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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2014-15. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-38, Mumbai [in short ‘CIT(A)’] and arises out of penalty levied u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’).
The ground of appeal filed by the assessee reads as under :
In the facts and circumstances of the case and in law, the Ld. CIT(A)-38 Mumbai has erred in confirming the penalty of Rs.2,31,628/- levied u/s 271(1)(c) of the Income Tax Act, 1961. 2 Shri Sachin T. Sankpal 3. Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2014-15 on 26.11.2016 declaring total income of Rs.49,32,500/-. The assessment was completed u/s 143(3) of the Act on 14.12.2016 assessing total income at Rs.57,88,081/-. The same was rectified u/s 154 on 08.02.2017 revising total income at Rs.56,82,105/-.
In the assessment completed u/s 143(3) dated 14.12.2016, the Assessing Officer (AO) observed that in the balance sheet, it is reflected that loans advanced totaling to Rs.1,04,57,183/- have been continued to the previous year to the following parties, from whom no interest has been charged :
Chetan Lokhande Rs.2,00,000/- Rajendra K. Patel Rs.58,356/- Sachin Kakdekar Rs.11,00,000/- Sesha Said Infra Projects P. Ltd. Rs.90,98,827/- Total Rs.1,04,57,183/- The assessee has claimed deduction of Rs.8,55,582/- on account of interest paid. The AO came to a finding that interest to the extent the advance had been made without charging any interest is to be disallowed u/s 36(1)(iii) of the Act. Accordingly, he computed the interest on the loan of Rs.1,04,57,183/- @ 12% which comes to Rs.12,54,862/-. Further observing that the deduction on account of interest paid exceeds the above amount, he disallowed the interest expenses to the extent of Rs.8,55,582/-. Then he revised the disallowance to Rs.7,49,606/- vide rectification order dated 08.02.2017.
Subsequently, he levied a minimum penalty of Rs.2,31,628/- u/s 271(1)(c) on the supposed concealed income of Rs.7,49,606/-. 3 Shri Sachin T. Sankpal 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 18.01.2019, the Ld. CIT(A) confirmed the above penalty levied by the AO on merits by observing that :
Even during the appellate proceedings, the appellant contended that this is only matter of difference in opinion and disallowance of claim and therefore not liable to penalty. I further observed that the appellant has fixed assets worth Rs.4.98 crores and capital of Rs.2.63 crores. However, it is seen that the appellant has not produced any fund flow statement showing sources and application of funds. Therefore, the nexus between the unsecured loans taken and granted are not established. In view of the same, the interest expense claimed by the appellant has no nexus with the business carried on the appellant. The appellant has also not proved that the interest free loans were advanced to the aforesaid parties/persons on account of business exigencies. In the given fact and circumstances of the case, I find that the penalty levied by the AO is on sound footing. Accordingly, the penalty of Rs.2,31,628/- levied by the AO is confirmed.
Before us, the Ld. counsel for the assessee relies on the judgment of the Hon’ble Supreme Court in CIT v. Reliance Petroproducts (P.) Ltd. (2010) 189 Taxman 322 (SC). On the other hand, the Ld. Departmental Representative supports the order passed by the Ld. CIT(A).
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below.
As mentioned earlier, the details on which the AO derived his finding on concealment were reflected in the balance sheet (para 4 of the assessment order dated 14.12.2016). The interest paid is reflected in the profit and loss account. 4 Shri Sachin T. Sankpal In Reliance Petroproducts (P) Ltd. (supra), the Hon’ble Supreme Court has held that “ merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty u/s 271(1)(c).”
In a recent decision dated 12.06.2020, the Hon’ble Bombay High Court, having considered similar issues in Ventura Textiles Ltd. vs. CIT (ITA.No.958/2017), held as under:-
“33. In Reliance Petroproducts Pvt. Ltd. (supra), Supreme Court examined meaning of the words 'particulars' and 'inaccurate'. As per Law Lexicon, the word 'particulars' means 'detail or details; the details of a claim or the separate items of an account'. Therefore, it was held that the word 'particulars' used in Section 271(1)(c) of the Act would embrace the meaning of the details of the claim made. Referring to Webster's Dictionary where the word 'inaccurate' has been defined as 'not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript', Supreme Court held that the two words i.e., 'inaccurate' and 'particulars' read in conjunction must mean that the details supplied in the return are not accurate, not exact or correct, not according to truth or erroneous. It was held that mere making of a claim which is not sustainable in law by itself would not amount to furnishing inaccurate particulars regarding the income of the assessee. Therefore, such claim made in the return cannot amount to furnishing inaccurate particulars of income. Elaborating further, Supreme Court held that if such stand of the Revenue was accepted then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c) of the Act which is clearly not the intendment of the Legislature.
This decision was followed by this Court in CIT Vs. M/s. Mansukh Dyeing & Printing Mills, Income Tax Appeal No.1133 of 2008, decided on 24.06.2013. In CIT Vs. DCM Ltd., 359 ITR 101, Delhi High Court applied the said decision of the Supreme Court and further observed that law does not debar an assessee from making a claim which he believes is plausible and when he knows that it is going to be examined by the Assessing Officer. In such a case a liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinized both on facts and in law. Threat of penalty cannot become a gag and / or haunt an assessee for making a claim which may be erroneous or wrong. Again, in CIT Vs. Shahabad Co-operative Sugar Mills Ltd., 322 ITR 73, Punjab & Haryana High Court held that making of wrong claim is not at par with concealment or giving of inaccurate information which may call for levy of penalty under Section 271(1)(c) of the Act. 5 Shri Sachin T. Sankpal 35. Reverting back to the present case it is quite evident that assessee had declared the full facts; the full factual matrix or facts were before the Assessing Officer while passing the assessment order. It is another matter that the claim based on such facts was found to be inadmissible. This is not the same thing as furnishing inaccurate particulars of income as contemplated under Section 271(1) (c) of the Act.”
6.1 We are of the considered view that the ratio laid down in Reliance Petroproduct (P) Ltd.(supra) and Ventura Textiles Ltd. (supra) is squarely applicable to the instant case. Following the same, we delete the penalty of Rs.2,31,628/- levied by the AO u/s 271(1)(c) of the Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 02/03/2021.