ITO Ward 17 (3), v. Vijay Fertilizers (P) LTd,

ITA 4700/DEL/2007 | 2001-2002
Pronouncement Date: 09-07-2010 | Result: Dismissed

Appeal Details

RSA Number 470020114 RSA 2007
Assessee PAN DELOF2007A
Bench Delhi
Appeal Number ITA 4700/DEL/2007
Duration Of Justice 2 year(s) 7 month(s) 5 day(s)
Appellant ITO Ward 17 (3),
Respondent Vijay Fertilizers (P) LTd,
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 09-07-2010
Date Of Final Hearing 01-07-2010
Next Hearing Date 01-07-2010
Assessment Year 2001-2002
Appeal Filed On 04-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `I: NEW DELHI BEFORE SHRI C.L.SETHI JM & SHRI K.D. RANJAN AM I.T. A. NO.4700/DEL OF 2007 ASSESSMENT YEAR: 2001-02 INCOME-TAX OFFICER M/S VIJAY FERTILIZERS P . LTD. WARD 17(3) NEW DELHI. VS D-819 SECOND FLOOR NEW FRIENDS COLONY NEW DELHI. APPELLANT RESPONDENT APPELLANT BY: MS ANUSHA KHURANA DR RESPONDENT BY: SHRI VAIBHAV VISHAL ORDER PER C.L. SETHI JM: THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 6. 9.2007 PASSED BY THE LD. CIT(A) IN THE MATTER OF A PENALTY LEVIED BY THE AO U/S 271(1)(C ) OF THE INCOME-TAX ACT 1961 (THE ACT) PERTAINING TO T HE ASSTT. YEAR 2001-02. 2. THE GROUND RAISED BY THE REVENUE IS THAT CIT(A) HAS ERRED IN LAW IN DELETING THE PENALTY OF RS.1 41 936/- LEVIED BY THE AO U/S 271(1)( C) OF THE ACT EVEN IF THE MATTER WAS CONFIRMED BY THE HONBLE HIGH COURT IN RESPECT OF THE ADDITION MADE BY THE AO. 3. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 2 4. IN THE ASSESSMENT AN ADDITION OF RS.3 47 294/- ON ACCOUNT OF INTEREST PAID TO BANK WAS MADE BY THE AO BY DISALLOWING THE CLAIM OF EXPENSES ON THE GROUND THAT DURING THE YEAR NO BUSINESS ACTIVIT IES WERE CARRIED OUT BY THE ASSESSEE. THE ADDITION MADE BY THE AO REMAINED SUS TAINED. THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)( C) IN RES PECT OF THE AFORESAID ADDITION OF RS.3 47 294/- AND HE ULTIMATELY LEVIED THE PENALTY AMOUNTING TO RS.1 41 936/- BEING 100% OF THE TAX SOUGHT TO BE E VADED. WHEN THE MATTER RELATING TO THE LEVY OF PENALTY HAD COME UP FOR CON SIDERATION BEFORE THE TRIBUNAL THE TRIBUNAL CONFIRMED THE ORDER OF CIT(A ) IN DELETING THE PENALTY BY HOLDING THAT THE APPEAL FILED BY THE REVENUE WAS NOT MAINTAINABLE INASMUCH AS THE TAX EFFECT WAS BELOW RS.2 LACS. TH E REVENUE WENT IN APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THE TRIBUNAL S ORDER DATED 21.8.2008. THE HONBLE HIGH COURT FOUND THAT IN THE PRESENT C ASE A PROSECUTION HAVE ALREADY BEEN LAUNCHED BY THE DEPARTMENT AGAINST THE ASSESSEE AND THEREFORE THE BOARD CIRCULAR PROVIDING THAT NO APP EAL SHOULD BE FILED IF THE TAX EFFECT IN THE APPEAL IS LESS THAN THE PRESCRIBE D LIMIT OF RS.2 LACS WOULD NOT BE APPLICABLE AS IT WOULD BE COVERED BY THE EXC LUSION CLAUSES OF THE CIRCULAR. THE HONBLE HIGH COURT THEREFORE RESTO RED THE MATTER BACK TO THE TRIBUNAL TO DECIDE THE SAME ON MERITS. 3 5. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THR OUGH THE ORDERS OF THE AUTHORITIES BELOW. 6. IT IS NOT IN DISPUTE THAT THE AO HAS LEVIED THE PENALTY IN RESPECT OF THE DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE TO TH E BANK TOWARDS LOAN TAKEN BY THE ASSESSEE FOR BUSINESS PURPOSES FOR THE REAS ON THAT DURING THE RELEVANT PERIOD THE ASSESSEE CARRIED OUT NO BUSINESS ACTIVIT Y AND HENCE THE BUSINESS EXPENSES ARE NOT ALLOWABLE. THE AO LEVIED THE PENA LTY BY OBSERVING THAT THE ASSESSEE MADE A FALSE CLAIM OF INADMISSIBLE BUSINES S EXPENDITURE. HOWEVER ON APPEAL THE LEARNED CIT(A) DELETED THE PENALTY B Y RELYING UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HONEY WELL DACE (INDIA) LTD. 229 ITR 169 (DEL). 7. HENCE THE DEPARTMENT IS IN APPEAL BEFORE US. 8. ON PERUSAL OF THE STATEMENT OF ACCOUNT WHICH HA S BEEN DULY AUDITED BY THE AUDITOR WE FIND THAT IN THE PROFIT AND LOSS ACCOUNT READ WITH SCHEDULE X OF THE AUDITED ACCOUNTS THE ASSESSEE HAS FURNISH ED THE DETAILS OF THE INTEREST PAID TO BANK BY DESCRIBING THE ITEMS AS UN DER: (I) INTEREST CHARGED ON BANK FD 1 94 882.66 (II) INTEREST ON TERM LOAN 1 52 412.00 WITH THESE FIGURES THE ASSESSEE ALSO FURNISHED THE FIGURES OF IMMEDIATE PREVIOUS YEAR AS UNDER: 4 (I) INTEREST CHARGED ON BANK FD 1 68 587.36 (II) INTEREST ON TERM LOAN 1 52 400.0 0 IN THE IMMEDIATE PREVIOUS YEAR THE ASSESSEES CLAI M OF EXPENSES TOWARDS INTEREST PAID TO BANK WAS ALLOWED AS DEDUCTION AS IN THAT YEAR THE ASSESSEE WAS CARRYING ON THE BUSINESS. HOWEVER DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COULD NOT EFFECT ANY BU SINESS TRANSACTION DUE TO SOME COMPELLING CIRCUMSTANCES. BUT IT IS NOT IN DI SPUTE THAT THE ASSESSEE HAS PAID THE INTEREST TO BANK ON THE LOAN OBTAINED IN E ARLIER YEARS. THE PAYMENT OF INTEREST TO BANK IS NOT IN DISPUTE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS FURNISHED FULL PARTICULARS AS TO THE PAYMENT OF THE INTEREST CHARGED ON BANK LOAN. IT IS THUS A CASE WHERE ASSESSEE HAS FURNISHED FULL AND TRUE PARTICULARS OF INTEREST PAID TO BANK AND IT HAS PR IMA FACIE DISCLOSED THE CLAIM IN THE PROFIT AND LOSS ACCOUNT WITH FULL NARRATION. IT IS NOT THE CASE MADE OUT BY THE AO THAT ASSESSEE HAD CONCEALED ANY PARTICULA RS OF INTEREST PAID TO BANK. THE ASSESSEES CLAIM HAS BEEN MERELY DISALLO WED FOR THE REASON THAT NO BUSINESS TRANSACTION WAS ACTUALLY CARRIED OUT BY THE ASSESSEE. FURTHER IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS IN BUSINESS IN IMMEDIATELY PRECEDING YEARS AND THE INTEREST PAYMENT TO BANK WAS ALLOWED AS DEDUCTION. THEREFORE IT IS A CASE WHERE ASSESSEES CLAIM OF INTEREST HAS BEEN DISALLOWED MERELY ON TECHNICAL GROUNDS AND NOT BECAUSE OF FURNISHING AN Y INACCURATE PARTICULARS OF INCOME. THE PRESENT CASE CANNOT BE SAID TO BE A CASE WHERE FALSE CLAIM 5 HAS BEEN MADE BY THE ASSESSEE WHEN IT IS NOT IN DIS PUTE THAT THE INTEREST HAS ACTUALLY PAID BY THE ASSESSEE TO THE BANK. WE THER EFORE UPHELD THE ORDER OF CIT(A) IN DELETING THE PENALTY. IN SUPPORT OF OUR VIEW TAKEN ABOVE WE MAY RELY UPON THE DECISION OF SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD. 322 ITR 158 (SC) WERE THE HONBLE SU PREME COURT HAS HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINAB LE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE WHEN THERE IS NO FINDING THAT ANY DETAIL S UPPLIED BY THE ASSESSEE IN ITS RETURN ARE INCORRECT OR ERRONEOUS OR FALSE. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 10. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 9 TH .JULY 2010 (K.D. RANJAN) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9 TH JULY 2010 VIJAY COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-XIX NEW DELHI 5. DR ASSISTANT REGISTRAR