REASON THE ASSESSEE WILL INVITE PENALTY UNDER SECT ION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLAT URE. 5. FROM THE DECISION OF THE SUPREME COURT IT IS CLE AR THAT MERE DISALLOWANCE OF CLAIM OF EXPENSES DOES NOT ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. IN THE CASE OF RELIANCE PETRO (SUPRA) I DENTICAL CLAIM OF INTEREST WAS NOT ALLOWED BY THE REVENUE BUT THERE WAS NO INA CCURATE PARTICULARS OF INCOME THEREFORE PENALTY U/S 271(1)(C) WAS HEL D TO BE NOT LEVIABLE. IN VIEW OF THE CATEGORICAL FINDING OF THE CIT(A) THAT ASSESSEE HAS NOT GIVEN ANY INACCURATE PARTICULARS IN ITS RETURN OF INCOME THEREFORE MERELY DISALLOWANCE OF PART OF INTEREST ALLEGED TO BE DIVE RTED OUT OF INTEREST BEARING FUNDS DOES NOT ATTRACT THE PROVISIONS OF SE CTION 271(1)(C). ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) AND CONFIRM THE SAME. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 16/9/2011. SD/- SD/- (R. C. SHARMA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 16/9/2011. MAHATA/- ITA NO.3058/AHD/2010 ASST. YEAR 1998-99 5 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 23/8/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER /8/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..