INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B": NEW DELHI
BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 1574/Del/2017
(Assessment Year: 2012-13)
Chahat Exim Pvt. Ltd, Vs. ACIT,
A-113, Safdurjung Enclave, Circle-6(1),
New Delhi New Delhi
PAN: AACCC5747R
(Appellant) (Respondent)
Assessee by : Shri Raj Kumar, CA
Revenue by: Shri Surendra Meena, Sr. DR
Date of Hearing 08/08/2019
Date of pronouncement 06/11/2019
ORDER
PER PRASHANT MAHARISHI, A. M.
1. This is an appeal filed by the assessee against the order of the ld CIT(A)-2,
New Delhi dated 30.12.2016 for the Assessment Year 2012-13, confirming
the penalty of Rs. 723293/- levied by the ld ACIT u/s 271(1)(c) of the Act for
Assessment Year 2012-13.
2. Briefly stated the facts the shows that the assessee filed return of income on
20.09.2012 for an income of Rs. 6094270/-. Assessment u/s 143(3) was
made on 23.02.2015, wherein, disallowance of interest expenditure of Rs.
2340758/- was made. The penalty was also initiated u/s 271(1)(c) for
concealing/ furnishing inaccurate particulars of income.
3. The ld AO disallowed the interest for the reason that the assessee has taken
unsecured loan of Rs. 7.20 crores from the sister concern. This loan was
utilized for purchase of a property. Interest of Rs. 2340758/- was incurred
and the assessee was asked to explain the business expediency of the above
interest payment. AO reflected explanation of Assessee and disallowed the
interest. The ld AO treated it as concealment of income and furnishing of
inaccurate particulars of income at the time of initiation of penalty. The ld
AO levied the penalty of Rs. 723293/- holding that the assessee has
furnished inaccurate particulars of its income.
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Chahat Exim Pvt. Ltd Vs ACIT,
ITA No. 1574/Del/2017
(Assessment Year: 2012-13)
4. The order was challenged. The ld CIT(A) also confirmed the order of the ld
AO vide para No. 3.2.5 of his order as under:-
"3.2.5 It is evident that had the case of the appellant not been taken up
for scrutiny, the ineligible claim of expenses would have escaped
assessment. As only a few cases are taken up for scrutiny, therefore,
with the hope that its return may not come under scrutiny and may
simply processed u/s 143(1), the assessee can venture to give wrong
information. No satisfactory explanation has been filed by the appellant
on the inaccurate furnishing of particulars of income. The appellant has
failed to prove that there was no fraud or neglect in filing the correct
return of income. One cannot forget that the State depends upon the
revenue out of the tax collected by the department. Section 271 (l)(c) has
to be strictly applied in the larger interest of discipline in filing correct
returns by assessees. The view has to be kept in mind that penalty
provisions are not criminal and do not require culpable mens rea. The
judgements of various Hon'ble Courts relied upon by the appellant are
not applicable to the facts of the appellant's case. For instance, in the
case of CIT Vs Reliance Petro Products (P) Ltd. (2010) 322 ITR / T*? SC
/relied upon by the appellant the issue under consideration was
entirely different, that of claim of interest expenditure on loan taken by
the assessee, which was an investment company, for purchase of
shares. The assessee had in its return of income itself disallowed
expenditure of Rs.28.77 lacs u/s 14A of the Act. In the case of the
appellant, the interest has been claimed on unsecured loan which has
been utilized for non business purposes and the same has been
conceded by the appellant in as much as it has not filed any appeal
against the disallowance made in the assessment order. In view of the
above factual and legal position, the AO is held to be fully justified in
imposing the penalty of Rs.7,23,293/-u/s 271(l)(c) of the I.T. Act. Both
the grounds of appeal are dismissed."
5. The assessee aggrieved with that has preferred this appeal.
6. The ld AR stated that penalty cannot be levied in the present case on
technical ground. He further raised the following additional grounds of
appeal:-
"1. That the following additional grounds be please admitted and
adjudicated:-Additional Ground - 1
That under the facts and circumstances, the penalty proceedings are
vitiated and unsustainable in law, more so, as the penalty notice
issued is vague and non communicable as to under which limb the
penalty proceedings u/s.271(l)(c) have been initiated i.e. whether for
concealment of income or for furnishing inaccurate particulars of such
income.
Additional Ground - 2
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Chahat Exim Pvt. Ltd Vs ACIT,
ITA No. 1574/Del/2017
(Assessment Year: 2012-13)
That under the facts and circumstances the initiation of penalty vide
asstt. order is also vague since initiated as under which makes the
initiation illegal and unsustainable in law:-
"Therefore, penalty proceedings u/s.271(l)(c) are being initiated
separately for furnishing inaccurate particulars of income /
concealment of income".
2. That the above issues stands covered in the ground already taken,
however to do away with any controversy, the specific grounds on
these issues are preferred by way of additional grounds.
3. That the issues raised are the pure legal issues which goes to the root
of the matter and all facts and material required for the these grounds
are already available on record.
4. That such legal issues where facts exists on record and which issues
goes to the root of the matter can be taken as additional grounds at any
stage of proceeding and even before Hon'ble ITAT for the 1st time. The
ratios of following authorities squarely applies in support of this
petition:-
NATIONAL THERMAL POWER COMPANY LTD. 229ITR 383 (SC)
CIT VS. SIN IT GAD TECHNICAL EDUCATION SOCIETY 397 ITR 344
(SC) GEDORE TOOLS PVT. LTD., 238 ITR 268 (DEL.)
5. That no prejudice will cause to revenue by admitting these grounds,
since, the revenue will be having a proper and reasonable opportunity
of being heard on these issues.
6. That in the absence of admission of above grounds, the assessee may
suffer irreparable loss."
7. The ld DR vehemently supported the order of the lower authorities. With
respect to the additional ground he submitted that no such ground has
been taken before the lower authorities.
8. We have carefully considered the rival contention. The additional ground
raised by the Assessee is purely technical and legal in nature. It also goes
to the root of the matter therefore, same is admitted.
9. We have heard the parties. On perusal of the order it is apparent that at the
assessment stage the disallowance of Rs. 2340758/- out of interest
expenditure was made. The satisfaction recorded by the ld Assessing Officer
while initiating penalty proceedings u/s 271(1)(c) of the Act, he noted that
he is satisfied that the Assessee has furnished inaccurate particulars of
income/ concealed its income by filing inaccurate particulars of income.
Further, as per the penalty order in para No. 3, he noted that since the
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Chahat Exim Pvt. Ltd Vs ACIT,
ITA No. 1574/Del/2017
(Assessment Year: 2012-13)
above addition were treated as concealed income and inaccurate particulars
of income, penalty proceedings were initiated. In para No. 6 of penalty order
he noted that Assessee has furnished inaccurate particular of its income to
the extent of Rs. 2340758/-. In para no. 7 he also held that "I am of the
opinion that the Assessee has not furnished accurate particulars of its
income to the extent of Rs. 2340758/-. Hence, I have satisfied that this is a
fit case for imposition of penalty for furnishing inaccurate particulars in
respect of its income amounting to Rs. 2340758/- as per provision of
section 271(1)(c)." Therefore, it is apparent that in the assessment order AO
did not invoke anyone of the twin charges prescribed u/s 271(1)(c).
However, he levied penalty for furnishing inaccurate particulars of income.
Therefore, it is apparent that Assessee was not made aware of specific
charge against him but he was invited with a penalty for furnishing
inaccurate particulars of its income. Thus, the issue is squarely covered by
the decision of the Hon'ble Karnataka High Court in 359 ITR 565 in favour
of the Assessee. Accordingly, the penalty levied by the ld Assessing Officer
cannot be sustained.
10. Even otherwise on the merits, it is apparent that Assessee is engaged in real
estate business as mentioned in para No. 3.1 of the assessment order. The
Assessee has acquired a property and same was utilized for the business of
the Assessee. The borrowing was made of Rs. 4 crores was utilized for
acquiring the plot. The Assessee did not deny that at that particular time it
was an unauthorized area where the construction of commercial assets was
not permitted. Formal sale deed was also not registered. But it cannot be
denied that Assessee has furnished an explanation which was not found to
be incorrect. The ld AO has disallowed the interest expenditure for the
reason that impugned property for which the money was utilized is just
situated adjacent to the resident of the director. Thus, the expenditure of
interest was disallowed. But mere disallowance of expenditure cannot result
into penalty. The explanation of the Assessee was not found false. Therefore,
even on the merits the penalty u/s 271(1)(c) of the Act cannot be levied.
Mere not filing of appeal against the impugned disallowance also cannot go
against the assessee. There may be 101 reasons with assessee to not to
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Chahat Exim Pvt. Ltd Vs ACIT,
ITA No. 1574/Del/2017
(Assessment Year: 2012-13)
agitate the issue of disallowance in further appeal. But it cannot be held
that when appeal is not filed assessee is mandatorily invited with penalty
u/s 271(1)(c) of the Act.
11. Accordingly, we allow all the grounds of appeal of the Assessee, reverse the
finding of the ld CIT(A) and direct the ld AO to delete the impugned penalty.
12. In the result appeal of the Assessee is allowed.
Order pronounced in the open court on 06/11/2019.
-Sd/- -Sd/-
(SUCHITRA KAMBLE) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 06/11/2019
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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