M/S.M TITANIUM APARTMENTS PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1(2)(2), MUMBAI

This appeal has been filed by the assessee against the order dated 21.12.2017 passed by the Commissioner of Income Tax (Appeals)-2 (for short ‘the CIT(A), Mumbai, for the assessment year 2013-14, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the penalty order passed u/s 271 (1) (c) of the Income Tax Act, 1961 (for short the ‘Act’).

Brief facts of the case are that the assessee company filed its return of income for the assessment year under consideration declaring loss of Rs. 24,67,729/-. The AO completed assessment u/s 143(3) of the Act determining the total income of Rs. 2,48,011/- after making disallowance of Rs. 27,15,573/-. Accordingly, the AO initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and levied penalty of Rs. 8,39,167/-. In the first appeal the Ld. CIT(A) upheld the action of the AO and confirmed the penalty. The assessee is in appeal before the Tribunal against the impugned order passed by the Ld. CIT(A). Assessment Year: 2013-14

The assessee has preferred the present appeal against the said order on the following effective grounds:- 1. “The Learned Commissioner of Income Tax (Appeals)- 2, Mumbai (hereafter referred to as CIT (A) erred in confirming the Penalty of Rs. 8,39,167/- levied by the Dy. CIt-1(2)(2) u/s 271 (1) (c) of the Income Tax Act, 1961. Your appellant submits on the facts and circumstances of the case and in law, the penalty u/s 271 (1) (c) of the Act is not warranted and ought to be cancelled. 2. The CIT (A) erred not appreciating the fact that only the national amount of interest on interest free Loan given by the appellant has been disallowed and that there is no case for concealment of income and/or furnishing of inaccurate particulars of income.

Before us the Ld. counsel for the assessee submitted that the assessee had debited interest expenses amounting to Rs. 3,95,60,663/- i.e. interest expenses of Rs. 3,32,59,380/- against house property income and Rs. 63,01,2825/- against interest income. The assessee had given interest free loan to M/s National Plywood Industries Ltd. amounting to Rs. 2,50,00,000/-. The AO made interest disallowance amounting to Rs. 27,15,753/- and added the said amount to the income of the assessee. On the basis of the said addition, the AO initiated proceedings u/s 271 (1) (c) and levied penalty of Rs. 8,39,167/- for furnishing inaccurate particulars of its income. The Ld. counsel further submitted that section 271 (1)(c) applies where the assessee has concealed the particulars of its income or furnished inaccurate particulars of such income. In the present case the AO has wrongly levied the penalty for furnishing inaccurate particulars of income because the assessee has neither furnished inaccurate particulars of income nor supplied erroneous details in its return of income. Since, the AO has not given any finding that the details supplied by the assessee are inaccurate or incorrect or erroneous, the Ld. CIT Assessment Year: 2013-14 (A) ought to have deleted the penalty levied by the AO. The Ld. counsel further pointed out the in the subsequent assessment year penalty proceedings were not initiated against the assessee for making identical claim. Relying on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158, the Ld. counsel submitted that mere making of claim which is not sustainable by itself would not amount to furnishing of inaccurate particulars of income by the assessee. The Ld. counsel accordingly submitted that the impugned order passed by the Ld. CIT (A) may be set aside and the penalty levied u/s 271 (1) (c) of the Act may be deleted.

On the other hand, the Ld. Departmental Representative (DR) relying on the findings of the Ld. CIT (A) submitted that since an incorrect claim for expenditure would amount to furnishing inaccurate particulars of income, the Ld. CIT (A) has rightly confirmed the penalty levied by the AO.

We have heard the rival submissions and also perused the material on record in the light of the rival contentions of the parties. The only grievance of the assessee is that the Ld. CIT (A) has wrongly confirmed the penalty levied u/s 271 (1) (c) of the Act by the AO. We notice that the AO has made addition of Rs. 27,15,753/- on the ground that the assessee had given interest free loan to M/s National Plywood Industries Ltd. As pointed out by the Ld. counsel, the AO can levy penalty u/s 271 (1) (c) of the Act for concealing the particulars or furnishing inaccurate particulars of such income. In the present case, the AO has imposed penalty for furnishing inaccurate particulars without establishing that the assessee has furnished inaccurate particulars of income. Further, as pointed out by the Ld. counsel, the assessee has claimed interest expenses amounting to Rs. 3,95,60,663/-. However, the AO made disallowance amounting to Rs. 27,15,753/- for the reason that the assessee had advanced interest free loan to M/s National Plywood Industries Ltd. The Ld. CIT (A) has mentioned in appellate order that the appellant admitted during the assessment proceedings that it has charged interest @ 13% from M/s National Assessment Year: 2013-14