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2016 (10) TMI 317 - AT - Income TaxPenalty u/s 271(1)(c) - interest claimed on the loan from Shri V.L.Ittiachen - as per asseessee he has received loan from non-resident Indian after obtaining necessary approval from RBI - Held that - Since the assessee has received the money after getting necessary approval from RBI, it is not correct to say that the identity and creditworthiness of the creditor is not proved. This Tribunal is of the considered opinion that merely because an addition was made in the assessment proceedings that will not result automatically in levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer has to reappreciate the material available on record. This Tribunal is of the considered opinion that there was a justification in claiming the loan amount as gift. Merely because the claim of the assessee was disallowed in the assessment proceedings, this Tribunal is of the considered opinion that it cannot be construed that the assessee has furnished inaccurate particulars in view of the judgment of the Apex Court in Reliance Petroproducts Pvt. Ltd (2010 (3) TMI 80 - SUPREME COURT ). Similarly, rental receipt was fund to be omitted in the return of income. The CIT(A) found that there was reasonable cause in not disclosing the same in the return of income. This Tribunal do not find any reason to interfere with the order of the CIT(A). Similarly, for the disallowance of interest and commission and restricting the depreciation to 15% as against the claim of 25% by the Assessing Officer cannot be construed as furnishing inaccurate particulars of income. In view of the above, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A) and accordingly the same is confirmed. Absence of notice - Held that - From the material available on record it appears that this Tribunal by an order dated 16.2.2006 directed the assessee to file an affidavit making a categorical statement about the non-receipt of notice u/s 143(2). Even after the expiry of almost ten months, no affidavit was filed. Therefore, this Tribunal is of the considered opinion that the claim of the assessee that no notice was received cannot be accepted at this stage. Therefore, this Tribunal do not find any reason to uphold the contention of the assessee. Failure of the Assessing Officer to give adequate opportunity to the assessee - Held that - Admittedly, the assessee received the notice issued by the Assessing Officer u/s 142(1) and one Shri G. Palanidas, Dy. G.M(Taxation) of M/s Empee Group of companies appeared before the Assessing Officer. However, he has not filed any authorization to appear on behalf of the assessee. He simply claimed that he was a loyal employee of M/s Empee Distilleries Ltd, therefore, he is appearing on behalf of his Managing Director-cum-Chairman, Shri M.P.Purushothaman. As rightly submitted by the ld. DR, when the notice was received from the Assessing Officer it is for the assessee to appear before the Assessing Officer and if he could not appear in person it is for him to make alternate arrangement. Therefore, at this stage, it may not be proper on the part of the assessee to claim that no proper opportunity was given. The assessment year under consideration is 2001-02. Remanding the matter back to the file of the Assessing Officer after a lapse of almost 15 years may not serve any purpose, therefore, this Tribunal do not find any reason to uphold the contention of the ld. Counsel for the assessee. Addition on loan non-resident Indian - Held that - Admittedly, the assessee received a loan of ₹ 50 lakhs from Shri V.L.Ittiachen, a nonresident Indian. During the year under consideration by way of book entry, the assessee claimed that the outstanding loan of ₹ 40,60,000/- was converted into gift. Therefore, it is obvious that the creditor waived the principal amount without any consideration. Once the principal amount was waived, this Tribunal is of the considered opinion that this would form part of the income of the assessee u/s 41(1) of the Act. Therefore, the CIT(A) has rightly confirmed the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed. Unexplained cash credit - Held that - Assessing Officer found an unsecured loan of ₹ 39,62,212/-. When there is a credit in the books of account, the assessee has to necessarily establish the identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. In this case, the assessee has not filed any confirmation letter. Moreover, the details and mode of payment are not available on record. In the absence of any material to substantiate the claim of unsecured loan, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition made by the Assessing Officer. Addition of rent - whether the property tax paid by the assessee has to be allowed while computing the income from house property? - Held that - In view of the provisions of sec. 43B of the Act, this Tribunal is of the considered opinion that the taxes has to be allowed while computing the rental income provided the same was paid during the assessment year under consideration or atleast before the due date for filing the return of income for the year under consideration. This Tribunal is of the considered opinion that property tax and water tax is allowable deduction while computing the income from house property. However, it is for the assessee to establish that the payment has actually been made. Therefore, this Tribunal is of the considered opinion that the Assessing Officer shall verify the payment of property tax and water tax. Accordingly, the orders of the lower authorities are set aside and the issue of addition of ₹ 9 lakhs is remitted back to the file of the Assessing Officer. As admitted by the assessee before the Assessing Officer, the same shall be taken as income from rent. However, the Assessing Officer shall verify whether the assessee has actually paid the property tax and water tax during the year under consideration. If the assessee produce necessary evidence to establish the actual payment of water tax and property tax during the year under consideration or before the due date for filing the return of income, the same has to be allowed. Disallowance of interest payment and payment of commission - Held that - The assessee claimed payment of interest to the extent of ₹ 2,04,225/- and commission to the extent of ₹ 30,900/- for the year under consideration. The Assessing Officer found that similar claim was disallowed for the assessment year 1999-2000 and 2000-01. As rightly submitted by the ld. DR, the CIT(A) found that the Assessing Officer perhaps disallowed the claim of the assessee u/s 14A of the Act. The fact remains no details ae available on record with regard to the nature of payment of interest and commission. Since no details are available on record, this Tribunal do not find any reason to interfere with the order of the CIT(A) and accordingly the same is confirmed.
Issues Involved:
1. Penalty under Section 271(1)(c) of the Income-tax Act, 1961. 2. Limitation of notice under Section 143(2). 3. Adequate opportunity during assessment proceedings. 4. Addition of ?40,80,000 as income. 5. Addition of ?39,62,212 as income. 6. Addition of ?9 lakhs towards rent. 7. Disallowance of interest payment of ?2,04,225 and commission of ?30,900. Issue-wise Detailed Analysis: 1. Penalty under Section 271(1)(c) of the Income-tax Act, 1961: The Revenue appealed against the deletion of penalty levied by the Assessing Officer under Section 271(1)(c). The Assessing Officer imposed the penalty for inaccurate particulars related to interest on a loan, unexplained cash credit, and differences in depreciation rates. The Tribunal found that the assessee had received a loan from a non-resident Indian after RBI approval, which was later converted into a gift. The Tribunal held that merely because the claim was disallowed during assessment, it does not automatically justify the penalty under Section 271(1)(c), referencing the Supreme Court judgment in Reliance Petroproducts Pvt. Ltd. The Tribunal confirmed the CIT(A)’s deletion of the penalty. 2. Limitation of notice under Section 143(2): The assessee contended that the notice under Section 143(2) was issued beyond the statutory period, rendering the assessment invalid. The Tribunal noted that the assessee participated in the proceedings without raising this issue before the Assessing Officer and failed to file an affidavit as directed. Consequently, the Tribunal rejected the assessee's claim regarding the invalidity of the notice. 3. Adequate opportunity during assessment proceedings: The assessee argued that the Assessing Officer did not provide adequate opportunity to present necessary materials. The Tribunal observed that the assessee received the notice and a representative appeared before the Assessing Officer without proper authorization. The Tribunal concluded that the assessee had adequate opportunity and dismissed the claim, noting that reopening the matter after 15 years would be impractical. 4. Addition of ?40,80,000 as income: The assessee claimed that a loan of ?50 lakhs from a non-resident Indian was converted into a gift. The Tribunal found that the loan waiver constituted a cessation of liability, making it assessable as income under Section 41(1). The Tribunal upheld the CIT(A)’s confirmation of the addition. 5. Addition of ?39,62,212 as income: The Tribunal noted that the assessee failed to provide confirmation letters or details to substantiate the unsecured loan of ?39,62,212. Without evidence of the creditor's identity, genuineness of the transaction, or creditworthiness, the Tribunal upheld the CIT(A)’s decision to confirm the addition. 6. Addition of ?9 lakhs towards rent: The assessee agreed to treat ?9 lakhs as rental income but sought a deduction for property and water taxes paid. The Tribunal remanded the issue back to the Assessing Officer to verify the actual payment of these taxes, emphasizing that such deductions are allowable if paid during the relevant assessment year or before the due date for filing the return. 7. Disallowance of interest payment of ?2,04,225 and commission of ?30,900: The Tribunal found that the assessee did not provide details regarding the nature and purpose of the interest and commission payments. Given the lack of supporting evidence, the Tribunal upheld the CIT(A)’s confirmation of the disallowance. Conclusion: The Tribunal dismissed the Revenue’s appeal and partly allowed the assessee’s appeal for statistical purposes, remanding the issue of rental income back to the Assessing Officer for verification of tax payments. The order was pronounced in open court on 5th August 2016.
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