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TMI Blog2015 (3) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... inst levy of penalty u/s. 271(1)(c) of the Act. These appeals and cross objection were heard together and disposed of by this common order for the sake of convenience and brevity. ITA No. 921/Chd/2009- A.Y. 2006-07 2. The grievances of the Revenue read as under: "1. That the Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 71,90,199/- made u/s. 40A(2)(b) and also in view of the provisions of section 37(1) of the I.T. Act, 1961. 2. That the Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 71,90,199/- made u/s. 40(a)(ia) of the I.T. Act, 1961. 3. That the Ld. CIT(A) has erred in law and facts in allowing relief of Rs. 2,42,51,715/- out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebo Industries Ltd. This submission of the assessee did not find favour from the AO who was of the opinion that the assessee has not paid interest to any parties from whom he has taken advances and further the said interest was not reflected in the Tax Audit report u/s. 44AB of the Act. The AO accordingly disallowed interest of Rs. 63,45,627/- paid to M/s. Gazebo Industries Ltd. being specified person u/s. 40A(2)(b) of the Act. 4. Before the Ld. CIT(A), the assessee explained the nature of transaction with M/s. Gazebo Industries Ltd. After considering the facts and the submissions of the assessee, the Ld. CIT(A) observed that the AO has not doubted the payment of interest by the assessee to its sister concern. The Ld. CIT(A) further observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of law. The said interest has been allowed in all the preceding assessment year. The recipient M/s. Gazebo Industries Ltd. is declaring the interest income in its return of income. The Ld. CIT(A) has very rightly declined to invoke Explanation to Sec. 37(1) of the Act in respect of this payment of interest. Considering all these facts in totality, no interference is called for with the findings of the Ld. CIT(A). Ground No. 1 is dismissed. 9. Proceeding further, the AO noticed that the assessee has debited Rs. 1,94,73,663/- to its profit and loss account under the head Development expenses which included Rs. 71,90,199/- claimed to have been paid to M/s. Dev Construction. The AO found that the assessee has not deducted tax at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges have been incurred by M/s. Dev Construction. The Ld. CIT(A) has given a categorical finding that TDS has been made by Dev Construction on such labour payments. It is an undisputed fact that the assessee has simply reimbursed the expenditure incurred by M/s. Dev Construction. In our considered view, on such reimbursement of expenditure, there is no liability for TDS. The Ld. CIT(A) has rightly deleted the addition. No interference is called for. Ground No. 2 is accordingly dismissed. 14. On further perusal of the accounts, the AO noticed that the assessee has received payments as advances from M/s. Gazebo Industries Ltd. which are in addition to the brought forward advances. After considering the details of such advances, the AO notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). The Ld. CIT(A) finally concluded that amount aggregating to Rs. 19,98,285 can only be considered as deemed dividend u/s. 2(22)(e) of the Act and allowed a relief of Rs. 2,42,51,715/-. 16. Aggrieved by this, the Revenue is before us. 17. The Ld. DR simply relied upon the findings of the AO. 18. The Ld. Counsel for the assessee for the first time stated that provisions of Sec. 2(22)(e) of the Act was not applicable on the facts of the case because the assessee is neither a share holder of M/s. Gazebo Industries Ltd. nor the assessee is a member or a partner or a share holder in any concern in which M/s. Gazebo Industries Ltd. has a substantial interest nor the assessee has any substantial interest in M/s. Gazebo Industries Ltd. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed against the order of the Ld. CIT(A)-16 Mumbai dt. 11.1.2012 pertaining to A.Y. 2006-07. 24. The sole grievance of the assessee is that the Ld. CIT(A) has erred in confirming the penalty levied by the DCIT u/s. 271(1)(c) of the Act. 25. On perusing the orders of the authorities below, we find that the penalty has been levied on the amount treated as deemed dividend by the AO in the course of the assessment proceedings. Since we have restored this issue relating to deemed dividend in ITA No.921/Chd/09 to the files of the AO to be decided afresh and since the penalty has been levied on the said addition, the penalty order is also set aside. The AO is directed to decide this issue afresh. 26. In the result, the appeal filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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