TMI Blog2014 (3) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-3-2014 - hri A. Mohan Alankamony, Accountant Member And Shri S. S. Godara, Judicial Member Appellant by: Shri Ashik Shah, CA Respondent by: Shri S. Das Gupta, JCIT ORDER S.S.Godara, This appeal filed by the assessee for assessment year 2007-08, is directed against order of Commissioner of Income-tax (Appeals)-VI Chennai, dated 31.10.2013, passed in I.T.A.No.1309/1314 confirming penalty under section 271(1)(c) Income-tax Act, 1961 (in short the Act ). 2. It is apparent from the grounds raised in the appeal that the sole substantive grievance of the assessee is that the CIT(A) has erred in confirming impugned penalty u/s 271(1)(c) of the Act qua disallowance of ₹ 2 crores made u/s 14A of the Act pertaining to exempt income. The exact amount of the impugned penalty is not forthcoming as the Assessing Officer had computed total penalty sum of ₹ 4,56,61,617/- qua addition of section 14A and the one pertaining to proceedings u/s 92CA whereas the CIT(A) has accepted assessee s argument qua the latter head. 3. The assessee is a company engaged in the business of strategic investment and consultancy services. On 31.10.2007, it had file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is partly allowed in the aforesaid terms. On the other side, in penalty proceedings, the assessee denied to have either concealed or furnished inaccurate particulars of income. In penalty order dated 27.4.2012, the Assessing Officer took notice of the fact that the impugned disallowance of ₹ 8,22,92,012/- had been computed over and above what was already disallowed(supra). In his view, this amounted to concealment and furnished inaccurate particulars of income. Accordingly, he imposed minimum penalty of ₹ 4,56,61,617/- qua additions i.e section 14A and u/s 92CA. 4. Aggrieved, the assessee preferred appeal. In the lower appellate proceedings, the CIT(A) has restricted the penalty to the extent of concealment of income of ₹ 2 crores(supra) by observing as follows: I have considered the submissions of the AR of the assessee as well as the findings given in the assessment order carefully and also perused the various judicial pronouncements cited by the AR of the assessee. In the written submission filed by the AR of the appellant, the appellant stated that the assessee went in appeal against the order of assessment dated 24.12.2010 passed u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of rule 8D are applicable w.e.f. AY. 2008-09. However, prior to that, reasonable amount has to be deducted. The assessee has voluntarily made dis-allowance to the tune of ₹ 9,12,24,848/- on account of expenditure on interest. The assessee has not made any dis-allowance on management expenses in handling of portfolio to the tune of ₹ 15,28,07,35,000/-. The assessee must have been incurring expenditure in managing portfolio of such a magnitude. In all fairness, taking holistic view of the matter the professional skills, infrastructure etc., required we are of the opinion that the assessee must have spent ₹ 2 Crores in managing the investment portfolios. Accordingly, addition to the tune of ₹ 2 Crores is confirmed. This ground of appeal of the assessee is partly allowed in the aforesaid terms. Now the question arises whether the assessee has concealed any particulars of income for the purpose of levy of penalty u/s 271(1)(c) of the IT Act. The stand of the appellant was that no expenditure was incurred in earning huge dividend income which is exempt other than the interest expenditure which was already disallowed in the return of income. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portfolio to the tune of ₹ 15,28,07,35,000/-. The Hon'ble ITAT had held that the appellant had in fact spent an expenditure of ₹ 2,00,00,000/- for the purpose of managing the investment portfolio which was meant for earning exempt income. Therefore, it is evident that the claim of the appellant that he did not spend any money for managing the investment portfolio which was meant for earning exempt income is factually incorrect. The assessee in fact had infrastructure facility for managing the huge investment portfolio. The infrastructure facility requires professional skills, huge manpower and also physical space. The explanation of the appellant that the issue is debatable is also not legally correct as the fact of incurring expenditure on account of management for the investment portfolio is a pure question of fact. The appellant did not disclose the expenses incurred for the management of the investment portfolio which was meant for earning exempt income in computing the taxable income. Therefore, from the above facts and circumstances of the case, I am of the considered view that the appellant is liable for penalty u/s 271(1)(c) of the IT Act under clause B of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has drawn a presumption that the assessee must have been incurring expenditure in managing portfolio of management expenses of ₹ 15,28,07,35,000/-. A deemed disallowance has been made by adopting holistic approach in view of the totality of circumstances. In other words, there is no material quoted right from the assessment till proceedings upto the 'tribunal' which could falsify assessee s computation of disallowance of ₹ 9,12,24,848/-(supra). We have perused the case file and nothing is forthcoming right from the assessment proceedings or till lower appellate order in penalty case which could suggest that the disallowance u/s 14A had been computed after rejecting the particulars filed by the assessee before the Assessing Officer. Thus, we hold that even the estimated disallowance u/s 14A has been made only on the basis of particulars furnished and not otherwise. In these circumstances, we observe that present is a case of mere estimated addition made in view of the overall circumstances of the case and not based on the particulars of income, which does not warrant imposition of penalty. It is a trite proposition of law that each and every case of disallowance/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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