M/S PREET LAND PROMOTERS & DEVELOPERS PVT. LTD.,MOHALI vs. DCIT, MOHALI

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ITA 677/CHANDI/2016Status: DisposedITAT Chandigarh11 December 2018AY 2009-103 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had a bonafide belief for claiming the set-off of interest income. It was not a fit case for penalty as every disallowance does not automatically attract penalty provisions.

What were the facts?

The assessee set off interest income from FDRs against project expenses, believing it was eligible. The Assessing Officer disallowed this, treating the interest as income from other sources and initiating penalty proceedings for claiming a wrong set-off.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable for a bonafide claim of set-off of interest income against project expenses.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

आदेश/Order

Per Annapurna Gupta, A.M.:

The present appeal has been preferred by the assessee against the order dated 07.03.2016 of the Commissioner of Income Tax(Appeals)-2, Chandigarh [hereinafter referred to as ‘CIT(A)’] agitating the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act').

2.

In this case, the Assessing officer during the assessment proceedings found that the assessee had set of interest income earned from the FDRs against the project expenses. He observed that the expenditure relating to the project was required to be capitalized and that the assessee was not entitled to set off the interest income against the property expenditure. He,

ITA No. 677-Chd-2016- M./s Preet Land Promoters & Developers Pvt.Ltd, Mohali 2

therefore, disallowed the aforesaid claim of the assessee treating the

interest income separately under the head ‘income from other sources’ and

allowed the assessee to carry forward the expenditure relating to the

project till the competition of the project. The Assessing officer initiated

penalty proceedings u/s 271(1)(c) of the Act for claiming wrong deduction

/ set off of expenditure and, thereby, levied the impugned penalty.

3.

The assessee unsuccessfully contested the appeal before the Ld.

CIT(A).

4.

Before us, Ld. Counsel for the assessee has invited our attention to

the para 6.2 of the order of the CIT(A) and submitted that, in fact, the

assessee had taken Over Draft limit from bank. The assessee incurred

interest expenditure on the utilization of the amount out of the said over

draft limit. The said amount was used for the purpose of project only. The

assessee to maintain the said over draft limit had to furnish security to the

bank in the shape of the FDR upon which interest income was earned. The

assessee was of the bonafide belief that the interest income earned was

eligible for set off against the expenditure including that one spent on the

overdraft limit. It has been pleaded that the aforesaid claim of the assessee

was a bonafide claim and there was no intention to evade the tax. The Ld.

Counsel has submitted that even otherwise non-allowance of set off of the

interest income would go to increasing the claimed expenditure which the

assessee otherwise would have been entitled to claim on offering income

from the project at the completion stage. He, therefore, has submitted that

the assessee had no intention to furnish the inaccurate particulars of

income or conceal its income.

ITA No. 677-Chd-2016- M./s Preet Land Promoters & Developers Pvt.Ltd, Mohali 3

5.

Considering the above submissions of the assessee , we are of the view that it is not a fit case for levy of penalty u/s 271(1)(c) of the Act as the assessee has proved his bonafide for the claim of the aforesaid set off of interest income. It has been held time and again that every disallowance

made by the Assessing officer does not suo moto attract penalty provisions. Considering the overall facts of the case, we are of the view, that it is not a fit case for levy of penalty u/s 271(1)(c) of the Act and the same is ordered to be deleted.

The appeal of the assessee is therefore, allowed.

Order dictated and pronounced in the Open Court immediately on completion of hearing.

Sd/- Sd/- (संजय गग� / SANJAY GARG) अ�नपूणा� गु�ता / ANNAPURNA GUPTA) �या�यक सद�य/ Judicial Member लेखा सद�य/ Accountant Member Dated : 11.12 .2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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