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of <h1>ITAT allows appeal, overturning penalty imposed by AO and upheld by CIT(A). Assessee's explanation deemed genuine.</h1> <h3>Shri Dilip B. Doshi Versus The Assistant Commissioner of Income-tax</h3> Shri Dilip B. Doshi Versus The Assistant Commissioner of Income-tax - TMI Issues involved:Appeal against deletion of penalty u/s. 271(1)(c) of the IT Act for A.Y. 2004-2005.Detailed Analysis:1. Issue of Penalty Imposition by Assessing Officer (A.O.):The A.O. disallowed the claim of interest deduction made by the assessee against interest income, leading to the initiation of penalty proceedings u/s. 271(1)(c) for furnishing inaccurate particulars of income. The A.O. imposed a penalty of Rs. 80,000, which was 100% of the tax sought to be evaded.2. Challenge before CIT(A):The assessee challenged the penalty before the CIT(A), who observed that the claim made by the appellant regarding interest income was incorrect and deliberate. The CIT(A) upheld the penalty partially, directing the A.O. to verify and levy the minimum penalty as per law.3. Appellant's Arguments before ITAT:The appellant contended that the interest paid on borrowed funds was genuine and allowable as business expenses. The funds were used for business purposes, and the interest paid was in accordance with the Income Tax Law. The appellant argued that the A.O. did not question the nexus between the interest and the expenditure during the assessment proceedings.4. ITAT Decision:The ITAT noted that the A.O. did not provide any evidence of income concealment or furnishing inaccurate particulars by the assessee. The ITAT found the explanation provided by the assessee to be genuine and in compliance with Explanation 1 of Section 271(1)(c). Consequently, the ITAT reversed the CIT(A)'s order and allowed the assessee's appeal.5. Conclusion:The ITAT ruled in favor of the assessee, overturning the penalty imposed by the A.O. and upheld by the CIT(A). The ITAT found the assessee's explanation regarding interest expenses and income to be genuine and in line with the Income Tax Law, leading to the allowance of the appeal.This judgment highlights the importance of substantiating claims with genuine evidence and complying with tax laws to avoid penalties for inaccurate particulars of income.
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