TMI Blog2019 (4) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... of our aforesaid observations are of a strong conviction, that though the disallowance made by the A.O at the behest of the assessee would though suffice for saddling her with additional tax liability, however, in the totality of the facts of the case no penalty under Sec.271(1)(c) on the said count could have validly been imposed on her. - Decided in favour of assessee. - ITA No.433/Asr./2018 - - - Dated:- 15-1-2019 - Shri N.K. Saini, Vice President And Shri Ravish Sood, Judicial Member For the Appellant : Shri S.K.Vatta, A.R For the Respondent : Shri Bhavani Shankar, D.R. ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(A)-2, Jalandhar, dated 09.05.2018, which in turn arises from the order passed by the A.O under Sec. 271(1)(c) of the Income Tax Act, 1961 (for short I.T. Act ), dated 19.05.2017 for A.Y. 2014-15. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal: 1. That the learned worthy CIT (Appeals) was absolutely wrong and unjustified since erred both on facts in law in upholding the imposition of penalty u/s 271(1)(c) since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t take advantages or ignorance of an assessee their rights the Ld. A.O. was bound to follow the said instructions which are binding in nature. 6. That both the Ld. A.O. and Worthy CIT(Appeals) while imposing the penalty and upholding the penalty have completely disregarded the ratios of the judgments as relied upon by the assessee. 2. Briefly stated, the assessee had filed her return of income for A.Y. 2014-15 on 31.03.2015, declaring total income at ₹ 10,39,140/-. The assessee had in her return of income claimed deduction of interest expenditure of ₹ 61,04,706/- in respect of borrowed capital which was stated to have been utilised towards property. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the I.T Act. 3. During the course of the assessment proceedings the A.O issued a notice under Sec. 142(1) of the I.T Act, dated 09.06.2006 and called upon the assessee to furnish necessary details viz. (i). complete details of the rental income and the names and addresses of the persons who were paying rent; (ii). details of other incomes shown in the return of income; and (iii). bifurcated details of the househol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of ₹ 13,19,038/- was being made on the basis of the admission by the assessee as regards the mistake on her part. On the basis of the aforesaid deliberations the A.O assessed her income at ₹ 23,58,178/-. The A.O while culminating the assessment also initiated penalty proceedings under Sec.271(1)(c) in respect of the aforesaid disallowance of ₹ 13,19,038/- on the ground that the assessee had furnished inaccurate particulars of income. 5. The A.O after culminating the assessment proceedings called upon the assessee to explain as to why penalty under Sec. 271(1)(c) in respect of the aforesaid disallowance of interest expenditure of ₹ 13,19,038/- may not be imposed in her hands. The reply filed by the assessee that no penalty under Sec.271(1)(c) was called for in her hands, however did not find favour with the A.O who imposed penalty of ₹ 4,07,580/- under Sec.271(1)(c) of the I.T. Act. 6. Aggrieved, the assessee assailed the penalty imposed by the A.O under Sec. 271(1)(c) in appeal before the CIT(A). However, the CIT(A) not being persuade to subscribe to the contentions advanced by the assessee that no penalty under Sec. 271(1)(c) was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op of the admission on the part of the assessee in respect of the aforesaid excess claim of deduction of interest expenditure of ₹ 13,19,038/-, had pursuant thereto disallowed the said sum and framed assessment in her hands. 8. Per contra, the ld. Departmental Representative (for short D.R ) relied on the orders of the lower authorities. It was submitted by the ld. D.R that as the assessee had admitted the aforesaid mistake of having claimed excess deduction of interest expenditure only in the course of the assessment proceedings, therefore, the A.O had rightly imposed penalty under Sec.271(1)(c) in respect of such wrong claim of deduction so raised by her. 9. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, the assessee had in her return of income that was filed under sub-section (4) of Sec.139 on 31.03.2015 raised a claim of deduction of interest on borrowed funds at ₹ 61,04,706/-. However, in the course of the assessment proceedings the assessee had filed a revised statement of computation of income, wherein she had scaled down her claim of deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is it a fact that the excess claim of interest expenditure of ₹ 13,19,038/- had not been incurred in respect of another loan account of the assessee, or that the raising of the claim towards excess amount of interest expenditure of ₹ 13,19,038/- was merely a bogus claim of deduction raised by the assessee. Rather, the fact as it so remains is that the interest expenditure of ₹ 13,19,038/- (included in the claim of deduction of interest expenditure of ₹ 61,04,706/-) pertained to another loan account of the assessee with ICIC Bank i.e. Loan A/c no. ICICI LBL UD00001844368 which was utilised for making of investments in other concerns, and had wrongly been claimed as a deduction as being in the nature of interest on loan raised against property. In our considered view, the aforesaid claim of deduction of ₹ 13,19,038/- raised by the assessee would though not be allowable while computing her income, however, the same in our considered view, in the totality of the facts of the case would not justify imposition of penalty under Sec. 271(1)(c) in the hands of the assessee. At this stage, we may herein observe that the assessee prior to having been confronte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, direct that the penalty imposed on the assessee be cancelled. 11. Further, as observed by us hereinabove, it is neither the case of the revenue, nor a fact that the excess claim of deduction of ₹ 13,19,038/- that was raised by the assessee was found to be a bogus claim that was raised in the thin air. Rather, as observed by us hereinabove, the aforesaid claim of interest expenditure raised by the assessee was in context of the loans which were raised by her for making of investments in other concerns. We thus in terms of our aforesaid observations are of a strong conviction, that though the disallowance of ₹ 13,19,038/- made by the A.O at the behest of the assessee would though suffice for saddling her with additional tax liability, however, in the totality of the facts of the case no penalty under Sec.271(1)(c) on the said count could have validly been imposed on her. 12. We thus in terms of our aforesaid observations being of the considered view that the CIT(A) had wrongly upheld the penalty imposed by the A.O under Sec.271(1)(c) of the I.T. Act, therefore, set aside his order and delete the penalty of ₹ 4,07,580/- imposed by the A.O under Sec.271 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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