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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI R. S. SYAL & SMT SUCHITRA KAMBLE
ORDER PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 31/7/2013 passed by CIT(A)-XXIV-New Delhi. 2. The grounds of appeal are as follows:-
“1. On the facts and in the circumstances of the case, the Ld.CIT(A) not justified in confirming penalty of Rs. 27,39,410/- imposed by the Assessing Officer u/s 271(1)(c) of the IT Act, 1961 whereas the addition made by the A.O and confirmed by the Ld.CIT(A) is due to disallowing entire expenses and also assed interest income as income from other sources.
The assessee filed its return of income declaring loss of Rs.51,19,900/- for the relevant Assessment Year 2007-08 on 14/5/2007. The assessee is a partnership concern consisting of two partners namely, M/s JRC Grid Engineers (P) Ltd. and M/s Chandna Developers (P) Ltd., a special purpose vehicle which came into existence on 28/12/2005 as partnership deed. As per deed, the firm is engaged in business of construction work, acquiring land, developing and constructing buildings on such land. During the period under consideration, the assessee entered into an agreement with Army Welfare Housing Organization (AWHO) for purchasing 110 acres of land and building the residential accommodation on that land for AWHO. For this purpose, as per the agreement, the assessee took advance of Rs. 13 crores from AWHO against the bank guarantee of Rs. 13.50 crores given by the assessee. The case was selected for scrutiny. During the course of assessment, the A.O noted that the assessee has debited Rs. 67,36,671/- on a/c of interest payment on advance of AWHO and other expenses against interest income of Rs. 26,43,583/- thereby computing a loss of Rs.52,35,797/-. During the course of assessment, the A.O also noted that the assessee filed 3 different balance sheets, and P & L account for the relevant period during the assessment proceedings. The A.O rejected the claim of interest expenditure on the ground that it was penal in nature and no TDS was deducted by the assessee before making the payment of interest to the AWHO. The A.O assessed the business income of the assessee at nil on the fact that the loss was not carried forward by the assessee and the book results were not reliable. The A.O also worked out a sum of Rs. 38.50 lacs as interest accrued on advance of Rs. 5,50 crores given to various persons. The A.O also assessed the interest income credited by the assessee in its P & L Account as “Income from other sources” instead of “Business Income” claimed by the assessee. The assessment was completed u/s 143(3) by the A.O vide order dated 31/12/2009. The addition was made on account of two heads i.e. interest on FD & undisclosed income. The Assessing Officer observed that as per documents filed by the assessee, the firm received Rs. 13 Crores on 4/9/2006 against which an interest of Rs. 69,95,774/- claimed as interest paid to AWHO @ 9.05. The assessee firm claimed that the rate of interest was 9.05% though it was nowhere mentioned in MOU. The assessee was asked to produce certificate of interest and as the assessee was not liable to deduct TDS on payment of interest. In response to above, no reply has been field by the assessee. In view of the above, the expense of Rs. 69,95,774/- debited to profit and loss account on account of interest paid was disallowed. The A.O also initiated penalty proceedings u/s 272(1)(c) of the IT Act for furnishing inaccurate particulars of its income by the assessee.
Aggrieved by the aforesaid additions/disallowances, the assessee filed an appeal before the CIT(A). The CIT (A) dismissed the appeal of the assessee. The CIT(A) upheld the action of the Assessing Officer in assessing the interest income of Rs. 26,43,583/- as income from other sources instead of claim of the assessee that of business income. However, the CIT(A) deleted the notional income of Rs. 38.50 Lacs computed by the Assessing Officer as interest on advances made by the assessee. Subsequently, order of the CIT(A) was upheld by the ITAT.
Meanwhile, the Assessing Officer issued a show cause notice under Section 271(1)(c) to the assessee for furnishing explanation regarding inaccurate particulars of income furnished by the assessee. In reply, the assessee submitted before the Assessing Officer that it has shown all the facts during the course of assessment proceedings and the Act of the assessee does not come within the purview of Section 271(1)(c) of the Act as disallowance of expenses does not amount to concealment. The Assessing Officer imposed the penalty of Rs. 27,39,410/-.
Aggrieved by the said order the assessee filed appeal before the CIT(A) who dismissed the appeal.
The Ld. AR submitted that the assessee has shown all the facts during the course of assessment proceedings and the Act of the assessee does not come within the purview of Section 271(1)(c) of the Act as disallowance of expenses does not amount to concealment.
The Ld. DR relied upon the orders of the Assessing Officer and that of the CIT(A).
We have heard both the parties and perused the record. In fact, the quantum appeal decided by the CIT(A) and by the ITAT has held that business expenditure to the extent of Rs. 11,42,700/- and other expenses incurred by the assessee for purchase of land and claimed as business expenditure are allowable subject to other provisions of the Act. The ITAT also allowed the interest of Rs. 67,36,671/- as business expenditure subject to the allowability under the provision of Section 40(a)(ia) of the Act. The imposition of penalty on the entire amount which was later on reduced by the CIT(A) and ITAT is not just and proper. All the documents were before the Assessing Officer during the Assessment proceedings. The claim of the assessee being particular income as business income does not amount to concealment. There is no concealment on part of assessee as per Section 271(1)(c) of the Act. Therefore, order of the CIT(A) and the Assessing Officer are set aside.
In result, appeal of the assessee is allowed.