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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI B.R. BASKARAN (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against order dated 03/10/2013 passed by Ld. CIT (Appeals)- 22, Mumbai for the assessment year 2008-2009, whereby the Ld. CIT(A) has upheld the penalty order dated 24/03/2011 passed by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’).
2. Brief facts of the case are that the assessee an individual having income from trade and shares and house property filed his return of income for the relevant assessment year declare in the total income of Rs. 8,18,664/-. However, the AO determined the total income of the assessee at Rs. 14,01,050/-, making interest disallowance, 2 Assessment Year: 2008-2009 disallowance u/s 14A and additions made u/s 23(1)(a) of the Act. The additions were confirmed by the CIT (A) in first appeal. The AO initiated penalty proceedings u/s 271 (1)(c) of the Act and levied penalty of Rs. 2,20,000/-. The penalty order was also confirmed by the Ld. CIT(A). Against the said order, the assessee is in appeal before the Tribunal raising the following effective grounds of appeal:
“Ground No. 1 : Levy of penalty amounting to Rs. 2,20,000/- under section 271(1)(c) R.W.S. 274 of the Income Tax Act, 1961 (“the Act”): 1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals)-22, Mumbai [“the CIT (A)”] in levying penalty of Rs. 2,20,000/- under section 271(1)(c) of the Act on the alleged ground that the Appellant had concealed the particulars of his income and had furnished inaccurate particulars of income.
The Appellant prays that the AO be directed to delete the penalty of Rs. 2,20,000/- under section 271(1)(c) of the Act”.
At the outset, the Ld. counsel for the assessee submitted the Tribunal has deleted all the additions in quantum appeal A.Y. 2008-09, vide order dated 15/12/2016. Since, the additions on the basis of the assessment order has been passed by AO and confirmed by the Ld. CIT (A) have been deleted by the Tribunal, the penalty order does not survive.
The Ld. Departmental Representative (DR) fairly admitted that the ITAT has deleted all the additions confirmed by the Ld. CIT (A) in quantum appeal.
3 Assessment Year: 2008-2009
We notice that the co-ordinate Bench has deleted the interest disallowance in quantum appeal holding as under:
“…. We have heard the rival contentions and perused the relevant material including cited case laws. The facts are not in dispute. A perusal of the ledger account of the lender shows that both debit and credits have taken place in the account during the year and finally the opening balance has been reduced from Rs. 31.87 Lacs to Rs. 20.85 Lacs at year end. Interest, although credited on the last date, but nevertheless accrues with the afflux of time. Due TDS has been paid thereupon and the lender, following cash system has duly reflected the same in her tax return and paid the taxes thereupon. The only question left to be decided is whether payment made to the lender can be presumed to be first applied towards satisfaction of interest or not. For this, the following general principal laid down by Apex Court towards appropriation of payment in the above-cited decision would be helpful:-
In view of what has been noticed hereinabove, we hold that the general rule of appropriation of payments towards a decretal amount is to be adjusted firstly strictly in accordance with the directions contained in the decree and in the absence of such direction, adjustments, be made firstly in payment of interest and costs and thereafter in payment of the principal amount. Such a principle is, however subject to one exception, i.e. that the parties may agree to the adjustment of the payment in any other manner despite the decree. As and when such an agreement is pleaded, the onus of proving is always upon the person pleading the agreement contrary to the general rules or terms of the decree schedule. The provisions of Sections 59 to 61 of the Contract Act are applicable in cases where a debtor owes several distinct debs to one person and do not deal with cases in which the principal and interest are due on a single debt.
Further, the lender, following cash system, has duly reflected the same in her tax return which shows suggest implied receipt of interest by the lender. Therefore, considering the overall fact and circumstances of the case, we are inclined to hold that the assessee would be entitled for deduction of impugned interest 4 Assessment Year: 2008-2009 expenditure. This Ground of assessee’s appeal is allowed. Ground No. 1 & 2 is disposed off.”
The co-ordinate Bench has deleted the disallowance u/s 14A by relying upon the order dated 14/09/2012 passed by the Mumbai Bench of the Tribunal in DCIT Vs. India Average Securities Ltd., and confirmed by the Hon’ble Bombay High Court. The relevant portion of the order reads as under:
...We have heard the rival contentions. A perusal of above cited orders rendered by Mumbai Tribunal and affirm by jurisdictional Hon’ble Bombay High Court support the argument of the AR that 14A disallowance is not called for shares which are held as stock- in- trade. It is nowhere in dispute that the shares are not held as stock-in-trade. A perusal of balance sheets reflects the shares as stock-in –trade only. Following the ratio of above cited decision, we are inclined to decide impugned disallowance u/s 14A and this ground of assessee’s appeal succeeds.
Additions made u/s 23(1)(a) has been deleted by the co-ordinate Bench by following the decision of Delhi Bench of the Tribunal passed in ACIT Vs. Prabha Sangi 139 ITD 504 and order of the co-ordinate Bench rendered in Premsudha Exports Pvt. Ltd. Vs. ACIT 10 ITD 158. The relevant portion of the order reads as under:
Therefore, respectfully following the above, we are inclined to hold that the assessee’s case falls u/s 23(1)(c) and accordingly, the assessee is eligible for ‘vacancy allowance’ for the period during which the property was not let out. Moreover, one more decisive factor to arrive at this conclusion is that fact that the possession of the properties was received only towards the end of the year and possession letter clearly indicate that the possession was for ‘interior decoration work’. Therefore, on the above peculiar facts and circumstances of the case, we are inclined to delete the 5 Assessment Year: 2008-2009 impugned addition and allow this ground of this appeal of the assessee.
Since, the additions have been deleted by the Tribunal in quantum appeal, the impugned order confirming penalty levied by the AO does not survive. We therefore, set aside the impugned order passed by the Ld. CIT (A) and direct the AO to delete the penalty.
In the result, appeal filed by the assessee for the assessment year 2008-2009 is allowed.