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Income Tax Appellate Tribunal, ‘B’ BENCH,
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
This appeal by the assessee is directed against the order dated 31-10-2013 passed by the Commissioner of Income Tax(Appeals), Kolkata for the assessment year 2000-01.
The assessee has raised the following grounds:- 1. The orders passed by the lower authorities are arbitrary, unreasoned, erroneous, invalid and bad in law.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in . confirming the levy of penalty u/s 271 (1 )( c) of the Income-tax Act, 1961, overlooking the fact that the appellant M/s. Twenty First Century Securities Ltd 1 assessee had furnished all the relevant informing relating to the assessment for the year under consideration.
3. On the facts and in the circumstances of the case, the learned CIT(A) erred in overlooking the fact that the impugned disallowance u/s 14A of the Act, had been made in respect of a debatable issue about whether for making disallowance under that section of the Act, only dividend yielding investments were to be considered or all the investments were to be taken into account and furthermore that the disallowance had been made purely on estimate basis.
4. On the facts and in the circumstances of the case, the learned CIT(A) erred in relying on the decision in the case of Chanchal Katiyal (All) 173 Taxman 71, without discussing how the said judgment is applicable to the present case.
5. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the levy of penalty of Rs.45,467/- u/s 271(I)(c) of the Act.
6. The appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.
3. The only effective ground amongst all other above to be decided in this appeal of assessee is as to whether the CIT-A is justified in confirming the impugned penalty imposed by the AO in the facts and circumstances of the case.
4. The brief facts relating to the issue are that in this case original assessment u/s 143(3) was completed on 28.3.03 determining total loss of Rs.1,07,84,480/- as against returned loss of Rs.1,65,74,9801-. The AO disallowed an amount of Rs.57,90,4921- being paid interest on loan utilized for acquisition of shares u/s14A of the Act.
5. In appeal, CIT(A) directed the AO to restrict the said disallowance to tune of Rs.48,62,000/- against which the Revenue filed an appeal before Tribunal and the Tribunal remanded the issue to AO and directed to examine whether M/s. Twenty First Century Securities Ltd 2 the investments were made out of borrowed funds or the assessee's own fund by its order dated 24.8.05 in ITA no.604/ Kol/2005.
6. According to AO, during the course of such proceedings, the Assessee contended, during the relevant F.Y, that it earned dividend of Rs.42,020/- on investment which was funded out of borrowed fund for Rs.6,94,685/- and filed details of the same. According to AO, the Assessee submitted that it has no objection in disallowing corresponding interest @17% i.e. Rs.1,18,096/-. The AO examined the details and passed the assessment order dt:24.11.06 u/s 254/143(3) wherein the AO disallowed Rs.1,18,096/- on account of interest paid on borrowed amount and revised the total loss at Rs.l,64,56,884/-.
7. Thereafter, the Penalty proceeding u/s 271(l)(c) was initiated by issuing a notice dt:24.11.06 u/s 271(1)(c) of the Act was issued. According to AO, the Assessee kept on seeking adjournments on one pretext or other, stating that they intend to engage a senior counsel for preparation of written submissions and requested to refix the case after two weeks time. The AO identified the case as time-barring and held the Assessee failed to defend the case, inspite of having availed many opportunities. Considering the same, the AO imposed penalty of Rs.45,467/- u/s 271(1)(c) of the Act.
8. Aggrieved by such penalty order, the assessee preferred an appeal before the CIT-A and contended that all the details involving investments and dividend earned were produced before M/s. Twenty First Century Securities Ltd 3 the AO along with expenses of interest and were disclosed in the P & L account. Further, disallowance of interest as made by the AO is on estimation basis and no penalty can be levied on the same. The assesse, further relied on the decision of Honourable Supreme Court the case of Prithipal Singh & Co reported in 249 ITR 670 which affirmed the principle laid down by the Honourable Punjab and Haryana High Court in the respect of the “word” as referred in the section 271(1)(c) of the act. The CIT-A after considering the submissions of the assessee confirmed the impugned penalty for the reason that the assessee could not furnish any explanation inspite of having availed many opportunities. The relevant findings of the CIT-A is reproduced hereunder:-
“3.3 I have examined the penalty order dt. 30.05.2007. I find that sufficient opportunity was given to the appellant on 2.1.2007 and 21.05.2007 ( a period of more than five and a half month) to explain all the above four issues which have now been raised before me by the A.R of the appellant. However, the appellant did not furnish any explanation before the AO. Reasons for not doing so could not be explained by the A.R of the appellant. For that reason alone, penalty imposed u/s. 271(1)( c) is upheld in view of the case of CIT Vs. Chanchal Katiyal (All) 173 Taxmann 71. Appeal is dismissed.”
Before us the assessee contends that the case of the assessee is covered by the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd reported in 322 ITR 158(SC) and reiterated the submissions as made before the CIT-A. The Ld. DR submits that the assessee has wrongly claimed an amount of Rs. 1,18,096/- as interest payment and he relied on the orders of the lower authorities. M/s. Twenty First Century Securities Ltd 4
Heard rival submissions and perused the material available on record. We find that the assessee filed return of income showing loss of Rs.1,65,74,980/-and thereafter, in pursuance of the order of Tribunal, the loss was revised at Rs.1,64,56,884/- and disallowed Rs.1,18,096/- towards interest paid on borrowed fund and the facts remains undisputed. We find from the original assessment order dt:28-03-03 that the AO show caused the assessee to explain why an amount of Rs.57,90,492/- found to be interest paid to the borrowed funds and accordingly the said amount was adjusted to the returned loss. Therefore, it is clear from the perusal of the record the AO revised only loss against the returned loss and the AO could not bring on record to show anything that supressed by the assessee in its return.
In this regard we may refer to the decision of Honourable Supreme Court supra and the facts therein are that the assessee therein filed return for the relevant assessment declaring loss of Rs. 26,54,554 and the determined the total income at Rs. 2,22,688, whereby, the addition in respect of interest expenditure was made. The AO initiated penalty proceedings under s. 271(1)(c) of the Act on account of concealment of income/furnishing of inaccurate particulars of income. The CIT-A deleted the said disallowance and the Tribunal and Hon’ble High Court upheld the order of CIT-A. Before the Honourable Supreme Court the assessee contended that the disallowance made by the AO was solely on the basis of a different view on the same set of facts and there was no concealment of income nor what any inaccurate particulars of such income furnished. The Honourable Supreme Court held that a mere making a claim which is not sustainable in law and will not amount to M/s. Twenty First Century Securities Ltd 5 concealment of income or furnishing inaccurate particulars. The relevant portion of which is reproduced herein below:
We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.
In the present case, the assessee filed the required evidence before the AO in original assessment proceedings wherein the interest amount to the extent of Rs.57,90,492/- was adjusted to the returned loss in the original assessment and thereafter, while giving effect to order of Tribunal, the AO made the disallowance of the interest paid on borrowed funds. Therefore, it is a clear the AO identified the amount of Rs.57,90,492/- as interest paid and on such amount the AO disallowed Rs.1,18,096/-which is a corresponding interest under section 14A treating the same as expenditure incurred on earning dividend of Rs.42,020/-. The CIT(A) did not consider the same as it clearly appearing in the original assessment order. Therefore, both the authorities did not consider the material evidence available on record in right perspective. We find that merely interest has been disallowed does not mean that the assessee has considered the income are filed the inaccurate particulars of income. We also find that there is no finding that any details furnished by the assessee in its return were found to be incorrect or false. Thus, the order of penalty is liable to be quashed. In our view that the assessee has offered explanation, which has been substantiated by way of material/evidences before the authorities, which is found to be bonafide relating to computation of total income. Therefore, no penalty in this regard M/s. Twenty First Century Securities Ltd 6 can be imposed. Therefore, in view of the discussion above, the penalty imposed and as confirmed by the CIT-A is hereby cancelled. Therefore, grounds raised by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed Order Pronounced in the Open Court on23rd September,2016