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2019 (4) TMI 98 - AT - Income TaxPenalty u/s 271(1)(c) - complete disclosure the facts - taxability of excess contribution received by the assessee - taxable or not on the principles of mutuality - all the concurrent authorities starting from CIT A to the honourable High Court has decided this issue against the assessee holding that principle of mutuality does not apply on the facts of the case - SLP admitted - HELD THAT:- During the course of assessment, proceedings the assessee made the complete disclosure explaining that why the above amount assessee claims to be tainted with mutuality and therefore is not chargeable to tax u/s 4 of the income tax act. Evidences and arguments placed before us shows that assessee has made a claim disclosing the complete facts about the same in its return of income putting notes in the computation of total income, corroborating it with its balance sheet, supporting it with judicial precedents of the honourable Supreme Courts. This show that assessee has completely disclosed the facts about its claim along with all the arguments. It is also the fate of the claim of the assessee that it has been concurrently rejected by all the appellate forums. However, mere rejection of the claim of the assessee cannot be invited with the penalty. Further more on this issue of the excess contribution received the learned AO has recorded his satisfaction that assessee has furnished inaccurate particulars of income in the assessment order. However, at the time of levy of the penalty as per para number 1 at page number 2 of the penalty order he levied penalty for concealment of income. This fact itself renders the penalty on this issue not sustainable. - Decided in favour of assessee. Disallowance of claim u/s 35D - The assessee has claimed expenses of INR 454992/ under section 35D as preliminary expenses however the capital employed of the assessee is only INR 10200/ and the claim is required to be restricted only to the extent of 5% of the capital employed for amortization - HELD THAT:- The assessee explained as per letter dated 8/9/2003 before the AO that the total preliminary expenses are INR 568740/ out of which INR 113748/ being 1/5 of the total expenses were charged to the income and expenditure account for the year ended on 31st of March 2000. The balance amount of INR 454992/ has been charged to the income and expenditure account for the year ended 31st of March 2001 it was stated that as assessee has claimed that it is a mutual concern operating on a no profit basis the above preliminary expenses are merely form part of the expenses charged to the income and expenditure account incurred by the assessee in the ordinary course of business for carrying out the activities of the assessee and therefore such preliminary expenses have been rightly claimed in the impugned assessment year. The claim of the assessee was rejected for the reason that the assessee is not a mutual concern. Therefore for the reasons given by us in cancelling the penalty levied on addition of ₹ 4444002/ of the excess contribution received claimed as a mutual concern, we also cancel the penalty on the disallowance of INR 4 54482/.- Penalty cancelled - Decided in favour of assessee.
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