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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI AMIT SHUKLA
आदेश ORDER अिमत शु�ला, �या. स.: PER AMIT SHUKLA, JM:
The aforesaid appeal has been filed by the assessee against impugned order dated 21.05.2012 passed by CIT(A)-19, Mumbai, in relation to the penalty proceedings u/s 271(1)(c) for the assessment year 2008-09.
The assessee is mainly aggrieved by levy of penalty of Rs. 30,23,839/- on account of claim of deduction of Rs. 90,55,129/- on account of cost of improvement from short-term-capital-gain.
The brief facts of the case are that, the assessee claimed interest expenses of Rs. 90,55,129/- against short-term-capital-
2 M/s Gyanshankar Investments & Trading Co Pvt Ltd gain on sale of shares and mutual funds. In response to the show cause notice, the assessee submitted that the same is allowable as cost of acquisition u/s 48, as interest has been paid to the broker on account of delay of payment of purchase consideration which is directly related to purchase of shares. In support of this contention, assessee had relied upon the decision of Karnataka High Court in the case of CIT vs Sri Hariram Hotels (P) Limited, reported in 325 ITR 136. However, the Ld. AO disallowed the said claim of interest expenses on the ground that same is not allowable. In response to the show cause notice, in the penalty proceedings, assessee again filed a very detailed explanation/ submissions justifying the claim of deduction of interest of Rs. 90,55,129/- form short-term-capital-gain of Rs. 17,30,19,129/- on sale of shares on the strength of judicial decisions. However, the Ld. AO rejected the assessee’s contention and levied the penalty. In the first appeal, the Ld. CIT(A) too confirmed the said penalty after discussing various judicial decisions on laws relating to penalty.
Before us, the Ld. Counsel has submitted that assessee’s claim was based on certain judicial decisions and without pointing out any factual differences in the ratio of such decisions, the penalty should not be levied even if the assessee has not filed any appeal against the said disallowance, it does not mean that assessee’s claim was not bona fide, as it was based on various High Court decisions at the time of filing of return of income.
Whereas, the Ld. DR relied upon the order of the CIT(A).
After considering the rival submissions and on perusal of the relevant finding given in the impugned order, we find that penalty has been levied on account of claim of interest expenses paid to a broker on account of delay in payment of purchase while computing the short-term-capital-gain. At the time of making the claim, the assessee had referred to following various court
3 M/s Gyanshankar Investments & Trading Co Pvt Ltd decisions, wherein the interest on borrowing for purchase of shares were treated as part of cost while computing the capital gain on sale of shares :- CIT vs Shri Hariram Hotels Pvt Ltd 325 ITR 136 (Karn) CIT vs Maithreyi Pai 152 ITR 247 (Karn) CIT vs Mithlesh Kumari 92 ITR 9 Addl. CIT vs K S Gupta 119 ITR 372 Naozar Chenoy vs CIT 234 ITR 95 Thus assessee’s claim was well supported by the decisions of Karnataka High Court in the case of CIT vs Maithreyi Pai (152 ITR 147) and Sri Hariram Hotels (P) Limited (supra). It is not the case that the assessee had made any untenable claim in law or has furnished any inaccurate particulars of income. If the assessee’s claim at the time of filing of return of income was bona fide based on certain legal proposition, then it cannot be said that penalty is to be levied u/s 271(1)(c). Hon’ble Supreme Court in the case of Reliance Petro Products (reported in 322 ITR 158) has gone to the extent that, mere making of a claim, which is unsustainable in law would not amount to furnishing of inaccurate particulars of income. Thus, on these facts we hold that penalty levied by the AO and confirmed by the CIT(A) cannot be sustained and hence, penalty on this score stands deleted.
In the result, appeal of the assessee stands allowed. Order pronounced in the open court on 15th October, 2015.
Sd/- Sd/- (िड. क�नाकर राव) (अिमत शु�ला) लेखा सद�य �याईक सद�य (D. KARUNAKARA RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 15th October, 2015 ��त/Copy to:- 1) अपीलाथ� /The Appellant. 2) ��यथ� /The Respondent. 3) The CIT(A) -19, Mumbai.