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2022 (12) TMI 25 - AT - Income TaxPenalty u/s.271(1)(c) - Nature of interest income - capital receipt or revenue receipt - interest income claimed by assessee, on the pre-commencement of business period, as capital receipt as against assessed by AO as revenue receipt - AO levied penalty @ 200% - CIT-A restricted it to 100% - HELD THAT:- It is an admitted fact that the assessee has filed complete particulars of income before the AO and nothing was concealed. As in the present case, the assessee has disclosed all the facts relating to the transaction of loans obtained from banks and the details of bank account and the details of interest earned but treated the same as capital in nature, in view of the decisions of Bokaro Steels Ltd.[1998 (12) TMI 4 - SUPREME COURT] and Karnal Cooperative Sugar Mills Ltd.[1999 (4) TMI 7 - SC ORDER] - It means that there is a debate available whether idle funds kept temporarily during the intermittent period between the set-up of business and actual start of the business, the interest income earned is capital or revenue. The assessee only claimed the same as capital in nature and not disclosed as revenue income on which taxes to be paid. The assessee has made complete disclosure of facts and only issue is whether the interest received on idle funds lying with banks in the shape of fixed deposits is a capital receipt or revenue receipt. This, being a highly debatable issue, the assessee is exigible to penalty u/s.271(1)(c) of the Act, for furnishing of inaccurate particulars of income. This being a highly debatable issue and once there is a debate as assessee’s present case, Hon’ble Madras High Court has admitted the substantial question of law against the order of Tribunal in quantum, we are of the view that assessee is not liable for penalty u/s.271(1)(c) - Hence, we delete the penalty levied by AO completely in both the assessment years and allow both the appeals of assessee.
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