Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, ‘’ D’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
Assessee by : Shri Gaurav Nahata, A.R Revenue by : Shri Purshottam Kumar, Sr.D.R सुनवाई क� तारीख/Date of Hearing : 02/05/2022 घोषणा क� तारीख /Date of Pronouncement: 11/05/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income (Appeals)-8, Ahmedabad, dated 06/06/2019 arising in the matter of penalty order passed under s.271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-12.
The only issue raised by the assessee is that the learned CIT-A erred in confirming the penalty levied by the AO for ₹ 1,45,456/- under the provisions of section 271(1)(c) of the Act.
The facts in brief are that the assessee in the present case is a private company and engaged in the business of running education institution. During the assessment proceeding AO found that the assessee has advanced interest free loan out of borrowed fund. Thus the AO in absence of sufficient interest fund to advance, the interest attributable to such interest free loan to the tune of Rs. 2,64,480/- and added to the total income of the assessee.
3.1 Likewise, the AO found that union bank of India and Tradewell Construction Corporation Pvt Ltd during the under consideration paid interest of Rs. 16,705/- and 2,03,967 respectively to the assessee and deducted tax at source on the same. However, the assessee has not offered the impugned interest income in income tax return. Hence the same was added to the total income of the assessee.
3.2 Simultaneously, the AO initiated penalty proceeding under section 271(1)(c) of the Act on account of furnishing inaccurate particular of income.
3.3 Subsequently the above addition was also confirmed by the learned CIT-A by his order dated 10th May 2016. Accordingly the AO show caused the assessee why penalty under section 271(1)(c) should not be imposed.
3.4 The assessee submitted that there was no specific evidence brought on record for making the impugned addition. As such the addition was made in arbitrary manner. Hence, the provision of section 271(1)(c) cannot be invoked.
3.5 However, the AO was of the view that the assessee has furnished inaccurate particular of income by not disallowing the proportionate interest expenses on account of diversion of interest bearing fund as well not offering the interest income eared form bank and M/s Tradewell Construction Corporation Pvt Ltd. Accordingly, the AO held the assessee as guilty for furnishing inaccurate particulars of income and levied the penalty of ₹ 1,45,456/- being hundred percent of the amount of tax sought to be evaded under the provisions of explanation 1 to section 271(1)(c) of the Act.
Aggrieved assessee preferred an appeal to the learned CIT-A, who also confirmed the order of the AO.
Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.
The learned AR before us submitted that the assessee has not furnished any inaccurate particulars of income in the manner as contemplated by the courts in the series of adjustments in the context of the provisions of section 271(1)© of the Act. Thus, there cannot be any penalty on the assessee.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the interest expenses for Rs. 2,63,480 was disallowed under the provisions of section 36(1)(iii) of the Act. Likewise addition was made on account difference in income declared viz-a-viz income as per TDS certificate. Further, the AO held the same as an act of furnishing inaccurate particular of income and levied the penalty of Rs. 1,45,456/- being 100% of the amount of tax sought to be evaded under the provisions of explanation 1 to section 271(1)(c) of the Act which came to be confirmed by the learned CIT-A.
8.1 The case of the learned AR for the assessee before us is that it has not furnished any inaccurate of particular of income. As such it claimed interest cost incurred on borrowing and part of same was disallowed by exercising the provision of section 36(1)(iii) of the Act. There was no allegation and evidences that amount of interest cost claimed was not genuine or not correct. Therefore question of furnishing inaccurate particular of does not arise. It is only a case of claim of the assessee not admitted by the AO by exercising certain provision of law and that too in arbitrary manner. As such the advance of interest free loan of Rs. 38 Lacs which was treated as diversion of interest bearing fund was made out of own funds available with the assessee to the tune of Rs. 25.92 crore but the revenue authority without going into the fact made the disallowances in arbitrary manner. Similarly, it was explained, the difference in income as compared to the TDS certificate on account of interest income, has been offered to tax in subsequent year but the revenue authority without considering the explanation made the addition and levied penalty in arbitrary manner.
8.2 We are in agreement with contention of the learned AR that in the process of verification of the income of the assessee, if the AO calculates different total income than the income declared by the assessee, then the difference between the income declared by assessee and assessed by the AO would not amount to furnishing of inaccurate particulars of income or concealment of income per say. Definitely this is not the intention of the legislator to treat every addition or disallowances in assessment proceeding as either concealment or furnishing inaccurate particular of the income and thereby levying the penalty. The phrase furnishing in accurate particulars of income has not been defined under the provision of the Act. However, we note that the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt Ltd reported in 189 taxman 322 has discussed the term inaccurate particulars as “the word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous”. Thus, to arrive at the conclusion that, the assessee has furnished inaccurate particulars of income, it has to be tested whether the detail furnished in the return of income is incorrect or erroneous or false. In other words the element of consciousness in furnishing inaccurate particulars of income coupled with circumstantial evidences should be present in the particular case. Unless, the characters of inaccurate particulars of income as discussed above are present in any particular case, the penalty provisions under section 271(1)(c) of the Act cannot be attracted.
8.3 Coming to the present case, we find that revenue authority nowhere brought any evidences on record that the information provided in the return of income are not true or false or not as per truth. There was no finding of the AO that amount of interest cost claimed by the assessee is not as per truth. As such, as per the AO some part of interest expense was not acceptable due to alleged diversion of borrowed fund which is nothing but mere assumption. Likewise amount of interest income on which certain parties has deducted tax at source and not offered to tax in the year under consideration but the assessee submitted that same was offered to tax in subsequent year not found be false by the Revenue authority.
8.4 Thus, in our considered view the provisions of 271(1)(c) of the Act cannot be attracted in the given facts and circumstances. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Hence the ground of appeal of the assessee is allowed
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 11/05/2022 at Ahmedabad.