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TMI Blog2021 (9) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... or in connecting with setting up of a new industrial undertaking the above said amount was disallowed. (b) The assessee had debited total interest expenditure of Rs. 1,33,78,834/- on interest of borrowed capital. Since the assessee could not prove to the satisfaction of the Assessing Officer that the borrowed funds were not utilized for non-business purposes. The Assessing Officer observed that the assessee has diverted the interest bearing funds to sister's concern. Accordingly, the Assessing Officer disallowed proportionate interest amount of Rs. 21,02,649/- u/s 36(1)(iii) of the Act. 3. Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT(A) and Ld. CIT(A) sustained the additions made by the Assessing Officer. The Assessing Officer initiated the proceedings u/s 271(1)(c) of the Act and accordingly notice u/s 274 was issued and served on the assessee. In response, the assessee filed written submissions vide letter dated 27.11.2017. The Assessing Officer after considering the submissions of the assessee. He reproduced the submissions of the assessee in his order for the sake of clarity it is reproduced below: "Our client further invite your at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer rejected the contentions of the assessee by relying on section 271(1)(c) Explanation 1 and decisions in the case of Union of India v. Dharmendra Textiles Processors & Others (2008) reported in 306 ITR 277 (SC) and MAK Data P. Ltd. v. CIT (Supreme Court) levied penalty at 100% of the said tax sought to be evaded to the extent of Rs. 70,54,549/-. 5. Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT(A) and Ld. CIT(A) after considering the submissions of the assessee sustained the penalty levied by the Assessing Officer relying on section 271(1)(c) and Explanation 1 along with the case laws relied by the Assessing Officer and by distinguishing the case of Reliance Petro Products Ltd. 322 ITR 158 (SC) to the assessee's case held that the assessee has furnished inaccurate particulars of income as well as concealed the particulars of income. 6. Aggrieved with the above order, the assessee is in appeal before us raising following grounds of appeal: "A. Levy of penalty under section 271(1)(c) in respect of disallowance of ROC fees paid eligible for deduction under section 35D amounting to Rs. 27,400/- : 1. On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le issue and accordingly, the same cannot be treated as a false claim. c. In not appreciating the fact that penalty under section 271(1)(c) is not leviable merely because disallowance of particular claim made by the appellant has been upheld. d. In not appreciating the fact even after insertion of explanation 1 to section 271(1)(c), there has to be conscious concealment on the part of the appellant e. In not appreciating the fact that the failure to return the correct income did not arise from any fraud or gross or willful neglect on the part of the appellant. 3. In view of the above grounds of appeal, the appellant prays that the assessing officer has to be directed to delete the penalty levied under section 271(1)(c) amounting to Rs. 6,98,447/-. The appellant hereby reserves the right to add to, alter or amplify the above grounds of appeal." 7. Before us, the Ld. AR brought to our notice para 4.3 of the assessment order and submitted that the assessee has increased the share capital and incurred preliminary expenses relating to registration fees paid to registrar of the company in increasing various share capital for the purpose of expansion of business the amount clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds available with the appellant company. In the submission made it was further submitted that the term loans obtained by the appellant from banks were for specific purposes and the terms governing the same it could not be used for any other purpose. As the amount advance to holding company was for the furtherance of business activity of the appellant company and the fact it was given out of interest free funds the interest expenditure was fully allowable as deduction, it was also submitted that as all the test laid down under section 36(1)(iii) were satisfied the entire interest expenses ought to be allowed as deduction. e. The appellant further submitted that total interest debited to the profit and loss account was paid m respect of capital borrowed for the purpose of business. Further, the appellant advanced money to the holding company out of commercial expediency as the said holding company was in the same line of business. f. In the assessment order passed under section 143(3), the appellant's contention that the advance was given out of commercial expediency and out of interest free funds has been rejected on the grounds that the appellant had not submitted any ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the expenditure claimed by the assessee are debatable and merely because these expenditures were disallowed and as well as assessee preferred not to appeal before second appellate authority. The Assessing Officer levied the penalty. We noticed that in the similar situations, the Hon'ble High Court in the case of Reliance Petro Products Pvt. Ltd. (supra) held as under : "A glance of provision of section 271(1)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income. That was not the case of the revenue either. It was an admitted position in the instant case that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The revenue argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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