TaxTMI 
TaxTMI 
2017 (1) TMI 387
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces of the case, whether the Ld. CIT(A) is justified in deleting the penalty levied by the AO on account of disallowances of interest expenses of Rs. 44,19,194/- without considering the merits of the case. (2) On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. (3) It is therefore, prayed that the order of the CIT(A) may be set-side and that of Assessing Officer may be restored to the above extent. 2. Briefly stated facts as culled out from the records are that assessee is a private limited company engaged in construction work. Return of income for Asst. Year 2007-08 showing NIL income was filed on 19.10.2007. The case was selected for scrutiny assessment and assessme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....ft. area and this amount was calculated at Rs. 48,80,893/-. Ld. AR further submitted that this amount of Rs. 48,80,893/- includes proportionate construction expenses and proportionate interest expenses and effectively out of the total interest amount of Rs. 44,19,194/- proportionate amount of 2192 sq.ft./11,219 sq.ft. if applied then interest expenses of Rs. 8,63,435/- stands to be claimed against profits and the remaining amount continues to be carried forward in succeeding years and would be booked to expenditure head as and when remaining area is sold. 6. Ld. AR further submitted that the ld. Assessing Officer has also accepted the fact that expenditure was allowable on mercantile basis and the same has been done by assessee by claimin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 44,19,194/- included interest paid to a Co-op. Bank at Rs. 21,10,019/- in Asst. Year 2004-05 and Rs. 23,01,175/- in Asst. Year 2005-06. In response to the query raised by ld. Assessing Officer it was specifically replied by the assessee that the total amount of Rs. 44,19,194/- has been transferred to construction account and the amount standing in the construction account has been apportioned on the basis of square feet areas sold. In the year under appeal assessee sold 2191 sq.ft. out of 11,219 sq.ft and proportionate amount of Rs. 2,49,81,176/- being the total construction amount was accordingly apportioned by applying 2192 sq.ft. /11,219 sq.ft., which gave a figure of Rs. 48, 80,893/- and the same was transferred to profit and loss....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CIT(A) followed the judgment of Hon. Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (supra) 10. Further continuing to our above discussion and on analysis of the facts we find that there is no dispute to the fact that the amount of Rs. 44,19,194/- was paid towards interest towards preceding Asst. Years 2004-05 and 2005-06 at Rs. 21,10,019/- and Rs. 23,09,175/- respectively and this amount which was capitalized in the preceding years was transferred to construction account and proportionate amount was transferred to profit and loss account on the basis of area sold. We will not like to go into the issue of actual interest expenditure claimed by the assessee as it was Rs. 8,63,435/- as submitted by assessee or Rs. 44....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., it is possible that even the assessee could make a "silly" mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court. 18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under Section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest tha....