TMI Blog2020 (10) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty cannot be automatic and rely on the decision of the CIT Vs. Manjunatha Cotton and Ginning factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT]. A.O has levied the penalty for concealment of income as the assessee company has the treated the speculation loss as a business loss and claimed set off against the income from other sources. Claim of the assessee is in consideration of the financial statements and the assessee adopted one of the possible views that the business loss can be set off against the income from other sources. The assessee has made a claim under the bonafide belief that it is allowable under the law. Direct the A.O to delete the penalty and allow the grounds of appeal of the assessee. - ITA No. 4418/Mum/2018 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed explanations on 26.03.2012. Whereas, the A.O found that the assessee has claimed setoff of speculation loss against the income on fixed deposits. In the assessment proceedings income on fixed deposits was taxed and the speculation loss was allowed to be carry forward. The A.O found that the assessee has not given satisfactory explanations on the claim. The observations of the A.O are that the trading in shares is to be treated as speculation business and applied the provisions of the Sec. 73 of the Act and levied a penalty of ₹ 6,39,324/- and passed order u/s 271(1)(c) of the Act dated 30.02.2012. Aggrieved by the penalty order the assessee has filed an appeal with the CIT(A). Whereas, the CIT(A)considered the grounds of appeal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income in the financial statements which is not disputed by the A.O. We find that the A.O. has levied the penalty because of set off claimed by the assessee and the mere disallowance or disagreement of a claim cannot be a basis for levy of penalty and also the addition made in the assessment order by the A.O cannot be a gateway for automatic levy of penalty. The Ld. CIT(A) has passed a elaborate order confirming the penalty, overlooking the facts, nature and method of operations of the assessee business. We are of the view that penalty cannot be automatic and rely on the decision of the CIT Vs. Manjunatha Cotton and Ginning factory, [2013] 359 ITR 564 (Kar), and the principles as under: In the case of CIT Vs. Manjunatha Cotton and G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty even if the tax liability is admitted is not automatic. (k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the Assessing Officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. (u) The findings recorded in the assessment proceedings insofar as concealment of income and furnishing of incorrect particulars would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. 5. Further, the A.O has levied the penalty for conceal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the claim, or the separate item of an account. Therefore, the word particular used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect on inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The ld. counsel argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income . We do not think that such can be the interpretation of the concerned words. The w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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