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2014 (7) TMI 1055 - AT - Income TaxPenalty u/s 271(1)(c) - Disallowance u/s14A - Investment in shares – Held that:- The entire assets of the assessee-company stand financed by borrowed capital, on which interest stands paid - The reserve and surplus is only by way of revaluation reserve created during the year, i.e., on revaluing the (fixed) assets and not in the nature of free reserves - even including the same does not increase the ‘capital’ to exceed the accumulated losses - no explanation in fact have been rendered by the assessee toward the disallowance which emanates from the facts on record, the levy of penalty on the disallowance. Provision for doubtful debts u/s 36(1)(vii) r.w Explanation – Held that:- There could be a case where the provision amount which stands reduced from the amount of ‘sundry debtors’ in the balance-sheet as at the year-end, is not so for presentation purposes only, and in fact not carried forward to the following year in the accounts, and the debtors carried forward at the reduced, net amount so that the it is in effect and substance only a write off as decided in Vijaya Bank vs. CIT [2010 (4) TMI 46 - SUPREME COURT] - No explanation toward claim of a provision having been rendered by the assessee at any stage, thus, the penalty is confirmed – Decided against Assessee. Disallowance for rent paid – Held that:- The Revenue’s case in the penalty proceedings as not tenable - This is as a disallowance u/s. 40A(2)(a) could only be of an expenditure that is otherwise allowable, so that there could be no doubt with regard to the assessee having rented a house property, and for which rent stands paid at ₹ 10,000/- per month, having in fact also made an interest-free deposit of ₹ 100 lacs toward the same - There is no whisper in any order in the quantum proceedings, or even in the penalty proceedings, to show that the rent is excessive having regard to the annual value or the rent that the property may fetch from year to year – Thus, no case for levy of penalty is made out – Decided in favour of assessee.
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