C)The Matter Was Further Challenged By The Assesseebefore The Itat Which Allowed The Quantum Appeal By Virtueof Order Dad 3[Rd] February 2016. The Itat In The S v. It Would Be Pertinent To Mention That The Hon’ble Apexcourt In The Case Of S.a. Builders Ltd. (Supra) Held :1[2007] 158 Taxman 74 (Sc

Digitallysigned bySHRADDHASHRADDHAKAMLESHKAMLESHTALEKARTALEKARDate:2022.09.0612:10:30+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO. 211 OF 2018 The Pr. Commissioner of Income Tax-9,Aaykar Bhavan, M.K. Road,Churchgate, Mumbai-400 020.V/sM/s. E-City Investments & HoldingsCompany Private Limited,844/4, Shah Industrial Estate,Off. New Link Road, Opp. Laxmi Industrial Estate,Mumbai-400 053.PAN No. ....Appellant ....Respondent **** Mr.Suresh Kumar for appellant.Mr.Ravi Sawana i/b Mr. Sriram Sridharan for respondent. **** CORAM : DHIRAJ SINGH THAKUR AND ABHAY AHUJA, JJ.Date : 18[th] AUGUST 2022 PC : 1.This is an appeal under section 260A of the Income Tax Act,1961 (‘the Act’) against the order dated 15[th] February 2017 passedby the Income Tax Appellate Tribunal, Mumbai (‘ITAT’) for theassessment year 2008-09, by virtue of which the Tribunal allowedthe appeal preferred by the assessee and set aside the order,whereby penalty was levied under section 271(1)(c) of the Act. 2.The following question of law has been proposed for our consideration : “Whether on the facts and circumstances ofthe case, the ITAT erred in law deleting thepenalty levied by the Assessing Offcer u/s271(1)(c) of the Income Tax Act therebyignoring the provisions of section 271(1)(c)of the Act?” 3.Briefy stated the material facts are as under : (a) The assessee fled its return of income for the relevantassessment year 2008-09 declaring a total business loss ofRs.1,75,537/-. Later on, a revised return was fled declaringa total loss of Rs.6,71,20,385/-. The return was processedunder section 143(1) of the Act, and necessary order waspassed under section 143(3)(ii) of the Act, after makingamong others, an addition of Rs.6,63,78,465/- on accountof disallowance of interest under section 36(1)(iii) of the Act.According to section 36(1)(iii) of the Act, the amount ofinterest paid in respect of capital borrowed for the purposesof business or profession has to be allowed as a deduction incomputing the income tax under section 28 of the Act. The A.O. also initiated penalty proceedings underSection 271(1)(c) of the Act on the ground that the Assesseehad furnished inaccurate particulars of income & suppressed its real income by Rs.6,63,78,465. The A.O.fnally levied a penalty of Rs.2,25,62,040. (b)An appeal preferred by the assessee in regard to theissue of disallowance under Section 36(1)(iii) of the Act wasdismissed by the CIT(A). (c)The matter was further challenged by the assesseebefore the ITAT which allowed the quantum appeal by virtueof Order dad 3[rd] February 2016. The ITAT in the said order,while placing reliance inter alia upon the case of S.A.Builders Ltd. Vs. Commissioner of Income-tax (Appeals),Chandigarh[1,]came to a conclusion that the moneyadvanced by the assessee, as a holding company to itssubsidiaries, was on account of ‘business expediency’, asthe assessee had signifcant interest in the business of itssubsidiaries, which was similar in nature. It was also heldthat no disallowance had been made in the assessment year2007-08 or earlier, and therefore, while allowing the appealfled by the assessee, it reversed the decision of the CIT(A). 4.It would be pertinent to mention that the Hon’ble ApexCourt in the case of S.A. Builders Ltd. (Supra) held :1[2007] 158 Taxman 74 (SC) “24In our opinion, the High Court as well as theTribunal and other Income Tax authorities shouldhave approached the question of allowability ofinterest on the borrowed funds from the aboveangle. In other words, the High Court and otherauthorities should have enquired as to whether theinterest free loan was given to the sister company(which is a subsidiary of the assessee) as ameasure of commercial expediency, and if it was, itshould have been allowed.” 5.This judgment was also followed by this Court in The 4.It would be pertinent to mention that the Hon’ble ApexCourt in the case of S.A. Builders Ltd. (Supra) held :1[2007] 158 Taxman 74 (SC) “24In our opinion, the High Court as well as theTribunal and other Income Tax authorities shouldhave approached the question of allowability ofinterest on the borrowed funds from the aboveangle. In other words, the High Court and otherauthorities should have enquired as to whether theinterest free loan was given to the sister company(which is a subsidiary of the assessee) as ameasure of commercial expediency, and if it was, itshould have been allowed.” 5.This judgment was also followed by this Court in The Principal Commissioner of Income tax-9 Vs. M/s.E-CityInvestments & Holdings[2]. However, Ld. counsel for the respondentstated that the principles of law laid down in S.A. Builders Ltd.(Supra) by the Hon’ble Supreme Court were being reconsidered inthe case of Additional Commissioner of Income-tax Vs. Tulip StarHotels Ltd. [3], and further that vide order dated 30[th] April 2012, theSLP preferred in the case of The Principal Commissioner ofIncome tax-9 Vs.M/s.E-City Investments & Holdings,had beendirected to be tagged along with Tulip Star Hotels Ltd. (Supra). 6.In so far as penalty proceedings are concerned, an appealpreferred by the assessee before the CIT(A) came to be dismissedvide Order dated 28[th]Mach 2013 & the penalty of Rs.2,25,62,040/- was upheld. 7.Finally the assessee fled an appeal before the Income Tax 2Income Tax Appeal No.213 of 2017 dt. 22[nd] April 2019.3[2012]21 taxmann.com 97 (SC)3[2012]21 taxmann.com 97 (SC) Appellate Tribunal, Mumbai Bench “E”, which was allowed byvirtue of the order dated 15[th] February 2017, on the ground thatsince the quantum appeal of the assessee had been allowed andthe order of CIT (Appeals) reversed, the order confrming thepenalty levied by the Assessing Offcer did not survive. TheTribunal accordingly deleted the penalty of Rs.2,25,62,040/-levied under section 271(1)(c) of the Act. 8.Counsel for the appellant urged that since the SLP preferredby the revenue against the order of the Tribunal, dated 3[rd]February 2016 was pending before the Hon’ble Supreme Court,and the ratio of the judgment in the case of S.A. Builders Ltd.(Supra) was being reconsidered as held by the Hon’ble SupremeCourt in the case of Tulip Star Hotels Ltd. in its order dated 30[th]April 2012, it was not open to the Tribunal to delete the penaltylevied under section 271(1)(c) of the Act. 9.Counsel for the respondent, on the other hand, urged thatthe question of law which has been proposed for consideration bythe revenue in the present appeal, in fact, would not get affectedby the ultimate decision that might be rendered by the Hon’bleApex Court in the aforementioned two matters pending before itas making unsustainable claim could neither amount to concealment nor amount to furnishing inaccurate particulars ofincome. 10. Reliance was placed upon the judgment of Hon’ble Supreme Court in the case of Commissioner of Income-tax, Ahmedabad Vs. Reliance Petroproducts (P.) Ltd. [4]to buttress the point that a meremaking of a claim which was not sustainable in law by itselfwould not either amount to concealment of income or furnishinginaccurate particulars of income in terms of section 271(1)(c) ofthe Act. In the aforementioned judgment the Apex Court held : “10………….. Merely because the assessee had claimedthe expenditure, which claim was not accepted or wasnot acceptable to the Revenue, that by itself would not,in our opinion, attract the penalty under Section271(1)(c). If we accept the contention of the Revenuethen in case of every Return where the claim made isnot accepted by Assessing Offcer for any reason, theassessee will invite penalty under Section 271(1)(c).That is clearly not the intendment of the Legislature.” Reliance Petroproducts (P.) Ltd. [4]to buttress the point that a meremaking of a claim which was not sustainable in law by itselfwould not either amount to concealment of income or furnishinginaccurate particulars of income in terms of section 271(1)(c) ofthe Act. In the aforementioned judgment the Apex Court held : “10………….. Merely because the assessee had claimedthe expenditure, which claim was not accepted or wasnot acceptable to the Revenue, that by itself would not,in our opinion, attract the penalty under Section271(1)(c). If we accept the contention of the Revenuethen in case of every Return where the claim made isnot accepted by Assessing Offcer for any reason, theassessee will invite penalty under Section 271(1)(c).That is clearly not the intendment of the Legislature.” 11.In the present case, it can be seen that penalty proceedingshad been initiated against the assessee only on account of the factthat the deduction, which was claimed by the assessee had beendisallowed. The issue being squarely covered by the judgment ofthe Hon’ble Apex Court in the case of Reliance Petroproducts (P.)Ltd. (Supra), no substantial question of law, as proposed, arises in the present case. 12.The appeal is dismissed. No order as to costs. [ABHAY AHUJA, J.] [DHIRAJ SINGH THAKUR, J.]