ITA No. 2189/Ahd/2014. Case: Vasantbhai Haribhai Gajera Vs DCIT, Cir. 8. ITAT (Income Tax Appellate Tribunal)

Case NumberITA No. 2189/Ahd/2014
CounselFor Appellant: R.N. Vepari, AR and For Respondents: Dhaginvir Yadav, Sr. DR
JudgesRajpal Yadav, Member (J) and Amarjit Singh, Member (A)
IssueIncome Tax Act, 1961 - Sections 143(2), 24(b), 271, 271(1)(c), 274, 40A(7), 44AB
Judgement DateApril 05, 2017
CourtITAT (Income Tax Appellate Tribunal)


Rajpal Yadav, Member (J), (ITAT Ahmedabad)

  1. Assessee is in appeal before the Tribunal against order of the ld. CIT(A)-V dated 11.4.2014 passed for Asstt. Year 2008-09.

  2. Sole grievance of the assessee is that the ld. CIT(A) has erred in confirming penalty of Rs. 5,28,066/- imposed by the AO under section 271(1)(c) of the Income Tax Act.

  3. Brief facts of the case are that the assessee is an individual. He is director Laxmi Diamond Pvt. Ltd. He had filed his return of income electronically on 31.3.2009 declaring total income at Rs. 3,42,49,460/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of accounts it revealed to the AO that the assessee has debited interest expenditure of Rs. 18,77,520/- under section 24(b) of the Income Tax Act. It is pertinent to note that Smt. Champaben V. Gajera (wife of the assessee) had taken loan from ICICI Bank for purchase flat No. 21 and 22 at Suraj Apartment, Mumbai. Later on she has transferred these flats to the assessee vide her "Vasiatnama", hence, the assessee has become owner of these flats. The assessee has claimed that these flats were possessed by him and not rented out. According to the AO for self-acquired property the assessee cannot claim interest expenditure exceeding Rs. 1.50 lakhs as contemplated in section 24(b) of the Act. When this aspect was confronted to the assessee, he did not file any reply, but ultimately has accepted the disallowance of Rs. 17,27,520/- out of the claim of Rs. 18,77,520/-. In other words, the AO has allowed deduction of Rs. 1.50 lakhs on account of interest expenditure and disallowed the balance. Similarly, the assessee had a refund from Income Tax Department amounting to Rs. 13,40,740/-. It contained interest component of Rs. 32,700/-. The assessee failed to include this interest component, and accordingly, it was added to the income of the assessee. The ld. AO initiated penalty proceedings on the ground that the assessee has furnished inaccurate particulars of his income. Accordingly, he issued a show cause notice to the assessee and ultimately provided an opportunity by way of a letter dated 4.2.2013. The assessee has filed a reply dated 8.2.2013. The reply has been reproduced by the AO, but he was not satisfied with the contentions of the assessee and held that the assessee has furnished inaccurate particulars of his income, and therefore, he deserves to be visited with penalty. Accordingly, the AO imposed penalty of Rs. 5,28,066/-, which is equivalent to the tax sought to be evaded to by the assessee. Appeal to the ld. CIT(A) did not bring any relief to the assessee.

  4. The ld. counsel for the assessee has raised two fold submissions. In his first fold of submissions, he submitted that there is no clarity as to whether penalty was imposed for furnishing inaccurate particulars of income or concealment of particulars of income. Since the AO has failed to specify the charge against the assessee, therefore, penalty is not imposable upon the assessee. In support of his contentions, he relied upon the following decisions:

    • New Sorathia Engineering Co. (282-ITR-642) (Gujarat)

    • Amrut Tubewell Co. (275-CTR-86) (Gujarat)

    • Jyoti Ltd. (216-Taxman-64) (Gujarat)

    • Whiteford India...

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