TaxTMI 
TaxTMI 
2013 (5) TMI 444
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....9,630/- u/s. 73 of the Act holding that penalty not being initiated specifically on the issues." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty levied u/s.271(1)(c) on disallowance of Rs. 6,33,693/- on account of interest payment holding that when interest payment were not for business purposes, assessee furnished inaccurate particulars by claiming it to be business expenditure". 4. "On the facts and in the circumstances of the case, the impugned order of the CIT(A) is contrary to law to be set aside and that of the Assessing Officer be restored." 2. Thus, the department is aggrieved by deletion of penalty on following additions :- (i) Addition made on account of service charges at Rs. 25,16,280/- (ii) Addition made in respect of speculation loss under Section 73 at Rs. 2,99,630/- (iii) Disallowance on account of interest payment at Rs. 6,33,693/-. 3. Brief facts apropos the levy of penalty on above additions are that the assessee is member of Bombay Stock Exchange (in short "BSE") and is mainly engaged in business of share broking, dealing in shares and securities and carrying transaction for and ....
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....aid company. From these facts, the Tribunal came to the conclusion that the payments made to the said company for the project of business cannot be termed the service charges as no services have been provided by the said company except for transferring its entire clientele basis as per MOU. The Tribunal however accepted the alternative argument that the entire payment is of capital in nature and has to be audited back to the return of income. Thus, the addition of Rs. 25,16,280/- was made after holding as to be capital expenditure. However, before the date of passing of the Tribunal order, which is on 22nd June, 2012, the Assessing Officer has already levied the penalty for concealment of this score. However, the Assessing officer, in the penalty order, had made a very significant remark in the following manner :- "Alternatively if at any stage the claim of the assessee is allowed still the entire expenditure shall not be allowable in as much the assessee by taking over the clients of the SGFPL has taken over the goodwill of that company. The purchase of something that has an enduring benefit which is represented by the increase in the clients of the company as well as income fo....
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....d noted that the assessee has borrowed funds on which it was paying interest of Rs. 99,51,982/-. From the details submitted by the assessee, he further noted that the assessee has been paying interest at the rate of 8% on the borrowed funds. On the other hand, the assessee has given interest to funds to its concerns in response to the query. It was submitted that the assessee has not charged any interest on the temporary advances given to the party and the said advances are not out of borrowed funds. Further, it was a business need to advance the funds therefore to the interest was charged. There was no divergent of interest giving funds to these parties. The Assessing Officer is rejected the assessee's contention on the ground that all the factual material on record to substantiate claim ....... has been put forward, secondly, what was the commercial expediency has not been stated and lastly if the assessee had own funds, therefore, no need to borrow the funds. He further relied upon the various decisions of High Court and held that interest discussed on these advances should be calculated at the rate of 8% and accordingly, the claim of interest was reduced and the sum of Rs. 6,33....
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....en the AO in the penalty order has held it so. Therefore, it cannot be held that the assessee has furnished inaccurate particulars or has concealed the particulars of income. Therefore, no penalty under Section 271(1)(c) can be varied. Regarding the addition on account of disallowance of speculation loss, he submitted that at the time of filing of return and the assessment proceedings, there were very decisions of the Tribunal which were in favour of the assessee. He also pointed out that Mumbai Tribunal in several cases had earlier taken the favourable view that ......... in value of shares closing stock cannot be held as speculation loss within Explanation 273 which was only after subsequent decision of Hon'ble Bombay High Court in the case of .............................. reported in 333 ITR 275, which was rendered on ................. thus, issue has been settled against the assessee. Thus, it cannot be held that at the time of filing of return the assesse had no bona fide reason or explanation to claim loss on the valuation of shares. Thus in such a situation penalty under Section 271 (1)(c) cannot be levied. Regarding the disallowance on interest, he submitted that the asses....