CHAROTAR GAS SAHKARI MANDALI LTD.,ANAND vs. THE DY. CIT, ANAND CIRCLE, ANAND

Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

The ld. A.R. submitted that the assessee filed return of income on 11-09-2012 thereby claiming interest of Rs. 1,11,96,029/- that of assessment year 2007-08 and also claimed interest of Rs. 1,11,78,317/- of assessment year 2009-10. The assessee, in respect of income of Rs. 6,70,05,849/- being interest which was not paid earlier at one time settlement had credited it in the profit and loss account of the assessment year 2012-13. As the Revenue has denied the same in the assessment year 2007-08 and 2009-10, the present assessment order for assessment year 2012-13 was passed on 30-03- 2018 thereby disallowing the interest of Rs. 1,11,96,029/- but the same was deleted by the Tribunal vide order dated 10-07-2015 in respect of assessment year 2007-08. The rectification application though filed prior to the appeal filed before the Tribunal, the order u/s. 154 was passed on 10-02-2016 thereby deleting all disallowances and allowing the interest of assessment year 2007-08 to the extent of Rs. 1,11,96,029/- and interest of Rs. 1,11,78,317/- of assessment year 2009-10. The ld. A.R. submitted that this cannot be termed as furnishing inaccurate particulars of income for assessment year 2012- 13 as the assessee has entered into one time settlement in the assessment year 2012-13 only in respect of waiver of interest. Thus, the penalty order is not justified.

The ld. D.R. submitted that the assessee has not paid the difference in respect of interest which was not included in the settlement and therefore penalty was validly levied by the Assessing Officer. The ld. D.R. relied upon the penalty order and the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that in the year 2007-08, the interest of Rs. 1,11,96,029/- disallowed u/s. 43B of the Act has been allowed vide order of the Tribunal dated 10-07-2015 and the subsequent order u/s. 154 dated 10-02-2016, the quantum appeal for the assessment year 2012-13 has been withdrawn before the CIT(A) by the assessee since the assessee has got the relief. Once the matter has been settled and the assessee due to the circumstantial relief given by the Tribunal and the Revenue has withdrawn the appeal before the CIT(A). The treatment given in the profit and loss account for the present assessment year i.e. 2012-13 which was filed along with the returns filed on 11-09-2012 by the assessee cannot be treated as furnishing inaccurate particulars of income or concealment of income as at that point of time, the assessee was not allowed deduction of the interest of Rs. 1,11,96,029/- in respect of assessment year 2007-08. Since the assessee has entered into one time settlement in the assessment year 2012-13, and had credited income of Rs. 6,70,05,849/- being interest not paid as one time settlement, in the Profit and Loss Account. Therefore, the assessee had claimed deduction for interest of Rs. 1,11,96,029/- disallowed u/s. 43B in assessment year 2007-08, in the current year, under bonafide belief, on treating the unpaid interest as income. It is relevant to consider that disallowance made in A.Y. 2007-08 was not allowed as relief in appeal, at the time when the return for A.Y. 2012- 13 was filed. Therefore, the claim of the assessee as made in the return for assessment year 2012-13 cannot be held as outrightly inaccurate. In view of these facts, the Assessing Officer was not correct in imposing penalty u/s. 271(1)(c) of the Act, in respect of this claim. Thus, invocation of Section 271(1)(c) is not justified and hence the appeal of the assessee is allowed.