TMI Blog2017 (5) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... aim with prima facie some merits in it and such a claim cannot be simply brushed aside for the penalty purposes.We, therefore, direct the Assessing Officer to delete the penalty in respect of the claim of deduction under section 36(1)(viii). As regards penalties in respect of quantum addition we have noted that there is nothing to suggest that explanation of the assessee is incorrect and that the interest earned on the funds are indeed required to be used for designated purposes and yet the addition has been confirmed on the ground that interest was not actually refunded. Once again, whatever be the status of taxability, the fact remains that neither the explanation of the assessee has been found to be incorrect or false or simply unbelievable. The CIT(A) was thus quite justified in holding that the penalty could not be imposed simply because the income has turned out to be taxable and a wrong claim is made by the assessee. We approve the action of the CITI(A) on this point and decline to interfere in the matter. As regards the claim for amortization of lease hold land, there is nothing before us to controvert the findings of the CIT(A) and as such demonstrate that it was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding before Hon'ble Gujarat High on substantial ground of law. It is submitted that in such circumstances levy of penalty u/s 271(1)(c) is unjustified it be so held now. II) Grievances raised by the Assessing Officer :- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting penalty of ₹ 42,78,697/- levied u/s 271(1)(c) of the Act on account of addition in respect of interest income of project fund by holding it a case of denial of claim without appreciating the fact that the interest on said fund was already accrued to the assessee and which was not offered for taxation. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting penalty of ₹ 4,82,940/- levied u/s 271(1)(c) of the Act on account of addition of amortization of leasehold land without appreciating the fact that the land was taken on lease for the period of 99 years and therefore the expenses claimed was for the purpose of acquiring lease hold right which was a capital expenditure and not revenue expenditure as claimed by the assessee so as to reduce the tax liability. 3. On the facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The quantum of addition of ₹ 1,16,92,827 was thus made, and it was also held that the assessee is to be held responsible for having furnished inaccurate particulars of income. Accordingly, penalty under section 271(1)(c) was also imposed. However, when matter was carried in appeal before the CIT(A), the penalty was deleted as the CIT(A) was of the view that the claim of the assessee was made in a transparent manner and it was a plausible view of the matter that, in the given circumstances, interest was not income of the assessee. On this point, the Assessing Officer is aggrieved of the relief granted by the CIT(A) and is in appeal before us. The last issue with respect to imposition of penalty is of disallowance of deduction for amortization of leasehold land of ₹ 13,19,780. So far as is this issue is concerned, the deduction was declined to the assessee which has been confirmed by the Tribunal on the basis of Hon ble Supreme Court s decision which was admittedly not available at the point of time when the related income tax return was filed. Learned CIT(A) is of the view that since the matter had not reached finality at the stage of filing of income tax return, and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y explanation by the assessee must be accepted. In my view, the explanation of the assessee for the purpose of avoidance of penalty must be an acceptable explanation. He may not prove what he asserts to the hilt positively but as a matter of fact materials must be brought on the record to show that what he says is reasonably valid. The above views were approved by the Hon'ble Supreme Court in the case of CIT vs. Mussadilal Ram Bharose (l987) 165 ITR 14 (SC). Referring to the judgment of Hon'ble Patna High Court, Their Lordships had observed that The Patna High Court emphasised that as to the nature of the explanation to be rendered by the assessee, it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed upon him would be discharged and the presumption rebutted. We agree. We further agree that it is not the law that any and every explanation by the assessee must be accepted. It must be acceptable explanation, acceptable to a fact-finding body. Viewed in the light of this well settled legal position, the explanation of the assessee is indeed acceptable so far as penalty under section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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