TMI Blog2013 (5) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of return there was a possible view in favour of the assessee and therefore, it would not be held that assessee had either furnished any inaccurate particulars of income or has concealed the particulars of income. Thus, it cannot be a case of penalty under Section 271(1)(c) can be levied or confirmed. Penalty u/s. 271(1)(c) - disallowance of interest payment holding that when interest payment were not for business purposes, assessee furnished inaccurate particulars by claiming it to be business expenditure - Held that:- Once the assessee has submitted that it had surplus funds from where it had advanced the money to the sister's concerns, there cannot be any presumption that the same has been made out of borrowed funds only. At least in the penalty proceedings, with any adverse material on record to dispute the assessee's explanation, penalty for concealment cannot be levied or imposed. Thus, on this score also no penalty is warranted - the appeal filed by the department stands dismissed. - ITA No. 1624/Mum./2012 - - - Dated:- 5-4-2013 - Shri B. Ramakotaiah And Shri Amit Shukla,JJ. For the Petitioner : Mr. Rajarshi Dwivedy For the Respondent : Mr. Vipul B. Josh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion charges 2,33,307/- 3. Software expenses 2,03,479/- 4. Speculation Loss 2,99,630/- 5. Service Charges 25,16,280/- 6. Interest expenditure 6,33,693/- 7. Disallowance u/s 14A 19,520/- 60,62,159/- Assessed Total Income 2,33,32,721/- 4. All the aforesaid additions are a subject matter of dispute before first appellate authority and also the Tribunal. 5. Regarding the addition of Rs. 25,16,280/- made on account of service charges, the Assessing Officer had noted that the assessee has paid service charges to the following concerns :- Sl.No. Party Name Rupees 1. Sovereign Global Finance 21,16,280/- 2. Stock Guardian India P. Ltd. 2,19,000/- 3. NSE IT 5,000/- Total 43,57,840/- 6. In response to the query raised by the Assessing Officer with regard to explain the services rendered by the above entries, the assessee submitted that this payment is made to take over the clientele business of Sovereign Global Finance, purs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of this fact the assessee shall only be allowed depreciation on the purchase of new clientele business the depreciation that will be allowed would be 25%. The addition on this account will come to Rs. 18,87,710/- (Rs. 25,16,280 - Rs. 6,29,070/-)". 7. Regarding disallowance of speculation loss of Rs. 2,99,630/-, the Assessing Officer noted that the assessee has opening stock of Rs. 7,68,530/- it has made purchases of Rs. 6,11,290/- during the year. On the other hand the sales was that Rs. 7,610/- at the end of the year and closing stock was at Rs. 10,74,571/-. The assessee had shown a loss on account of valuation of closing stock of Rs. 2,99,630/-. In response to the show-cause notice as to why the said loss incurred on valuation of share in the closing stock should not be treated as speculation loss as per provision of Section 73 of the Act. The assessee submitted that the explanation to Section 73 is applicable where the part of business of a company consists of purchase and sale of shares and the loss is not due to the purchase and sale, the explanation to Section 73 cannot be applied. The loss is to be allowed as a business loss. In respect of this contention, relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has not initiated the penalty proceedings as there was no direction or satisfaction by the AO for initiating the penalty proceedings under Section 271(1)(c). Following the decisions of Rajan Company (291 ITR 340) held that without recording of satisfaction the AO cannot be levied penalty because there is no initiation of penalty proceedings. As all the additions will not automatically attract the penalty. The AO has recorded the same satisfaction after making the addition. Thus, penalty levied on various additions was mainly on this ground. 10. Before us, the learned Departmental Representative submitted that after the amendment brought in the statute in view of Section 271(1((c), there is no requirement of recording satisfaction and it would be sufficient if the AO at the end of the assessment year initiates the penalty proceedings. Thus, the view taken by the CIT(A) is wholly erroneous and brought on merits, he also made a detail submissions and submitted that all the additions being confirmed from the stage of ITAT or has not been decided, therefore, penalty has rightly been levied. On the other hand learned counsel submitted that even after the amendments, he cannot be h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be approved, at least in the penalty proceedings. Thus, on merits of the case, he submitted that no penalty is involved. 10. We have carefully considered the rival contentions, perused the relevant orders passed by authorities below. So far as the addition on Rs. 25,16,280/- is respect to disallowance of service charges claimed by the assessee, it is noted that the Tribunal has held such as an expenditure cannot be allowed as revenue expenditure but was in the nature of capital. Thus, disallowance was made by treating the said payment as capital expenditure. There is no charge of furnishing of inaccurate particulars or for concealment of particulars of income. Moreover, this issue has been admitted by the Hon'ble High Court vide order dated 28th January, 2013 in Income Tax Appeal No. 1897 of 2012. Thus, on these facts, it cannot be held that the assessee is guilty of furnishing inaccurate particulars or has concealed particulars of income. The nature of payment has also not been disputed. The only dispute relates to whether can be allowed as recalled expenditure or capital expenditure. Thus under these circumstances we do not feel that penalty under Section 271(1)(c) can be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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