TMI Blog2016 (3) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... of mind. In this regard we found support from the judgment rendered by Hon’ble Bombay High Court in case of CIT vs. Kaushalaya [ 1995 (1) TMI 25 - BOMBAY High Court ]. - Decided in favour of assessee Disallowance made consequent to change of heads of income - Held that:- While passing of the penalty order there is no recording of the fact that the Explanation offered by assessee was found false and unless falsity of the Explanation is established, no penalty can be imposed. We are of the considered view that the penalty under the aforementioned grounds has been levied merely on the basis of additions by disallowing certain claim/expenses and there is no material or evidence has been brought on record to show constructive concealment on the part of assessee. We found our support from the decision rendered in the case of CIT vs. Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT ] wherein it has been categorically mentioned that in order to expose the assessee to the penalty, the case should be strictly covered by the provisions and the penalty provisions cannot be invoked in the routine manner. A mere making of a claim which is not sustainable in law by itself will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(3) was passed on 20.12.2007 determining total income of ₹ 18,18,240/-. This income has been reduced to ₹ 14,57,880/- in consequence to the relief of ₹ 3,61,394/- allowed by the learned CIT(Appeals) in respect of sundry creditors. The assessee firm has claimed interest and rental income as business income. Assessee earns rental income out of subletting. However, the AO, while passing order u/s.143(3) held that the interest income as well as rent income is chargeable to tax under the head income from other sources . This view has also been upheld by the learned CIT(Appeals) vide order dated 17/2/2010. The assessee's claim of expenses under various heads which are not covered by provisions of section 57 of the I.T. Act. Therefore, they are not allowed by the Revenue Authorities. The penalty proceedings u/s. 271 (1)(c) of the Act were initiated. Accordingly, statutory notice u/s. 274 read with section 271(1)(c) was issued on 21.12.2007 and served upon the assessee on 24/12/2007. 3. The assessee submitted its explanation which is as under: The assessee firm filed its return of income on the same basis and in the same manner as in the past, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. Authorised Representative (AR) representing the assessee has relied upon the detailed written submissions made before the CIT(A). Further, Ld. AR filed a copy of the judgment dated 12.03.13 of Hon ble jurisdictional High Court in the assessee s own case in ITA No. 2575 of 2011 and evidenced fact of admission of the assessee s appeal by the Hon ble HC on the said additions. The issues admitted are detailed in para 2 of the judgment. The same reads as under: 2 Admit-on the following substantial questions of law:- (i) Whether en the facts and in the circumstances of case and in law, the Tribunal was right in holding that the period of limitation for issue of notice under Section 143(2) of the Act read with Proviso would commence from the date of filing of the revised return of income and not from the date of filing of the original return of income? (ii) Whether on the facts and circumstances of the case and in law, the income of ₹ 11,85,504 received as rent from sub- lease of the factory premises is assessable as income under the head Business ? (iii) Whether on the facts and circumstances of the case and in law the interest income of ₹ 8,73, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t become apparent that the addition is certainly debatable-In such circumstances penalty cannot be levied u/s 271 (1)(c)-Admission of substantial question of law by High Court lends credence to bona fides of the assessee in claiming deduction- Once it was held that claim of assessee could have been considered for deduction as per a person. properly instructed in law and is not completely debarred at all, mere fact of confirmation of disallowance would not per se lead to the imposition of penalty-Since additions, in respect of which penalty has been upheld, have been held by High Court to be involving a substantial question of law, penalty is not exigible under section 271(1)(c) and thus deleted-Revenues' appeal dismissed. 9. Apart from the above submissions, we have also analyzed the orders passed by CIT(A) and our findings on grounds of appeal as are as under: Ground Nos. 1 2 10. After hearing the arguments of both the parties on the aforementioned grounds, we have also noticed that on completion of assessment proceedings a notice u/s 274 r.w.s. 271 of I.T.Act, 1961 dated 20.12.2007 was issued. On perusal of the said notice we have observed that the said noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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