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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI AMARJIT SINGH, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 26.02.2016 passed by the Commissioner of Income Tax (Appeals)-53, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2010-11 wherein the penalty levied by the AO by virtue of order dated 27.06.2013 has been confirmed.
The assessee has raised the following grounds:-
ITA. No.2295/M/2016 A.Y. 2010-11
“1 The Ld. CIT(A) erred in confirming the action of the Assessing Officer of levying penalty us/ 271(1)(c) of Rs.3,64,309/-. 2. The CIT(A) further erred in this connection in holding that the appellant had furnished inaccurate particulars of its income by way of claiming deduction of interest on delayed payment of TDS amounting to Rs.10,71,814/ in its return of income. 3. The appellant craves leave to add to and/or amend and/or delete and/or modify and /or alter the aforesaid grounds of appeal as and when the occasion demands.
4. All the aforesaid grounds of appeal are independent, in the alternative & without prejudice to one another.” The brief facts of the case are that the assessee filed its return of 3. income for the A.Y. 2010-11 on 15.10.2010 declaring total income to the tune of Rs.3,78,45,556/-. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act, 1961 dated 31.12.2012 determining total income to the tune of Rs.3,89,98,804/- under the normal provisions of the Act as the taxability under the provision of Section 115JB of the Act was less than the taxability under normal provision of the Income-tax Act. The assessee company engaged in the business of building construction activity. During assessment proceeding, it was observed that the assessee company has paid the interest on delayed payment of tax deducted at source amounting to Rs.10,71,814/-. The said interest is not deductible u/s 40(a)(iii) of the Income Tax Act, 1961 as the interest u/s 139, 215, 217, 220(2), 234A, 234B, 234C is to be regarded as accretion to tax and cannot be allowed to be deducted. Therefore, the sum to the tune of Rs.10,71,814/- was disallowed and added to the income of the assessee. After giving notice, the penalty to the tune of Rs.3,64,309/-
ITA. No.2295/M/2016 A.Y. 2010-11 was levied by virtue of order dated 27.06.2013. Thereafter the assessee filed an appeal before the CIT(A) who confirmed the penalty order, therefore, the assessee filed the present appeal before us.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. In this case the assessee company paid the interest on delayed payment on TDS to the tune of Rs.10,71,814/-. The Assessing Officer treated the interest to be accretion to tax, therefore, the same was disallowed and accordingly the penalty was levied. At the very outset, The Ld. Representative of the assessee has argued that the case of the assessee duly been covered by the decision of the Hon’ble ITAT Mumbai Bench in the case of titled as M/s. Damask Infracon Pvt. Ltd. Vs. DCIT dated 25.01.2017. Therefore, no penalty is leviable in accordance with law. However, on the other hand, the Ld. Representative of the Department has refuted the said contentions. Before going further, it is necessary to advert the finding of the case relied by the Ld. Representative of the assessee i.e. ITA. No. 2296/M/2016 titled as M/s. Damask Infracon Pvt. Ltd. Vs. DCIT dated 25.01.2017. The relevant finding is hereby reproduced below as under:- “We have considered the submissions of the parties and perused the material available on record. Undisputedly, the addition on the basis of which penalty u/s 271(1)© has been imposed is on account of interest charged u/s 201(IA), claimed as deduction by the assessee. It is also not in dispute that the addition
ITA. No.2295/M/2016 A.Y. 2010-11 made by the Assessing Officer of the said amount, for whatever may be the reason, has been accepted by the assessee. However, the issue before us is, whether penalty u/s 271(1)(c) can be imposed merely on the basis of addition made by the Assessing Officer and accepted by the assessee. As could be seen from the order of the Assessing Officer the basis for disallowance of the interest u/s 201(1A), is it is a rate or tax as per section 40(a)(ii) of the Act, While coming to such conclusion, the Assessing Officer has observed that interest u/s 139,215,217,220(2), 234A, 234B and 234C is to be regarded as accretion to tax, hence, cannot be allowed as deduction. However, there is no reference to interest charged u/s 201(1A). We further fi9nd that in case of Arthur Anderson & Co. (supra), while considering the issue of re-opening of assessment arising out of deductibility of interest charged u/s 220(2) vis-à-vis section 40(a)(ii) of the Act, Hon’ble Jurisdictional High Court followed the decision of the Hon’ble Supreme Court in Harshad Shantilal Mehta Vs. Custodian, (1998 231 ITR 871 (SC) wherein it is held that the definition of tax u/s 2(43) does not include penalty or interest and set aside the notice issued for re- opening the assessment. Thus, in view of the aforesaid, decision of used u/s 40(a)(ii) would include interest charged u/s 201(1A) is not free from the doubt, hence, a debatable issue. Moreover, the explanation of the assessee that it claimed deduction of the interest paid u/s 201(1A) under a bonafied impression that such interest is compensatory in nature cannot be discarded outright, as in our view, whether such interest is compensatory or penal is a debatable issue. Moreover, there is nothing on record to suggest that the assessee has failed to disclose full particulars relating to TDS and its remittance to the Government account. Therefore, the assessee cannot be accused of concealing or furnishing inaccurate particulars of income. In the aforesaid view of the matter, we hold that imposition of penalty u/s 271 (1)(c) of the Act in the instant case is unjustified. Accordingly, we delete the same.”
Facts and circumstances of the present case is quite similar to the facts mentioned above, the penalty was levied on the basis of the addition on account of interest charge u/s 201(IA) claimed as deduction by the assessee. The Assessing Officer was of the view the ITA. No.2295/M/2016 A.Y. 2010-11 interest u/s 139, 215, 217, 220(2), 234A, 234B, 234C is to be regarded as accretion to tax , hence, is not be liable to be allowed as deduction. While passing the order, the Hon’ble ITAT has discussed the decision of the case titled as Arthur Anderson & CO Vs. ACIT, (2010) 190 taxmann.com 279 (Bom) and Harshad Shantilal Mehta Vs. Custodian (1998) 231 ITR 871 (SC), where it is held that the definition of tax u/s 2(43) of the Act does not include penalty or interest and set aside the notice issued for re-opening the assessment. Moreover this issue is debatable. The assessee claimed the interest. The interest is compensatory or penal in nature, is debatable issue. Disclosure is not in dispute. The assessee disclosed all the material facts before the AO and deposited the tax along with interest. Taking into account of all the facts and circumstances and by relying upon the order of Hon’ble ITAT in title as M/s. Damask Infracon Pvt. Ltd. Vs. DCIT dated 25.01.2017, we are of the view that the no penalty is leviable. Therefore, we delete the penalty.
In the result, the appeal filed by the assessee is hereby ordered to be allowed. Order pronounced in the open court on 17.01.2018 Sd/- Sd/- (RAJENDRA) (AMARJIT SINGH) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 17. 01. 2018
ITA. No.2295/M/2016 A.Y. 2010-11