MR. ANAND M SHETTY,MUMBAI vs. ACIT 29(1), MUMBAI

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ITA 299/MUM/2019Status: DisposedITAT Mumbai02 March 2020AY 2013-143 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance of interest was based on vague reasoning and did not warrant a penalty. It also noted that PF/ESIC payments made before the due date of filing the return are allowable, thus setting aside the penalty.

What were the facts?

The assessee claimed deductions for interest expenses and contributions to PF/ESIC. The Assessing Officer disallowed a portion of the interest expenses due to lack of justification and contributions to PF/ESIC due to late payment, leading to a penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on disallowances made on account of interest expenses with vague reasoning and for delayed PF/ESIC payments when made before the return filing due date.

Which sections of the Income-tax Act were involved?

Section 57,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA, AM & SHRI C. N. PRASAD, JM

For Respondent: Shri Michael Jerald
Pronounced: 02.03.2020

O R D E R Per Shamim Yahya, A. M.:

This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-40, Mumbai (‘ld.CIT(A) for short) dated 17.12.2018 and pertains to the assessment year (A.Y.) 2013-14.

2.

The issue raised is that the ld. CIT(A) erred in confirming the penalty of Rs.2,00,659/- u/s. 271(1)(c) of the Income Tax Act, 1961 (‘the Act' for short).

3.

The issue in this case is that the penalty is levied on two counts. Firstly, there was disallowance of interest u/s. 57 of the Act. On this issue, the Assessing Officer (‘A.O.’ for short) noted that the assessee has claimed deduction u/s. 57 from the interest income amounting to Rs.22,67,606/-. Referring to the assessee’s reply in this regard, the A.O. noted that there was justification for interest expenses amounting to Rs.18,17,425/- and no justification for the balance was given for nexus between interest expenses and interest income. Hence, the A.O. made the impugned disallowance. On the issue of disallowance for contribution to PF and ESIC, the same was done on the ground that the payment was late as per the said Act, although the payments were made before the due date of filing of return.

4.

The penalty was levied on the above disallowances which was confirmed by the ld. CIT(A).

5.

Against the above order, the assessee is in appeal before us.

6.

None appeared for and on behalf of the assessee. We have heard the ld. Departmental Representative (ld. DR for short) and perused the records. As regards the disallowance on account of interest, we note that it is the submission of the assessee that the entire details was given regarding the interest paid and disallowance on this account cannot lead to rigor of penalty u/s. 271(1)(c) of the Act. On this issue, the assessee has also placed reliance upon the decision of the Hon'ble Supreme Court in the case of Reliance Petro Products (P) Ltd. 322 ITR 158 (SC). We note that the total interest claimed on this issue were of Rs.22,67,606/-. The authorities below have summarily held that Rs.18,17,425/- is justified and the rest is not justified. No reasoning whatsoever in detail has been brought on record. In this view of the matter, the disallowance of the claim of the assessee that also by a vague reasoning cannot lead to levy of penalty u/s. 271(1)(c) of the Act.

7.

As regards the disallowance for delayed payment of PF and ESIC, we note that if the same is paid before the due date of filing the return, the same has been held as allowable expenses in various case laws. In this view of the matter, the assessee cannot be visited with the penalty u/s. 271(1)(c) of the Act on this account. Hence, we set aside the orders of the authorities below and delete the penalty.

8.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 02.03.2020

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