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2011 (4) TMI 130 - AT - Income TaxAssessee in default - Penalty - Allowance - The assessee is engaged in the business of dealing in shares and securities, investment therein and advancing loans - The assessee claimed payment of bank interest and charges and certain other expenses also - Besides interest income, the assessee earned dividend income on investment in shares - The Assessing Officer was of the view that the net interest of Rs. 95,63,346, demat charges of Rs. 60 and proportionate expenses amounting to Rs. 11,70,941 were not deductible in computing the total income by dint of the provision contained in section 14A, as such expenses related to earning of tax-free income. Regarding penalty: - However, the accounts have been audited and the return was accompanied by the tax audit report - There is no allegation by the Assessing Officer that there was any collusion between the auditor and the assessee to enhance the loss in the return of income by ignoring the provision contained in section 14A - Therefore, it can be said that the assessee has furnished an explanation which is bona fide - It was inter alia mentioned that allocation of expenses is beset with a lot of problems and the issue was laid to rest by introduction of Rule 8D - Therefore, even in absence of any attempt on the part of the assessee to segregate the expenditure, it can be said that the questions of disallowance and its quantification are contentious, which leads to the inference that the difference of opinion between the assessee and the authorities is bona fide - It is held that the learned CIT(A) was right in deleting the penalty.
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