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2019 (5) TMI 342 - ITAT AHMEDABADPenalty u/s 271(1)(c) - disallowance of proportionate interest expenditure incurred on borrowed funds - HELD THAT:- A conspectus of the Explanation – Section 271(1)(c) makes it clear that the statute visualized the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. AO may be justified in making estimated disallowance in quantum proceedings, such disallowance of expenses, that too on estimated basis, could not automatically fall within mischief of Section 271(1)(c). While a claim towards expenditure may not found acceptable in quantum proceedings, such disallowance cannot invite by way of penalty. When all material facts relevant to the said claim were placed on record, the presence or absence of commercial instinct in a given case is a matter of inference. Such adverse inference against assessee would not attract imposition of penalty. The claim of expenditure towards interest made at best be taken as erroneous claim by the assessee. Such claim made in a bonafide manner cannot lead imposition of penalty. Although such claim may not be maintainable for the purposes of quantum proceedings however, in the absence of any falsity per se in such claim, making an incorrect claim for deduction is not at par with concealment or inaccurate particulars of income. Decision in the case of CIT vs. Dalmia Dyechem Industries Ltd. [2015 (7) TMI 619 - BOMBAY HIGH COURT] relied to submit that the penalty cannot be imposed unless the action of the assessee per se is dishonest, malafide and amounting to concealment of facts. There, being no concealment of fact per se imposition of penalty is not justified. The penalty, in our view, is clearly not maintainable in the absence of any contumacious or dishonest conduct. Consequently, we set aside the order of the CIT(A) and direct the AO to delete the penalty on disallowance of estimated interest expenditure - Appeal of the assessee is allowed.
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