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M/s Spaco Technologies (I) P. Ltd Versus DCIT 5 (3) , Mumbai and Asst. CIT 5 (3) , Mumbai Versus M/s Spaco Technologies (I) P. Ltd

2017 (2) TMI 333 - ITAT MUMBAI

Penalty u/s 271(1)(c) - addition u/s 14A - Held that:- We do not see any concealment or furnishing of inaccurate particulars in respect of the disallowance made under Section 14A of the Act. Disallowance came to be made by invoking the provisions of Rule 8D. Here the assessee proved that it has own funds much more than investments and therefore there is no question of disallowance under 8D 2(ii). Coming to administrative expenses disallowed under Rule 8D 2(iii) we find that during the assessment .....

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bonafide error while computing the capital gains is not proved to be false by the assessing officer. The assessing officer could not prove that the explanation of the assessee was not genuine. The assessee computed long term capital gain taking the sale proceeds of entire investments which were shown in the profit and loss account may be by oversight or inadvertence. It is only a change in the head of income. It is not complete non disclosure by the assessee. Therefore, the explanation of the as .....

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a Yadav ORDER PER C.N.PRASAD (J.M.) : Both these appeals are filed by the Revenue and Assessee against the order of the Ld. CIT (Appeals)-9, Mumbai dated 23.07.2014 for the assessment year 2008-09 in partly deleting the penalty levied under Section 271(1)(c) of the Act. 2. Briefly stated the facts are that the assessee engaged in the business of manufacturing of oxygen gas, trading of spares and letting out of surplus space filed its return declaring income of ₹ 3,26,78,516/-. Assessment w .....

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CIT (Appeals) partly sustained the disallowance under 14A of the Act. 3. The assessing officer initiated penalty proceedings under 271(1)(c) on the disallowance sustained by the Ld. CIT (Appeals) and on the addition made towards short term capital gains. With respect to the disallowance made under Section 14A, the assessee contended that it had incurred an amount of ₹ 60,265/- for earning exempt income and the same was disallowed by the assessee in its computation. Incurring of this expen .....

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fore, levy of penalty under Section 271(1)(c) is not correct. 4. With regard to the addition made on account of short term capital gains, the assessee contended that it had committed inadvertent and bonafide error in showing the short term capital gain as long term capital gain and this was corrected suo-moto in the course of assessment proceedings. However, the assessing officer rejected the explanation of the assessee and levied penalty under section 271(1)(c) on the disallowance sustained by .....

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ment and therefore, we proceed to hear the Ld. DR and dispose of the appeals on merits. 6. The Ld. DR vehemently submits that the Ld. CIT (Appeals) is not justified in deleting the penalty in respect of the disallowance made under Section 14A read with Rule 8D(ii) and further supported the orders of the Ld. CIT (Appeals) in sustaining the penalty in respect of the disallowance made under Section 14A read with Rule 8D (iii) and the addition made towards the short term capital gains. 7. We have he .....

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ed on the addition made by the assessing officer in respect of short term capital gains. On appeal, the Ld. CIT (Appeals) deleted the penalty in respect of disallowance made under Section 14A read with Rule 8D2(ii) but confirmed in respect of the disallowance made under Section 8D2(iii). He also confirmed the penalty in respect of the short term capital gain, observing as under :- 5.2. As regards the penalty u/s.271 (l)(c) in respect of the disallowance of ₹ 1.44 crore u/s. 14 A of I.T Act .....

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₹ 92,23,260/- and ₹ 51,58,434/- respectively totaling to Rs.I.44 crores in all. The AO has levied penalty on the addition on account of disallowance u/s.14A by holding that the appellant was liable to furnish the particulars of income in accordance with the provision of sec.14 A r.w. Rule 8D i.e. by making disallowance u/s.14 A by invoking rule 8 D as envisaged by the decision of Hon'ble Bombay High Court in the case of Godrej and Boyce Pvt. Ltd. 43 DTR 177. Since the assessee h .....

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were initiated in that year for the same default (iii) the appellant has repeatedly pointed out that its own fund were much more than the total investments, under such circumstances it cannot be presumed that borrowed funds have been utilized for the investment in shares and (iv) the appellant has suo-moto made disallowance out of administrative expenses, whereas the AO has mechanically applied Rule 8 D. Under these circumstances, the appellant has vehemently denied that the penalty proceedings .....

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own funds in form of reserves of ₹ 143.83 crore which are sufficient enough to explain the investment of ₹ 112.76 crores and this stand was also accepted u/s.143(3) of I T Act in A.Y 2007-08 when no disallowance was made on account of proportionate interest, therefore it can safely be presumed that the disallowance made by the AO under Rule 8 D [ii] on account of proportionate interest does not attract penalty proceedings u/s.271(1)(c) because the appellant's contention was also .....

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n in the light of the decision of Hon'ble Bombay High Court in the case of M/ s. Godrej & Boyce Ltd. (Supra) it was required to work out the disallowance under Rule 8 D (iii). Since the appellant has failed to do so, this conduct of the appellant tantamount to furnishing incorrect particulars of income, therefore penalty on the addition worked out by disallowance under Rule 8 D (iii) is justified and the same is confirmed. Regarding the levy of penalty on short term capital gain of ͅ .....

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ppellant has furnished inaccurate particulars of its income. Under these circumstances, penalty on tax sought to be evaded by making such wrong claim is clearly attractable, hence the same is also confirmed. 8. On careful reading of the order of the Ld. CIT (Appeals) and the submissions of the assessee before the lower authorities, we do not see any concealment or furnishing of inaccurate particulars in respect of the disallowance made under Section 14A of the Act. Disallowance came to be made b .....

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on that the assessee furnished inaccurate particulars or concealment of income. Hence no penalty is attracted for such disallowance. 9. Coming to the addition made towards short term capital gains, the assessee in the course of assessment proceedings submitted that while computing the total income for the assessment year, it has taken profit on sale of investments as per profit and loss account which included short term as well as long term capital gains and the short term capital gains and comp .....

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