M/S SPECTRUM INNS AND MOTELS PVT. LTD.,CHANDIGARH vs. ITO, W-5(2), CHANDIGARH

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 26.12.2018 of the Commissioner of Income Tax (Appeals)- 2, Chandigarh [hereinafter referred to as ‘CIT(A)’]

ITA No. 254/Chd/2019- M/s Spectrum Inns and Motels Pvt Ltd, Chandigarh 2 3. The brief facts of the case are that during the assessment

proceedings, the Assessing Officer noticed that the assessee firm

had advanced interest free loan worth Rs. 1,38,47,642/- to Smt.

Suman Lata, whereas, the assessee had claimed a sum of Rs.

63,21,153/- under the head ‘finance charges’ including interest to

banks and other. The Assessing Officer observed that on the one

hand the assessee had claimed heavy interest expenditure but at the

same time it had advanced interest free loans to one Smt. Suman Lata

without any business exigency. The assessee failed to explain the

purpose of loan given to Smt. Suman Lata. The Assessing Officer,

therefore, disallowed proportionate interest expenditure invoking the

provisions of section 36(1)(iii) of the Income Tax Act and added the

amount of disallowance into the income of the assessee. The

Assessing Officer also separately initiated penalty proceedings u/s

271(1)(c) of the Act and imposed the impugned penalty of Rs.

3,51,873/-.

4, The assessee unsuccessfully contested the matter before the Ld.

CIT(A).

the assessee’s case is covered by the decision of the Hon'ble

Supreme Court in the case of ‘ CIT vs Reliance Petro Products Ltd’

[2013] 322 ITR 158 and has submitted that the assessee has neither

ITA No. 254/Chd/2019- M/s Spectrum Inns and Motels Pvt Ltd, Chandigarh 3 furnished any inaccurate particulars of income nor has concealed its

income.

the lower authorities.

Representatives of the parties and gone through the record. A perusal

of the assessment order, penalty order as well as the impugned order

of the Ld. CIT(A) reveal that the assessee nowhere has stated the

purpose of advancing the interest free loan to one Smt. Suman Lata

and there is no pleading on the part of the assessee that it had not

used interest bearing funds to make the interest free advances to Smt.

Suman Lata. Under the circumstances, the Assessing Officer made

the impugned disallowance u/s 36(i)(iii) of the Act. No doubt every

disallowance does not ipso facto give rise to levy of penalty u/s 271

(1)(c) of the Act, however, at the same time, if it is established that

the assessee has filed inaccurate particulars of its income which

included a certain claim of expenditure which otherwise is not

genuine or is not relatable to the business activity of the assessee

and the assessee does not offer any explanation for the same, the

Assessing Officer can rightly invoke the provisions of section 271

(1)(c) of the Act. From the perusal of the facts of the case, it reveals

that the assessee nowhere has offered any explanation for advancing

ITA No. 254/Chd/2019- M/s Spectrum Inns and Motels Pvt Ltd, Chandigarh 4 the loan for non-business purposes from the interest bearing funds and for claiming interest expenditure on such funds as business

expenditure. The case law cited by the assessee is not applicable to the facts of the case as we do not deem the claim of the assessee as a bonafide claim. We, therefore, do not find any merit in this appeal of the assessee and the same is accordingly dismissed. In the result, the appeal of the assessee stands dismissed. Order pronounced in the Open Court on 30.10.2019.

Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 30.10.2019 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar