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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Assessee by .. Shri Mitesh Joshi, AR .. Revenue by Date of hearing .. 28-11-2016 .. Date of pronouncement 28-11-2016 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of CIT (A)-9, Mumbai in appeal No. CIT (A)-9/ACIT-5(3)/25/2012-13 dated 22-03-2013. The Assessment was framed by ACIT Circle-5(3), Mumbai for the A.Y. 2007-08 vide order dated 02- 12-2009 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty under dispute was levied by ACIT Circle-5(3) u/s 271 (1)(c) of the Act vide order dated 31-03-2012.
The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty u/s 271(1) (c) of the Act. For this assessee has raised following three grounds: -
“1. The appellant submits that the order passed by the learned Assistant Commissioner of Income Tax, (hereinafter referred to as “the Assessing Officer”) levying penalty u/s 271(1)(c), is illegal, null and void and bad in law and ought to be cancelled. 2. a) The appellant submits that it had filed full, true, correct and compete particulars of his income and has neither concealed its income and Assessing Officer erred in levying penalty u/s 271(1)(c). b) The appellant submits that the learned Commissioner of Income-tax (Appeals) erred in not appreciating the fact that the appellant’s claim was a bonafide claim and merely because appellant’s view has not been accepted by Act, the same cannot be a ground for levy of penalty.
The appellant submits that the Assessing Officer be directed to delete the penalty levied u/s 271(1)(c) of amounting to Rs. 6,15,000/-.”
3. Briefly stated facts are that the assessee claimed total interest payment against income from house property amounting to Rs. 1,94,19,167/- during the year under consideration. The AO noted from the break-up of interest payment given by the assessee, that out of the same a sum of Rs.1,34,34,549/- was attributable to non- residential premises of loan of HDFC Ltd. He noted that the balance of Rs. 59,84,610/- constitutes interest paid to the four directors of the company amounting to Rs. 59,84,610/- was utilized for repaid loans taken for acquisition of properties. The AO accordingly noted that out of the total unsecured loans taken from the directors and others amounting to Rs. 6.20 crores, a sum of Rs.1.46 crore was not utilized for the purpose of investment in acquiring the properties. Accordingly, he proposed disallowance of interest @ 9% on the sum of Rs.1.46 crore and an amount of Rs.12 lacs not utilized for acquisition of properties. He computed the total disallowance interest at Rs. 18,20,618/- on these two amounts. This addition was challenged before CIT(A) and CIT(A) confirmed the addition. No further appeal was preferred and addition was accepted. The AO started the penalty proceedings u/s 271 (1) (c) of the Act and levied the penalty for furnishing of inaccurate particulars of income u/s 271 (1)(c) of the Act. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of the AO by elaborate order. Aggrieved, now assessee is in second appeal before Tribunal.
Before us, the learned Counsel for the assessee filed complete details of loans taken and interest paid thereon, which are as under: -
Year ended Assessm Loan taken form Ivory Unsecured loan taken New loan New loan ent Year properties from directors and taken taken & others used for paying property tax 31-03-2004 2004-05 *Principle Rs.4,72,00,00/- +Interest Rs.96,75,540/- 31-03-2005 2005-06 - 5,86,00,000 17,04,460 12,00,000 31-03-2006 2006-07 - 5,88,00,000 2,00,000 2,00,000 31-03-2007 2007-08 - 6,20,00,000 32,00,000 32,00,000 Total 5,68,75,540 6,20,00,000 46,00,000
Loan taken from ivory Properties Rs.4,72,00,000/- and interest thereon Rs.96,75,540/- was repaid by taking loan from directors and others Rs.5,86,00,000/-. The learned counsel for the assessee made argument that the entire amount was used for purchase of property accept the amounts of Rs. 12 lacs used for payment to property tax in A.Y. 2005-06, amount of Rs. 2 lacs in A.Y. 2006-07 and an amount of Rs. 32 lacs in A.Y. 2007-08. The learned counsel for the assessee filed complete detail of loan utilized for payment of property tax amounting to Rs. 46 lacs. He stated that at the best interest on the same can be disallowed @ 9%, as assumed by the AO which comes to Rs.4,14,000/-. The learned Counsel for the assessee stated that this amounts were utilized for payment of property tax and not allowable as deduction from income from house property. He stated that interest on these amounts can be disallowed and penalty qua that only be levied. The learned Counsel for the assessee filed computation of working of penalty, which is as under: - Particulars Amount Loan taken in AY 2005-06 and used for payment of property tax 12,00,000 Loan taken in AY 2006-07 and used for payment of property tax 2,00,000 Loan taken in AY 2007-08 and used for payment of property tax 32,00,000 Total loan utilized for payment of property tax 46,00,000 Interest @ 9% 4,14,000 Tax @ 30% and surcharge @ 2% 1,26,684 Penalty @ 100% 1,26,684 ”
We have gone through the case records and argument of both these sides. We find from the facts of the case that the assessee’s Counsel has brought out the facts very clearly wherein loan amount utilized for payment of property tax and interest thereon, which was claimed by the assessee is liable to disallowance. When a query was put to learned Sr. DR as regards to the amounts utilized for the purchase/acquisition of properties except the amount of Rs.46 lacs, as computed by the assessee’s Counsel, he could not show that which amount has been utilized for acquisition of properties from which assessee earning rental income. The learned Sr. DR made only submission that the assessee has accepted the addition. We are of the view that the actual position in law is that merely because the assessee accepted the assessment that cannot automatically bring in levy of penalty. If the assessee offered an explanation the Revenue has to consider the acceptability of the explanation, and if the explanation found to be acceptable notwithstanding addition made is accepted
by the assessee as income, penalty may not be levied on this ground alone. In this case, the assessee has clearly demonstrated that entire unsecured loans except a sum of Rs.46 lacs has been utilized in acquisition of properties from where assessee is earning rental income. The learned Counsel for the assessee conceded that interest qua this unsecured loan of Rs. 46 lacs, which has been utilized for payment of Municipal Taxes, penalty can be sustained. We are in agreement with the learned Counsel for the assessee that except this unsecured loan of Rs.46 lacs, the entire loans were invested in acquisition of properties and interest has to be allowed as deduction. As regards to unsecured loan of Rs.46 lacs, which are utilized for Municipal taxes, the disallowance @ 9% interest comes to Rs.4,14,000/- and penalty u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income qua this amount should be restricted. Needless to say that this finding is for the purpose of penalty proceedings only and it will not help in quantum proceedings in any way because that has become final. This appeal of assessee is partly allowed. AO is directed accordingly.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 28-11-2016.