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2015 (5) TMI 906 - ITAT DELHI

2015 (5) TMI 906 - ITAT DELHI - TMI - Penalty u/s 271(1)(c) - interest income received from fixed deposits was shown as business income - Held that:- Revenue have not brought out any fact or allegation on record that the information given by the assessee in its return of income was either bogus or incorrect and hence the same is prescribed as correct which was not disputed by the AO. The CIT(A) also observed that the interest income received from fixed deposits was shown as business income on th .....

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gaged a consultant to advise the assessee in business matters and also to advise about the sale of shares to a foreign entity or party. Therefore, the impugned amount of consultancy fee was debited under the head of legal and professional expenses which was claimed as business expenditure under a bonafide belief that the expenditure was incurred for business and the same was allowable against the business income. However, during the quantum proceedings, the claim of consultancy fee was allowed a .....

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0 (3) TMI 80 - SUPREME COURT ), wherein held that merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the Revenue, that, by itself, would not attract penalty u/s 271(1)(c). However, in the present case, the claim of the assessee on both the counts was not dismissed at the threshold but both the claims of the assessee was allowed in a different head of income instead of the head of income adopted by the assessee in its return of income. Th .....

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1961 for short (the Act) has been set aside by deleting the penalty imposed by the AO. 2. The sole ground raised by the Revenue in this appeal reads as under: Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the penalty amounting to ₹ 33,81,821/- imposed by the Assessing Officer u/s 271(1)(c) of the I.T. Act, 1961? 3. Briefly stated the facts giving rise to this appeal are that the assessment was completed u/s 143(3) of the Act on 13.11. .....

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of ₹ 75,47,005/- and, therefore, the AO disallowed the same as business expenditure and the said expenditure of consultancy fee was allowed against the capital gain income and, thus, the capital gain was assessed and reduced to ₹ 50,47,005/-. The aforesaid both the additions were upheld by the CIT(A) and assessee did not prefer any appeal before ITAT and the said additions attained finality. 4. Subsequently the AO initiated penalty proceedings u/s 271(1)(c) of the Act and after prov .....

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rieved by the above penalty order the assessee preferred an appeal before the CIT(A) which was allowed by passing the impugned order and the AO was directed to delete the penalty. Now the Revenue Department is before this Tribunal in the second appeal with the sole ground as reproduced hereinabove. 6. We have heard argument of both the sides and carefully perused the relevant material placed on record. 7. The ld. Departmental Representative, supporting the penalty order, submitted that the asses .....

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Act was rightly levied on the assessee. The ld. DR vehemently contended that the CIT was not justified in deleting the penalty without any justified and cogent reason and wrongly placed reliance on the various judgments of Hon ble Supreme Court and High Court including the decision of Hon ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd., 189 Taxman 322 (SC). The ld. DR finally prayed that impugned order may be set aside by restoring that of the penalty order. 8. The ld .....

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e nor the assessee has concealed any particulars of its income and, therefore, penalty u/s 271(1)(c) of the Act cannot be imposed merely because the assessee made a claim which was allowed in some another head of income instead of the head of the income chosen by the assessee. The ld. Counsel lastly prayed that the appeal of the Revenue deserves to be dismissed being devoid of merits. 9. On careful consideration of above submissions at the very outset, we note that the CIT(A) granted relief for .....

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he foreign party as business expenditure. The Assessing Officer held that the interest income received from fixed deposits is assessable as income from other sources and the consultancy payment of ₹ 25,00,000/- was paid for sale of shares to the foreign party therefore, such expenses cannot be allowed as business expenditure as the income from sale of shares was assessable under the head long term capital gain. The Assessing Officer held that since appellant has furnished inappropriate par .....

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- as income from other sources. The appellant had stated that it had a bonafide belief that interest income is assessable as business income, therefore, same was shown as business income during the year. It has stated that nothing has been concealed and everything was disclosed in the return of income. For the addition of ₹ 25,00,000/- made on account of disallowance of consultancy fee as business expenditure, it is submitted by the appellant that it has engaged a consultant to advise it i .....

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nceal or file inaccurate particulars of income, therefore, penalty for concealment could not be imposed on the appellant. A glance at the provisions of section 271(1)(c) suggests that in order to be covered u/s 271(1)(c) there has to be concealment of income of the appellant. Secondly the appellant must have furnished inaccurate particulars of its income in the return of income. However in the instant case, the appellant has given all particulars of its income shown in the return of income. The .....

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that such expenditure is allowable as business expenditure. The Explanation furnished by the appellant is bonafide and was based on the relevant information available in the return of income. Therefore, the appellant cannot be held guilty of furnishing inaccurate particulars of income or concealment of income. The addition was based on difference of opinion and on such additions two views are possible, wherever two views are possible on a issue penalty u/s 271(1)(c) cannot be levied. The assess .....

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therefore, the case of the appellant cannot be covered under the provisions of section 271(1)(c) explanation-1(A). Hence, the penalty levied by the Assessing Officer was not justified and same is delelted. 10. In view of above, we are in agreement with the conclusion of CIT(A) that the appellant - assessee had given all particulars of its income in the return of income and assessee did not conceal or suppress any fact relating to the income earned during the relevant financial year. The AO have .....

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ther sources instead of business income during the quantum proceedings. In this situation, the addition was based on difference of opinion and when two views are possible the penalty u/s 271(1)(c) of the Act cannot be levied. 11. In so far as the consultancy fee payment is concerned. The CIT(A) rightly accepted the explanation of the assessee that it has engaged a consultant to advise the assessee in business matters and also to advise about the sale of shares to a foreign entity or party. There .....

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