TMI Blog2016 (6) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... ct can be attracted. It could be said that the assessee-firm made claim before the authorities below which did not found favour with the Revenue and was not accepted by the authorities below in quantum proceedings which was later confirmed by the learned CIT(A) and the Tribunal in quantum assessments . The case of the assessee-firm is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT v. Reliance Petroproducts Private Limited (2010 (3) TMI 80 - SUPREME COURT ) - Decided in favour of assessee - I.T.A. No. 8644/Mum/2011 - - - Dated:- 3-6-2016 - Shri Saktijit Dey, Judicial Member And Shri Ramit Kochar, Accountant Member For the Assessee : Shri S.C. Tiwari For the Revenue : Shri Chandrajit Singh ( D.R. ) ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee-firm, being ITA No. 8644/Mum/2011, is directed against the order dated 25-11-2011 passed by learned Commissioner of Income Tax (Appeals)- 8, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2005-06, the appellate proceedings before the learned CIT(A) arising from the penalty order dated 29-03-2010 passed by the learned assessing officer (her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-firm. The assessee-firm submitted before the A.O. that the assessee-firm is dealing and trading in shares and the assessee-firm has to borrow funds from the market at varying rates to meet the business exigencies. Borrowing of funds and returning back the same is a continuous process in a business environment. The assessee-firm borrowed the funds from outside parties and has paid interest to them @ 12% per annum and it was submitted that sometimes there is surplus funds for short intervals which are likely to remain idle for some point of time and the said funds may again be required after a short interval for business purposes. In such a situation if the funds are parked with a bank for a short period of time , the funds may fetch lower interest rate of 3 to 4% p.a.. The assessee-firm submitted that any prudent businessman who is already shouldering higher interest rate on borrowed funds would like to minimize interest loss and hence the funds were parked with sister concerns at the rate higher than the bank rates but lower than the rate at which funds were borrowed. It was submitted that the funds if parked with third parties may fetch higher returns than at the rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings with respect to the disallowance of interest expenses as detailed above . As per the A.O. , the assessee-firm has not bonafidely explained the reasons to substantiate the claim made by the assessee-firm in the penalty proceedings u/s 271(1)(c) of the Act and the assessee-firm has furnished inaccurate particulars of income leading to the concealment of income within the meaning of section 271(1)(c) of the Act as the onus as cast u/s 271(1)(c) of the Act was not discharged by the assessee-firm to take it out of clutches of the penalty provisions u/s 271(1)(c) of the Act . The AO relied upon decision of Hon ble Supreme Court in the case of UOI v. Dharmendra Textile Processors (2008) 174 taxman 571(SC), Hon ble High Court of Kerala decision in the case of CIT v. P K Narayanan (1999) 106 taxman 567(Ker.), ITAT, Hyderabad decision in the case of Shivlal Dulichand Agarwal v. ITO (1993) 45 ITD 319(Hyd. Trib.) and Hon ble Bombay High court decision in the case of Western Automobiles (India) v. CIT (1978) 112 ITR 1048(Bom.) Accordingly, the A.O. levied penalty of ₹ 8,36,850/- u/s 271(1)(c) of the Act on the grounds that it is established that the assessee-firm has conceale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue: 1. Khanchand Thakurdas v. CIT -140 ITR 581(Kar. HC) 2. CIT v. Dev Raj-98 ITR 76(P H HC) 3. Mahadeswara Movies v. CIT 144 ITR 127(Kar. HC) 4. CIT v. Hiralal Shankarlal 165 ITR 124(Calcutta HC) 5. CIT v. Raj Textile -166 ITR 632(MP HC) The learned Counsel submitted that the assessee-firm borrowed funds @ 12% p.a. interest and deployed the funds at 6 to 9% p.a. interest to its sister concerns. The assessee-firm relied upon the decision of Hon ble Punjab Haryana High Court in the case of CIT v. Pankaj Munjal Family Trust, (2010) 326 ITR 286(P H HC) and the decision of Hon ble Supreme Court in the case of S.A. Builders Ltd. v. CIT (2007) 288 ITR 1(SC). The learned counsel submitted that any prudent businessman who is already shouldering higher interest rate on borrowed funds would like to minimize interest loss. The Tribunal although confirmed the additions in ITA no. 424/Mum/2009 vide its orders dated 17-07-2015 but the penalty proceedings u/s 271(1)(c) of the Act are separate proceedings. The assessee-firm has not violated any provisions of law. The ld. Counsel relied upon the decision of Hon ble Bombay High Court in the case of CIT v. Aditya Bir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. It was the contention of the assessee-firm that deploying the funds for short intervals of time with the sister concerns was undertaken to avoid keeping the funds idle, hence, lower rate is charged @ 6-9% p.a., while bank interest rate is 3-4% p.a.. The assessee-firm submitted that if the funds are deployed with outside parties , the assessee-firm will receive higher interest but the safety and security of the investment will be in jeopardy as well the timely return of the funds deployed will be also not certain and hence the funds are kept for short period of time with sister concern which fetched 6-9% p.a. interest and which can be recalled at any time as per requirements of the assessee-firm. The assessee firm sighted that it is a business decision based on commercial expediency relying upon the decision of Hon ble Supreme Court in the case of S A Builders(supra) and the Revenue cannot put itself into an armchair of the business men to decide the business decisions of the businessmen. With respect to dividend stripping u/s 94(7) of the Act, the assessee-firm has pleaded accidental or inadvertent omission due to oversight and represents bonafide and unintentional mistake and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty of ₹ 8,36,850/- so levied by the AO and confirmed/sustained by the learned CIT(A) is not sustainable. We have duly considered the case laws relied upon by the Revenue but the same did not advance the case of the Revenue. Hon ble Supreme Court in the case of UOI v. Dharmendra Textile Processors(supra) has laid down that mens rea is not relevant in penalty proceedings but at the same time each and every omission or mistake of the tax-payer in filing of the return of income or filing of claim which is not accepted by the Revenue will not make the tax-payer exigible to penalty if the tax-payer comes out with an bonafide and plausible explanation will not make the tax-payer exigible to penalty u/s 271(1)(c) of the Act as laid down by Hon ble Supreme Court in Reliance Petroproducts Private Limited(Supra). Similarly, the decision of Hon ble Delhi High Court in Zoom Communications Private Limited(supra) is not applicable as the assessee firm in the instant case has come out with bona-fide and plausible explanation which is not controverted by the Revenue . The assessee- firm in the instant case has come out with plausible and bonafide explanation that for intervening short period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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