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2019 (8) TMI 103 - AT - Income TaxPenalty 271(1)(c) - deduction of interest out of ‘income from other sources’ - HELD THAT:- The fact of the incurring of expenditure was also supported with the relevant evidences. The disallowance was sustained in the quantum proceedings as the assessee did not succeed in proving how the borrowed funds from Kotak Mahindra Bank were utilized. The nexus was not proved for utilization of money from borrowed funds. The penalty has been imposed as the expenditure claimed was not found to be allowable. We note the observations of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Limi ted [2010 (3) TMI 80 - SUPREME COURT] that no penalty is justified where all the details of expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the Revenue, by itself, would not attract penalty u/s 271(1)(c). We notice that similar circumstances exist in the present case. Guided by the principles laid down by the Hon’ble Supreme Court (supra), we find merit for non-applicability of penalty in the absence of any falsity in the particulars furnished. The AO has admitted the claim of interest expenditure to the extent of interest income and therefore one cannot definitely say that interest expenditure was not utilized for the purpose of earning interests. The disallowance of excess expenditure over and above similar income generated, cannot, in our view, invite penal action in the form of penalty. The order of the CIT(A) is accordingly set aside and the AO is directed to delete the penalty.
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