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2019 (5) TMI 342

atute visualized the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. AO may be justified in making estimated disallowance in quantum proceedings, such disallowance of expenses, that too on estimated basis, could not automatically fall within mischief of Section 271(1)(c). While a claim towards expenditure may not found acceptable in quantum proceedings, such disallowance cannot invite by way of penalty. When all material facts relevant to the said claim were placed on record, the presence or absence of commercial instinct in a given case is a matter of inference. Such adverse inference against assessee would not attract imposition of penalty. The claim of expenditure towards interest ma .....

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Assessing Officer (AO) under s. 271(1)(c) r.w.s. 274 of the Income Tax Act, 1961 (the Act) concerning AY 2002-03. 2. The grounds of appeal raised by assessee read as under: 1. The Commissioner of Income Tax (Appeals) has erred in levying penalty of ₹ 12,13,525/- u/s. 271(1)(c) of the Income tax Act, It is submitted that on the facts and circumstances of the case, no penalty is leviable, as there is not any concealment of income on the part of the assessee. Therefore the penalty so levied u/s 271(1)(c) of ₹ 12.13,525/- be deleted. 2. The Commissioner of Income Tax (Appeals) has erred in imposing penalty u/s 271(1)(C) of ₹ 12.13.525/- on the- addition confirmed by CIT(A) of ₹ 33,99,231/- on account of disallowance of .....

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xpenses to the extent of ₹ 33,99,231/- to be for non business purposes. The aforesaid estimated disallowance also invited penalty under s.271(1)(c) of the Act @ 100% thereon. 4. In the first appeal, the CIT(A) also confirmed the penalty so imposed. 5. Further aggrieved, the assessee preferred appeal before the Tribunal. 6. We have considered the rival submissions and perused the orders of the authorities below. The controversy involves imposition of penalty u/s.271(1)(c) of the Act on disallowance on estimated interest expenses in proportion to the corresponding interest free advances given by the assessee. We straightway note that in order to attract penalty u/s.271(1)(c) of the Act, it is necessary that there must be concealment by .....

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presence or absence of commercial instinct in a given case is a matter of inference. Such adverse inference against assessee would not attract imposition of penalty. The claim of expenditure towards interest made at best be taken as erroneous claim by the assessee. Such claim made in a bonafide manner cannot lead imposition of penalty. Although such claim may not be maintainable for the purposes of quantum proceedings however, in the absence of any falsity per se in such claim, making an incorrect claim for deduction is not at par with concealment or inaccurate particulars of income. 7. We also take note of the decision of the Hon ble Bombay High Court in the case of CIT vs. Dalmia Dyechem Industries Ltd. Income Tax Appeal No. 1396 of 2013 .....

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