Case Law Details
Farrukhabad Investment (India) Ltd Vs DCIT (ITAT Agra Third Member)
The Id. DR cited several reasons, which, in his opinion, justified imposition of penalty, such as,. the RBI rejecting the application for registration of NBFC; names and addresses of the depositors not available; no books of account or vouchers available; a qualification by the auditors of the company; payment of interest not ascertainable; no deduction of tax at source. These facts, in the opinion of the Id. DR, militate against the bona fide claim of the assessee. In my considered opinion, the factors as enumerated above simply show that the assessee could not substantiate the claim of payment of 10% of total interest which has been ultimately disallowed. By no standard, these factors eclipse the genuineness or bona fide of the transaction of interest payment. The mere fact that the Reserve Bank of India rejected the assessee’s application or the books of account etc. could not be produced, cannot per se cast a shadow of doubt on the genuineness of payment of interest to the depositors. It is axiomatic that production of books of accounts and other related documents was an impossible task, as these were admittedly taken away by the depositors etc. The fact that the assessee, in fact, paid interest is proved from the deletion of addition to the extent of 90% of the interest by the Appellate Authorities. This confirms that the assessee, in fact, paid 100% interest but the addition of 10% was made simply because of the inability of the assessee to adduce necessary evidence due to the non- availability of the books of account and other related documents. At the cost of repetition, it is stated that assessment proceedings are separate from penalty proceedings. The factors emphasized by the Id. DR are, of course, relevant in so far as the question of deduction of interest is concerned. But, when the matter concerns imposition of the penalty, such factors bear no significance as they simply demonstrate that the assessee failed to prove its claim of payment of interest and not that such a claim was false or got disproved at the hands of the AO. I therefore, hold that no penalty could have been imposed in respect of disallowance of interest.
FULL TEXT OF THE ITAT JUDGMENT
In this case, the ld. Third Member has agreed with the order passed by the ld. Accountant Member, whereby the penalty imposed in respect of disallowance of interest and commission was deleted. In accordance with the said order passed by the ld. Third Member, the penalty order is held to be unsustainable.
2. In the result, the appeal filed by the assessee stands allowed.
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