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Levy of penalty u/s 271 - disallowance of the interest paid on borrowed funds - Held that:- In the present case, the assessee filed the required evidence before the AO in original assessment proceedings wherein the interest amount to the extent of ₹ 57,90,492/- was adjusted to the returned loss in the original assessment and thereafter, while giving effect to order of Tribunal, the AO made the disallowance of the interest paid on borrowed funds. Therefore, it is a clear the AO identified the amount of ₹ 57,90,492/- as interest paid and on such amount the AO disallowed ₹ 1,18,096/-which is a corresponding interest under section 14A treating the same as expenditure incurred on earning dividend of ₹ 42,020/-.

CIT(A) did not consider the same as it clearly appearing in the original assessment order. Therefore, both the authorities did not consider the material evidence available on record in right perspective. We find that merely interest has been disallowed does not mean that the assessee has considered the income are filed the inaccurate particulars of income. Also there is no finding that any details furnished by the assessee in its return were found to be incorrect or false. Thus, the order of penalty is liable to be quashed. - Decided in favour of assessee


 

 

 

 

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