TMI Blog2016 (7) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... me at ₹ 97,60,500/-. The assessee has filed its return declaring 'nil' income after claimed whole of the income as exempt income under section 80P of the Act. Further, the Assessing Officer noticed that the assessee earned interest on FDR from the Co-operative banks and also from other banks which are not covered by the provisions of Section 80P(2)(d) of the Act. The interest from banks other than cooperative banks amount worked out to ₹ 1,51,73,115/-. Further the Assessing Officer noticed that the assessee had earned income at ₹ 1,50,935/- from the sale of cement, ₹ 1,95,655/- from sale of hardware, ₹ 8651/- from sale of CFL and ₹ 1,400/- from Insurance. These amounts were also not eligible for deduction under section 80P of the Act. 2(i) The Assessing Officer disallowed the amount of ₹ 1,55,29,765/- (i.e. ₹ 1,51,73,115/- + ₹ 3,56,641/-) which was restricted to the profit declared by assessee in its Profit Loss Account i.e. ₹ 97,60,590/- and initiated the penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. 3. During the course of penalty proceedings, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is available on the interest derived on the FDRs purchased from the banks other than cooperative banks, not being covered u/s 80P(2)(d) of the Act. Therefore, the exemption claimed on earning of the interest on FDRs earned from such banks @ ₹ 1,51,73,115/- was added to the income of the appellant u/s 56 of the Act. Thus, the interest earned on FDR from the banks other than cooperative banks was disallowed by holding that they are not covered u/s 80P(2)(d) of the Act. Further, the assessee had income from sale of cement, hardware, CFL and from insurance aggregating ₹ 3,56,641/- which was disallowed as, it was not in accordance with the aims and objectives of the society which is eligible for deduction only for the work done for the welfare of its members. The exemption u/s 80P, disallowed aggregating ₹ 1,55,29,756/-, was restricted to the profit declared by the assessee in its P L account i.e. ₹ 97,60,590/-. The Ld. CIT(Appeals) partly allowed the appeal of the assessee with the observation that interest to the extent which has direct nexus with the interest received should be allowed by the Assessing Officer, by placing reliance on the other of the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al High Court in the case of CIT vs. Shahbad Cooperative Sugar Mills dated 12.10.2009 wherein the facts were different as the assessee was an agricultural society engaged in marketing of sugar by its members and the said claim was rejected on the ground that the claim was available on the marketing of agricultural produced and not on manufactured articles. Therefore, it is distinguishable on facts. Further, in the said case it was held that there was no conscious breach of law whereas in the case under consideration as already discussed earlier, although for A.Y. 2007-08 it was already held by the Hon'ble ITAT that only that part of the interest shall be deducted which has direct nexus with the interest received on the FDRs with banks other than Cooperative banks which is to be assessed; the appellant continued with the practice to work out to its net profit after debiting the full amount, of interest on FDRs from banks not covered u/s 80P(2)(d) and therefore it was a consciously committed act of claiming a wrong deduction. The decision of the Hon'ble Supreme court in the case of CIT vs. Reliance Petro Products Pvt. Ltd.(2010) 322 ITR 158 relied upon is not applicable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s case as the same is a matter of fact and the does not absolve it of the wrong deduction claimed on the rest of the interest on FDRs from the banks other than commercial banks which does not have a direct-nexus with the interest earned. Further, the AO was also justified in holding that the income from sale of cement, hardware, CFL, insurance is not in accordance with the aims and objectives of the society and no deduction is allowable on the same and the appellant knowingly claimed deduction wrongly on the same. Therefore, it attracted penalty u/s 271(l)(c). In view of the said facts and circumstances, the penalty u/s 271(l)(c) imposed in this case is held to be justified. These grounds of appeal are dismissed. 4. Grounds of appeal no.4 5:- These grounds of appeal are general in nature, requiring no specific adjudication. In the result, the appeal is dismissed. 5. None appeared on behalf of the assessee at the time of hearing of the appeal. On the last date of hearing fixed on 22.06.2016, appeal was adjourned on the request of the assessee to 04.07.2016. On 04.07.2016, none appeared and a request has been received through FAX from Shri O.P. Garg Co. ( Charter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The assessee, therefore, made a bogus claim of exemption income in the return of income. Further, it was found that assessee has earned income on account of sale of hardware etc. which was not according to the aims and objects of the assessee society and its income on such items was also not exempt which was also wrongly claimed as exempt income. 9. The ld. CIT(Appeals) on quantum, reduced the income by observing that interest to the extent which had direct nexus with the interest received, should be allowed by following order of ITAT in the case of the assessee for preceding assessment year 2007-08 when proceedings for penalty under section 271(1)(c) of the Act were initiated and explanation of the assessee was called for before levy of the penalty, assessee did not file any explanation before Assessing Officer despite the Assessing Officer gave two opportunities to the assessee. Thus, the assessee failed to explain anything before Assessing Officer at the penalty stage and has not filed any explanation before levy of the penalty. Since no explanation is filed at the penalty stage, therefore, levy of the penalty was justified in the matter. I rely upon decisions of Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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