Income Tax Appellate Tribunal - Ahmedabad
Shri Jignesh Jayantilal Shah,, ... vs The Dy. Cit, Circle-1,, Bhavnagar on 17 January, 2020
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC" BENCH, AHMEDABAD
BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER And
SHRI WASEEM AHMED, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No. 2538/Ahd/2017
( नधा रण वष /Assessment Year : 2013-14)
Jignesh Jayantilal Shah बनाम/ The DCIT
935, Muni Dairy Vs. Circle-1
Subhashnagar Bhavnagar
Bhavnagar-364 001
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AGYPS 8575 Q
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से/ Appellant by : Shri B.R. Popat, AR
यथ क ओर से/Respondent by: Shri Rajdeep Singh, Sr.DR
सन
ु वाई क तार#ख/ Date of Hearing 25/10/2019
घोषणा क तार#ख /Date of Pronouncement 17/01/2020
आदे श / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)-6, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)-6/109/16-17 dated 31/08/2017 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(hereinafter referred to as "the Act") dated 29/03/2016 relevant to Assessment Year (AY) 2013-14.
2. The assessee has raised the following grounds of appeal:-
The learned CIT(A)-6, Ahmedabad has erred in law and on facts in -ITA No.2538/Ahd/2017
Jignesh Jayantilal Shah vs. DCIT Asst.Year - 2013-14 -2-
1. Confirming the action of the AO in levying penalty of Rs.3,50,025/-
under section 271(1)(c) even though there is no concealment or inaccurate particulars of income.
2. Confirming the action of the AO in levying penalty of Rs.3,50,025/- under section 271(1)(c) even though the penalty order is served after the limitation period prescribed under section 275 of the Act.
3. Confirming the action of the AO in levying penalty of Rs.3,50,025/- under section 271(1)(c) by misinterpreting true sense of judgement delivered by the Hon'ble Apex Court in the case of Reliance Petroproducts.
The assessee craves leave to add, amend, delete or alter one or more grounds of appeal.
2. The aforesaid appeal has been filled by the assessee against the confirmation of penalty u/s 271(1)(c) by the Learned CIT (A).
3. Briefly stated fact is that, the assessee is an individual and earning income under the head salary & house property. The assessee during the year under consideration i.e. A.Y. 2013-14, has acquired immovable property which was converted into stock in trade in next A.Y i.e. A.Y. 2014-15. For the purpose of acquiring such property the assessee taken unsecured loan and paid interest of Rs. 11,31,987/- which was claimed as deduction u/s 57 of the Act. Subsequently the AO disallowed the same by holding the impugned interest expenditure as capital in nature. Accordingly, the AO initiated the penalty proceedings under section 271(1)(c) on account of such addition and further issued notice under section 274 r.w.s 271(1)(c) dated 29-03-2016 and subsequent & final notice dated 08-08-2016 was issued upon the assessee. But the assessee failed to offer any explanation or submission.
3.1. Therefore, the AO in absence of any reply from assessee, held that if any particular of the return found to be inaccurate or false which has an impact on the total income is subject to penalty u/s 271(1)(c) of the Act. In ITA No.2538/Ahd/2017 Jignesh Jayantilal Shah vs. DCIT Asst.Year - 2013-14 -3- this regard the AO relied upon various case laws, the AO especially emphasize on the decision of Hon'ble Supreme Court in case of Dharmendra Textiles Processors 306 ITR 277 where it was held that " penalty u/s 271(1)(c) is 'civil liability' and 'means era' need not to be proved for the levy of penalty. Mere establishing of inaccuracy in particulars of income would be adequate for attracting 'civil liability' of penalty."
3.2 The AO further observed that the books of accounts of the assessee were subject to regular audit. Hence it is not possible that that the Auditor has not brought the fact to the notice of the assessee. But still assessee takes a chance to claim a capital expenditure as revenue expenditure u/s 57 of the Act.
3.3. The AO also observed that assessee did not file any appeal against the assessment order and also not furnished any explanation with respect to proceedings u/s 271(1)(c) of the Act. Accordingly the AO levied penalty of Rs. 3,50,025/- being 100% of tax evaded on Rs. 11,3 31,987/- for furnishing inaccurate particulars of income.
Being aggrieved by the order of the AO the assessee preferred an appeal before learned CIT (A).
4. The assessee before learned CIT(A) submitted that the provision of section 271(1)(c) has two limb i.e. concealment of income and furnishing inaccurate particular of income. But the AO at the time of issuing notice for initiating penalty proceeding has not mentioned any specific reason/limb. Therefore in absence of any specific reason the proceeding u/s 271(1)(c) is ITA No.2538/Ahd/2017 Jignesh Jayantilal Shah vs. DCIT Asst.Year - 2013-14 -4- bad in law. The assessee in his support relied on the decision of the Hon'ble Karnataka High Court in case of Manjunatha Cotton and Ginning Factory 359 ITR 565.
4.1. The assessee also submitted that the penalty order was served beyond the time limit prescribed under the provision of section 275 of the Act.
4.2. The assessee further submitted that the AO has failed to understand that the assessment proceedings and penalty proceedings are different and finding of assessment proceeding is irrelevant unless other corroborative evidence brought in order to prove concealment of income or furnishing inaccurate particulars of income. The assessee in this regard relied upon the decision of Hon'ble Supreme Court in case of CIT vs. Reliance Petroproducts (2010) 189 taxman 322.
4.3. However, the learned CIT (A) after considering the submission of the assessee and the AO finding observed as under:
(i) From the submission of the assessee before the AO during assessment proceeding, it clear that the he was known to the wrong claim made in the return and on question from authority he shifted the burden of wrong claim on consultant.
(ii) The assessee did not submit any documentary evidence in support of his claim that the notice of penalty proceeding issued without any specification. However the AO in penalty order clearly mentioned that the penalty has been levied for furnishing inaccurate particular of income.
(iii) The assessee has deliberately attempt to claim capital expenditure as revenue. It is very much in the knowledge of the assessee that interest expenses incurred with respect to acquiring capital asset is capital in nature.ITA No.2538/Ahd/2017
Jignesh Jayantilal Shah vs. DCIT Asst.Year - 2013-14 -5-
(iv) The assessee did not make any explanation before AO as required under explanation 1 to section 271(1)(c) of the Act. Therefore for in absence of any explanation the AO has rightly levied penalty.
4.4. In view of the above, the learned CIT(A) confirmed the penalty order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
5. The learned AR before us filed a paper book running from pages 1 to 15 and submitted the assessee has not furnished any inaccurate particulars of income. Therefore, there cannot be levied any penalty under section 271(1)© of the Act.
6. On the other hand, the learned DR before us vehemently supported the order of the authorities below.
7. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates to the penalty imposed by the AO under section 271(1)(c) of the Act which was subsequently confirmed by the learned CIT (A) on account of furnishing inaccurate particulars of income. The assessee in his return of income has made a claim for the interest paid on the money borrowed which was utilized for the purchase of the property. As such the property against which the loan was taken was classified in balance sheet as capital assets. Therefore, the amount of corresponding interest was ineligible. However the Assessee claimed the interest expenses in the profit and loss account. Accordingly, the ITA No.2538/Ahd/2017 Jignesh Jayantilal Shah vs. DCIT Asst.Year - 2013-14 -6- AO held that the assessee has furnished inaccurate particulars of income by claiming the impugned expenses in the profit and loss account. Thus the AO levied the penalty amounting to Rs. 3,50,025/- being 100% of the amount of tax sought to be evaded. The penalty was subsequently confirmed by the learned CIT (A).
7.1. Admittedly, the assessee has made disclosure of all the particulars of interest expenses charged against the income in the profit and loss account. Now the question arises before us to adjudicate whether the wrong claim of interest expense amounts to concealment or furnishing inaccurate particulars of income in the given facts and circumstances.
7.2. In this regard, we note that the assessee instead of capitalizing the interest expense, has claimed deduction as revenue expense. Thus, in our considered view, the claim was made under the wrong head of income which was not false. Accordingly, we conclude that the assessee has made a wrong claim, but that does not mean that the assessee has furnished inaccurate particulars of income. In this regard, we find support and guidance from the judgment of Reliance Petro Product Pvt. Ltd. (supra) wherein, it was held as under:
"The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars."ITA No.2538/Ahd/2017
Jignesh Jayantilal Shah vs. DCIT Asst.Year - 2013-14 -7- 7.3. We also find support and guidance from the decision of coordinate bench of this ITAT in case of Dholu Construction & Projects Ltd. reported in 17 taxmann.com 176. Where it was held as under;
"Merely because the claim made by the assessee is not found acceptable cannot lead to the interference that claim was rather false or particulars furnished in support of the claim were inaccurate. Non-acceptance of the claim is different from false claim or inaccurate particulars having been filed in support of the claim. The case of the Assessing Officer and the Commissioner (Appeals) does not fall in the main proviso of section 271(1)(c) as there is no evidence to this effect. Whatever finding is given about furnishing inaccurate particulars is not in accordance with the law. [Para 9] 7.4. From the above, it is transpired that a wrong claim by the assessee cannot be equated with inaccurate particular of income. As such the assessee has actually incurred the amount of interest expenses for the purchase of the land /property which was to be capitalized but he wrongly claimed the deduction under section 57 of the Act. It is also pertinent to note that the assessee has claimed total interest expenses amounting to ₹13,65,484/- against the income under the head other sources. As such the claim of the assessee was accepted by the AO for an amount of Rs. 2,33,497/- out of the total claim of Rs. 1365484/- only. Accordingly the balance amount of ₹11,31,987 was disallowed by the AO. This fact can be verified from the statement of income filed by the assessee and the relevant extract is reproduced as under:
"INCOME FROM OTHER SOURCES 28524
BANK INTEREST 17982
OTHER INCOME 35229
INTEREST ON BANK FDR 233497
INTEREST FROM OTHER PARTIES -1365484 -1131987
LESS: EXPENSES
TOTAL -1050252"
7.5. Thus, from the above, we note that part of the claim of the assessee was admitted by the revenue and part of the claim of the assessee was denied by the revenue as discussed above. Accordingly, we hold that part of ITA No.2538/Ahd/2017 Jignesh Jayantilal Shah vs. DCIT Asst.Year - 2013-14 -8- the expenses disallowed by the AO represents the inaccurate claim by the assessee which cannot be equated with the inaccurate particulars of income. Accordingly, we are of the view that there cannot be any penalty under the provisions of section 271(1)(c) of the Act in the given facts and circumstances. Hence, the order of the learned CIT (A) is set aside and we further direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is allowed.
8. In the result, appeal of the Assessee is allowed.
This Order pronounced in Open Court on 17/01/2020
Sd/- Sd/-
(MAHAVIR PRASAD) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 17/01/2020
ट#.सी.नायर, व. न.स./T.C. NAIR, Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं'धत आयकर आयु(त / Concerned CIT
4. आयकर आयु(त(अपील) / The CIT(A)-6
5. )वभागीय त न'ध, आयकर अपील#य अ'धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या)पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad