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2015 (3) TMI 1131 - ITAT MUMBAI

2015 (3) TMI 1131 - ITAT MUMBAI - TMI - Disallowance u/s 14A - penalty u/s Sec 271(1)(c ) - Held that:- For levy of penalty the AO must show that there was furnishing of inaccurate particulars of income or that the explanation furnished by the assessee was not bonafide one. The findings given in the assessment proceedings cannot operate as resjudicata, because the considerations that arise in the penalty proceedings are different from those in the assessment proceedings. The AO has brought nothi .....

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comes to a conclusion that it is false, then the AO can proceed to levy the penalty. The findings given in the assessment proceedings cannot operate as res-judicata, because the considerations that arise in the penalty proceedings are different from those in the assessment proceeding.

In case of Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT ), Hon’ble Supreme Court has deleted the penalty, which was imposed on account of disallowance of interest paid on loans taken for purc .....

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n the matter of imposition of penalty u/s.271(1)(c) of the Act, wherein following grounds have been taken by the Revenue :- 1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in allowing the appeal of the assessee and thereby deleting the penalty levied u/s.271(1)(c) without appreciating the fact that assessee has furnished inaccurate particulars of income by not making any disallowance u/s.14A r.w.Rule 8D, which is fully applicable in the instant case? 2. .....

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he AO where additions has been made due to difference in opinion on disputable issue. However, the AO did not agree with the contentions of the assessee. The AO observed in the penalty order that the additions have been sustained by the CIT(A). The AO has further held that the assessee has furnished inaccurate particulars of income in respect of the above referred addition on account of disallowance u/s.14A of the I.T.Act. Accordingly, 100% penalty of the tax sought to be evaded was levied on th .....

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ning of the dividend income which has been received on the investment of the appellant which were made out of its own surplus funds. However, the A.O. was of the b view that the appellant might have incurred some expenses for earning the exempt income of dividend, therefore, by following the decision of Bombay High Court in the case of M/ s Godrej & Boyce Mfg. Co. Ltd. (Supra.) has worked out the disallowance u/s.14A by applying the formula of Rule 8D. A perusal of assessment order as well a .....

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nation of the appellant. In such a scenario, in view of the decision of Hon'ble Apex Court in the case of M/s Reliance Petro Products (Supra.), the penalty ujs.271(1)(c) of the I.T.Act,1961 is not justified hence the same is deleted. 4. The contention of the assessee before the AO was that it had not incurred any specific expenditure in earning of the dividend income which has been received on the investment of the assessee, even investment was made out of its own surplus funds. However, the .....

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preme Court in the case of Reliance Petroproducts, 322 ITR 158 (SC), deleted the penalty. 6. Ld. AR placed on record various judicial pronouncements wherein levy of penalty u/s.271(1)(c) for disallowance u/s.14A was not warranted in case where no direct nexus between the expenditure and exempt income was established. 7. The disallowance u/s 14A is by way of fiction but such fiction is not for levy of penalty also. For levy of penalty the AO must show that there was furnishing of inaccurate parti .....

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