Power Drugs Pvt. Ltd., Chandigarh vs Department Of Income Tax

The ACIT, Vs M/s Power Drugs P.Ltd., Circle 3(1), # 2342, Sector 23-C, Chandigarh. Chandigarh.

PAN: AABCP7960J

(Appellant) (Respondent)

Appellant by : Shri Manjit Singh Respondent by : Shri Sunil Kumar

Date of Hearing : 17.06.2015 Date of Pronouncement : 19.06.2015

PER BHAVNESH SAINI,JM

This appeal by revenue is against the order of ld.

CIT(Appeals) Chandigarh dated 11.11.2014 for assessment

year 2007-08 challenging the cancellation of penalty under

section 271(1)(c) of the Income Tax Act.

2. Briefly the facts as noted in the impugned order are

that the Assessing Officer levied the penalty under section

271(1)(c) of the Act. It was found that assessee had given

interest free advances to number of persons. The Assessing

Officer questioned the assessee regarding allowability of

interest claimed under section 36(1)(iii) of the Act and the

assessee had submitted that the advances were giving

keeping diversification and expansion of business in mind. 2

The Assessing Officer was not satisfied with the reply of the

assessee and disallowed proportionate interest under

section 36(1)(iii) of the Act, a part of which has been

confirmed by the ld. CIT(Appeals). Vide separate order,

Assessing Officer has levied penalty on the same

disallowance of interest under section 36(1)(iii) of the Act of

the Act.

3. The assessee challenged the penalty order before ld.

CIT(Appeals). The ld. CIT(Appeals) noted that the addition

is made after rejecting the contention of the assessee for

paying interest for the purpose of business but the

Assessing Officer was not satisfied with the explanation of

the assessee and made the estimated addition. The ld.

CIT(Appeals) considering that it was an estimate addition,

following the judgement of the Hon'ble Punjab & Haryana

High Court in the case of Harigopal Singh, 258 ITR 85

cancelled the penalty and allowed the appeal of the

assessee.

4. We have heard ld. Representatives of both the parties

and perused the material available on record. We agree

with submission of the ld. DR that ld. CIT(Appeals) has

wrongly considered it to be a case of estimated addition and

cancelled the penalty by following the decision in the case

of Harigopal Singh (supra) which is on different facts.

However, the facts and sufficient material is available on

record to decide the departmental appeal on merits. Copy of

the assessment order is filed on record, in which the

Assessing Officer has observed that assessee had given 3

interest free loans and advances to six persons namely

Ashok Anand and Raj Rani Anand, and date of payment was

February, 2004. In the cases of M/s Pamvi Tissues Ltd. and

M/s Bansal Steel Tubes, they were old balances and brought

forward from the earlier years. In cases of Amit Goyal and

Sumit Goyal, the date of payments are January 2007 and

May, 2006 which pertain to the assessment year under

appeal. The Assessing Officer disallowed the part of

interest in these cases for the purpose of making the

addition. The ld. counsel for the assessee has referred to

assessment order of the preceding assessment year 2006-07,

copy of which is filed in the Paper Book in which the

Assessing Officer also considered the same disallowance of

interest in respect of amounts advanced to Shri Ashok

Anand and Mrs. Raj Rani Anand and the Assessing Officer

disallowed the interest of Rs. 6 lacs under section 36(1)(iii)

of the Act.

4(i) The ld. counsel for the assessee also pointed out that

on the similar additions, the Assessing Officer initiated the

penalty proceedings under section 271(1)(c) of the Act but

vide order dated 21.03.2012 (PB-11) the Assessing Officer

dropped the penalty proceedings under section 271(1)(c) of

the Act. The stand of the department is, therefore, clear

that on the old balances, the Assessing Officer did not levy

penalty under section 271(1)(c) of the Act in preceding

assessment year 2006-07 in respect of the interest free

advances given to Shri Ashok Anand and Mrs. Raj Rani

Anand. The balances in their cases were forwarded in the 4

assessment year under appeal as well alongwith the

balances brought forward in the cases of M/s Pamvi Tissues

Ltd. and M/s Bansal Steel Tubes. Therefore, on the

principle of consistency, the Assessing Officer should not

have levied the penalty under section 271(1)(c) of the Act in

assessment year under appeal because the outstanding

amounts were old balances carried forward from the earlier

years. As regards the interest free loans and advances

given to Shri Amit Goyal and Shri Sumit Goyal in

assessment year under appeal, the Assessing Officer made

proportionate disallowance of interest because the assessee

could not prove that these advances were given for the

business purposes. Thus, assessee had disclosed all the

particulars of income before the Assessing Officer at

assessment stage. The assessee claimed the advances given

for business purposes but the opinion of the assessee was

not acceptable to the Assessing Officer and had held that

these advances were given for non business purposes.

Therefore, it is a case of mere disallowance of interest on

change of opinion and as such would not warrant the levy of

penalty under section 271(1)(c) of the Act of the Act. The

Assessing Officer has not brought any sufficient material on

record to prove that assessee has concealed the particulars

of income or furnished inaccurate particulars of income.

The Hon'ble Supreme Court in the case of Reliance

Petroproducts Ltd. 322 ITR 158 held as under :

"A glance at the provisions of Section 271(1)(c) of the Income-tax Act,1961 suggests that in order to be covered by it, there has to be conceal ment of the particulars of 5

the income of the assessee. Secondly, the assessee must have f urnished inaccurate particulars of his income. The meaning of the word 'particulars' used in Section 271(1)(c) would embrace the detail s of the claim made. Where no inf ormation given in the return is f ound to be incorrect or inaccurate, the assessee cannot be held guil ty of f urnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provisions, the penal ty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to f urnishing inaccurate particulars. There can be no dispute that everything would depend upon the return f iled by the assessee, because that is the only document where the assessee can f urnish the particulars of his income. When such particul ars are f ound to be inaccurate, the l iability would arise. To attract penal ty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.

Where there is no f inding that any details supplied by the assessee in its return are f ound to be incorrect or erroneous or f alse there is no question of inviting the penal ty u/s 271(1)(c). A mere making of a claim which is not sustainable in law, by itself , will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to f urnishing inaccurate particulars."

5. Considering the facts and circumstances of the case,

we are of the view that ld. CIT(Appeals) correctly cancelled

the penalty in the matter.

6. In the result, departmental appeal stands dismissed.

Order pronounced in the Open Court on 19th

June,2015.

Sd/- Sd/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19th June,2015. 'Poonam' Copy to:

The Appellant, The Respondent, The CIT(A), The CIT,DR

Assistant Registrar, ITAT Chandigarh