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2010 (5) TMI 564 - ITAT, DELHIPenalty - Addition - The learned counsel for the assessee has submitted that there is no requirement to disclose in the audit report the matter with regard to disallowance of loss within the meaning of Section 94(7), and as such mere because the fact of disallowance of loss to be made u/s 94(7) was not mentioned in the audit report, it could not be said that the assessee has concealed the particulars of his income or furnished inaccurate particulars of his income - What has been disclosed by the assessee in the return of income is only the amount of loss adjusted against the other taxable income of the assessee, and amount of dividend claimed exempt without disclosing any other particulars whatsoever relating to the purchase and sale of units - it is a case where the assessee has failed to furnish any explanation and material particulars relating to the income and loss arising to the assessee on purchase and sale of the units in question as to why the loss incurred on sale of units were not adjusted or set off against the dividend income - It is well settled that all and every fanciful and fantastic explanation offered by any person cannot in itself be construed to be a bona fide one Tribunal has cancelled the assessment on account of legality of the notice taken up in appeal, and, therefore, on this ground alone, the penalty cannot be imposed - At this stage, a reference is made to a decision of Hon'ble jurisdictional high Court of Delhi in the case of CIT vs Escorts Finance Ltd. dated 21th August, 24, 2009 where penalty levied u/s 271(l)(c) in respect of the disallowance of assessee's claim made u/s 35D for expenses incurred for public issue of shares was held to be justified - u/s 94(7) of the Act, against the taxable profit of the assessee instead of adjusting the same against exempted dividend income and thereby derived double benefit, is totally in disregard to the clear and unambiguous provisions contained in Section 94(7) of the Act and is not bonafide, and further, the assessee has failed to disclose fully and truly all materials relating to that claim in the return of income - In the result, the appeal filed by the assessee stands dismissed
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