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M/s Gupta International Versus Assistant Commissioner of Income Tax, Panipat Circle, Panipat

Levy of penalty u/s 271(1)(c) - disallowance of interest - Held that:- The issue is squarely covered in favour of the assessee by the decision of Hon’ble Apex Court in the case of Reliance Petroproducts Pvt.Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein held a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. The ratio of above decision of Hon’ble Apex Court would be squarely applicable t .....

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oks of account - Held that:- No satisfactory explanation is given by the assessee’s counsel. The only explanation was that the difference is meager and that the same is a clerical error. We are unable to accept such explanation and therefore sustain the penalty levied in respect of difference in the receipt. We, therefore, direct the Assessing Officer to calculate the penalty at the rate of 100% of the tax sought to be evaded on the difference in the receipt shown in the TDS certificate and as s .....

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s against the levy of penalty of ₹ 3,76,390/- imposed u/s 271(1)(c) of the Income-tax Act, 1961. 3. The Assessing Officer has levied the penalty in respect of the following three additions :- (i) Disallowance of interest amounting to ₹ 9,42,000/- which is capitalized by the Assessing Officer. (ii) Disallowance of interest of ₹ 1,50,980/- which is also capitalized by the Assessing Officer. (iii) Addition on account of difference in the receipt as per TDS certificate and books of .....

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money was borrowed for the purpose of either investment in the plot or for construction of the building. The total investment in the plot was ₹ 1.40 crores and the investment in the building was ₹ 15.98 lakhs and ₹ 3.78 lakhs. Thus, the total investment in the plot and building taken together was less than ₹ 1.25 crores. He stated that the own fund in the form of partner s capital on which no interest was paid was more than ₹ 6.73 crores. Thus, the own fund was much .....

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ree funds were sufficient to meet the investment. That in the case of the assessee, interest free funds are more than five times of the investment in plot/building. In view of the above decision of Hon'ble Jurisdictional High Court, even the disallowance of interest is not justified. He stated that the assessee has accepted the order of the Assessing Officer because the addition is tax neutral as assessee would be getting more depreciation due to capitalization of interest. It is only the ti .....

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s 271(1)(c). In support of this contention, he relied upon the decision of Hon ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. - (2010) 322 ITR 158 (SC). With regard to the difference in the receipt as per TDS certificate and as per books of account, he stated that it is only a clerical mistake which is of insignificant amount and therefore, does not deserve any penalty u/s 271(1)(c) of the Act. 5. Learned DR, on the other hand, argued at length. He also furnished the writt .....

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ing which has admittedly not been utilized for the purpose of business during the year under consideration. Since the assessee has claimed the deduction which is contrary to the provisions of law, the act of the assessee falls within the ambit of furnishing of inaccurate particulars of income. In support of this contention, he relied upon the following decisions:- (i) N.G. Technologies Vs. CIT - [2016] 70 taxmann.com 37 (SC). (ii) CIT Vs. HCIL Kalindee Arsspl - [2013] 37 taxmann.com 347 (Del). ( .....

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penalty proceedings are separate and independent proceedings. Section 36(1)(iii) reads as under:- 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 - (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession : [Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset .....

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apital was borrowed for acquisition of asset till the last date on which such asset was first put to use shall not be allowed as a deduction. Admittedly, the plot and building which was under construction was not put to use but, at the same time, it has been stated that no money was borrowed for the acquisition of plot or for investment in the construction of building. The Assessing Officer has also not pointed out any borrowing for acquisition of plot or for investment of the building. He has c .....

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sufficient to cover the interest free advances made by it of ₹ 10.29 crores to its sister company. We are entirely in agreement with the judgment of the Bombay High Court in Commissioner of Income Tax vs. Reliance Utilities & Power Ltd., (2009) 313 ITR 340, para-10, that if there are interest free funds available a presumption would arise that investment would be out of the interest free funds generated or available with the company if the interest free funds were sufficient to meet t .....

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was clarified by the learned counsel that the assessee has accepted the assessment order and has not filed any appeal. He stated that once the interest is capitalized, the assessee will ultimately get the deduction in the subsequent year in the form of more depreciation and therefore, there was only the timing difference in respect of allowability of interest. Hence, the assessee did not file any appeal against the addition made by the Assessing Officer. Now, the limited question before us is w .....

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