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2013 (8) TMI 1039 - ITAT PUNE

2013 (8) TMI 1039 - ITAT PUNE - TMI - ITA No. 537/PN/2010 - Dated:- 30-8-2013 - Shri R.S. Padvekar, Judicial Member and Shri R.K. Panda, Accountant Member Appellant by : Shri Pramod Shingte Respondent by : Smt. Sunita Rao ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 16- 12-2009 of the CIT(A)-III, Pune relating to Block Period 1991-92 to 2000-01 and 2001-02 part. 2. Levy of penalty of ₹ 61,70,000 u/s.158BFA (2) of the Income Tax Act by the .....

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9,357/- pertaining to 3 years, i.e. A.Y. 1999-2000 to 2001-02. While arriving at this loss, the assessee had claimed accrued interest of ₹ 90,77,000/- on advances received from the members of the society. The Assessing Officer completed the assessment on 29-08-2002 determining the total undisclosed income at ₹ 58,67,526/-. In the said order the Assessing Officer disallowed accrued interest of ₹ 90,77,000/- claimed by the assessee in toto, charged to tax the notional income of & .....

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xpenses incurred by the assessee for earning undisclosed income. The Assessing Officer thereafter computed the revised income of the assessee at ₹ 16,38,620/- vide his order dated 07-05-2008. 3.2 The Assessing Officer thereafter initiated penalty proceedings u/s.271(1)(c) of the Income Tax Act. In response to the same, it was submitted that had the interest on advance of ₹ 90,77,000/- been allowed as claimed by the assessee, the assessed income would have been negative. It was submit .....

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e entire interest. It was submitted that the interest has been disallowed on merely technical grounds. However, the assessee was under contractual obligation to pay interest and the claim was not frivolous or malafide. It was submitted that although the claim has been disallowed on technical grounds, levy of penalty u/s.158BFA(2) is unwarranted and unjustified. Relying on various decisions it was submitted that levy of interest u/s.158BFA(2) is discretionary and not compulsory. It was further su .....

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of the letters submitted by the assessee at the time of assessment were not found during the course of search. Therefore, the Assessing Officer made the disallowance which has been upheld by the CIT(A). The Assessing Officer further noted that lack of particulars/details regarding expenses cannot be treated as bonafide omission on assessee s part and the consequent addition to the income has to be considered to be a sound basis for penalty. Further, the loss was claimed on the basis of books of .....

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r by holding as under : 5. I have carefully considered the contention of the appellant in the light of the facts of the case and provisions of law. The appellant's contention that his claim of interest of ₹ 90,77,000/- was bonafide and genuine based on the contractual obligation of the plot holders does not appear to be acceptable. As observed by the Assessing Officer in para 6 of his order that there is no evidence found at the time of the search with regard to the liability of the as .....

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consideration, I find myself in agreement with the view taken by the Assessing Officer. 5.1. Further, the claim of the appellant that the Assessing Officer should have taken the basis for working out the quantum of penalty to be the amount of tax leviable in respect of the undisclosed income under clause (c) of section 158BC and not the difference between the returned loss and assessed undisclosed income, to my mind, is not in accordance with the provisions of law as contained in second proviso .....

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e the assessee has shown a negative figure against undisclosed income in the block return; for the purpose of calculating penalty u/s.158BFA(2), the difference between the assessed undisclosed income and the negative figure (loss) shown in the return has to be taken. This view is also supported by the fact that, as per statutory mandate, the penalty u/s 158BFA(2) is leviable on an amount which is the difference between 'undisclosed income determined' and the 'undisclosed income shown .....

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ppeal before us. 6. The Ld. Counsel for the assessee reiterated the same submissions as made before the Assessing Officer and the CIT(A). Challenging the leviability of penalty he submitted that the disallowance of interest was made only on the basis of the return of income filed by the assessee and not based on any document found during the course of search. Referring to the provisions of section 158B(b) he submitted that the words or any expense, deduction or allowance claimed under this act w .....

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or allowance claimed under this act which is found to be false not being there in section 158B(b) at the time of filing of the return on 31-05-2001, penalty u/s.158BFA(2) could not be validly imposed on the basis of certain disallowances of expenditure claimed and rejection of claim of set off of business loss. 6.1 Referring to the decision of the Kolkata Bench of the Tribunal in the case of Enfield Industries Ltd. Vs. DCIT reported in 107 ITD 1 he submitted that when there was no evidence on r .....

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undisclosed income of ₹ 61,67,600/-. 7. The Ld. Departmental Representative on the other hand while supporting the order of the CIT(A) submitted that the assessee has not maintained any books of accounts before the search and those were prepared only after the search. Therefore, by claiming such interest payable to the plot holders the assessee deliberately tried to evade his tax and therefore under such facts and circumstances of the case penalty u/s.158BFA(2) is leviable. 8. We have con .....

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lthough the Assessing Officer disallowed the entire interest the CIT(A) on the basis of certain documents allowed interest to the extent of ₹ 9,07,700/-. We find the Tribunal reversed the order of the CIT(A) on this issue. The Assessing Officer thereafter levied penalty u/s.158BFA(2) on account of disallowance of the interest on such advances and levied penalty of ₹ 61,67,700/-. While doing so, he observed that the claim made by the assessee is not backed by any evidence found at the .....

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92 and part of 2001-02 and the date of search is 29-08-2000 and the assessee filed return of income on 23-03-2001. Therefore, in view of the decision of the Mumbai Bench of the Tribunal (Third Member) in the case of Super Metal Industries (Supra) penalty u/s.158BFA(2) cannot be levied under the facts and circumstances of the case. 8.2 We find merit in the above submission of the Ld. Counsel for the assessee. We find the Mumbai Bench of the Tribunal (Third Member) in the case of Super Metal Indus .....

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