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IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
. . , ,
BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA, AM
./I.T.A. No. 8869/Mum/2011
( / Assessment Year: 2003-04)
Dr. Bharti L. Chandan ITO-11(2)(2),
Prasad Nursing Home, Mumbai
Yogeshwar Dham, Chandanbag Road, /
Off. M. G. Road, Mulund (W), Vs.
Mumbai-400 080
. / . /PAN/GIR No. AAGPC 7157 C
( /Appellant) : ( / Respondent)
/ Appellant by : Shri Bhupendra Shah
/Respondent by : Shri Jivanlal Lavidiya
/ : 09.07.2014
Date of Hearing
Date of Order : 15.07.2014
/ O R D E R
Per Sanjay Arora, A. M.:
This is an Appeal by the Assessee directed against the Order by the Commissioner
of Income Tax (Appeals)-3, Mumbai (`CIT(A)' for short) dated 12.12.2011, confirming
the levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (`the Act' hereinafter) for
the assessment year (A.Y.) 2003-04 vide order dated 22.03.2010.
2. The brief facts of the case are that the assessee, a doctor (child specialist) by
profession, claimed interest at Rs.1,16,083/- in computation of her income arising to her
in exercise of her profession. The same was found to be on a loan of Rs.10 lacs from
HDFC Bank, which had been, upon receipt, transferred by her to a company by the name
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Dr. Bharti L. Chandan vs. ITO
`Sanjivani Diagnotic Hospital & Resarch Centre Pvt. Ltd.', a company in which she was
a director, as a loan. There was, accordingly, no nexus between the interest suffered and
claimed by the assessee and her professional activity or income arising there-from. The
same came to be disallowed in assessment, invoking section 14A, and which stood
confirmed in appeal. Though he did not exactly endorse the application of section 14A, in
the view of the first appellate authority, there was no business (professional) purpose in
extending the loan by the assessee to the company, which had perhaps been given on
interest-free basis to the borrower-company due to her directorial interest. The assessee
did not carry the matter before the tribunal.
Penalty proceedings, initiated at the conclusion of the assessment proceedings,
were proceeded with. The assessee had willfully sought to conceal and suppress her
income, and which would not have come to light but for her return having been subject to
the verification procedure under the Act. Explanation 1 to section 271(1)(c) stood clearly
attracted. Penalty at the minimum rate, working to Rs.36,568/-, was accordingly levied,
relying on the decision in the case of CIT vs. A. Sreenivasa Pai [2000] 242 ITR 29 (Ker).
In first appeal, the ld. CIT(A) found that both the Explanation 1(A) and Explanation 1(B)
to section 271(1)(c) stood attracted in the instant case. In-as-much as there was no nexus
between the interest paid and her professional income, the assessee's claim was a
deliberate attempt to suppress her professional income, and her case was without any
explanation, attracting Explanation 1(A). In-as-much as the assessee had been unable to
substantiate her explanation that the loan to the company was given with an intent to earn
interest, Explanation 1(B) would stand attracted. Penalty was, accordingly, confirmed,
relying on the decision in the case of UOI vs. Dharmendra Textile Processors [2008] 306
ITR 277 (SC). Aggrieved, the assessee is in second appeal.
3. We have heard the parties, and perused the material on record.
3.1 The law in the matter of levy of penalty u/s.271(1)(c) of the Act is trite. Penalty is
not automatic, and a plausible explanation saves penalty, the onus to furnish which
though is fully and squarely on the assessee, and toward which we may refer to a host of
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Dr. Bharti L. Chandan vs. ITO
decisions by the apex court, apart from the case law relied upon by the Revenue: CIT v.
Atul Mohan Bindal [2009] 317 ITR 1 (SC); Dharmendra Textile Processors (supra); K.P.
Madhusudhanan vs. CIT [2001] 251 ITR 99 (SC); B.A. Balasubramaniam and Bros. v.
CIT (1999) 236 ITR 977 (SC); Addl. CIT vs. Jeevan Lal Shah [1994] 205 ITR 244 (SC).
3.2 We have gone through the assessee's explanation furnished before the Assessing
Officer (A.O.) vide letter submitted on 25.03.2009 (copy on record), specifically called
for by the Bench during hearing. The same is sans any explanation on facts, and full of
decisions; in fact, even on other than `penalty'. The assessee has at no stage, either before
the authorities below or even before us, shown as to how and in what manner the said
decisions are applicable in the facts and circumstances of the case. There is, thus, in fact,
no explanation on facts, even as observed by the ld. CIT(A). The contention that the loan
to the company was given with an intent to earn interest, apart from being inconsistent
with the assessee's return, claiming interest against her professional receipt, was
furnished for the first time before the ld. CIT(A). Even so, it is without any substantiation.
No wonder, he finds the assessee's case as covered both under Explanation 1(A) and
Explanation 1(B) to s. 271(1)(c).
The main thrust of the assessee's arguments before us, placing reliance on the
decision in the case of CIT vs. Shivam Motors Pvt. Ltd. (in IT(Appeal) No. 88 of 2014
dated 05.05.2014 All.-HC)), was that in-as-much as no income stands generated from
the loan, section 14A, where-under the disallowance had been effected, would have no
application in the instant case. The argument is misleading, being contrary to the
assessee's own explanation that the amount advanced to the company was not by way of
share capital, but by way of a loan, which is interest bearing. Interest, if any, on the said
loan, would not be tax-exempt. There is, thus, no question of it yielding income not
forming part of the total income, so that in the absence of such income section 14A
disallowance would not hold. The question is not of the provision under which the
assessee's claim stood disallowed, but of the basis of the assessee's claim. The same
stands made u/s. 36(1)(iii), toward which no basis or explanation has been forthcoming
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Dr. Bharti L. Chandan vs. ITO
even up to before us. Again, even assuming it to be u/s.57(iii), for which though there is
no basis or material, there is nothing to substantiate that interest, though contracted for,
was declined or could not be given by the company due to its adverse financial position.
The first appellate authority in the quantum proceedings has, in fact, upon examining the
same, stated that it does not indicate that the company is not in a position to pay interest.
Even as the said finding assumes finality in view of it being not contested, the assessee
has not brought any material on record at any stage of the penalty proceedings to
challenge the same. Rather, the ld. Authorized Representative's (AR's) contention before
us that the loan was secured by the assessee for its onward transmission to the company
as it (the company), being in loss, was unable to raise loan on its own, refurbishes the
view that an accommodation by way of interest-free loan was sought to be extended to
the company by the assessee, a director and, as it appears, a principal stakeholder.
3.3 The assessee before us has placed reliance on the decision in the case of CIT v.
Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC). The same nowhere rewrites
the law (as explained by the apex court over a series of decisions referred to here-in-
before), or states of Explanation 1 to section 271(1)(c), wherein the penalty stands levied,
as no longer valid. Rather, to the extent it states that it all depends on the return (of
income), it is against the assessee in the facts and circumstances of the case. In fact, both
we as well as the ld. CIT(A) earlier have, in examination of the assessee's case from the
stand point of section 57(iii), travelled outside the assessee's return, only in a bid to see if
any case for any explanation is made out. The assessee's case, on the contrary, is covered
by the decisions as in the case of CIT vs. Zoom Communication (P.) Ltd. [2010] 327 ITR
510 (Del.), rendered after considering the decision in the case of Reliance Petroproducts
(P.) Ltd. (supra), and CIT vs. Escorts Finance Ltd. [2010] 328 ITR 44 (Del). We have
already observed that the decision in the case of Shivam Motors Pvt. Ltd. (supra) has no
application in the facts and circumstances of the present case.
4. We, accordingly, have no hesitation in, for the reasons afore-stated, upholding the
levy of penalty in the instant case. We decide accordingly.
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ITA No. 8869/Mum/2011 (A.Y. 2003-04)
Dr. Bharti L. Chandan vs. ITO
5. In the result, the assessee's appeal is dismissed.
Order pronounced in the open court on July 09, 2014 at the conclusion of the hearing.
Sd/- Sd/-
(I. P. Bansal) (Sanjay Arora)
/ Judicial Member / Accountant Member
Mumbai; Dated : 15.07.2014
. ../Roshani, Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT - concerned
5. , , / DR, ITAT, Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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