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TMI Blog2014 (9) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... District Court, Bathinda arguments of the Ld. that since the deposit was made under the direction of the Hon’ble Supreme Court, it needs to be treated as capital receipt, to be set off against the cost of the project and accordingly after considering the arguments of the parties, we find there is prima facie case in favour of the assessee As regards the legal claim with reference to disclosure with regard thereto had been made, it was argued that since the matter was litigated there were two possible views and in such cases concealment of penalty is not leviable. Further, the AO nowhere specified the concealment of particulars of income alleged to have been concealed by the assessee. On this score too, the assessee has a prima facie case and the balance of convenience is in favour of the assessee. The purpose of taking into consideration the period of limitation for filing the appeal before the Tribunal is, as to whether the assessee is pressing/going to press for stay. Obviously, when such a remedy has been prescribed by the statute, it cannot be taken away at the will of the department. It is only because it is reasonably expected that the stay applications would be filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income furnished by the assessee., and that, therefore, the penalty cannot be levied for alleged filing of inaccurate particulars of income. 4. Regarding the second issue, i.e., treatment of interest income on deposits made during the construction period , it has been contended that during the year, the assessee earned the following interest income: a) Interest of ₹ 23,61,30,524/- on funds temporarily deposited in fixed deposits; b) Interest of ₹ 72,99,696/- on fixed deposit of ₹ 7,50,00,000/- made by the assessee with the District Court, Bathinda on the direction of the Hon ble Supreme Court. 5. It has been contended that in the original return of income filed by the assessee, the assessee had declared total income at ₹ 23,61,30,524/-, after treating interest earned on short term deposits with banks as income chargeable to tax under the head Income from other sources income ., that subsequently, in the case of Indian Oil Panipat Power Consortium Limited vs. ITO 315 ITR 255 (Delhi), it was held that where funds were infused specifically for purposes of construction/setting up of the plant, interest earned on temporary deposit of funds not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rarily in short term fixed deposits, the interest earned during the pre-commencement period needs to be set off against the project cost and it is not liable to tax, particularly when the funds were not surplus funds, neither they were in excess of the requirements for setting up the refinery and the funds were also not idle funds. 7. Apropos the issue of taxability of interest income accrued on deposits of ₹ 7,50,00,000/- made with the District Court, Bathinda under the direction of the Hon ble Supreme Court, it has been contended that during the year, interest amounting to ₹ 72,99,696/- accrued on deposits of ₹ 7.50 crores made with the District Court, Bathinda, in terms of interim order dated 12.5.2006 in S.L.P. No. 8386 of 2006, filed by the assessee, seeking stay on the order of the Hon ble High Court, granting additional compensation to the farmers whose land had been compulsorily acquired by the Punjab Government for the purpose of setting up of the refinery; that land measuring 1992.75 acres was acquired by the Punjab Govt. on behalf of H.P.C.L. in 1997 at Bathinda, for setting up of the refinery; that the farmers were given compensation, against which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce complete disclosure was made with regard to this claim and the claim was a bona fide and legal claim on which two views are possible, no concealment penalty is leviable.; and that further the AO has failed to specify the particulars of income alleged to have been concealed by the assessee. 8. In so far as regards the claim of carry forward of business loss, it has been stated that during the year, the assessee incurred revenue expenditure aggregating to ₹ 5,68,18,000/-; that however, since the project was under construction during the year and had not started operation, there was no profit or loss taxable under the head Profit and Gain from Business Profession ; that it was due to an inadvertent mistake that project related expenditure was shown as business loss; that however, the same was not claimed as set off against assessee s income from other sources; that in the original return, the assessee had declared total income at ₹ 23,61,52,102/- on account of interest income, the revenue expenditure was ignored and not claimed as set off against such other income; that however, the such expenditure was carried forward to business loss to subsequent year in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the amount. It has been submitted that there is no bar against the AO for ordering attachment of bank account in an appropriate case, as in the present case. 11. Regarding the first issue, i.e., recording of satisfaction by the AO while levying penalty, it has been contended that this is a technical ground and on a mere technical ground, the stay should not be granted. 12. Regarding the debatable issue aspect, it has been contended that there is nothing debatable in the matter; that it is a mere question of fact that the Ld. CIT(A) as well the ITAT has confirmed the findings of the A.O; that the fate of the assessee s appeal before the Hon ble High Court is not known. 13. The Ld. DR has contended that as such, the balance of convenience is not at all in favour of the assessee; that no high pitched assessment has been made; and that when the quantum has been confirmed, levy of penalty by the Ld.CIT(A) is justified. 14. As regards the financial condition of the assessee, it has been contended by the Ld. DR, that admittedly, the refinery project is a project worth millions of rupees and so, penalties of a few lakhs rupees will not make a difference; and that further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of plant needs to be treated as capital receipt and reduced from the project cost. To the same effect following decisions were relied upon: i) CIT vs. Bokaro Steels Ltd: 236 ITR 315 (SC) ii) Karnal Co-operative Sugar Mills: 243 ITR 2 (SC) iii) CIT vs. Karnataka Power Corporation : 247 ITR 268 (SC) iv) CIT vs. Arihant Threads Ltd : 12 Taxman.com 69 (P H) 19. Turning to the issue of taxability of interest accrued from deposits of ₹ 7.50 crores made with the District Court, Bathinda, it was argued that, the deposits were made under the direction of the Hon ble Supreme Court and the right of the assessee in the FDR was inchoate, in asmuchas the FDR was in the name of the Court and physical possession thereof at all times remained with the Additional District Judge, Bhatinda and accordingly, the assessee had no power or control deal with the FDR in any manner. It was further argued that the amount accrued from additional compensation, which remained in dispute all through, upto the Hon ble Supreme Court. In CIT vs. Hindustan Housing and Land Development Trust Ltd , 161 ITR 524 (SC), it has been held that when right to receive payment is in dispute, income would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Processors (P) Limited: 286 ITR 499 (Mad.) xiii) CIT vs. Trident Infotech Corpn. Ltd: 34 Taxman.com 132 (P H) xiv) Cheap Cycle Stores v. CIT , : 281 ITR 166 (All) xv) CIT vs. Saket Agarwal : ITA No.871/Del/2013 xvi) Shrinandlal Mukandlal Pittie vs. WTO : 81 ITD 190 (Mum.) xvii) Devi Dass Sukhani vs. ITO : 101 TTJ 551 (Jd.) xviii) Wimco Seedings Limited : 114 TTJ 986 (Del) 23. We also find merit in the assessee s contention that since the assessee has been continuously incurring heavy losses, it is undergoing acute financial hardship, warranting a stay order. It is pertinent to point out that vide letter dated 17.09.2014, addressed to the AO, the assessee in HPCL Mittal Energy Limited had, inter-alia, brought to the notice of the AO, that appeal has been filed before the Tribunal on 08.09.2014, which was pending and that an application for stay had been filed on 16.09.2014. It was requested that the entire disputed outstanding demand be stayed till the disposal of the appeal. Inspite thereof the AO attached the bank accounts. 24. In UTI Mutual Fund vs ITO and Ors , 361 ITR 469 (Bom.), it has been held that where bank account has been attached, no actual re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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