DCIT 8(3)(2), MUMBAI vs. VADINAR PROPERTIES LTD, MUMBAI

The Ld.CIT(A)'s order is contrary to law and on facts and deserves to be set aside and A.O's order may be restored.

The appellant craves leave to amend or alter any ground or add a new ground that may be necessary.” The learned D.R. for Revenue was heard in support of the grounds raised and placed strong reliance on the order of the AO levying penalty under section 271(1)(c) of the Act. 3.2 Per contra, the learned A.R. of the assessee supported the impugned order of the learned CIT(A) deleting the penalty levied under section 271(1)(c) of the Act for A.Y. 2010-11 in the case on hand as being in order. 3.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. On a perusal of the impugned order, it is seen that the learned CIT(A) has deleted the penalty of `22,41,232/- holding as under at para 3.3 thereof: - “3.3 A reading of the penalty order itself as discussed above, clearly shows that there was interest expenses debited against Income from House Property, however, it was found that the figure for the entire interest payment, part of which was related to funds utilized for construction of Phase. II of Township, which being still under construction, thus did not belong to income earned from House Property in the F.Y. relevant to A.Y. 2010-11, the subject matter of the appeal. It is also noted that vide letter 30.07.2012, the assessee submitted in writing the facts and admitted the mistake that an amount of Rs.65,93,798/- has been claimed in the year, though the same was not allowable expenditure in the instant A.Y. The A.O. has passed the order on 31.07.2013 i.e. almost a year later than submission of this letter of assessee before him. Though in the penalty order, the A.O. has stated that details of expenditure claimed are not substantiated and then no evidence of genuineness of these expenses were furnished, the fact remains that the A.O. has also not brought any finding on record to M/s. Vadinar Properties Ltd prove that the expenses were not genuine and not substantiated. The undisputed fact remains that A.O. has not given reason to support his statement and then even if these expenses were found as not genuine for the reasons they claim was not made during the period relevant to A.Y. 2010-11, as assessee gave the reasoning that it technically belonged to later years, no cognizance of A.O.'s unsupported statement can be taken in the case. The A.O. has simply added this amount of Rs.65,93,798/-, which was already offered during the course of assessment proceedings itself by the appellant. On these given facts, when the figure of interest expenses was duly disclosed coupled with the fact that the disallowable interest amounting to Rs.65,93,798/- out of the total interest payment of Rs.8,89,72,101/- was also disclosed by the appellant only; by submitting their letter dt.30.07.2012 and same has resulted into enhanced assessed income, the appellant cannot be said to have furnished wrong particulars or inaccurate particulars of having concealed particulars or concealed the income. In fact by making admission on their own, they have offered enhanced income to be taxed in the F.Y. relevant to A.Y. 2010-11. In view of this where income has been assessed at a enhanced figure, that too on account of assessee's submission only during the course of assessment proceedings itself, which the A.O. has not been able to decipher, the appellant cannot be found fault with as per the provisions of sec.271(i)(c) and hence, the penalty levied u/s.271(1)(c) amounting to Rs. 22,41,232/- being sustainable, is deleted herewith. Ground No.1 is allowed.” 3.3.2 From a careful perusal of the finding of the learned CIT(A) in the impugned order and the contentions of the AO in the order levying penalty under section 271(1)(c) of the Act, it is evidently clear that interest expenses were debited against ‘income from house property’. It is seen that the assessee vide letter dated 30.07.2012, submitted in the course of assessment proceedings, had brought to the notice of the AO that on rechecking the computation of income and details of interest payments it found that the figure of interest payment includes interest payment of `49,39,298/- and loan processing fee of `16,54,500/- were related to the loan utilized for Phase-II of Township, which was still under construction in the year under consideration, did not pertain to the ‘income from house property’ earned in the year under consideration. The assessee thereby suo moto admitted the mistake committed by it that an amount of `65,93,798/- has been claimed in this year which was not allowable expenditure and enhanced its income accordingly. We find from the record that the order of assessment for the year under consideration was passed M/s. Vadinar Properties Ltd almost six months later on 18.01.2013. Though the AO contends that the genuineness or details of expenditure claimed are not substantiated, we find that the AO has not brought on record any material evidence to prove his contention that the aforesaid expenses were not genuine and not substantiated. In our view, the facts on record indicate that the AO has merely disallowed this amount of `65,93,798/- which was already disclosed by the assessee suo moto vide its letter dated 31.07.2012 thereby enhancing its income for A.Y. 2010-11 in the course of assessment proceedings. In this factual matrix, when all the relevant details were placed on record suo moto by the assessee on this issue vide letter dated 30.07.2012 resulting in enhancing its income for A.Y. 2010-11, in our considered opinion, the assessee cannot be said to have furnished inaccurate particulars of income or concealed particulars of income, in terms of the provisions of section 271(1)(c) of the Act. In that view of the matter, we uphold the order of the learned CIT(A) holding that the penalty under section 271(1)(c) of the Act levied by the AO to be unsustainable and in deleting the same. We hold and direct accordingly. 2.3.2 In the decision of the Hon'ble Apex Court in the case of Mak Data P. Ltd. (2013) 358 ITR 593 (SC), relied on by Revenue, the Hon'ble Court while considering the provisions of Explanation 1 to section 271(1)(c) of the Act observed that the general principles of law in respect of penalty for concealment of income, does not grant the assessee immunity from penalty on account of surrender or voluntary disclosure of income. As per the provisions of Explanation 1 to section 271(1)(c) of the Act, the question is whether the assessee has offered any explanation for concealment of income or furnishing of inaccurate particulars of income. In the case on hand, we find that this requirement laid down by the Hon'ble Apex Court has been met by the assessee. As observed by the learned CIT(A), the assessee’s explanation by submitting its letter dated 30.07.2012 suo moto withdrawing its claim for interest expenses to the extent of `65,93,798/-, mistakenly claimed in its computation of income, resulting in enhanced income being offered for A.Y. 2010-11; well before completion of assessment order on 18.01.2013 proves that assessee cannot be said to have furnished