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Shri Om Singh Malik 503-Patel Nagar, Muzaffarnagar Vs. ITO New Mandi, Ward-1(2), Muzaffarnagar.
July, 06th 2015


                   ITA No: 40,41/Del/2014
                    AY : - 2005-06,2006-07

 Shri Om Singh Malik            vs.    ITO
 503-Patel Nagar, New Mandi,           Ward-1(2),
 Muzaffarnagar                          Muzaffarnagar.

(Appellant)                       (Respondent)

                    ITA No: 42/Del/2014
                       AY : - 2005-06

 Shri Manish Malik               vs.    ITO
 503-Patel Nagar, New Mandi,           Ward-1(2),
 Muzaffarnagar                         Muzaffarnagar.

  (Appellant)                     (Respondent)

                 ITA No: 43/Del/2014
                      AY : - 2005-06

 Smt. Ranbiri Devi               vs.    ITO
 503-Patel Nagar, New Mandi,           Ward-2(3),
 Muzaffarnagar                         Muzaffarnagar.

(Appellant)                       (Respondent)

                 ITA No: 44/Del/2014
                      AY : - 2005-06

 Shri Ashish Malik              vs.     ITO
 503-Patel Nagar, New Mandi,           Ward1(2),
 Muzaffarnagar                         Muzaffarnagar.

(Appellant)                       (Respondent)
                                                         ITA Nos. 40 - 44/Del/2014

                       Appellant by    : Shri Sanjay Kumar Singhal, Advocate
                       Respondent by :Shri K.K. Jaiswal, Sr. DR
                       Date of hearing :01.6.2015
               Date of pronouncement :3.7.2015


        These five appeals by the assesses for the assessment year 2005-06 and

2006-07 are directed against the order of the CIT(A). Since identical issue is involved

in all these appeals, these are being disposed of with this consolidated order.

2.      The only issue in these appeals preferred by the assesees is with regard to

validity of penalty imposed u/s 271(1)© of the Act.      Ld. Counsel for the assessee

submitted that the penalty u/s 271(1)© was imposed for addition made on account

of disallowance of interest claimed as deduction as interest paid on borrowed capital

for the purpose of construction of House. He submitted that the AO made the

disallowance on the plea that the house itself was not complete during the relevant

assessment years 2005-06 and 2006-07 and therefore no deduction on account of

interest on borrowed capital could be allowed to the assessee. He submitted that the

assessments for the assessment year 2007-08 was framed on 21.12.2010 in scrutiny

assessment and the AO himself held that the construction of the property was

completed in this year and therefore the deduction claimed by the assessee for the

interest paid on the borrowed capital was allowable and accordingly allowed

deduction of amount representing 1/5 of disallowed amount on account of interest

paid on borrowed capital in earlier years. Ld. Counsel for the assessee filed a copy of

                                                         ITA Nos. 40 - 44/Del/2014

the assessment order in evidence of his submission. Ld. DR has opposed the

submission of the Ld. Counsel for the assessee. He submitted that the assessee has

made a wrong claim of deduction of interest amount on borrowed capital although

the house itself was not complete during the relevant assessment years. He

submitted that by claiming deduction of interest on borrowed capital wrongly the

assessee has inflated expenses to avoid incidence of tax as observed by the CIT(A)

while dismissing the appeal of the assessee on this ground. He referred the relevant

portion of the assessment order as well as the appellate order passed by the CIT(A)

in support of the case of the revenue. He relied on the order of the AO and CIT(A).

3.      I have considered the rival submissions and have perused the order of the

AO and the CIT(A). I find that the assesses have disclosed all material facts relevant

for their assessments at the time of original assessment before the AO itself. It is a

case of honest difference of opinion between the assessee and the revenue

regarding the correct assessment year of deduction on account of interest accrued

on borrowed capital. I find that the AO himself has allowed the deduction on

account of interest on borrowings from the bank in the assessment framed in

scrutiny assessment for the assessment year 2007-08 and has allowed 1/5 of such

interest accrued in the earlier years on account of interest paid on borrowed capital.

The assessee has raised the loan from the bank and the genuineness of the interest

accrued on such borrowings is not in dispute. The AO has rightly allowed the

deduction on account of interest on borrowed amount in the subsequent assessment

year 2007-08 when the construction of the property in question was completed.

Merely because the deduction of interest on borrowed capital was allowable as per

law in a different assessment year, as admitted by the AO, and the assessee has

                                                             ITA Nos. 40 - 44/Del/2014

made the claim in some other assessment year, it could not be said that the

assessee is guilty for concealment of income or for filing of inaccurate particulars of

income. In this view of the matter I hold that the penalty u/s 271(1)(c) could not be

sustained and is accordingly cancelled and the grounds of appeal of the assessee are

allowed in all the appeals before me.

4.       In the result all the appeals of the assesees are allowed.

         Order pronounced in the Open Court on 3.7.2015.


                                                    (G.C. GUPTA)
                                                   VICE PRESIDENT

Dated: the 3.7.2015

Copy of the Order forwarded to:

1.    Appellant
2.    Respondent
3.    CIT
4.    CIT(A)
5.    DR
6.    Guard File
                                                              By Order
                                                             Dy. Registrar

Sl.                   Description                   Date

 1.   Date of dictation by the Author             1.6.2015

 2.   Draft placed before the Dictating Member    1.6.2015

 3.   Draft placed before the Second Member

 4.   Draft approved by the Second Member

                                                 ITA Nos. 40 - 44/Del/2014

5.   Date of approved order comes to the Sr.

6.   Date of pronouncement of order

7.   Date of file sent to the Bench Clerk

8.   Date on which file goes to the Head Clerk

9.   Date of dispatch of order

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