2017 (1) TMI 387 - AT - Income Tax

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 transferred to profit and loss account on the basis of area sold. We will not like to go into the issue of actual 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 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 found to be inaccurate particulars or concealment of income, it was upto to the authorities to accept its claim in the return or not. Merely because 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. Also see Price Waterhouse Coopers (P) Ltd. vs. CIT 2012 (9) TMI 775 - SUPREME COURT - Decided in favour of assessee

Summary

Issues:
1. Whether the penalty imposed on disallowance of interest expenses of ?44,19,194/- under section 271(1)(c) of the IT Act, 1961 should be deleted.
2. Whether the claim made by the assessee for interest expenses was legitimate and whether the penalty under section 271(1)(c) should be upheld.
3. Whether the Revenue's appeal against the deletion of penalty by the CIT(A) is justified.

Detailed Analysis:
Issue 1:
The Revenue appealed against the deletion of penalty by the CIT(A) regarding the disallowance of interest expenses of ?44,19,194. The Revenue contended that the interest expenses claimed were not allowable deductions under section 43B(e) of the Act as they were paid to a Co-op. Bank, not a scheduled bank. However, the assessee argued that the interest expenses were related to preceding years and were apportioned based on the area sold during the year. The CIT(A) observed that the claim made by the assessee was bona fide and not a case of concealment of income or furnishing inaccurate particulars. The Tribunal upheld the CIT(A)'s decision, citing the judgment in the case of CIT vs. Reliance Petro Products Pvt. Ltd.

Issue 2:
The Tribunal analyzed the facts and found that the claim made by the assessee for interest expenses was legitimate and made in good faith. The Tribunal emphasized that the assessee had provided all details in the return, and the claim was not found to be inaccurate or a concealment of income. Referring to the judgment in the case of Price Waterhouse Coopers (P) Ltd. vs. CIT, the Tribunal concluded that the imposition of a penalty was not justified as it was a bona fide error and not an attempt to conceal income. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c).

Issue 3:
The Tribunal dismissed the Revenue's appeal against the deletion of the penalty by the CIT(A). The Tribunal reiterated that the claim made by the assessee was legitimate and not a case of concealment of income. Relying on the judgments of the Hon. Supreme Court, the Tribunal confirmed that the penalty under section 271(1)(c) was not warranted in this case. Consequently, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal.

Overall, the Tribunal found that the assessee's claim for interest expenses was made in good faith, and there was no intention to conceal income. The Tribunal emphasized that the penalty under section 271(1)(c) was not applicable in this situation, leading to the dismissal of the Revenue's appeal.