TMI Blog2021 (9) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). - Decided in favour of assessee. - ITA No. 1463/MUM/2019 - - - Dated:- 31-8-2021 - Shri C.N. Prasad (Judicial Member) And Shri S. Rifaur Rahman (Accountant Member) For the Assessee : Mr. Prasad Paranjape, AR For the Revenue : Mr. Brajendra Kumar, DR ORDER PER S. RIFAUR RAHMAN, A.M. The present appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai [in short CIT(A) ] for the assessment year 2011-12 dated 10.12.2018 and arises out of assessment completed u/s 143(3) of the Income Tax Act, 1961 (in short the Act) 2. Brief facts of the case are the assessment u/s 143(3) for the assessment year 2011-12 was completed on 19.03.2014 determining the total income of (-) ₹ 35,30,360/-. During the course of assessment, the Assessing Officer observed that : (a) The assessee claimed an amount of ₹ 27,400/- as preliminary expenses u/s 35D. Since, the assessee has not brought anything on record to prove that increase in share capital is for the extension of its existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of income can be imposed only if there is conscious and deliberate concealment on the part of the assesses. The mere fact that a claim for expenditure stands disallowed does not by itself lead to the inference that the assessee had in accurate particulars in regard to that item. h) Our client further invite your attention to the following observation made by the by the Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (83 ITR 26). An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on consideration of all the relevant circumstances. In view of the submissions, our clients request you kindly drop the penalty proceedings initiation u/s 271(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the failure to return the correct income did not arise from any fraud or gross or willful neglect on the part of the appellant. Asset Motors Pvt. Ltd. f. 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 ₹ 9102/-. B. Levy of penalty under section 271(1)(c) in respect of disallowance of interest expenditure of ₹ 21,02,649/- under section 36(1)(iii) by treating it as not incurred for business purpose:- 1. On the facts and in the circumstances of the case and in Jaw, the Deputy Commissioner of Income tax (appeals) erred in upholding the action of the assessing officer in levying penalty under section 271(1)(c) read with explanation 1 thereto. 2. The Commissioner of Income-tax (Appeals) further erred in the following respects:- a. In not appreciating the fact that the appellant had made full disclosure during the course of assessment proceedings in respect of interest expenditure of ₹ 21,02,649/- eligible for deduction under section 36(1)(iii) of the Income Tax Act 1961. b. In not appreciating the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 35D and extended the amortization of preliminary expenses to all the undertakings and relevant extract of the Finance Act is placed on page 49 of the Paper Book and he brought to our notice that the section was amended to provide the benefit of amortization to all assessees. For the purpose, he relied on the case of CIT v. Reliance Petro Products Pvt. Ltd. (supra) and submitted that the assessee had claimed expenditure and the Assessing Officer did not accept the above expenditure that itself will not attract penalty provisions. 8. With regard to interest disallowance of proportionate amount given to sister s concerns, the Ld. AR submitted before AO that : The appellant explained that it was engaged in the business of dealing in motor vehicles and servicing of vehicles. Its holding company Assets Auto India Private Limited was also engaged in the business of dealing in motor vehicles and servicing of motor vehicles. The appellant had advanced ₹ 2.20 crores to its holding company for expanding the business operation and to strengthen the business activity. It was also submitted that during the year additional amount of ₹ 22 lacs was given and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of interest expenditure. j. Against the appellate order passed by the CIT(A), the appellant has not preferred an appeal before the Income Tax Appellate Tribunal. Since the assessee diverted its own funds to holding company and assessee was having sufficient own funds and advancing to its sister s concern/holding company are only for business expediency and disallowance of such interest is a debatable issue and such disallowance of interest will not fall under penalty provisions. He relied on the case of Reliance Petro Products Pvt. Ltd. (supra) and prayed that penalty may be deleted. 9. On the other hand, the Ld. DR submitted that the quantum of appeal of the assessee is sustained by the Ld. CIT(A) and therefore, the penalty levied by the Assessing Officer is justified and accordingly he submitted that the transactions are not bona fide transactions, therefore, he relied on the orders of the Ld. CIT(A). Considered the rival submissions and perused the material on record. We noticed that the assessee has claimed RoC charges and interest expenditure. The Assessing Officer disallowed the same with the observation that the assessee has not explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X
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