Income Tax Appellate Tribunal - Ahmedabad
Dy, Cit, Circle-1,, Surat vs Parinay Organisers Pvt. Ltd.,, Surat on 4 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD '' B " BENCH - AHMEDABAD
Before Shri S. S. Godara, JM & Shri Manish Borad, AM.
ITA No.3040/Ahd/2013
Asst. Year: 2007-08
DCIT, Circle-1, Surat. Vs. Parinay Organizers Pvt.
Ltd., c/o Mukesh N.
Desai,
U-11, Jolly Square, Opp.
Ram Mandir, Ram
Chowk, Ghod Dhod road,
Surat.
Appellant Respondent
PAN AACCP 3640G
Appellant by Shri James Kurien, Sr. DR
Respondent by None
Date of hearing: 22/12/2016
Date of pronouncement: 04/01/2017
ORDER
PER Manish Borad, Accountant Member.
This appeal of Revenue for Asst. Year 2007-08 is directed against the order of ld. CIT(A)-1, Surat, dated 24.10.2013 vide appeal No.CAS-1/TFR/216/2013-14, arising out of order u/s 271(1)(c) of the IT Act, 1961 (in short the Act) framed on 19.03.2012 by DCIT, CC-4, Surat. Following grounds have been raised by Revenue :-
ITA No. 3040/Ahd2013 2Asst. Year 2007-08 (1) On the facts of the circumstances of the case, whether the Ld. CIT(A) is justified in deleting the penalty levied by the AO on account of disallowances of interest expenses of Rs. 44,19,194/- without considering the merits of the case.
(2) On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.
(3) It is therefore, prayed that the order of the CIT(A) may be set-side and that of Assessing Officer may be restored to the above extent.
2. Briefly stated facts as culled out from the records are that assessee is a private limited company engaged in construction work. Return of income for Asst. Year 2007-08 showing NIL income was filed on 19.10.2007. The case was selected for scrutiny assessment and assessment order u/s 143(3) of the Act was framed on 15.12.2009 after disallowing interest expenses of Rs.44,19,194/- and income assessed at Rs.NIL after setting off of brought forward losses. In the quantum appeal assessee could not succeed before ld. CIT(A) and the Tribunal. Penalty proceedings u/s 271(1)(c) of the Act were initiated on the disallowance of interest and levied penalty of Rs.13,25,759 vide order dated 13.03.2012 which was deleted by ld. CIT(A) vide his appellate order dated 24.10.2013.
3. Aggrieved, Revenue is now in appeal before the Tribunal.
4. Ld. DR referred and relied on the order of ld. Assessing Officer disallowing interest expenses of Rs.44,19,194/- claimed to have been paid to a co-operative bank in earlier years which was not allowable to be claimed as deduction u/s 43B(e) of the Act which is specifically meant for interest paid to a scheduled bank.
ITA No. 3040/Ahd2013 3Asst. Year 2007-08
5. On the other hand, ld. AR submitted that interest expenses of Rs.44,19,194/- relates to preceding years which includes Rs.21,10,019/- for Asst. Year 2004-05 and Rs.23,09,175/- relevant to Asst. Year 2005-06 and these two amounts together at Rs.44,19,194/- were shown in the balance sheet on the asset side. During the year under appeal this interest amount of Rs.44.19,194/- was transferred to the construction account which after the inclusion of Rs.44,19,194/- stood at Rs.2,49,81,176/-. Out of this amount proportionate amount was calculated towards 2192 sq.ft. sold during the year out of 11,219 sq.ft. area and this amount was calculated at Rs.48,80,893/-. Ld. AR further submitted that this amount of Rs.48,80,893/- includes proportionate construction expenses and proportionate interest expenses and effectively out of the total interest amount of Rs.44,19,194/- proportionate amount of 2192 sq.ft./11,219 sq.ft. if applied then interest expenses of Rs.8,63,435/- stands to be claimed against profits and the remaining amount continues to be carried forward in succeeding years and would be booked to expenditure head as and when remaining area is sold.
6. Ld. AR further submitted that the ld. Assessing Officer has also accepted the fact that expenditure was allowable on mercantile basis and the same has been done by assessee by claiming it only against the sales made. The claim made by the assessee was legitimate legal claim which has not been accepted by the ld. Assessing Officer but certainly it cannot call for imposing a penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income or ITA No. 3040/Ahd2013 4 Asst. Year 2007-08 concealment of income. Ld. AR referred and relied on the judgment of Hon. Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC) wherein it has been mentioned that "merely the information given in the return, which is not accepted by the ld. Assessing Officer, penalty u/s 271(1)(c) of the Act cannot be levied".
7. We have heard the rival contentions and perused the material placed on record. Sole grievance of the Revenue in this appeal is against the order of ld. CIT(A) deleting the penalty u/s 271(1)(c) of the Act levied by the Assessing Officer on account of disallowance of interest expenses of Rs.44.19,194/- without considering the merits of the case. We observe that assessee is engaged in the construction business and has booked the expenses on a pro rata basis as per the completion of construction and the area sold during the year. As submitted by ld. AR total area of construction was 11,219 sq.ft. out of which during the asst. year 2007-08 assessee has sold 2192 sq.ft. During assessment proceedings ld. Assessing Officer observed that a sum of Rs.44,19,194/- incurred towards interest expenditure was added to the construction account. This amount of Rs.44,19,194/- included interest paid to a Co-op. Bank at Rs.21,10,019/- in Asst. Year 2004-05 and Rs.23,01,175/- in Asst. Year 2005-06. In response to the query raised by ld. Assessing Officer it was specifically replied by the assessee that the total amount of Rs.44,19,194/- has been transferred to construction account and the amount standing in the construction account has been apportioned on the basis of square feet areas sold. In the year under appeal assessee sold 2191 sq.ft.
ITA No. 3040/Ahd2013 5Asst. Year 2007-08 out of 11,219 sq.ft and proportionate amount of Rs. 2,49,81,176/- being the total construction amount was accordingly apportioned by applying 2192 sq.ft. /11,219 sq.ft., which gave a figure of Rs.48, 80,893/- and the same was transferred to profit and loss account. Assessee has also submitted before ld. Assessing Officer that Rs.48,80,893/- includes the interest amount of Rs.8,63,435/- only and not Rs.44,19,194/- and the expenditure claimed was normal business expenditure on mercantile basis. However, Ld. Assessing Officer brought in provisions of section 43B of the Act in the picture and observed that as per the provisions of section 43B(e) of the Act deduction can be claimed for the interest paid to a scheduled bank which in the instant case pertains to a Co-op. Bank. Ld. Assessing Officer also ignored the fact that proportionate interest amount was only Rs.8,63,435/- and not Rs.44,19,194/-. He disallowed the total interest expenditure of Rs.44,19,194/- as not eligible for deduction u/s 43B(e) of the Act.
8. In this appeal we have to limit our focus only to the grievance of Revenue that whether ld. CIT(A) was correct in deleting the penalty imposed u/s 271(1)(c) of the Act on the alleged addition of Rs.44,19,194/-. We find that ld. CIT(A) deleted the penalty u/s 271(1)(c) of the Act and allowed the appeal of assessee by observing as under :-
4. ी कौ शक एस. दलाल, एडवोकेट अपीलकता के प को तुत करने हे तु इस काया लय म अपील क! सन ु वाई के दौरान उपि थत हुए एवं अपील क! सुनवाई क! गई।ITA No. 3040/Ahd2013 6
Asst. Year 2007-08
5. इस केस म 15.12.2009 को )नधा रण आदे श पा-रत हुआ था िजसम अपीलाथ/ का 44,19,194/- का 0याज खचा अ वीकार कर 3दया गया था। यह 0याज )नधा रण वष - 2004- 05 व 2005-06 से संबं6धत था। अपीलाथ/ ने यह 0याज construction project account म add 7कया था और )नधा रण वष - 2007-08 म pro rata basis पर बेची गई units के आधार पर धारा 23B के अंतग त claim 7कया था। )नधा रण अ6धकार9 ने यह कहा 7क यह 0याज Co-operative Bank से संबं6धत है और धारा 43B(e) के अंतग त सफ Scheduled ब<क का 0याज ह9 payment basis पर claim 7कया जा सकता है । इस कारण यह addition कर 3दया गया। धारा 271(1)(c) के अंतग त शाि त इसी addition के संबंध म लगाई गई है । अपीलाथ/ ने अपने तु)तकरण म merits के उपर भी तु)तकरण 3दया व उसके अलावा कई case laws पर rely करते हुए यह कहा 7क उसका claim एक bonafide claim था और मा> इस कारण से 7क वह claim वीकार नह9ं हुआ। 7कया गया addition धारा 217(1)(c) के अंतग त concealment क! प-रभाषा म नह9ं आता। अपीलाथ/ ने सव?@च Aयायालय के 332 ITR 158 म reported Reliance Petro Product के केस पर भी rely 7कया।
6. अपीलाथ/ के केस के सभी तBयC को दे खने के बाद यह पDट है 7क इस केस म अपीलाथ/ ने अपनी आय क! संगणना से संबं6धत कोई भी तBय )छपाया नह9ं था। उसने अपने legal interpretation के आधार पर यह claim 7कया था, जो7क वीकार नह9ं 7कया गया। इस लए यह भी नह9ं कहा जा सकता 7क अपीलाथ/ का पDट9करण सदभावी नह9ं था। इन कारणC से 7कया गया addition धारा 271(1)(c) के पDट9करण 1 के अंतग त deemed concealment क! प-रभाषा म नह9ं आता। अतः अपीलाथ/ क! अपील मंजूर क! जाती है और लगाई गई शाि त रH क! जाती है ।
9. From perusal of CIT(A)'s order we find that ld. CIT(A) has appreciated the facts that the claim made by assessee was bona fide in nature to the best of his knowledge but the same was not accepted by the Assessing Authority. Ld. Assessing Officer has not brought in any evidence to prove that there was concealment of income or furnishing of inaccurate particulars of income. Ld. CIT(A) followed the judgment of Hon. Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (supra) ITA No. 3040/Ahd2013 7 Asst. Year 2007-08
10. Further continuing to our above discussion and on analysis of the facts we find that there is no dispute to the fact that the amount of Rs.44,19,194/- was paid towards interest towards preceding Asst. Years 2004-05 and 2005-06 at Rs.21,10,019/- and Rs.23,09,175/- respectively and this amount which was capitalized in the preceding years was transferred to construction account and proportionate amount was transferred to profit and loss account on the basis of area sold. We will not like to go into the issue of actual interest expenditure claimed by the assessee as it was Rs.8,63,435/- as submitted by assessee or Rs.44,19,194/- as alleged by ld. Assessing Officer which was the figure taken by him from perusal of the construction account in which interest amount of Rs.44,19,194/- was transferred and was not fully claimed in the year. We just confine to adjudicate as to "whether in these circumstances assessee should have been visited with penalty u/s 271(1)(c) of the Act." In the given circumstances there has been a claim made by the assessee treating it to be a bona fide claim but not accepted by the Revenue authorities. We observe that Hon. Supreme Court in the case of CIT vs. Reliance Petro Product Pvt. Ltd. (supra) has held that if the assessee had furnished all the details of its expenditure as well as income in the return, which were not found to be inaccurate particulars or concealment of income, it was upto to the authorities to accept its claim in the return or not. Merely because assessee had claimed expenditure which was not accepted or not acceptable to Revenue that by itself would not attract a penalty u/s 271(1)(c) of the Act.
ITA No. 3040/Ahd2013 8Asst. Year 2007-08
11. We further observe that similar view was taken by Hon. Supreme Court in the case of Price Waterhouse Coopers (P) Ltd. vs. CIT (2012) 25 taxmann.com 400 (SC) wherein Hon. Apex Court has observed as follows :-
17. Having heard learned counsel for the parties, we arc of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court.
18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under Section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report.
19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.
20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We arc satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars.
21. Under these circumstances, the appeal is allowed and the order passed by the Calcutta High Court is set aside.
12. Respectfully following the judgments of Hon. Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (supra) and in the case of Price Waterhouse Coopers (P) Ltd. vs. CIT (supra) we are of the confirm the view that in the given case assessee had made ITA No. 3040/Ahd2013 9 Asst. Year 2007-08 claim of expenditure on pro rata basis by way of filing particulars which were not found to be inaccurate at any stage nor there has been any concealment of income but it was merely non-allowability of claim by the Revenue authorities by applying the provisions of section 43B(e) of the Act but certainly such circumstances do not call for visiting assessee with penalty u/s 271(1)(c) of the Act. We, therefore, find no reason to interfere with the order of ld. CIT(A) deleting the penalty u/s 271(1)(c) of the Act on disallowance of Rs.44,19,194/- and accordingly uphold the same and dismiss this ground of Revenue.
13. Other grounds are of general nature, which need no adjudication.
14. In the result, appeal of Revenue is dismissed.
Order pronounced in the open Court on 4th January, 2017 Sd/- sd/-
( S. S. Godara) (Manish Borad)
Judicial Member Accountant Member
Dated 04/01/2017
Mahata/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad
ITA No. 3040/Ahd2013 10
Asst. Year 2007-08
1. Date of dictation: 03/01/2017
2. Date on which the typed draft is placed before the Dictating Member: 04/01/2017 other Member:
3. Date on which 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: 4/1/17
7. Date on which the file goes to the Head Clerk:
8. The date on which the file goes to the Assistant Registrar for signature on the order:
9. Date of Despatch of the Order: