M/s. Naraindas Bhagwan Das, New Delhi v. ITO, New Delhi

ITA 6089/DEL/2013 | 2008-2009
Pronouncement Date: 31-07-2015 | Result: Allowed

Appeal Details

RSA Number 608920114 RSA 2013
Assessee PAN AAAFN5058M
Bench Delhi
Appeal Number ITA 6089/DEL/2013
Duration Of Justice 1 year(s) 8 month(s) 19 day(s)
Appellant M/s. Naraindas Bhagwan Das, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 31-07-2015
Date Of Final Hearing 22-07-2015
Next Hearing Date 22-07-2015
Assessment Year 2008-2009
Appeal Filed On 11-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI A.T. VARKEY JUDICIAL MEMBER ITA NO.6089/DEL./2013 (ASSESSMENT YEAR : 2008-09) M/S. NARAINDAS BHAGWAN DAS VS. ITO WARD 29 (3) 11/1585 M.J. BUILDING NEW DELHI. BHAGIRATH PALACE DELHI 110 006. (PAN : AAAFN5058M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL MALHOTRA ADVOCATE REVENUE BY : SHRI P. DAM KANUNJNA SENIOR DR DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT : 31.07.2015 O R D E R PER A.T. VARKEY JUDICIAL MEMBER : THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-X XV NEW DELHI DATED 30.08.2013 FOR THE ASSESSMENT YEAR 2008-09. 2. THE SOLITARY GROUND TAKEN BY THE ASSESSEE READS AS UNDER :- THAT ON LAW FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXV HA S ERRED IN UPHOLDING THE PENALTY OF RS.1 43 376/- LEV IED U/S 271(1)(C) OF INCOME TAX ACT. WHILE UPHOLDING THE P ENALTY THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIATE THAT MERE ITA NO.6089/DEL./2013 2 DISALLOWANCE OF ANY EXPENDITURE CAN NOT BE TREATED AS A CASE OF CONCEALMENT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM HAD INCOME FROM PURCHASE AND SALE OF MEDICINES DURING THE RELEVANT ASSESSMENT YEAR. THE QUANTUM ASSESSMENT IN THIS CASE WAS COMPLETED ON AN INCOME OF RS.18 85 690/- AS AGAINST THE RETURNED INCOME OF RS .5 23 500/- WHICH WAS SUBSEQUENTLY REVISED BY THE ASSESSEE ENHANCING IT T O RS.14 21 690/-. DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEE DINGS THE AO CAME ACROSS CERTAIN INTEREST BEARING UNSECURED LOANS HAV ING BEEN GIVEN FREE OF INTEREST TO CERTAIN PARTIES. THE AMOUNT OF INTEREST WAS WRONGLY CLAIMED AGGREGATED TO RS.4 64 000/-. THE AO DISALLOWED THE SUM OF RS 4 64 000/- AS INTEREST WRONGLY DEBITED TO THE ACCOUNTS HOLDING DIVERSION OF INTEREST BEARING BUSINESS LOANS BY THE ASSESSEE FOR NON-BUSI NESS PURPOSES. AGGRIEVED BY THE DISALLOWANCE THE ASSESSEE PREFERR ED AN APPEAL TO THE CIT(A) WHO UPHELD THE DISALLOWANCE MADE BY THE AO. THE ASSESSEE THEREAFTER DID NOT PREFER ANY APPEAL AGAINST THE IM PUGNED QUANTUM APPEAL SO IT HAS BECAME FINAL. 3.1 EMBOLDENED BY THE SAID ORDER OF THE CIT(A) IN QUANTUM APPEAL OF THE ASSESSEE THEREAFTER THE AO PASSED AN ORDER U /S 271 (1)(C) OF THE ACT IMPOSING THE PENALTY OF RS.1 43 376/- I.E. 100% OF THE TAX EVADED INTER-ALIA ON THE GROUNDS THAT ASSESSEE DIVERTED THE BUSINESS LOANS ON WHICH INTEREST WAS BORNE BY THE ASSESSEE; NO ARGUMENT WAS OFFERED THAT THE ASSESSEE HAD ITA NO.6089/DEL./2013 3 NOT CONCEALED THE INCOME; THE ASSESSEE HAD NOT FILE D ANY REPLY; HAD THIS POINT NOT COME TO THE NOTICE OF THE AO THE ADDITIO N MADE WOULD HAVE ESCAPED; THE ASSESSEE WAS ASSISTED BY A TAX CONSULT ANT AND IT COULD NOT BE PRESUMED THAT IT WAS NOT AWARE OF THE PROVISIONS OF THE LAW; MOREOVER THE RETURN WAS FILED WITH THE ASSISTANCE OF TAX EXPERT AND IT COULD NOT BE PRESUMED THAT IT WAS NOT AWARE OF THE PROVISIONS OF THE LAW; AND IT IS A WELL ESTABLISHED PRINCIPLE OF LAW THAT FOR CLAIMING THE DEDUCTION OF INTEREST IT IS NECESSARY THAT FUNDS SHOULD BE UTILIZED IN TH E BUSINESS. 3.2 AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT (A) WHO CONFIRMED THE PENALTY LEVIED U/S 271(1)(C) OF THE A CT AS UNDER :- 5. I HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS MADE BY THE APPELLANT THE FACTS ON REC ORD AND ALL THE MATERIAL ASPECTS HAVING A BEARING ON THE PENALT Y ORDER DATED 12/03/2013. AS REGARDS THE FIRST GROUND OF APPEAL IT IS OF GENERAL NATURE HENCE NO COMMENTS. AS REGARDS THE OTHER GROUND OF APPEAL THAT THE ASSE SSEE DID NOT FURNISH ANY FALSE RETURN THE LENGTHY SUBMI SSION FURNISHED BY THE ASSESSEE DURING THE COURSE OF APPE LLATE PROCEEDINGS WAS CAREFULLY GONE THROUGH BY ME. THE C ASE LAWS CITED BY THE ASSESSEE WERE PERUSED. THE FACTS OF AL L THE CASES RELIED ON BY THE ASSESSEE WERE NOT IDENTICAL TO THE ONES PREVAILING IN THE CASE AT HAND. EACH DECISION IS AN AUTHORITY FOR THE CASE IT DECIDES. THEREFORE THE RULINGS CITED B Y THE LD.AR FOR THE ASSESSEE ARE OF NO AID AS NO LAW HAS BEEN L AID DOWN BY THE ABOVE DECISIONS SO AS TO ATTRACT THE DOCTRINE O F 'BINDING PRECEDENT'. AS REGARDS THE DEFENCE PUT FORWARD BY THE AR OF THE ASSESSEE WHICH HAD A BEARING ON THE FACTUAL ASPECT S OF THE CASE THE SAME WERE METICULOUSLY CONSIDERED BY ME. IT WAS THE CASE OF THE APPELLANT THAT IT WAS UNDER THE BONAFIDE BEL IEF THAT THE INTEREST EXPENDITURE AMOUNTING TO RS 4.64 LAKHS DID QUALIFY FOR ITA NO.6089/DEL./2013 4 DEDUCTION REGARDLESS OF THE FACT THAT THE INTEREST EXPENDITURE SO INCURRED WAS ATTRIBUTABLE TO LOANS WHICH WERE GIVEN FREE OF INTEREST OUT OF THE INTEREST BEARING FUNDS BY THE A PPELLANT HENCE A MATTER OF HONEST DIFFERENCE OF OPINION BETWEEN TH E APPELLANT AND THE ASSESSING OFFICER. HENCE NO QUESTION OF CO NCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME E XISTED. THE ABOVE SUBMISSIONS OF THE ASSESSEE DID NOT SEEM TO H OLD WATER WHEN VIEWED AGAINST THE FACT THAT THE APPELLANT WAS IN THE KNOW OF THE FACT THAT PART OF THE INTEREST BEARING LOANS WAS UTILISED FOR GIVING LOANS TO CERTAIN PARTIES WITHOUT CHARGING AN Y INTEREST. THAT BEING SO THERE WAS NO QUESTION OF CLAIMING INT EREST EXPENDITURE PROPORTIONATE TO THE LOAN AMOUNT DIVERT ED FOR GIVING LOANS FREE OF INTEREST. DIFFERENCE OF OPINIO N IMPLIES THE POSSIBILITY OF THE EXISTENCE OF TWO OR MORE DIVERGE NT VIEWS. IN THE INSTANT CASE THE POSITION OF LAW I.E. SECTION 36(1)(III) OF THE INCOME TAX ACT 1961 BEING CLEAR THERE WAS NOT ANY OCCASION FOR DIFFERENCE OF OPINION. IT IS TRUE THAT THE ASSE SSEES HAVE GENERALLY VERY LIMITED KNOWLEDGE OF THE INCOME TAX ACT AND IT IS THE TAX AUDITORS OR THE ACCOUNTANTS WHO REFINE A ND GIVE THE FINISHING TOUCHES TO THE ACCOUNTS SUBMITTED TO THEM BY THE FORMER FOR AUDIT ETC. AS PER THE PROVISIONS OF THE INCOME TAX ACT 1961 BUT THE FACT CANNOT BE IGNORED THAT THE ASSESSEES ARE THE MASTERS OF THE FACTS/ BUSINESS AFFAIRS IN AS MU CH AS THEY ARE THE ONES WHO ACTUALLY CONDUCT THE BUSINESS. HENCE IT WAS THE APPELLANT'S DUTY TO ASSIST AND ADVISE THE AUDITORS ON THIS ASPECT OF THE BUSINESS. IN THE INSTANT CASE THE CLAIM OF INTEREST EXPENDITURE WHICH WAS NOT ELIGIBLE FOR DEDUCTION AS PER LAW DOES GO TO SHOW THAT BY SOME POSITIVE ACT OF OMISSI ON & COMMISSION THE INCOME WAS SOUGHT TO BE CONCEALED BY CLAIMING THE FULL AMOUNT OF INTEREST PAYABLE ON THE UNSECURE D LOANS NOT OTHERWISE ALLOWABLE IN FULL. IN THE ABOVE VIEW OF T HE MATTER PENALTY ORDER IMPOSING LEVY OF RS.1 43 376/- IS SU STAINED. 4. THE ASSESSEE BEING AGGRIEVED AGAINST THE ORDER OF THE CIT (A) IS IN APPEAL BEFORE US. 5. LD. AR CONTENDED THAT ACCORDING TO THE AO INTER EST IS NOT LEVIED ON DEBITED ENTRIES. LD. AR SUBMITTED THAT SINCE THE A SSESSEE WAS NOT CHARGING ANY INTEREST NOTIONAL INTEREST HAS BEEN DISALLOWED IN ASSESSMENT ORDER. LD. ITA NO.6089/DEL./2013 5 AR SUBMITTED THAT THE CIT (A) HAS CONFIRMED THE ADD ITION MADE BY THE AO IN THE QUANTUM APPEAL AND THE PENALTY HAS BEEN LEVI ED BECAUSE THE QUANTUM APPEAL HAS BEEN CONFIRMED BY THE CIT (A). HOWEVER IT HAS BEEN BROUGHT TO OUR NOTICE BY THE LD. AR THAT THE ASSESS EE DID NOT PREFER AN APPEAL BEFORE THE ITAT IN RESPECT TO QUANTUM. LD. AR ALSO BROUGHT TO OUR NOTICE THAT 90% OF THE INTEREST FREE LOAN WAS GIVEN BY THE ASSESSEE IN THE PREVIOUS YEARS AND A PERUSAL OF THE BOOKS OF ACCOUN T WOULD CORROBORATE THAT ONLY 10% OF THE INTEREST FREE LOAN WAS GIVEN I N THIS ASSESSMENT YEAR AND ONLY IN RESPECT TO THE SAID SUM NO INTEREST WA S CHARGED BY THE ASSESSEE ON THE SAID LOAN AMOUNT. HE PLEADED THAT FOR DISAL LOWANCE ON ACCOUNT THAT INTEREST WAS NOT LEVIED ON INTEREST BEARING FUNDS F OR LOAN GIVEN BY THE ASSESSEE WHICH WAS A BONAFIDE CLAIM OF THE ASSESSEE CANNOT BE A GROUND FOR LEVY OF PENALTY AND ACCORDINGLY PLEADED TO DEL ETE THE PENALTY. 6. ON THE OTHER HAND LD. DR RELIED ON THE ORDERS O F THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORDS. WE FIND THAT THE ASSESSEE HAS BORROWED CAPITAL FOR THE PURPOSE OF BUSINESS AND HAS PAID INTEREST TO THE LENDERS FROM WHOM MONEY HA S BEEN BORROWED. THE ASSESSING AUTHORITY REJECTED PART OF THE CLAIM OF I NTEREST FOR THE REASON THAT THE ASSESSEE HAD NOT CHARGED ANY INTEREST FROM CERT AIN PARTIES WHEN THE ASSESSEE WAS PAYING INTEREST ON LOANS RAISED BY THE M. WE FIND THAT THE QUANTUM APPEAL OF THE ASSESSEE HAS BEEN DISMISSED B Y THE LD. CIT (A). ITA NO.6089/DEL./2013 6 HOWEVER THE ASSESSEE/APPELLANT DID NOT PREFER TO F ILE AN APPEAL BEFORE THE ITAT IN THE QUANTUM. THEREAFTER WE FIND THAT THE AO INITIATED THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE WHICH CULMINATED I N LEVYING MINIMUM PENALTY @ 100% OF TAX SOUGHT TO BE EVADED WHICH IS RS.1 43 376/-. ACCORDING TO THE AO BECAUSE THE SCRUTINY ASSESSMEN T WAS DONE IT CAME TO THE NOTICE OF THE REVENUE THAT ASSESSEE HAD GIVEN I NTEREST FREE LOANS AND WAS PAYING INTEREST ON THE BORROWED CAPITAL AND SIN CE THE FIRM IS ASSISTED BY TAX CONSULTANTS IT CANNOT BE PRESUMED THAT THE ASSESSEE WAS NOT AWARE OF THE PROVISIONS OF LAW. THEREFORE HE MULCT THE PENALTY. ON APPEAL THE LD. CIT (A) WAS OF THE OPINION THAT IT WAS THE ASSE SSEES DUTY TO ASSIST AND ADVISE THE AUDITORS ON THE BUSINESS ASPECTS AND ACC ORDING TO HIM IN THE INSTANT CASE THE CLAIM OF INTEREST EXPENDITURE WHI CH WAS NOT ELIGIBLE FOR DEDUCTION AS PER LAW DOES GO TO SHOW THAT BY SOME P OSITIVE ACT OF OMISSION & COMMISSION THE INCOME WAS SOUGHT TO BE CONCEALED BY CLAIMING THE FULL AMOUNT OF INTEREST PAYABLE ON THE UNSECURED LOANS N OT OTHERWISE ALLOWABLE IN APPEAL. THEREFORE HE SUSTAINED THE PENALTY. W E FIND THAT THE ASSESSEE HAD CLAIMED THE EXPENDITURE ON INTEREST INCURRED BY THE ASSESSEE TO CERTAIN PARTIES WHICH WAS DISALLOWED BY THE AO. HERE THE QUESTION IS WHETHER PENALTY IS ATTRACTED OR NOT. WE FIND THAT THE CLAI M OF THE ASSESSEE IN RESPECT TO LOAN FROM UNSECURED CREDITORS IS NOT DI SPUTED AND THAT DISBURSEMENT OF INTEREST FREE LOAN HAVE NOT BEEN CO NCEALED BY THE ASSESSEE BEFORE THE AO. HERE WE FIND THAT THE CLAIM MADE BY THE ASSESSEE IS NOT A ITA NO.6089/DEL./2013 7 FALSE CLAIM. AT BEST IT CAN BE TERMED AS A WRONG CLAIM THOUGH THE GENUINENESS OF THE EXPENDITURE HAS NOT BEEN SUSPECT ED BY THE AO. SO WHEN THE EXPENDITURE MADE BY THE ASSESSEE WHICH WAS CLAIMED AS AN ALLOWABLE EXPENDITURE WHEN DISALLOWED BY THE AO CAN NOT BE TERMED AS CONCEALMENT OR PROVIDING INACCURATE PARTICULARS. E VEN IF ASSESSEE FIRM ENGAGES ASSISTANCE OF TAX CONSULTANTS AND THEN FOR THE MISTAKE OF TAX CONSULTANTS THE ASSESSEE CANNOT BE PENALIZED. IN THE LIGHT OF THE ABOVE FACTS WE FIND THAT THE INSTANT CASE DOES NOT MERIT PENALTY TO BE LEVIED AGAINST IT. THEREFORE WE ARE INCLINED TO DELETE T HE PENALTY LEVIED AGAINST THE ASSESSEE. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31DAY O F JULY 2015. SD/- SD/- (S.V. MEHROTRA) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 31 ST DAY OF JULY 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVIII NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.