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Income Tax Appellate Tribunal, “G” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Sandeep Gosain (JM)
O R D E R Per B.R. Baskaran (AM) :-
The appeal of the assessee is directed against the order dated 16.3.2012 passed by the learned CIT(A)-36, Mumbai and it relates to A.Y. 2005-06. Penalty of ` 91.46 lakhs levied by the Assessing Officer u/s. 271(1)(c) of the Act, having been confirmed by the learned CIT(A), the assessee has filed this appeal before us.
Facts relating to the case are stated in brief. The assessee is engaged in the business of share broking, trading in shares and securities. During the year under consideration there was no trading activity. The assessee had received only interest and miscellaneous income. During the year under consideration, the assessee had entered into one time settlement with the M/s Centurian bank for settling loan taken from it. The Assessing Officer noticed that the assessee has credited a sum of ` 9.23 crores to the capital reserve account. The Assessing Officer examined the details and took the view that the loan amount of ` 9.23 crores waived off by the bank is assessable as income of 2 Triumph Securities Ltd.
the assessee u/s. 41(1) of the Act. The AO also noticed that another concern named M/s Triumph Forex Services P Ltd had also waived a sum of Rs.8,36,711/-. Accordingly, he assessed both the amounts as income of the assessee u/s 41(1) of the Act. The assessing officer also stated in the assessment order that the penalty proceedings u/s 271(1)(c) of the Act is initiated for “furnishing inaccurate particulars of income”.
In the appellate proceedings, the learned CIT(A) appears to have taken the view that principal portion of the loan waived by the bank cannot be assessed u/s. 41(1) of the Act and only interest portion can be assessed. Accordingly, the learned CIT(A) restricted the addition to ` 2.49 crores in respect of loan amount waived by M/s Centurian Bank and to Rs.68,575/- in respect of loan waived by M/s Triumph Forex Services P Ltd. After than the Assessing Officer initiated the penalty proceedings u/s.271(1)(c) of the Act and levied penalty of ` 91.46 lakhs on the above said amount for “concealing the income”. The assessee challenged the penalty order by filing the appeal before the learned CIT(A) but could not succeed. Hence, the assessee has filed this appeal before us.
At the outset, the Ld A.R submitted that the assessing officer has initiated penalty proceedings for furnishing inaccurate particulars of income, but finally levied the penalty for concealing the income, i.e., he has initiated under one limb of sec. 271(1)(c) and levied penalty under another limb. He submitted that the said action of the AO is not permissible and hence the penalty order is liable to be quashed on this legal ground alone. In this regard, he placed reliance on the following case law:- (a) CIT Vs. Shri Samson Perinchery (ITA No.1154 of 2014 & others dated 05-01-2017)(Bom)
(b) Shri Samson Perinchery Vs. ACIT (ITA No.4625/M/2013 & Others dated 11.10.2013)(Mum-ITAT)
(c) M/s Dharni Developers Vs. ACIT (ITA No.1848 to 1851/Mum/2012 dated 07.01.2015)(Mum-ITAT).
3 Triumph Securities Ltd.
The Ld A.R further submitted that the assessee has paid the One time settlement amount as a lump sum and the bank does not segregate and specify as to how the payment made by the assessee were appropriated towards Principal amount and interest/charges. He submitted that the payments received by a bank would normally be appropriated towards interest portion and the remaining amount shall be appropriated towards principal portion. Accordingly he submitted that, in the absence of any particulars, it was not correct to presume that the amount paid by the assessee was adjusted towards Principal portion and accordingly interest portion was waived. Hence, in the absence of credible evidence, it cannot be said that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income. Accordingly he submitted that on merits also, the impugned penalty is liable to be quashed, since the addition confirmed by the Ld CIT(A) as well as by the Tribunal is a debatable one.
On the contrary, the ld D.R placed reliance on the decision rendered by Hon’ble Supreme Court in the case of MAK Data P Ltd Vs. CIT (2013)(358 ITR 593) and submitted that the burden is placed upon the assessee to offer proper explanations. He submitted that the explanation offered by the assessee was very vague. Accordingly he submitted that the Ld CIT(A) has rightly confirmed the penalty levied u/s 271(1)(c) of the Act.
We have heard rival contentions and perused the record. On merits, we notice that the co-ordinate bench of Tribunal, vide its order dated 18-09-2013 passed in has disposed of the quantum appeal confirming the addition of Rs.2.49 crores confirmed by the Ld CIT(A). The co- ordinate bench has also observed in paragraph 7 of its order that the Settlement Agreement entered between the assessee and the bank does not specify the principal amount and interest and other charges. It is the AO who has given bifurcation of the outstanding loan amount into Principal portion and interest portion.
4 Triumph Securities Ltd.
When the question of the adjustment of amount paid by the assessee came, the Ld CIT(A) has taken the view that the entire amount repaid by the assessee was adjusted towards Principal portion and accordingly took the view that the entire interest portion was waived. As rightly pointed out by Ld A.R, the view so taken by Ld CIT(A), which was also confirmed by the Tribunal, is not based on any record. In the normal circumstances, the bank would like to adjust the repayments first towards interest liability and then towards principal liability. Under this analogy, it is quite possible that the loan amount waived by the bank may consist of mainly principal portion. Hence the issue with regard to the quantum amount assessed u/s 41(1) of the Act would become a debatable one and on this count, the impugned penalty is liable to be quashed.
We have noticed that the AO has initiated penalty proceedings for “furnishing inaccurate particulars of income”, but finally levied the penalty for concealing the income. Under identical set of facts, the co-ordinate bench deleted the penalty in the case of Dharni Developers (supra) by following the below mentioned decisions:- (a) K.M. Bhatia (Quarry) Vs. CIT (193 ITR 379)(Guj) (b) CIT Vs. Lakhdir Lalji (1972)(85 ITR 77)(Guj) (c) CIT Vs. Manjunath Cotton and Ginning Factory (359 ITR 565)(Kar).
The co-ordinate bench has followed the decision of Manjunath Cotton and Ginning Factory (supra) to cancel the penalty levied in the case of Samson Perinchery (supra) on identical set of facts, i.e., the penalty was initiated under one limb of sec. 271(1)(c), but finally penalty was levied under another limb. The decision rendered by the co-ordinate bench in the case of Samson Perinchery (supra) has since been upheld by the Hon’ble Bombay High Court in the same case, referred supra.
5 Triumph Securities Ltd.
In view of the foregoing discussions, we are of the view that the penalty levied u/s 271(1)(c) cannot be sustained. Accordingly we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned penalty.
In the result, the appeal of the assessee is allowed.
Order has been pronounced in the Court on 6.3.2017.