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2019 (12) TMI 140

..... 274 r.w.s. 271(1)(C) we find that although, the assessee has challenged the validity of penalty proceedings, in light of non striking of irrelevant portion in the notice u/s 274, but, fact remains that the AO had issued further show-cause notice, dated 19/02/2016, for which the assessee neither filed any explanation nor justified its case in light of Explanation-1 to section 271(1)(c). AO has arrived at proper satisfaction, in respect of additions made towards interest income on fixed deposits at the time of assessment proceedings, where he had initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income leading to concealment of income. We, further noted that the AO had levied penalty u/s 271(1)(c) for furnishing inaccurate particulars of income leading to concealment of income. Once a proper satisfaction has been arrived at before initiation of penalty proceedings or any time during proceedings, then subsequent issue of show-cause notice is a formality to communicate the assessee about initiation of penalty proceeding. In this case, AO had issued one more show-cause notice and also, called upon the assessee to explain why penalty proceedings shall n .....

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..... he meaning of Explanation-1 to section 271(1)(C) of the I.T.Act, 1961. Therefore, we are of the considered view that there is no error in penalty levied u/s 271(1)(c) and accordingly, the CIT(A) was right in affirmed penalty levied by the Ld. AO. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject ground taken by the assessee. - ITA No.2313/Mum/2018 - 11-10-2019 - Shri G. Manjunatha, Accountant Member And Shri Ram Lal Negi, Judicial Member For the Assessee : Neelkanth Khandelwal For the Revenue : Abi Rama Kartikeyan ORDER PER G.MANJUNATHA (A.M): This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-2, Mumbai, dated 30/01/2018 and it pertains to the Assessment Year 2010-11. 2. The assessee has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law the CIT(A) ought to have held that the assessing officer had not compiled with the provisions of section 274(1) of the Act by not granting assesses reasonable opportunity of being heard and hence the penalty levied under section 271(1)( c) of the Act is bad in law. 2. On the facts and in the circumstances of the cas .....

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..... ncome from other sources. The AO, after considering ecplanation of the assessee, observed that there was no nexus between interest earned from fixed deposits and business activity of the assessee and accordingly, assessed interest income amounting to ₹ 1,21,63,944/- under the head income from other sources. The assessee has filed an appeal before the first appellate authority, however could not succeed. The Ld.CIT(A) dismissed appeal filed by the assessee and affirmed additions made by the AO towards interest income. Thereafter, penalty proceedings u/s 271(1)(c) of the I.T.Act,1961 was initiated and accordingly, a show- cause notice, dated 19/02/2016 was issued u/s 274 r.w.s. 271(1)(c) of the I.T.Act, 1961. In response, the Ld. AR of the assessee filed a letter and requested for short adjournment, however could not file any explanation. The Ld. AO after considering relevant submissions of the assessee and also taken note of provisions of Explanation-1 to section 271(1)(c) held that without any sufficient reasonable cause, the assessee has committed default by furnishing inaccurate particulars of its income and accordingly, opined that it is a fit case for levy of penalty u/s .....

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..... person fails to offer any explanation or offers an explanation which Is found by the (Assessing) Officer or the (Commissioner of Appeals) (or the Commissioner) To be false or; (B) such person offers an explanation which he is not able to substantiate (and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him Then the amount, added, or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed". 6. The facts fall under above clause 'A' as the assesses failed to offer an explanation in respect of facts which are material to the computation of its total Income. I am satisfied that without any sufficient and reasonable cause the assesses has committed default by furnishing inaccurate particulars of its Income as defined u/s 271(1) (c) of the I.T Act. Considering the facts of the case and provisions of explaination-1 to Section 27l(1)(c), I am satisfied that the assessee has furnished inaccurate pa .....

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..... sion of the Hon ble ITAT in the case of Earthmoving equipment services Corporation vs. DCIT 22(2) Mumbai (ITA No.6617/u/2014) where the Hon ble ITAT Mumbai Bench E vide order dated 02.05.2017 in which the above claim was dismissed by holding that in the assessment order as well as in penalty order the AO had specifically brought out the facts for which the penalty was initiated and levied. In this case also in the assessment order as well as in the penalty order the AO has clearly brought out on record the fact that the penalty was initiated and levied for filing of inaccurate particulars of income. It is further noticed that the appellant has never raised this issue before the AO therefore, the same cannot be entertained at this stage. In this regard I would like to place my reliance on the ratio laid down in the case of M/s Nokia India (P) Ltd. Vs DCIT (2015) 59 Taxann.co 2012. Accordingly, the additional ground raised by the appellant is not admissible, therefore, dismissed. 5.1 During assessment proceedings the AO noticed that this is a first year of the appellant s business and the business activities could not be started due to delay in acquiring the land and other infrastruc .....

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..... reme Court in the case of CIT vs Reliance Petro Products Pvt.Ltd. and so on. 5.4 From the above facts it is seen that the appellant had parked its surplus share capital in the banks, in the form of fixed deposits and earned interest income there from. The same was not offered for tax with the plea that it had been earned against share capital and would be used for capital investment. As per rulings of the various courts, including Supreme Court in the usual course, the interest received against surplus deposits, required to be taxed under the head Income from Other sources u/s 56 of the Act. In this regard I would like to place my reliance on the ruling of the Hon ble ITAT in the case of Thermal Powertech Corpn. India Vs DCIT (2017) taxmann.com 168 (Hyderabad Trib.) (2017)/164 ITD 449, wherein it is inter-alia, held that- where assessee-company formed to build own and operate a power plan deposited unutilized borrowed funds in short term fixed deposits during the construction of power plant interest earned on those deposits would be taxed as income from other sources . 5.5 The fact that a person/entity carried on business does not lead to inference that all the income received by s .....

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..... noring certain judicial decisions. In this regard, he relied upon the following judicial decisions:- i) Meherjee Cassinath Holdings Vs ACIT in ITA No. 2555/Mum/2012 ii) Rekha Bhupendra Dalal vs DCIT in ITA No. 3363/Mum/2016. 6. The Ld. DR, on the other hand strongly supported order of the Ld.CIT(A). 7. We have heard both the parties, perused the material available on record and gone through orders of the authorities below. As regards, preliminary objections of the assessee, in light of show cause notice issued by the AO u/s 274 r.w.s. 271(1)(C) of the I.T.Act, 1961, dated 30/01/2014, we find that although, the assessee has challenged the validity of penalty proceedings, in light of non striking of irrelevant portion in the notice u/s 274, but, fact remains that the Ld. AO had issued further show-cause notice, dated 19/02/2016, for which the assessee neither filed any explanation nor justified its case in light of Explanation-1 to section 271(1)(c) of the I.T.Act 1961. We, further noted that the Ld. AO has arrived at proper satisfaction, in respect of additions made towards interest income on fixed deposits at the time of assessment proceedings, where he had initiated penalty procee .....

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..... tion, if you examine the case of the assesee, it is abundantly clear that the assessee has parked its surplus funds in the banks in form of fixed deposits and earned interest income. Further, although interest income from fixed deposits is assessable under the head income from other sources, the assessee has treated said interest income as capital receipts and set up against pre-operative expenses without offering interest income for tax. Therefore, we are of the considered view that the assessee has furnished inaccurate particulars of income, in respect of interest income earned from fixed deposits, which warrants levy of penalty u/s 271(1)(c) of the I.T.Act, 1961. Further, the assessee has also failed to offer any explanation in response to a show cause notice thereby committed default within the meaning of Explanation-1 to section 271(1)(C) of the I.T.Act, 1961. Therefore, we are of the considered view that there is no error in penalty levied u/s 271(1)(c) and accordingly, the Ld.CIT(A) was right in affirmed penalty levied by the Ld. AO. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject ground taken by the assesee. 9. In the result, appeal filed by the as .....

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