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2017 (1) TMI 387 - ITAT AHMEDABAD

2017 (1) TMI 387 - ITAT AHMEDABAD - TMI - Penalty proceedings u/s 271(1)(c) - disallowance of interest as not eligible for deduction u/s 43B(e) - Held that:- There is no dispute to the fact that the amount of ₹ 44,19,194/- was paid towards interest towards preceding Asst. Years 2004-05 and 2005-06 at ₹ 21,10,019/- and ₹ 23,09,175/- respectively and this amount which was capitalized in the preceding years was transferred to construction account and proportionate amount was trans .....

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these circumstances assessee should have been visited with penalty u/s 271(1)(c) of the Act. In the given circumstances there has been a claim made by the assessee treating it to be a bona fide claim but not accepted by the Revenue authorities. We observe that Hon. Supreme Court in the case of CIT vs. Reliance Petro Product Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) has held that if the assessee had furnished all the details of its expenditure as well as income in the return, which were not f .....

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ish Borad, AM. For The Appellant : Shri James Kurien, Sr. DR For The Respondent : None ORDER PER Manish Borad, Accountant Member. This appeal of Revenue for Asst. Year 2007-08 is directed against the order of ld. CIT(A)-1, Surat, dated 24.10.2013 vide appeal No.CAS-1/TFR/216/2013-14, arising out of order u/s 271(1)(c) of the IT Act, 1961 (in short the Act) framed on 19.03.2012 by DCIT, CC-4, Surat. Following grounds have been raised by Revenue :- (1) On the facts of the circumstances of the case .....

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from the records are that assessee is a private limited company engaged in construction work. Return of income for Asst. Year 2007-08 showing NIL income was filed on 19.10.2007. The case was selected for scrutiny assessment and assessment order u/s 143(3) of the Act was framed on 15.12.2009 after disallowing interest expenses of ₹ 44,19,194/- and income assessed at Rs.NIL after setting off of brought forward losses. In the quantum appeal assessee could not succeed before ld. CIT(A) and the .....

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as not allowable to be claimed as deduction u/s 43B(e) of the Act which is specifically meant for interest paid to a scheduled bank. 5. On the other hand, ld. AR submitted that interest expenses of ₹ 44,19,194/- relates to preceding years which includes ₹ 21,10,019/- for Asst. Year 2004-05 and ₹ 23,09,175/- relevant to Asst. Year 2005-06 and these two amounts together at ₹ 44,19,194/- were shown in the balance sheet on the asset side. During the year under appeal this int .....

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out of the total interest amount of ₹ 44,19,194/- proportionate amount of 2192 sq.ft./11,219 sq.ft. if applied then interest expenses of ₹ 8,63,435/- stands to be claimed against profits and the remaining amount continues to be carried forward in succeeding years and would be booked to expenditure head as and when remaining area is sold. 6. Ld. AR further submitted that the ld. Assessing Officer has also accepted the fact that expenditure was allowable on mercantile basis and the sam .....

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n it has been mentioned that merely the information given in the return, which is not accepted by the ld. Assessing Officer, penalty u/s 271(1)(c) of the Act cannot be levied . 7. We have heard the rival contentions and perused the material placed on record. Sole grievance of the Revenue in this appeal is against the order of ld. CIT(A) deleting the penalty u/s 271(1)(c) of the Act levied by the Assessing Officer on account of disallowance of interest expenses of ₹ 44.19,194/- without cons .....

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d to the construction account. This amount of ₹ 44,19,194/- included interest paid to a Co-op. Bank at ₹ 21,10,019/- in Asst. Year 2004-05 and ₹ 23,01,175/- in Asst. Year 2005-06. In response to the query raised by ld. Assessing Officer it was specifically replied by the assessee that the total amount of ₹ 44,19,194/- has been transferred to construction account and the amount standing in the construction account has been apportioned on the basis of square feet areas sold .....

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e expenditure claimed was normal business expenditure on mercantile basis. However, Ld. Assessing Officer brought in provisions of section 43B of the Act in the picture and observed that as per the provisions of section 43B(e) of the Act deduction can be claimed for the interest paid to a scheduled bank which in the instant case pertains to a Co-op. Bank. Ld. Assessing Officer also ignored the fact that proportionate interest amount was only ₹ 8,63,435/- and not ₹ 44,19,194/-. He dis .....

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find that ld. CIT(A) has appreciated the facts that the claim made by assessee was bona fide in nature to the best of his knowledge but the same was not accepted by the Assessing Authority. Ld. Assessing Officer has not brought in any evidence to prove that there was concealment of income or furnishing of inaccurate particulars of income. Ld. CIT(A) followed the judgment of Hon. Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (supra) 10. Further continuing to our above dis .....

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interest expenditure claimed by the assessee as it was ₹ 8,63,435/- as submitted by assessee or ₹ 44,19,194/- as alleged by ld. Assessing Officer which was the figure taken by him from perusal of the construction account in which interest amount of ₹ 44,19,194/- was transferred and was not fully claimed in the year. We just confine to adjudicate as to whether in these circumstances assessee should have been visited with penalty u/s 271(1)(c) of the Act. In the given circumstan .....

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use assessee had claimed expenditure which was not accepted or not acceptable to Revenue that by itself would not attract a penalty u/s 271(1)(c) of the Act. 11. We further observe that similar view was taken by Hon. Supreme Court in the case of Price Waterhouse Coopers (P) Ltd. vs. CIT (2012) 25 taxmann.com 400 (SC) wherein Hon. Apex Court has observed as follows :- 17. Having heard learned counsel for the parties, we arc of the view that the facts of the case are rather peculiar and somewhat u .....

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computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate .....

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