M/S CAPRI DEVELOPERS PVT. LTD.,CHANDIGARH vs. ACIT, C-4(1), CHANDIGARH

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against

the order dated 19.12.2017 of the Commissioner of Income Tax(A)-2,

Chandigarh [hereinafter referred to as ‘CIT(A)’] agitating the

confirmation of penalty levied by the Assessing officer u/s

271(1)(c) of the Act

impugned penalty observing that the assessee had wrongly claimed

deduction of interest u/s 24(b) of the Income-tax Act, 1961 (in short

'the Act'). He observed that deduction u/s 24(b) of the Act was

allowable relating to the interest expenditure incurred on the amount

ITA No. 200/Chd/2018- M/s Capri Developers Pvt Ltd, Chandigarh 2

borrowed for construction / repairs etc. of the property, income from

which is assessable under the head ‘income from house property’.

However, the assessee company in this case was involved in the

business of real estate. The rental income was returned as the main

business income and, hence, the loan taken was for business

purposes. He, therefore, denied the deduction u/s 24(b) of the Act

and simultaneously initiated penalty proceedings u/s 271(1)(c) of the

Act and levied the impugned penalty, which has been further

confirmed by the Ld. CIT(A).

assumed that the earning of rental income was the business income of

the assessee even then the interest expenditure incurred by the

assessee in relation to the earning of the rental income was

otherwise allowable as an expenditure u/s 36(i)(iii) of the Act. He

has further submitted that though the claim of the assessee of the

deduction u/s 24(b) of the Act was denied by the authorities in

quantum assessment proceedings, however, it was not a case of

furnishing of inaccurate particulars of income or concealment of

income. That the assessee under bonafide belief wrongly claimed

deduction u/s 24(b) whereas the assessee otherwise was entitled to

claim deduction as business expenditure.

lower authorities.

assessee, we find that it is not a fit case for levy of penalty u/s

ITA No. 200/Chd/2018- M/s Capri Developers Pvt Ltd, Chandigarh 3

271(1)(c) of the Act. Therefore, the penalty imposed by the lower authorities is hereby ordered to be deleted.

In the result, the appeal of the assessee stands allowed. Order pronounced in the Open Court on 14.8.2018

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 14. 08.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR