E.S. PATANWALA,MUMBAI vs. DCIT-13(1), MUMBAI

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ITA 2616/MUM/2018Status: DisposedITAT Mumbai27 November 2019AY 2008-093 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 AO's order for levying penalty was silent on concealment or furnishing inaccurate particulars of income. The addition was based on a notional interest charge, and there was no actual concealment by the assessee.

What were the facts?

The assessee partnership firm declared nil income and had a brought forward loss. The AO made an addition for notional interest on partners' debit balances, which the assessee did not appeal. Subsequently, the AO levied penalty under Section 271(1)(c).

What were the issues?

Whether penalty under Section 271(1)(c) can be levied when the addition is notional and there is no finding of concealment or inaccurate particulars of income.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E”, BENCH

Before: SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM

For Appellant: Shri Mukarram H Sachikot
For Respondent: Mr. Amit Pratap Singh
Hearing: 06/11/2019Pronounced: 27/11/2019

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2008-09 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-56, Mumbai in appeal No.CIT(A)-56/DCIT Circle-13(1)/2017-18/539 dated 21/02/2018 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) 2. The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in upholding the levy of penalty u/s.271(1)(c) of the Act in the facts and circumstances of the case.

M/s. E.S.Patanwala 3. We have heard rival submissions and perused the materials available on record. We find that assessee is a registered partnership firm and had declared nil income in the return filed by it for the A.Y.2008-09 on 30/09/2008. The assessment was completed u/s.143(3) of the Act on 10/12/2010 determining nil income after adjusting a loss of Rs.1,04,83,875/- brought forward from A.Y.2001-02. We find that the ld. AO had observed that assessee had paid interest to its partners on the amounts contributed by them and interest was also paid on borrowed funds. The partners were having debit balances on account of excess withdrawals. Accordingly, the ld. AO added interest @12% on those excess withdrawals and made an addition towards notional interest in the assessment. The assessee did not file any appeal against this quantum addition. Based on this fact of assessee not preferring any appeal and quantum assessment becoming final, the ld. AO proceeded to levy penalty u/s. 271(1)(c) of the Act by levying the minimum penalty of Rs.2,41,081/- vide order u/s.271(1)(c) of the Act dated 24/06/2011. This action of the ld. AO was upheld by the ld. CIT(A). But we find from the perusal of the entire penalty order, the ld. AO nowhere had even whispered as to whether the assessee had concealed the particulars of its income or had furnished inaccurate particulars of its income. The entire order of the ld. AO is totally silent on this aspect. In any case, we find the addition has been made on a notional basis by the ld. AO by charging interest at an estimated rate of 12% on excess withdrawals made by the partners from the firm. On this count itself, the penalty u/s.271(1)(c) of the Act deserves to be deleted. Moreover, we also hold that there is absolutely no concealment of particulars of income by the assessee or furnishing of inaccurate particulars of income by the assessee. Hence, there cannot be any levy of penalty u/s.271(1)(c) of the Act, merely because an addition has been made in the assessment which remain uncontested by the assessee. Accordingly, the grounds raised by the assessee are allowed.

M/s. E.S.Patanwala 4. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on this 27/11/2019 Sd/- Sd/- (MAHAVIR SINGH) (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 27/11/2019 KARUNA, sr.ps Copy of the Order forwarded to : The Appellant 1. The Respondent. 2. The CIT(A), Mumbai. 3. CIT 4. DR, ITAT, Mumbai 5. 6. Guard file. //True Copy//

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