2014 (7) TMI 298

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....t years 1999-2000,2000-01, 2002-03 and 2003-04. Since the factual background and the issues involved in these appeals are common, these appeals are being disposed of with this common order for the sake of convenience. 2. Facts of the case in brief, as taken from the appeal folder for the assessment year 1999-2000, are that the assessee, engaged in the manufacture and trading of fans, originally filed return of income on 30.12.1999 declaring a loss of Rs. 2,86,31,814. Later, in response to the notice under S.153C of the Act, consequent to search and seizure operations under S.132 of the Act in Sujana Group of cases, it filed return of income, adhering to the loss declared of Rs. 2,86,31,814. Later in the assessment framed under S.143(3) r....

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....the proceedings for imposition of penalty under S.271(1)(c) of the Act. 3. In response to the penalty notice, the assessee company stated inter alia that the persons who handled the accounts of the company had left the company and due to shifting of office, few files and records were not traceable. It was also stated that the assessee company claimed the interest under the head 'interest on working capital' and the business activity was carried on during the relevant assessment year. Reliance was also placed on the decision of the Apex Court in the case of CIT V/s. Reliance Petro Products (P) Ltd. Finding no merit in the contentions of the assessee, and observing inter alia that as per the provisions of S.36(1)(iii), only the amount of i....

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....elevant portion thereof, cancelled the impugned penalties levied by the Assessing Officer for concealment. "6. I have seen carefully the facts and evidence and I have also gone through the case law on the issue. Firstly, it is a settled law that on a debatable issue penalty under section 271(1)(c) is not leviable. Looking at the facts of the case it is clear that the entire debate was about the claim of interest on bank loans. The appellant stated that even though there was no turnover, some business was still being carried out as it was actively scouting for work and contracts. Therefore, it made a claim for interest on working capital loans. However, the Assessing Officer differed on the issue and allowed the claim. Meanwhile as litiga....

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.... of the impugned penalties by the CIT(A), Revenue is in appeal before us for all the three years. 6. The Learned Departmental Representative, strongly supporting the orders of the Assessing Officer, submitted that the assessee is clearly guilty of furnishiung inaccurate particulars of income, and consequently, it is a fit case for the levy of impugned penalties. He submitted that the assessee has diverted the funds for non-business purposes and never proved that the funds were used for business purposes, and deliberately made a wrong claim of expenditure, which could have gone unnoticed, but for the scrutiny, and consequently, the CIT(A) is not justified in holding that the assessee has discharged the onus. In the circumstances, it is su....

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....e interest amounts disallowed relate to borrowals from the bank towards working capital requirements of the assessee. Assessee has explained the various difficulties that it had to encounter on account of the fact of the concerned accountant and others, who were handling the accounting matters, who left the company, and the hostile relationship between the assessee company and the banker, which prevented it from complying with the requirement of the Assessing Officer, which led to the disallowances in question during the years under appeal. The very same reasons were also stated to have prevailed the assessee in accepting the additions made by the Assessing Officer, instead of proceeding in appeal against the same. Thus, there was a justifi....

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....n 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) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars." In the case before, there is no dispute with regard to the interest payments made by the assessee to the bank. Neither the amounts of payment nor the factum of payment of payment was questioned, so as to allege that the assessee has furnished inaccurate particulars of its income. If the disallowance was made by the Assessing Office....