Agencies (India) Corporation, ... vs Department Of Income Tax
- CitationITA No. 2459/Ahd/2011
Ratio decidendi
The rule this decision rests on
The Tribunal's reasoning rests on the following principles: Where a penalty under section 271(1)(c) is sought to be levied on an addition confirmed in appeal, the penalty cannot be sustained where the assessing officer has not recorded any finding that the borrowed funds were used for non-business purposes, and where the disallowance of interest was made on a pure estimate basis without establishing a nexus between the loans raised and the advances given. Where the Revenue, in appeal against an order deleting a penalty, brings no contrary binding decision and does not controvert the findings of the first appellate authority, the first appellate authority's deletion of the penalty, grounded on those findings and on the authorities it relied upon, is not to be interfered with.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Income-tax Officer, Agencies (India) Ward-11(4), Corporation, 75, New Cloth Ahmedabad Vs Market, (Appellant) O/s Raipur Gate, Ahmedabad-380002 (Respondent) PAN: AADFA 2955 K
Revenue by: Shri M.K. Singh, Sr. D.R. Assessee by: Shri Gaurav Nahta, A.R.
Date of hearing : 13-03-2015 Date of pronouncement : 20-03-2015
आदे श/ORDER
PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:-
This is the Revenue's appeal against the order of Ld. CIT(A)-XVI, Ahmedabad dated 22-07-2011 for A.Y. 2005-06.
2. The relevant facts as culled out from the material on record are as under.
3. Assessee is a partnership firm stated to be engaged in the business of trading in dyes and chemicals. Assessee filed its return of income for I.T.A No. 2459/Ahd/2011 A.Y. 2005-06 Page No 2 ITO vs. Agencies (India) Corporation A.Y. 2005-06 on 30-11-2005 declaring total income of Rs. 29,520/-. The case was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) vide order dated 24-12-2007 and the total income was determined at Rs. 16,87,350/- by inter alia making various additions including disallowance of interest expenses of Rs. 16,04,717/-. Against the quantum addition made by AO, Assessee preferred appeal before CIT(A) who granted partial relief to the assessee and restricted the interest disallowance to Rs. 8,73,700/-. On the aforesaid disallowance confirmed by CIT(A), AO vide order dated 23-03-2010 levied penalty of Rs. 3,19,910/- u/s. 271(1)(c) of the Act. Aggrieved by the aforesaid penalty levied by AO, Assessee carried the matter before CIT(A) who vide order dated 22-07-11 deleted the penalty. Aggrieved by the aforesaid order of CIT(A), Revenue is now in appeal before us and has raised following ground:-
"1. The Ld. CIT(A) erred in law and on facts in deleting the penalty of Rs. 3,19,910/- levied u/s. 271(1)(c) of the Act."
4. Before us, Ld. DR submitted that when the partial disallowance on account of interest has been confirmed by Ld. CIT(A) then in that case proportionate penalty should be confirmed. Ld. AR on the other hand submitted that Assessee had furnished the necessary explanation and had not furnished any inaccurate particulars of income. He further submitted that merely because the claim of assessee has not been accepted that by itself would not attract penalty u/s. 271(1)(c). He thus supported the order of CIT(A).
5. We have heard the rival submission and perused the material on record. In the present case disallowance of interest of Rs. 16,04,717/- was made by AO which was restricted to Rs. 8,73,700/- by CIT(A). On the addition confirmed by CIT(A), penalty u/s. 271(1)(c) has been levied by I.T.A No. 2459/Ahd/2011 A.Y. 2005-06 Page No 3 ITO vs. Agencies (India) Corporation AO. We find that CIT(A) while deleting the penalty u/s. 271(1)(c) had noted that there is no finding of the AO about the loan funds raised being used for non-business purposes and has further noted that AO had not disallowed the interest expenses by establishing nexus with the loan raised to the advances given but made the disallowances on pure estimate basis. CIT(A) while deleting the additions had also relied on the decision of Hon'ble Gujarat High Court in the case of Subhash Trading Company 221 ITR 110 (Guj) and the decision of Amhedabad Tribunal in the case of Suren Arvindbhai Vakil vs. ITO 137 TTJ (Ahd) 613. Before us, Revenue has not brought any contrary binding decision in its support nor could controvert the findings of CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of Ld. CIT(A) and thus this ground of Revenue is dismissed.
6. Thus, the appeal of the Revenue is dismissed.
Order pronounced in open court on the date mentioned hereinabove at caption page
Sd/- Sd/-
(MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 20/03/2015 ak
आदे श क ूितिल प अमे षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद
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